With China’s Travel Sector Possibly Depressed, What Will Qunar.com Do With Investment Money?

With worries that the new bird flu outbreak could constrict the Chinese travel sector, tourism company Qunar.com has plowed ahead and closed its latest investment round, gaining USD57 million from Baidu.com, Hillhouse Capital, and GGV Capital.

The three investors will each invest USD19 million in Qunar.com. The investments were decided in March 2013. However, the full valuation of Qunar.com has not yet been disclosed.

Chinese search engine Baidu and GGV Capital are both former investors of Qunar.com. In November 2009, GGV Capital invested USD15 million in the Chinese tourism website; while Baidu invested USD306 million for a stake of 62.01% in July 2011, making it a controlling shareholder of Qunar.com.

In recent weeks, a new strain of bird flu called H7N9 has killed more than 60 people. Some Chinese cities have suspended live poultry sales to contain the problem, and hotels and airlines are on the lookout for signs that travelers may spread the illness. When SARS affected China in 2003, hotels, trains, and airlines were all hit as tourists failed to travel and businesses closed.

Baidu’s investment in Qunar.com is reportedly because of two reasons. On one hand, Qunar.com’s business is close to Baidu’s core search engine focus; and on the other hand, from the financial investment perspective, Baidu hopes to gain profit from a possible IPO of Qunar.com. In addition, Qunar.com has a strategic meaning for Baidu. The Chinese search engine company expressed its interest in Qunar.com’s positive performance on mobile devices. According to Zhuang Chenchao, chief executive officer of Qunar.com, in 2013, about 20% of bookings on Qunar.com were completed via mobile devices.

However, this new round of investments may lead to the postponement of the company’s IPO. At the end of 2012, rumors about Qunar.com’s IPO spread widely on the Internet. Due to the depression of the American IPO market and the uncertainty of the Variable Interest Equity Entity structure, Qunar.com temporarily gave up the IPO plans. If the VIE issues are ever resolved, and if the markets look favorably again on the seemingly-dark accounting practices of Chinese technology companies, Qunar may push ahead with the IPO.