JOURNAL OF CHINESE ECONOMICS, 2014 Vol. 2. No.

3, pp 38-47
http://journals.sfu.ca/nwchp/index.php/journal

The Analysis of Business Model Transformation

Case Study on Qunar1
Jingshu Yao 2, Ting Liu3, and Hong Zheng4

Abstract: The business model of online travel website mainly includes Online Travel Agent
(OTA), Vertical Search, User Generated Content. Qunar is the third party online travel website
focusing on vertical search and price comparison. However, in recent years, its business scope
has extended to the OTA fields. A business model combined by Vertical Search and OTA
became arguably the most controversial in E-tourism industry. Based on studying the Qunars
founding background and the online tourism development statusthis paper analysis the
transforming motivation from the aspects of consumers demand, enterprise strategy
development, and merchant marketing. For consumers, the motivation is to track the quality of
services. For enterprises, it is long-term corporate planning and the layout. For merchants, it is
providing more marketing channels. In terms of straight economics, the effects of Qunars
transformation include the diversity of profit model and a rapid income growth. This study
explores the business model of E-tourism enterprises, which is flexible and comprehensible.
This study focuses to the core expertise while being sufficiently diversified. Qunar is the
benchmarking enterprise of China. The dynamic research of its business model is meaningful to
the relevant study and other E-tourism companies.

Keywords: Qunar vertical search, price comparison, business model transformation

JEL Classification: H32, L11, L21, O31

1. Introduction

As an Internet based company founded in 2005 and through eight years development, Qunar5
has become the leading tourism search engine in China. Qunar advocates the freedom,
independent, and comfortable travel experiences. Its slogan is Make Your Travel More
Intelligent. It pursues the goal to let numerous Chinese tourists have the ability to make their
own decisions. Qunar promotes the development of China's online travel industry.
There is no doubt that Qunar is the best in the field of tourism product price comparison.
The search volume of Qunar has reached 1.8 billion in 2012 and 1.4 billion in the first half of
2013. Qunar has the highest proportion website in Chinas online travel industry. In 2012, the
Mobile Applications of the Internet Products (App) download counts of Qunar has exceeded
100 million, ranking first in similar products6. Figure 1 shows the E-tourism market shares
1
This research is funded by Beijing Tourism Development Research Project.
2 Graduate student, International School of Business, Beijing International Studies University, China. E-mail:
jingshu.yao@163.com
3
Graduate student, International School of Business, Beijing International Studies University, China. E-mail:
1248609442@qq.com
4
Associate professor, School of Tourism Management, Beijing International Studies University, China. E-mail:
statistics_0921@126.com.
5
Official website of Qunarhttp://www.qunar.com/
6
The App of Qunar Has Downloads Ten Billions Times, October 18,2013, see http://www.traveldaily.cn/article/74384.html
 Yao, Liu, and Zheng 39

according to App. The distribution proportion during the first three quarters of 2013, Qunars
achievements are conspicuous. The Qunars enterprise culture is very popular among younger
generation. However, in recent years, the development model of Qunar is arguably the most
controversial in both industry and academia.

Figure 1The E-tourism Companies market of App distribution proportion

Data source: http://www.sootoo.com/content/459241.shtml

This article proceeds as follows. The next section is literature review. Section 3 describes
the background of Qunars business model transformation. Section 4 explores the motivation of
Qunars business model transformation. Section 5 examines the economic effects of Qunars
business model transformation. Section 6 concludes and discusses.

2. Literature Review

According to the China National Knowledge Infrastructure (CNKI), the current 308 papers
about Qunar can be divided into four aspects: (1) The business model research of Qunar. Cheng
Mingjie (2011) and Wang Mingyu (2013) both pointed out that Qunar is the third-party vertical
search platform and its profit model is Cost Per Click (CPC). Xi Xing (2011) defined the
business model of Qunar as the Google in tourism industry. Chen Yifeng (2006) introduced the
technology of vertical search. Wang Linna (2007) also admitted the advantage of vertical search
of Qunar. (2) The innovation of Qunar. Jiang Hong (2011) introduced the cooperation between
Haihang and Qunar at E-commerce. Wang Jing (2012) studied what role Qunar playing in
tourism destinations marketing. (3) The research of marketing method. Zhang Ning and Deng
Pan (2010) studied the adverse marketing Consumer to Business (C2B) in hotel, which is
Qunars new marketing method. They also studied the psychological effect to consumers and
introduced the innovation at Internet marketing, such as micro marketing. (4) The comparison
study. Cheng Tuo (2014) and Duan Muhai (2014) focused on the differences of business models
among Qunar, Ctrip and Elong 7 . Li Ling (2012) pointed out the different
information dissemination ways between Qunar and Ctrip. About the future development of
Qunar, Su Juan (2010) and Wang Jiewen (2011) both insisted that the core business of Qunar is
the remarkable vertical search capability in tourism products. They thought Qunar should make

7
Ctrip http://www.ctrip.com/ and Elonghttp://www.elong.com/ are two typical Online Travel Agencies in China

40 Analysis of Business Model Transformation

full use of it and play the role as the information providing website.
The previous literatures do not pay attention on analyzing why Qunar expends its business
scope to Online Travel Agent (OTA) fields and launches the Total Solutions System (TTS)8, nor
the effects of its business model transformation.

3. The Background of Qunars Business Model Transformation

According to the latest data, Qunar serves 50,000 domestic direct-sale hotels, and exceeds Ctrip
and Elong9, which are well established online travel agents. That poses a threat to the industry
giants. Since May 2011, Qunar got into the Bed and Breakfast (B&B)10 market, which was
ignored by Ctrip and Elong. In recent two years, Qunar has sped up its collaboration with
direct-sale hotels and the number of this kind of hotels increases rapidly. The scope of
direct-sale hotels ranges from economical hotels to high-end hotels at homeland and abroad.
Many industry figures blame that Qunar deviates from its role as the third party platform
online travel website of vertical search and price comparison.
In April 2013, nearly ten OTAs, including Ctrip, Elong, Feiren, Mango, and Zhuna
withdrew their hotel service products from Qunar, since Qunar launched the TTS to the hotel
business. The giant OTA thought that under the TTS system, all of the hotel reservations could
be done at Qunar. With all suppliers hidden, the website traffic and consumers that belong to
the supplier have transferred to Qunar. However, the officials of Qunar respond that TTS model
is conducive to standardize and unify the agents, and improves service quality. It attracts more
customers booking at Qunar, and at the same time, the agents on this platform will eventually
benefit.
As a typical third party website focus on vertical search and price comparison, Qunar
vigorously gets into the direct-sale market and launches the TTS that has sparked questions.
Some scholars point out that Qunar should play the role as referee to judge the player (point
to the agents of Qunar) who provides the products, but now Qunar also gets involved in the low
price competition. It plays the role both as referee and player, which obviously violates the
rules of the industry. Others insist that: Qunar wants to become an OTA motivated by
interests. There are also a lot of people believing that Qunar will build itself as the combination
of Google and Expedia in online travel industry. Facing with the disputes, the academia and
the industry cannot help to ask: Where does Qunar want to go?
To answer this question, its better to start with the original intention of Qunar. Zhuang
Chenchao, the CEO of Qunar, explained that Chinese consumers faced with many unsolved
problems when choosing a travel product, I believe that a platform focusing on information
integration will be valuable.11According to the description, we can get the information about
the Qunars position. First of all, Qunar was founded to chase consumer desire. Second, Qunar
would help tourists to make their travel decision. Last but not the least, Qunar plays a role as a
platform focusing on information integration. Consequently, Qunars mission is to build the
one-stop third party online travel platform based on consumer desire.
8
TTS model is Qunars pioneering trading system breaking the traditional model of vertical search website.
http://www.51766.com/xinwen/11026/1102685858.html
9
Qunar Controls More Than Ten Thousands Hotels, October, 11,2011,
fromhttp://news.xinhuanet.com/overseas/2013-09/11/c_125366784.htm
10
Bed and Breakfast, one kinds of Hotels, which is running by individuals, more personalized than other kinds hotels
11
The Story of Qunar, February 3, 2013fromhttp://www.franchiselaw.cn/Details.asp?id=19821

 Yao, Liu, and Zheng 41

4. The Motivation of Qunars Business Model Transformation

4.1 Satisfying customers demand

From the aspect of cross session, the online travel industry chain can be divided into four parts:
(1) the upstream suppliers, including hotels, airlines, catering enterprises, leasing companies,
attractions, etc; (2) the middle direct-sale agents, including online trading platform and travel
agencies, etc; (3) the downstream internet media marketing platform, including the
comprehensive search platform, social network websites, vertical search platform, etc; (4) the
ending consumers. The online travel industry chain is shown in figure 2. Qunar belongs to the
third part, which is the downstream network-marketing platform.
From the longitudinal view, the online travel industry has passed through four stages12: The
first stage is from the late 1990s to the beginning of the 20th century, which is the cultivation
period of online travel industry. The core business model mainly depended on commission
mode at the airline and hotel booking business, and a few online agents began to emerge. The
second stage is from 2004 to 2006. In this period, the online travel market continued
to blossom, online travel agents provided multi-products and multi-prices. The third-party
vertical price comparison platform started to emerge. The third stage is from 2007 to 2009, with
the diversified demand of users, services such as online scenic booking, travel route design and
travel experience sharing come out. The websites providing these services were emerging. The
fourth stage is from 2010 to 2013, large electronic companies invested in online travel industry.
From the point of view, Qunar appears in the second stage, as the platform providing vertical
search and price comparison. The online travel industry chain can be seen in figure 2.
After analyzing of the chain structure and development feature of the online travel industry,
we can draw a conclusion that Qunar is a product of market and its business is decided by
end-users. Launching of TTS model in hotel business also considers more about the user
experience. In the pattern of TTS model, all of the booking processes are done on one network
interface, which avoids multiple hops between OTA and Qunar. Future more, TTS system
centralizes user information, which makes Qunar guarantee users rights. The difference
between CPC and TTS system can be illustrated by Figure 3.

12
Alex (2012), The Report of China Online Travel E-Business Development, 34.

42 Analysis of Business Model Transformation

Figure 2: The online travel industry chain

Figure 3: The comparison of CPC and TTS system

4.2 Striving for more resources

The one-stop service platform provides comprehensive process travel service, from generating
travel desire to sharing experience after the travel. To build such a one-stop platform, Qunar
needs to integrate the resources on tourism industry chain and other relevant online travel
companies, such as insurance companies as well.
According to The Project Prospectus of Qunar, released in November 2013,the consumer

 Yao, Liu, and Zheng 43

resources of Qunar includes Air China, China Eastern Airlines, China Southern Airlines,
Hainan Airlines and other 17 domestic airlines; CATHAY PACIFIC, Dragon Air, Lufthansa,
United Airline and other 11 international airlines. It also includes hotels, such as
Intercontinental, Marriott, super 8, Jinjiang, Home, 7-Days and other 53360 hotels at homeland
and abroad. It covers Taikang online, Huatai, Pacific and other 113 indirect customers. It also
has connections with online travel agents, such as Accor, Ctrip, Elong, Feiren and other 1240
OTAs both in China and abroad.
With huge customer resources, Qunar establishes itself as a strong vertical search and
price comparison platform, which provides consumers with rich source of travel information.
The real-time monitoring data indicates that, by November 2013, Qunar has covered 3300
domestic flights, 43000 international flights, For hotel reservation business, it covers 380
websites, 71360 cities, 468000 hotels. For vacation business, it connects 1380 travel agencies
and 104608 tourism routes. In addition, the website provides ten thousands kinds of electronic
tickets, and nearly 33000 group purchase products.

4.3 Providing a platform for marketing

Lets make a comparison between Qunar and Ctrip, which can illustrate the role of Qunar. From
the point of industry positioning, Qunar is the top third party online travel vertical search and
price comparison platform, while Ctrip is the top online travel agency. From the point of
business model, the former is technology-oriented online search platform, while the latter is the
online travel agency. From the point of earning model, Qunar primarily relies on CPC and TTS
mode, while Ctrip is a commission mode. From the relationship of the two, Qunar is an OTA
integration platform, while Ctrip is a customer of Qunar, and Ctrip is an OTA only.
Qunar adheres to the strategy of opening-up, which brings diversification. The hotel
groups, individual hotels, airlines, cruises, scenic spots take Qunar as a direct-sale platform.
The OTA and other distributors take Qunar as a marketing platform. Qunar cares whether
online tourism resources can be integrated fully and available to consumers. For example,
taking group-buying, Qunar cooperates with hotels directly when the group-buying mode were
not accepted by OTA; however, when it does, Qunar introduces the group-buying products
provided by Elong and Ctrip, playing the role as the marketing platform.

5. The Economic Effects of Qunars Business Model Transformation

5.1 Diversified profit model

Different business model of online tourism companies has different profit models. The
corresponding profit models of three typical E-tourism website are listed in Table 1.

Table 1Business model and profit model of some typical E-tourism website
Business Model Typical Case Profit Model
OTA Priceline/Expedia/Ctrip /Elong Agent commission/Advertising/Wholesale
Vertical SearchKuxun Qunar Advertising (CPC)
User Generated Trip advisor/Mafengwo Advertising (CPM)
Content (UGC)

44 Analysis of Business Model Transformation

Table 1 shows the original profit model of Qunar is advertisingmore specificallyCPC

advertising. As Qunar extends its business to hotel direct marketing and launches the TTS
transaction model, Qunars business has been diversified. It includes the agent commission,
CPC and Cost Per Mille (CPM)13.

5.2 Rapid revenue growth

The E-tourism market potential is huge. Recently most companies choose to sacrifice
short-term profit for long-term investment. Leading this movement, Qunar has
aggressively increased investment for the expansion on market shares. The revenue growth
well represents the market extension of Qunar. According to the 2014 second-quarter earnings
reports of E-tourism websites, the gross income increase rate of Ctrip is 38%, Elong is 24%, and
Qunar is 127%. Qunar also gets the most visible and fast growth in hotel and airline ticket
booking markets. Figure 3 shows the gross income increase rate of three leading E-tourism
website during 2013~2014.

Figure 3: The gross income increase rate of three leading E-tourism website

Data source:http://www.huxiu.com/article/40701/1.html

6. Summary and Suggestions

Business model transformation does not mean to abandon the original format, but would have
constantly supplement and fulfill the needs of the present. The transformation based on the
core competitiveness can make sure it is not easily imitated and surpassed by competitors.
Qunars business model has advantages, which is the key to keep core competitiveness in
the highly complex and varied markets. No matter what Qunar wants to become, the specified
role as the third party vertical search and price comparison, or the diversified player as
Baidu14+Taobao15, Qunar must clearly realize that its core competence is still based on the
ability to integrate resources and provides a qualified marketing platform for customers. With
that context, Qunar can seek opportunities for further development, such as expanding hotel
13
Cost Per Mille (CPM) is one kind of internet advertising charging models.
14
www.Baidu.com
15
www.taobao.com

 Yao, Liu, and Zheng 45

direct-sale business as the supplement, creating platform function as social network, comments
platform and travel guides.
To cooperate with widespread enterprises and seek common development opportunities, on
November 1st, 2013, Qunar went IPO and was listed in the NASDAQ in the United States.
Choosing Baidu as the largest shareholder is a logical and sensible decision, which combines
the superiority of the two. Large user base of Baidu provides more network traffic for Qunar
and the professional service of Qunar makes these scattered users more centralized. When both
of these two grasping the users character, they grasp market developing trends.
Qunar is the benchmarking enterprise of China E-tourism industry, the dynamic research
of its business model is meaningful to relative study and other E-tourism companies. Firstly, in
terms of academic research, it makes contribution to the future study of the online travel
companies business models. It reminds scholars that it may be unreasonable to define a fixed
model for some website. The business model of E-tourism enterprises is flexible and
comprehensible. It must focus on core expertise while being sufficiently diversified. Secondly,
in terms of practice, it helps the online travel companies to realize the development trend of this
field and take effective measures. Last but not the least, it also gives some tips to other indirect
related companies to seek investment opportunities in the online tourism field.

46 Analysis of Business Model Transformation

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