Online travel giants Ctrip, Qunar move toward cooperation

Ctrip.com International Ltd and Qunar.com Inc, the two Chinese main tourism websites, which have been rivals for years, agreed to cooperate on Monday in order to enlarge their market share.

Ctrip.com, the largest online travel agency in China, became a vacation products supplier for Qunar.com, the Chinese leading travel search engine, whose largest shareholder is Baidu Inc.

"Travelers will be able to find all Ctrip.com's vacation products on Qunar.com in the future," said Peng Xiaomei, deputy president of Qunar.com.

The two companies are still negotiating further cooperation on hotel bookings and the air ticket business, she added.

The cooperation surprised the industry because Qunar.com tried to become an online travel distributor by launching its Total Solution service a few months ago - a move that was opposed by many domestic online travel agencies, including Ctrip.com.

The two companies even went to court over the issue.

Qunar.com sued Ctrip.com for allegedly deceiving customers and malicious business practices in 2011 and, in 2012, it accused Ctrip.com of defamation.

However, the commercial disputes did not stop the companies from cooperating when necessary.

"Ctrip is open to cooperation. Vertical searching is only complementary to the online travel business. It brings some traffic volume to us," Ctrip.com said in a statement.

Ctrip's operational income was 655 million yuan ($105 million) in 2012, down 39 percent from 2011. The lower income was attributed to stiffer competition among China's online travel agencies, pushing up the agency's expenses for sales and marketing in the year.

"Ctrip urgently needs to raise its income. The huge traffic volume from Qunar.com is attractive," said Wang Tingting, an analyst from iResearch Consulting Group, an organization focusing on research within China's Internet industry.

On the other side, Qunar.com also needs capable suppliers because it is only a search engine at the moment, he said.

The cooperation with Ctrip.com will also bring good financial performance to Qunar.com, which is preparing to list in the United States, he added.

But Qunar.com has to be cautious about the cooperation because its main suppliers may limit the search engine's transition into a travel agency in the future, some business insiders warned.

"The cooperation does not eliminate the dispute between the two companies," said Zhang Haijun, CEO of Kuxun.cn, a Chinese tourism website.

Qunar.com could become a powerful rival, if it supplies a reservation service directly, Zhang said, adding Qunar's Total Solution service also targets this business, although the service only focuses on the hotel business currently.

"Ctrip.com obviously cares more about the competition with current online travel agencies now, rather than potential competitors," he added.

Ctrip.com, which is listed on the Nasdaq stock exchange, received net income of 210 million yuan in the second quarter of 2013, up 76 percent year-on-year, according to a quarterly report released on July 31.

"The companies' new strategies are the main reason for its much better business," Wang said.