Aggregator Rules? Qunar and Kuxun Gain on Ctrip

Aggregator Rules?

Qunar, the Chinese travel booking service aggregator topped China OTA (online travel agency) market with a percentage of visits of over 42% in this November, according to market researcher Experian Hitwise. Kuxun, the Chinese subsidiary of TripAdvisor with a business model similar to Qunar came in a distant second, gripping over 16.88% of the market share in its hand while Ctrip came in third with a market share of about 15%.

China’s top 10 travel sites claim more than 90% of Chinese online travel business while Qunar and Kuxun, the two aggregators have a combined share of over 50%.

Founded in May 2005 and headquartered in Beijing, Qunar claimed to be the largest Chinese travel website in the world. According to Beijing-based market researcher iResearch the site has around 60 million monthly visits. Its search scope covers over 700 online agencies, 150,000 hotels as well as 15,000 domestic and international flight routes. Qunar also rides the wave of group buying and got started offering daily deals on hotels, flights and so on since this January.

In this June, Baidu invested US$ 306 million in Qunar to become the latter’s biggest institutional shareholder, making the deal the largest investment Baidu ever made in the company’s history, which is also to date the largest investment in China’s online travel field.

As for Kuxun.com, the flight tickets, train tickets and hotels search engine, it was founded in early 2006 in Beijing and was acquired by TripAdvisor for US$ 12 million in October 2009 as the latter was gearing up for the fast-growing China travel market. Kuxun claims about 55 million monthly visits.

China’s Online Travel Market Heating Up

China’s travel industry generated 1.3 trillion yuan in revenue in 2009, up nine percent from 2008, the National Tourism Administration’s figure showed. And the number is expected to be 1.5 and 1.6 trillion in 2010 and 2011 respectively.

As for OTA market, all players generated north of US$ 1 billion in sales in the first three quarters of this year, up 45% year-over-year. And the OTA market sales expectancy in 2011 is expected to be more than US$ 1.45 billion, up 36.7% from last year, according to iResearch report.

The sheer market size is a big traction for big-names stepping into the territory. Except for the TripAdvisor-Kuxun acquisition and Baidu-Qunar investment, Tencent also acquire 16% of eLong for US$ 84.4 million in this May and bought 30% stake of 17U.com for US$ 7.8 million – 9.4 million earlier this year, signaling the internet giant’s move into online travel market. Taobao also launched its online travel channel Taobao Travel to make its inroads into the sector, providing services including flight tickets, hotels, travel services and destination information.

Major Trends Characterized 2011’ China OTA Market

• Capital confident in the sector, reflected in active investments and acquisitions.

Except for the aforementioned ones, some other travel sites-related investments and acquisitions took place in this year:

January – Lotour.com raised RMB 30 million in Series A round

April – Tuniu raised US$ 50 million in Series C round of funding from Sequoia China, DCM and so on.

September – Lvmama.com raised US$ tens of millions in Series C from Sequoia and South River Capital.

December – 17Yezi.com raised US$ 5 million from Koolanoo.

• Innovative Booking Service Being Introduced

As group buying services were constantly appealing to both capitals and consumers, many followed suit to launch daily deals focusing on hotels, flight tickets, scenic areas tickets and so on. Those sites include Qunar, Kuxun, Ctrip etc, literally all China’s top 10  travel sites except for Mangocity, Tieyou and Tuniu. Tuniu did operate a separate group buying service for a while and later on discontinued the offering.

Elong, Qunar, Lashou and an app named “Tonight’s Discounted Hotels” explored deeper into travel booking sector with the so-called “last-minute” booking model to help hotels max out its rooms and to help traveler find the best deals.

• Big Guys Stepping In

Baidu invested into Qunar, Tencent invested into eLong and 17U and operated its own QQ Travel service at the same time. Taobao launched Taobao Travel to grab a bite as well. Those big guys now all stepped into online travel sector.

• Occupying Mobile Forefront

An iResearch report out lately stated that China’s mobile Internet market has reached 10.83 billion by Q3 2011, increased 154.6% year-on-year and 38.9% quarter-on-quarter, largely aided by the proliferation of smartphones. Beijing-based market researcher Analysys International predicts that by next year the number of China’s mobile internet users will reach 500 million, surpassing the number of PC internet users.

In light of the grand picture in mobile area, companies including Qunar, Kuxun, Ctrip and eLong all started to invest heavily into mobile apps to leverage the portability of mobile devices and to bolster their businesses.