Specialized travel sites in China have emerged as a hot sector for funding, the latest proof being a recent $15 million financing of travel search provider Qunar.com in Shanghai as well as a just finalized Series A investment by Keytone Ventures for Travelzen.com, an innovative travel site that offers bookings for Greater China and payment in multiple currencies.
Qunar’s third-round financing was led by GGV Capital, with participation from prior investors GSR Ventures and Mayfield Fund, which provided the series A funding in summer 2006, as well as Tenaya Capital (then Lehman Brothers Venture Partners), which was involved in a November 2007, Series B round. With the new financing at Qunar, GGV managing partner Jixun Foo joins Tenaya managing director Ben Boyer and GSR managing director Richard Lim on the Chinese startup’s board of directors.
The travel market has attracted considerable startup action and venture financings and early positions have been taken, most notably by NASDAQ-listed Ctrip.com, which, according to Analysys International, commanded a 52 percent market share as of the second quarter of 2009. Business for such sites has continued to boom as the increased standard of living among Chinese consumers sees growing demand for leisure travel. The online travel booking market in China expanded by 13 percent in the second quarter of 2009 compared with the same period last year, Analysys International figures show.
Qunar differentiates its business model from rivals by focusing on online vertical search for hotels, flights and travel packages, explained CEO and co-founder Fritz Demopoulos. It also differs from competitors by selling advertising on the site, but not handling the travel transactions or bookings, he added. Moreover, unlike Ctrip, the market leader in the travel space with both online and offline bookings, Qunar is purely online.
Qunar’s CEO said ample opportunity exists for expansion of travel sites in China, despite a proliferation of contenders. He pointed out that the online component of travel bookings and services is still only about 10 percent of the market versus about 60 percent in North America and Europe. “In a sense, we have only started this race and it is going to be a long one,” said Demopoulos, who brings 10 years China Internet experience to the job, having most recently served as senior vice president of corporate development for gaming company Netease.com. He pointed out that in the U.S., Expedia was a “late starter but eventually rose to prominence.”
Other specialized sites vying for room in the travel sector are Tuniu.com, a reseller of package tours, which was funded by Gobi Partners in April 2009, and HUBS, an online hotel booking wholesaler that picked up backing in November 2008 from GGV and Matrix Partners.