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Qunar Seeks Higher Profile, Deal Firepower

The Wall Street Journal | Loretta Chao | 09/16/2011

BEIJING—Chinese travel search site Qunar.com Information Technology Co., majority-owned by search giant Baidu Inc., hopes an initial public offering next year will boost its brand and raise enough cash to allow it to make acquisitions despite waning interest in new Chinese listings, its top executive said.

Many Chinese Internet companies have sought to list shares in the U.S. in the past year, but market volatility and concerns about accounting issues at some U.S.-listed Chinese firms in recent months have softened investor interest. But CC Zhuang, Qunar co-founder and chief executive, said the market conditions don't bother him.

"We are not thirsty for the money," he said in an interview. Qunar wants to list in the U.S. because it is a "great branding event."

The company, which Mr. Zhuang said is profitable, hasn't identified specific acquisition targets yet but wants to be prepared if an opportunity comes up to expand its business. He declined to say how much Qunar hopes to raise.

Founded in 2005, Beijing-based Qunar provides a China-focused search engine for airline, train, hotel, and tour packages and user discussion forums on its website, a different model than older online travel companies in the market, such as Nasdaq-listed Ctrip.com International Ltd.

Ctrip, much like a traditional travel agent, earns revenue primarily from commissions on flight and hotel bookings. It processes many of its bookings offline, such as through call centers, requiring the company to employ thousands of customer-service personnel.

Qunar, which has 800 employees, currently gets 51 million unique visitors per month, according to Mr. Zhuang. He said it earns 80% of its revenue from advertisements tied to its travel search engine and 20% from other types of advertising and commissions on travel deals. He declined to disclose the company's revenue figures.

Qunar hopes to be "a one-stop shop" for travelers, Mr. Zhuang said, in a market where most bookings still don't involve the Web. To that end, the company has launched a number of travel search and booking products, including coupons for 30% to 60% discounts on hotel stays, a service to help travelers find last-minute deals and services to help users manage their itineraries. Some of the services are similar to offerings by U.S. companies Travelzoo Inc. and Priceline.com Inc. Like those website, Qunar targets budget-conscious travelers, he said.

Over the next year, the company will also invest in expanding its mobile products, which currently include applications for Apple Inc.'s iPhone and iPad as well as Google Inc.'s Android operating system, the executive added.

Baidu said in June it would invest $306 million in Qunar. It didn't specify the size of its stake but said the move made Baidu the company's majority shareholder. It also said Qunar would continue to operate as an independent company while cooperating with Baidu in travel-search services.

Mr. Zhuang said Baidu isn't involved with Qunar's operations but that the company has seats on Qunar's board of directors. The companies are working jointly working to develop products that help travel companies conduct transactions online. "Within three years, more than half of" travel bookings in China will be done online, he said.