Interview: Qunar’s CEO on Building China’s Largest Travel Booking Site From Scratch

Amidst all the talk about a potential $10 billion mega merger with Ctrip, you have to visit Qunar’s headquarters on Suzhou Street in the Haidian District of Beijing to fully appreciate why Qunar co-founder and CEO Chenchao “CC” Zhuang likes his competitive position and “prefers to manage the largest online travel company in China.”

Namely, Qunar, that is.

On the 17th floor, and parts of seven other floors in the building, product managers and engineers sit tightly packed in seemingly endless rows of desks, eyes intently focused on their computer screens in an atmosphere that is, at turns, serious, informal and fun.

Youngish employees clad in jeans or bright-yellow slacks, and work boots or sneakers with splotches of purple, orange or pink, saunter in and out past the reception desk while would-be employees seeking to join Qunar’s ranks of more than 2,500 fill out job applications, pens in hand, in the lobby.

CEO CC Zhuang walks into a modest conference room overlooking Suzhou Street, talks about the problems he encountered in 2005 when he sought to build a Kayak for China, and deftly dodges answering the big question of the day about a potential merger with Ctrip, but you can read plenty between the lines.

“I prefer to manage the largest online travel company in China,” Zhuang says. “There is such a long run. We will build the system matrix for Chinese online travel. There are so many exciting things for us.”

Qunar, with help from referrals, investment, and technology-sharing from controlling stakeholder Baidu, China’s largest general search engine, has the country’s largest traffic numbers in travel by far, dwarfing Ctrip and everyone else.

When pressed about a potential marriage between Ctrip and Qunar, Zhuang has an answer. “I won’t mention about mergers. I will be CEO of China’s largest travel company, which you can explain many ways,” Zhuang says, laughing. “For sure, Qunar itself will grow to be the Chinese largest online travel company by ourself or we are not against any kind of M&A in order to speed our process.”

Qunar started out as a travel metasearch player, but has evolved over the last three years into hybrid travel search and booking site with a software as a service (SaaS) platform to bring online tens of thousands of Chinese hotels (60,000 signed on in 2013), and soon tours, activities, and restaurant providers.

Zhuang says Qunar started out with the idea of becoming a metasearch site, the Kayak of China, as he puts it, but found there was so little infrastructure — from airline and hotel databases to online booking capabilities — that Qunar had to build almost everything from scratch.

There were also few entrenched players in metasearch or property management systems, for example, and that created both challenges and opportunities, Zhuang says.

“In China, you can be the all-star player because there is a lot of infrastructure shortage,” Zhuang says. “In many cases, we don’t have a player. It’s empty. It’s not there.”

Qunar’s vision is to become the “end to end” matrix/solution for online travel in China. It already has the largest traffic, and is the greatest number of hotel reviews, including both professional and user-written critiques, Zhuang says.

Channeling Room 77

Among the new products that Qunar is testing is the booking of individual rooms at small hotels, and distributing hardware to the properties so Qunar would be able to gauge for its customers which specific rooms have the most sunshine and the least noise, among other metrics.

The project, which is at a very early stage, resembles the sort of individual room booking and metrics that U.S. hotel search site Room 77 tried and largely abandoned after meeting much resistance from hotels.

“It’s very small scale for testing,” Zhuang says of the individual room booking and room-metrics hardware distribution. “But, I think that’s the future.”

Destination Services

Jenna Qian, who heads Qunar’s corporate communications and investor relations units, says the company is also making a big push this year to expand beyond third-party partnerships and to supplement them by establishing direct relationships with destination activities companies, including tours, attractions and dining, and to make these available in Qunar’s mobile apps.

Qunar has a sales and marketing workforce of some 1,100 people, and when they go into big leisure markets to contract with hotels and provide Qunar’s SaaS solution for online hotel bookings, the company plans to extend the product to destination activities, as well, Qian says.

Qunar wants to be able to offer the broadest array of travel products, and its combination of search and booking technologies can help deliver this comprehensiveness in a market that has what she describes as “hundreds of thousands” of online travel agencies, and 50 different price points for individual hotels because of the wide number of providers.

Pricing parity for hotel rates, which is big in North America and Europe, doesn’t exist in China, Qian says.

What Kayak and TripAdvisor Have Learned from Qunar

While Zhuang acknowledges that he initially sought to build the Kayak of China starting in 2005, he argues that Qunar’s SaaS system to bring online booking to the largely offline market was in place before Kayak started doing facilitated bookings of flights through OTAs, and that’s something that TripAdvisor is just getting around to doing for hotels in 2014.

Although there might be a counter-argument from Kayak, Zhuang argues that Qunar recognized the opportunity in mobile before just about everyone else, too.

On the mobile front, Qunar and Baidu recently co-developed voice recognition technology to assist travelers search for flights and hotels. Zhuang says it is working well for flights, but needs improvement on the hotel side of things.

Qunar executed an IPO in November 2013, raising $167 million, and saw its mobile revenue and total revenue jump 390% and 74%, respectively, in the fourth quarter of 2013, although the company continues to pile up losses.

That’s OK, Zhuang says, because Qunar’s investors are patient and in it for the long term.

With such a huge opportunity, Qunar is focused on the China domestic and outbound travel markets,  and doesn’t plan to address inbound travel for years, Zhuang says.

When you are trying to create an end-to-end solution for China, from trip-planning and search to booking tours on mobile devices when the traveler is on the go and already in the destination, there is a ton of work to be done, and Zhuang is excited about what he describes as trying to “leapfrog” the competition.

For now, reading between the lines, Zhuang seems content to have Qunar try to do that on its own, without the help of rival Ctrip.