Tuniu Rising High on Luxury Travel

According to iResearch, the Chinese online travel market is expected to grow from $46 billion in 2014 to $75 billion in 2017. A more conservative estimate for the market was released by PhoCusWright, which estimates the market to be worth $30.3 billion by 2015 and that it will account for 24% of China’s travel bookings by 2015.

Tuniu’s Offerings

Besides regular travel companies, leisure travel companies are also resorting to online channels to attract more tourists. Nanjing, China-based Tuniu (Nasdaq: TOUR) is a leading online leisure travel company in China. They offer their customers a wide selection of packaged tours, including organized and self-guided tours along with travel-related services through an online platform. iResearch had ranked them the leading player within the online organized tours market in 2013 on the basis of transaction volumes conducted on their site.

Tuniu began selling luxury tour packages online in 2007 and since then have sold more than 3 million tours. Their tour inventory includes tours from more than 3,000 travel suppliers with tours spread over 70 countries and domestic options within China. They have a listing of more than 100,000 each of organized and self-guided tours and tickets to more than 1,000 domestic and overseas tourist attractions.

They continue to add to their inventory through tie-ups and recently announced an agreement with China Three Gorges Project to become the exclusive online partner for reservations to visit the Three Gorges Dam. Additionally, both Tuniu and Three Gorges will work together to launch a joint targeted marketing campaign to promote this new offering to leisure travelers.

Tuniu has become a reliable source of information and leisure travel services through its web- and mobile-based sites that allow for simple, user friendly interactions. They also offer access to images, reference guides, and more than 900,000 customer reviews about the tours. Additionally, they have also established a support services network that helps tourists manage their bookings.

Tuniu’s Financials

Tuniu’s offerings have helped them report significant growth in recent years. Net revenues have grown 60% annually over the period 2011 through 2013 to RMB 1,949.7 million (~$322.1 million) in 2013. During the same period, their net losses have reduced from RMB 91.9 million (~$15.2 million) in 2011 to RMB 79.6 million (~$13.2 million) in 2013, respectively.

For the recently ended quarter, Tuniu saw revenues grow 85% over the year to RMB 716.4 million (~$115.5 million). Net loss increased to RMB 113.6 million (~$18.3 million).

By segment, revenues from organized tours grew 86% to RMB 696.7 million (~$112.3 million). Revenues from self-guided tours were up 62% to RMB 16.5 million (~$2.7 million) and other revenues grew 42% to RMB 6.8 million (~$1.1 million)

Among other metrics, total number of trips from organized tours, excluding local tours grew 99% over the year and total number of trips from self-guided tours increased 105% over the year. Mobile traffic now accounted for 35% of total online traffic and 30% of total orders during the quarter.

iResearch estimates the share of online leisure travel market as a percentage of the overall leisure travel industry in China to grow from 7.7% in 2013 to 13.2% in 2016. Surely, there is huge potential for growth of Tuniu, which has already established itself as a leader within the segment.

Till early 2014, Tuniu was venture funded with over $60 million in funding from investors including DCM, Gobi Partners, Sequoia Capital, Highland Capital Partners, and Rakuten. In May this year, they sold 8 million American Depository Shares at $9 each to raise $72 million. Their stock is currently trading at $18.58 with a market capitalization of $663 million after having touched a high of $24.99 earlier last month.