Date
23 October 2017

Take a bow, Baidu, for sizzling Qunar IPO

It took a mere 22 seconds for online travel portal Qunar.com (QUNR.US) to set its US market debut alight.

In that flash of time on Nov. 1, the stock hit its maximum daily trading limit, triggering an automatic suspension. It last changed hands at US$27.21, implying a market capitalization north of US$320 million, after investors thronged its initial public offering for 40 times more than the available shares.

The slow-burning fireworks had been lit two years earlier when Chinese search giant Baidu (BIDU.US) injected US$306 million into the obscure company for a 62 percent stake.

Not only did the investment allow Qunar to grow its business, it also gave the company a certain stature by virtue of its association with Baidu. Investors began to take notice and liked what they saw.

To be fair, Qunar had been doing well for itself before the Baidu investment. It had been a thriving proposition with a business model geared to young, budget-conscious travelers.

When Baidu took over in 2011, it began redirecting search traffic to Qunar. It handled 1.8 billion ticket and hotel accommodation inquiries last year alone, China Securities Journal reports.

The number is forecast to increase to 2.19 billion next year.

Qunar has established itself as the only travel website offering air tickets and accommodations at unbeatable prices. Through its partnerships with small online vendors, it offers a wide range of budget options.

Not surprisingly, Qunar’s fast-growing customer database has lured major airlines, including China Eastern, Air China and Hainan Airlines, to its platform where they have been operating online stores.

In contrast, rivals Ctrip.com (CTRP.US) caters to business travelers and corporate clients while eLong (LONG.US) is mainly focused on hotel bookings.

Qunar is one notch above in terms of market share on the strength of its mass appeal.

That is also its main asset going forward. With the Chinese government encouraging tourists to plan ahead, opportunities abound for online travel services providers. Qunar is best placed to corner the bulk of the market on its own and in partnership with Baidu.

The enormous market potential is not lost on Tencent (00700.HK), which has become the second largest shareholder in eLong after Expedia, and Alibaba which has a stake in popular travel networking platform Qyer.

Baidu has stolen a march on them with its Qunar stake now worth US$1.75 billion.

– Contact the writer at [email protected]

RA

 

EJI Weekly Newsletter

Please click here to unsubscribe