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Qunar CEO: leisure travel immune to China’s economic meltdown

08/27/2015| 6:08:11 PM|

Qunar wants us to believe it can sail through a hurricane unscathed but we’ll have to see how the Chinese economic crisis ultimately impacts the travel market.

While stock markets around the world are roiling because of the woes of the Chinese economy and citizens have seen their stock market investments vaporize, the CEO of Beijing-based booking site Qunar says leisure travel demand has been “immune” from the turmoil.

Qunar is confident it can weather the economic crisis

“Based on empirical evidence, however, leisure travel, our primary focus area, has been quite immune,” CEO “CC” Zhuang told analysts during the Qunar’s second quarter earnings call August 25. “July stats indicated that our growth momentum continued to be very strong across business lines. We are also well positioned for any potential macro headwinds.”

Travel companies and destinations around the world — not just in China — will be wondering how China’s economic crisis will affect the flow of Chinese travelers.

Zhuang said during the 2008-2009 downturn in China, Qunar achieved “a hyper growth rate and a rapid market share expansion” because of its operating efficiencies and “travel products with the best value proposition.”

In other notable developments, Qunar officials stated that they will buck booking site trends that tilt hotel sales toward the agency — pay at the hotel — model and will debut a merchant model, particularly for four- and five-star hotels, in the third quarter.

“We plan to launch a merchant model for hotels in Q3, in which we will bear the majority of the business risks, including the inventory risks for the transaction, in order to further secure unique products in strategic inventories,” Zhuang said. The amount in comparison to our total hotel volume will be very small.”

Booking.com, for one, was able to scale its hotel business by using the agency model, which is much simpler and faster to implement than the merchant model, which requires more complex technology and sometimes-cumbersome negotiations. Expedia Inc., on the other hand, rode the merchant model for years but several years ago implemented its Expedia Traveler Preference program, which gives the guests and hoteliers the option to pre-pay or pay at the hotel.

“We will expand this part of our business [the merchant model] in a very selective and strategic manner,” Zhuang said, with officials saying it may grow to a high single-digit percentage of Qunar’s hotel sales. “In the past we have very rapidly established us as the Chinese top B2C channel for hotel booking. On peak days over the summer our room nights stayed already represented around 10% of China’s total hotel market. With our rapidly expanding scale, now is the right time to start to leverage a merchant model in a strategic deliberate way.”

Zhuang also commented on the changing competitive dynamics in the China travel market, particularly because of Expedia’s decision to sell its majority stake in eLong to Ctrip.

He said hotels in China are hedging their bets against the power of Ctrip-eLong by signing up with Qunar.

“In terms of the hotel segment, after Ctrip/Elong deal, hotels actually are more coming to us because we have, you know, we are their last alternative channel,” Zhuang said. “So four-, five-star hotels are actually going very rapidly for our business in last quarter. And our volume actually reached 5 million in Q2, more than triple, year over year. And that will close the gap between [the] players.”

In the second quarter, Qunar saw its mobile revenue soar dramatically. Mobile revenue grew 321.7 percent to $96.8 million — and now amounted to a whopping 68.1 percent of its total revenue in the second quarter.

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TAGS: Qunar | leisure travel | economic crisis
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