eLong warns of Baidu threat

PUBLISHED : Wednesday, 10 August, 2011, 12:00am
UPDATED : Wednesday, 10 August, 2011, 12:00am

Amid a drop in quarterly profits, online travel agency eLong has raised concerns about the potential negative market impact of rival Qunar's acquisition by mainland internet search giant Baidu.

Beijing-based eLong yesterday reported a 24 per cent fall in second-quarter net profit to 7.1 million yuan (HK$8.6 million), from 9.4 million yuan a year earlier, due to lower margins. That offset the company's 17 per cent growth in revenue to 139.1 million yuan, up from 118.9 million yuan the previous year.

Hotel reservations revenue, accounting for 70 per cent of total turnover, rose 22 per cent to 104.6 million yuan from 85.6 million yuan a year ago. But commission per room night fell 15 per cent year-on-year, mainly due to lower average daily rates last quarter compared to those during the 2010 Shanghai World Expo, the rapid expansion of budget hotels and greater use of eLong coupons.

Analysys International estimated the mainland's online travel market grew 28 per cent in the second quarter to 2.11 billion yuan, up from 1.65 billion yuan a year earlier.

With high expectations of steady demand from mainland travellers this year, eLong projected its third-quarter revenue to be up to 165 million yuan. CEO Cui Guangfu said eLong would closely watch developments linked to Baidu's takeover of Qunar, an online search service for tickets, hotels and tours.

Baidu, which had a 76 per cent share of the mainland's desktop internet search market last quarter, agreed in June to pay US$306 million for a majority stake in Qunar.

'Their proposed combination would lessen competition in travel-related search in China and create the opportunity for the abuse of market dominance by Baidu,' Cui said.

'We hope this proposed acquisition does not ... lead to favouritism for Qunar products.'

Baidu spokesman Kaiser Kuo said: 'User preference and user experience are the bottom line [for Baidu]. If Qunar delivers the highest quality results for travel-related search, user behaviour will make that clear.'


eLong's share of the mainland's online travel market in the first quarter

- Ctrip had 47 per cent of the market