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What Do Key Metrics of Qunar Suggest About Its Future Growth Potential?

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Mar. 15 2016, Updated 9:09 p.m. ET

Flight reservations

Qunar Cayman Islands (QUNR) earns the highest revenue from flight reservations compared to other online travel industry majors such as Priceline (PCLN), Expedia (EXPE), and Ctrip.com (CTRP). As of 3Q15, flight reservations formed 45% of QUNR’s revenues.

This segment has grown by ~90% in the last three quarters. It’s expected to continue this trend given the high growth in the second largest domestic aviation market. Although business travel is expected to be affected by the larger economic slowdown, it will be more than offset by the leisure travel demand.

HSBC expects passenger volumes to grow by 12% in 2016, lower than the 14% growth from 2010–2014 but double the expected GDP (gross domestic product) growth.

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Hotel reservations

Hotels come in a close second to flight reservations. Hotels form 42% of QUNR’s revenues as of 3Q15. In fact, it’s Qunar’s fastest growing revenue segment. Hotel revenues have grown by 254% in the first three quarters of 2015 compared to 2014. High volume growth and a growing hotel network will continue to drive growth for the segment.

Advertising

Advertising is another fast-growing segment. For the first two quarters, advertising revenues increased an average of 30%. In the third quarter, this doubled to 60%.

Outlook

Growing volumes from the flight and hotel segments will ensure a higher traffic flow to Qunar’s site, which in turn will help boost advertisement revenues.

Although flight reservation volumes will continue to grow, Qunar expects hotels to drive its next leg of growth.

Key metrics for Qunar suggest a good growth possibility ahead. Investors can gain exposure to the Chinese OTA (online travel agency) market by investing in the KraneShares CSI China Internet ETF (KWEB).

In the next article, we’ll look at why Qunar could be trading profitability for revenue growth.

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