Vntrip.vn's valuation reaches $45 million despite mounting losses

In 2016, Vntrip.vn, a startup of online hotel reservation, resonated when it successfully raised a $3 million investment from Alibaba's angel investor.

Besides, Vntrip.vn also announced a strategic partnership with Booking.com to become the first Vietnamese company to be granted access to Booking.com's worldwide hotel network.

After the successful calls for investments, the company quickly boosted the development of services and promotion activities. The company declared itself as the largest online hotel site and app in Vietnam, with the largest number of customers and the lowest hotel room rates.

To attract customers, Vntrip.vn also launched a variety of promotions and additional services such as free airport pick up and drop off.

Vntrip also said it has built up its network of over 11,000 hotels across the country after its partnership with Booking.com and Expedia.com.

In mid-2017, the company raised a $10 million investment from independent investors led by Hong Kong-based investment firm Hendale Capital.

Recently, Vntrip.vn announced that it has secured an undisclosed investment from Switzerland-based IHAG Holding in a round that sees its valuation rise to $45 million.

Contrary to the drastically increasing valuation, the business performance of Vntrip.vn is quite modest. The business results of Vntrip OTA, the operator of Vntrip.vn, showed that in 2016, its revenue only reached VND11 billion ($473,321) and it also reported a loss of VND31 billion ($1.3 million).

Officially launched in July 2016, in the last few months of the year, the company’s operating costs reached nearly VND38 billion ($1.6 million), of which sales expense accounted for the largest proportion. This figure meant that Vntrip OTA had spent lots of money on promotions to attract customers.

Similar to other startups operating in the technology sector, Vntrip OTA accepts losses to grab greater market share. In 2017, the company’s losses doubled to VND71 billion ($3.05 million) and sales expenses also increased respectively to VND75 billion ($3.2 million).

Thus, in less than two years since its inception, Vntrip OTA has suffered multi-billion dong losses, while its equity is only about VND134 billion ($5.7 million).

The successful funding rings have enforced Vnrtrip OTA’s financial resources. In 2017, the company earned nearly VND92 billion ($3.9 million) from the issuance of shares and the capital contribution. Vntrip OTA has recently increased its equity to VND160 billion ($6.9 million).

In fact, investors hardly evaluate tech startups based on financial ratios such as revenue and short-term profit other than investors’ assessment of the size and potentiality of the market.

The development potential of Vntrip.vn depends mainly on the domestic tourism market. According to statistics of Viet Nam National Administration of Tourism (VNAT), tourism sector has grown significantly in recent years, reflected by the steady growth of both domestic and international travellers.

In the first quarter of 2018 alone, the total number of international travellers to Vietnam reached over 4.2 million, up 30.9 per cent over the same period in 2017 and domestic travellers reached 23.5 million. Total revenue from travellers hit VND161.6 trillion ($6.95 billion), a 22.5-per cent increase year on year.

However, the business results of Vntrip partly reflect the fierce competition in the field of online hotel booking application. Although it has spent hundreds of billions dong grabbing market share, Vntrip.vn cannot possess a solid position amid this sector in Vietnam, which is almost dominated by foreign corporations such as Agoda, Booking.com, Traveloka, or Airbnb, with a global service system.