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In an end of the year letter to shareholders aimed at calming their fears about an increasingly competitive market in China, an official from Chinese booking site Qunar says that the metasearch model isn’t viable in the mobile era.

“Much like, we have our roots in metasearch, but directing leads to other sites is NOT a winning proposition in the mobile age,” writes Yilu Zhao, Qunar’s chief strategy officer.

Founded in 2005, Qunar began as a flight metasearch site, directing consumers to airlines for bookings. But as Qunar began offering hotel search, it developed an SaaS platform that enables travelers to complete their bookings within Qunar apps without having to navigate to the hotel site, a process that often led to the loss of a booking.

“In anticipation of the mobile potential, we developed SaaS, and then when China went from offline to mobile in 2014, we fully embraced the seismic shift,” Zhao writes. “Our mobile stats, which many of you are familiar with (55% of hotel volume, 43% of flight volume and 40% of revenue in Q3 2014), is a result of our early determination.”

Tacit Endorsement?

Zhao’s statements about metasearch come as many metasearch players, including TripAdvisor, Hipmunk, Skyscanner, Trivago, Dohop and others are implementing in-app bookings or are in the process of doing so.

While the majority of these sites’ bookings still take place using the classic metasearch model in referring consumers to third-party sites to complete the booking, there could be a tipping point at some juncture when metasearch companies adopt in-app bookings as the norm.

To be sure, Qunar still plays in metasearch for international hotel bookings, but uses its SaaS platform for domestic hotel bookings.

Competition Not Increasing?

Quant’s letter to shareholders [embedded below] follows a trip by several officials to New York City earlier this month, and is clearly designed to ease shareholders’ concerns that Qunar might be adversely impacted by an increasingly competitive online travel market in China involving players, including Ctrip, eLong, Alibaba and others.

Zhao seeks to counter the proposition that competition in China, including deep discounting and branding campaigns, is on the rise.

“Yes, there has been a lot of chatter about intensified competition in both the media and earnings calls in our industry, Zhao writes. “Coupon. Branding campaigns (we do minimal). Big sales staff (we stayed on track and added small numbers in 2H2014). Inferring from these phrases, investors naturally think about lack of visibility and value destruction.”

In contrast, Zhao argues that the online market in China has been very competitive over the years and the current climate isn’t any different.

“What is missing here, however, is a primal truth, which is, competition has always been intense. Not more so, not less so, and we stay on our course.”

Increasing Investment

Investors and pundits may not be convinced by Qunar’s arguments. While the Chinese online travel market indeed has been highly competitive for years, what can’t be denied is that there is increasing investment into various players. For example, the Priceline Group invested in Ctrip, Expedia pours resources into a money-losing eLong, and Alibaba just completed an IPO and rebranded its travel offering as Alitrip.

Zhao of Qunar argues that the company has a technology and cost advantage over its competitors, and is in a good position.

“For years and years, we have competed in a field with large incumbent players,” Zhao writes. “They enjoyed larger scale, bigger brand name, deeper war chest, and the stature of being publicly listed. We had something different — our grit and our starry-eyed vision that technology is the key. We have the firm belief that Chinese consumers and merchants are smart, and we want our technology to be as smart as our constituencies.”

It all stacks up to make for a very interesting 2015 with ample competition and perhaps further consolidation.

Qunar Invests in Travel Agency Network

In other news, China Travel News reports that Qunar has invested in one of China’s largest travel agency networks, Travelling Bestone. Qunar hasn’t disclosed the amount of the investment, although the report states that this is Qunar’s “largest investment yet,” making Qunar the second largest investor in the offline travel agency.

The investment will further Qunar’s B2B ambitions, according to the report.

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Photo Credit: Yilu Zhao, Qunar's chief strategy officer, wrote to shareholders that competition in the online travel market is not increasing. AVCJ TV