“For how long OTAs in India can sustain aggressive marketing and cash back offers?”
Date Published : 22 Nov 2007
Source: www.eyefortravel.com
This statement came from a traditional player in the travel distribution business in India when EyeforTravel had conducted its first travel distribution conference in New Delhi in October 2006.
While consolidation is yet to take place, questions are being raised about the viability of so many players, about VC funding and how can OTAs focus on `cash flows’.
One of the major but relatively new player in India is Travelocity, which had launched its operations early this year.
Providing a viewpoint on the market status from Travelocity‘s perspective, its MD in India, Himanshu Singh shared: “Online travel is evolving in Asia Pacific, and in India, and it’s a highly competitive industry. While we believe there is room for everybody, consumers will vote with their fingers and choose online travel sites which offer great deals, are trustworthy and are here in India for the long term offering a great range of products and the comfort of knowing there’s help at hand if they need it. We are seeing consolidation in online travel globally, in Asia Pacific and so in that respect India is no different apart from the fact that the world is turning its attention to online opportunities here, and acquisitions are certainly one avenue for taking a piece of the growing Indian online travel pie.”
Singh added, “Publicly available data suggests that the top three OTAs in India are spending in excess of USD1 million a month on marketing, and we see consumer cash back offers touching 50%. This coupled with high fixed costs and growing competition will definitely put pressure on existing players.”
Singh, who was recently attended EyeforTravel’s second edition of the travel distribution conference in Mumbai, spoke to EyeforTravel.com’s Ritesh Gupta in an interview.
When Travelocity entered, it was stated that there business model would absolutely be built around online bookings and payment. What do you think is the key in a market like India to operate on such model? What have been the main challenges in sustaining this promise?
Yes, we remain true to the model. Across Asia Pacific, 75% of air tickets issued by our sites are now e-tickets, and 89% of payments are made securely online. This level of online booking and payment requires a very stable system, secure payment technologies and consumer trust.
We have found that launching with hotels in India was quite a good way for people to begin to get to know the Travelocity brand and become familiar with online bookings and payment.
Transaction values have been very encouraging, our transactions are growing and we’re now seeing over 60% of the hotel bookings made on Travelocity India being for overseas hotels. To me, this indicates a high and growing level of trust in the Travelocity India brand and our technological systems, and I see this continuing over time as we introduce a full suite of products. · Top 5 cities booked in India in July 07: – Delhi, Goa, Mumbai, Bangalore, & Chennai
· Top 5 cities booked overseas in July 07: – Bangkok, Hong Kong, Singapore, Dubai, and Los Angeles
That said, credit card penetration and credit limits in India currently remain a challenge, but not an insurmountable challenge in the foreseeable future.
If OTAs have pure online business models and a player having annual turnover above US$280 million, would it be right to say that Indian consumer’s profile doesn’t fit in with browse online and buy offline behaviour?
Many Indians are definitely comfortable with not only booking, but paying for travel online. We see it every day on Travelocity India.
“It was shared that Travelocity India is going to be the first and only online travel company in India to offer real-time global hotel bookings for 77,000 hotels. What role is hotel bookings, which currently accounts for a miniscule share of online travel business, playing in your revenue matrix?”
Our core business today is real time hotel search for availability, confirmed bookings, and payment. We’ve been very active in growing our suite of domestic ‘Net Rate’ hotels, and international Net Rate hotel choices, as sourced from our international network of Zuji, Travelocity and lastminute.com family sites. For hoteliers, this means great opportunities for hoteliers to market their hotels to Indian travellers, but on the flip side, a unique opportunity for Indian hotels to reach internationally-based travellers.
Compared to the current India competition, Travelocity India has some differentiators when it comes to hotel bookings that are driving a new interest in hotel sales online:
· Our system is very stable, and processes inquiries and bookings at a very high speed – checking availability and pricing in real time.
· Online bookings made on Travelocity India are CONFIRMED reservations. Hotels are notified of the booking via our technologically advanced system when you confirm the booking at your PC. Payment secures the booking. This system is only possible because of our international family of companies under the ZUJI, and Travelocity umbrella.
· There is a wealth of information on Travelocity.co.in about hotels you just can’t get at a local travel agent for hotels around the world (traveller reviews, photos, etc). Further, travelocity.co.in offers instantly-bookable hotels in India and globally which is a differentiator for us.
Shortly we plan to introduce a full suite of travel products including air sales and dynamic packaging onto Travelocity India.
In your opinion, why hotel bookings is far less than airline booking in online travel business? Is due to approach of hoteliers in India or inventory/ commission/ content sharing issues?
Online hotel bookings are a reality on Travelocity India – at the moment hotel sales online are our core business, and it’s going very well.
• Historically (2004-05) online travel sector growth in India was established and driven by Indian Railways, and the second phase of growth was lead by airlines, predominantly Low Cost Carriers (LCCs). This is also a major driver of online travel bookings in other Asian countries. LCCs in India today channel over 60% of their business through their own supplier-direct websites. Online hotel bookings are predicted to grow rapidly in the next 5 years, and on Online Travel Agent (OTA) sites. In fact it’s predicted hotel distribution will grow from 45% to 56% via intermediaries by 2010 in Asia Pacific. In India, the figures are even more dramatic, with growth predicted to grow from 35% (2005) distribution via OTAs today, to 57% by 2010.
Not only are hotels a relative latecomer online, but OTAs themselves represent the third phase of online development as the market matures. Today OTA sales account for less than 16% of the total online travel market, and this is where Travelocity India sees potential. As travellers become comfortable with visiting direct sites, they begin to shop around, and can find great value travel choices on sites like Travelocity India. Hotels is just one part of our long term play.
OTAs in India which have predominantly focused on domestic air bookings. How do you see the battle going forward as traditional offline consolidators particularly air consolidators enter the online space?
It’s about opportunity. And growth. And differentiators which allow huge product choice as Travelocity India will. And that’s why we’re here in India and very optimistic about the future!
There’s a huge asset to being an online agency because loads of data can be compiled – shopping, purchase, etc. – which can be converted into sales leads. How do you think OTAs or Travelocity specifically intends to capitalise on the same?
We encourage membership to Travelocity India. It’s free, and offers subscription to our newsletters. These electronic direct mailers (eDM) are a major and very important source of marketing for Travelocity India. And it’s how travellers learn about our great deals before they’re advertised, so it’s a win-win relationship.
A traditional player had strongly spoken about the brand equity last year and felt that traditional players should provide fulfillment services to online players as another point of revenue. How has this shaped up?
We definitely see some examples of this in the market.
Apart from our B2C site, we have a B2B business stream that allows us to actually work with travel agents to offer them access to our content and technology – our Travel Partner Network business.
Travelocity India offers real time review of hotel availability, traveller reviews, maps and various other information and photo features. How is your company positioned to make the best of the feature-rich online experiences?
Many Indian travellers now seek the “three C’s” that Travelocity India offers: Control, Choice and the Convenience of online bookings.
1. “Choice: Online gives travellers a greater understanding of all options available, in a fashion that can be tailored to suit their requirement. Consumers looking to make a hotel booking in Shanghai for example, can log on to Travelocity India, and have over 300 hotels to choose from, starting at Rs 800, all with instant confirmations. They have hotel information, photos, maps and reviews to help them make a decision. This disappearing asymmetry of information has inspired greater confidence in both travel and online travel. Travelocity India also offers traveller reviews to help travellers choose the right hotel for them.”
2. Convenience: A traveller can do all his research and travel booking in single or multiple sessions, at his leisure, at home or in office. He can choose a mode of payment which he is comfortable with, and pay in a secure fashion. That’s why we believe our offering of instantly bookable travel products that appeal to Indians will help us grow in this market.
3. Control: One of the most popular tools on Travelocity.co.in is the flexible date option. This gives a consumer the power to select a hotel, and look at how the rates increase or decrease over the next Ninety days, to help him choose a better day to book travel in. He can also look for activity and attractions in his chosen destination, and pre book them on the site itself. The very popularity of these tools is evidence enough that the Indian traveller today wants a greater control of his travel schedule, and not be herded around in conducted tours like before.
As a second phase we plan to enhance the hotel content from stand alone hotel bookings, to integrated packaging (dynamic packaging) bookings online where flights and hotels will be able to be searched for availability, confirmed and paid for online.
How do you think Travelocity.co.in has fared so far and what targets have you set for the time to come?
I think the going so far has been great. We are encouraged by the steady growth of our hotel business, and have had great success with our Travel Partner Network business. We have been pleasantly surprised at the way the hoteliers have embraced our global Net Rate distribution program in India.
Our next milestone is launching our full suite of travel products including air sales and dynamic packaging onto Travelocity India.
One Response to Travel Distribution India Special