Why Tuniu Bleeds Red Ink in China’s Red-Hot Online Travel Market

BEIJING ( TheStreet) -- A come-see-America travel package currently offered to Chinese tourists through the country's Tuniu ( TOUR) vacation-planning Web site is a 13-day whirlwind with stops in Hawaii, Las Vegas, Salt Lake City, Yellowstone National Park, Hollywood, Calif., San Diego and more.

If that sound like too much, too fast, look at how Tuniu’s stock price has performed since its Nasdaq IPO in May and compare that sterling performance with the company’s steeper losses cited in a second-quarter financial report released this week.

READ MORE: Tuniu Announces Unaudited Second Quarter 2014 Financial Results

Tuniu shares have gained about 144% over the past three months based on high expectations for Internet consumer services and overall tourism demand in ever-wealthier China. It’s also popular for bridging the worlds of U.S.-listed Chinese online giants Sina (SINA) and Baidu (BIDU), and basic online ticket sellers such as eLong (LONG) and Ctrip (CTRP).

Yet over the past three months, Tuniu’s spending far outpaced its rising stock value. Moreover, the company reported a net loss of $18.3 million for the second quarter compared to a $1.2 million loss in the same period 2013.

READ MORE: Three Chinese Internet Stocks to Own for Long-Term Growth

The bleeding was on the back of a 403% increase in marketing costs and a 183% rise in "general and administrative expenses" quarter-on-quarter, according to the financial report. Higher costs linked to "suppliers of the organized tours and headcount-related expenses for our tour advisers" also played a role, it said.

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