Those who missed out on the widely popular Chinese Initial Public Offering (IPO) Baidu Inc., which occurred in 2005, will get a second chance to invest in a Baidu-related IPO during 2012. Baidu’s majority-owned travel website, which is known as Qunar.com Information Technology Co. (Qunar), is planning the Qunar IPO for 2012. Baidu and Qunar are hoping to ride the wave of successful Chinese Internet IPOs that have occurred over the past couple of years in the United States to boost the prospects of the Qunar IPO.
Qunar was established in 2005 as a travel search engine that provides airline and train tickets, hotel rooms, and tour packages. In addition to its retail travel services, Qunar offers deals for group travel arrangements and user discussion forums on its website that focus on travel topics to help users make travel decisions.
Most of the Qunar’s revenues are generated from cost-per-click travel ads and display ads that appear on the site. Qunar offers travel booking information that is not limited to a specific travel vendor or vendors, which allows users to review a wide variety of travel options. Qunar users then make travel reservations directly with the vendors, with Qunar earning a referral fee. According to Qunar management, the company broke even in their 2010 fiscal year and their sales more than doubled during 2011. Qunar management is not currently providing a timeframe for the Qunar IPO.
For the same reason that most Chinese business opportunities creates a buzz on Wall Street, the enormous expected growth in the Chinese travel industry this decade has generated interest in the Qunar IPO. Overall travel revenue in China is predicted to increase from 1.5 Trillion Yuan in 2010 to 5.5 Trillion Yuan in 2020, which is over $870 Billion United States Dollars. That translates into a 14 percent annual growth rate for the Chinese travel industry. With Baidu’s backing and its dominant market position in China, Qunar should be able to capitalize on the expected growth in the Chinese travel market to grow revenues and earnings substantially over the coming decade, which bodes well for the Qunar IPO.
To stay ahead of the competition, Qunar is the first travel website to make mobile travel information apps available to Chinese consumers, which the company claims has already attracted greater than seven million users. A niche they can highlight during the Qunar IPO road show. Qunar mobile travel apps provide users constantly updated flight and train information and schedules, and provide alerts regarding tourist attractions that are located nearby.
The Qunar IPO offers an opportunity for investors to gain exposure to the fast growing Chinese economy through an investment in a company that is expected to make money in the fast growing Chinese travel industry.
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