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Will China’s Booming Travel Industry Help Qunar’s Revenues?

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Qunar’s revenue

For 4Q15, Qunar Cayman Islands’ (QUNR) revenues grew to $200 million, a 149% YoY (year-over-year) growth compared to 4Q14 revenues of $174 million. Quarter-over-quarter, revenues were almost flat.

For 2015, revenues had a 137% YoY growth to $644 million, compared to revenues of $566 million in 2014.

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Booming China travel industry

In 2014, China’s online bookings crossed $30 billion, a little higher than Japan’s $28 million. In 1Q15, it grew by 50%. The online travel industry in China is expected to continue its double-digit growth for the next few years. According to iResearch, a China-based research firm, the online travel markets in China will reach $75 billion by 2017. Phocuswright, a travel market research company, pegs it at a similar level.

Despite China’s slowing economy, travel and tourism continue to remain buoyant. This is due to China’s shift from an investment-based economy to a consumption-based economy. Its growing middle-class population and increasing disposable income are also added advantages.

Other OTAs, including Ctrip.com (CTRP), Priceline (PCLN), and Expedia (EXPE), will benefit from China’s growth. You can gain exposure to the Chinese OTA market by investing in the KraneShares CSI China Internet ETF (KWEB).

Outbound travel to contribute

The boom in Chinese tourism also brings healthy growth in outbound tourism with growth across both the air and hotel segments. Chinese travelers are among the top contributors to global tourism, and their numbers are expected to surpass 160 million by 2018. Another tipping point is China’s per capita income crossing the $8,000 mark. This has led to significant growth in international travel in countries such as Japan and South Korea.

QUNR is also expected to benefit from this tremendous growth, given its huge flight offering and hotel networks.

In the next part of the series, we’ll look at Qunar’s key metrics and what they tell us about future growth.

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