ONLINE TRAVEL INDUSTRY IN INDIA

Indian online travel market is growing at a steady rate due to increase in awareness coupled with confidence among the customers to make online transactions. The Indian customer is aware about online travel portals and is ready to pay for the convenience and better service. Today, the online travel industry is the driving force in the e-commerce segment and its importance is likely to increase in the future. Various offers and deals from the OTAs have made the market very lucrative for the customers, thus driving competition. 

The report begins with an introduction to the e-commerce market in India and offers information regarding the market size and growth. It also gives a break-up of the revenue for the e-commerce market. It goes on to explain the market structure of the e-commerce market and also provides an overview of the factors which drive this market. In the market overview section the structure of the online travel market is explained. Market size, growth and the break-up of the revenue generated is also provided for the online travel market. Increasing share of online travel market as well as the prevailing commission structure has been highlighted. Porter's five forces analysis gives an overall picture of the online travel industry and helps to understand the major influencers. The business model explains the role of global distribution systems and their role in the online travel industry. This section also explains the various incentives provided by the OTA's to attract more customers and the operational edge OTAs have over the traditional tour operators. 

Drivers include factors such as proliferation of the internet, especially broadband, which has increased online traffic considerably. Rising disposable income has also acted as a driver for online travel portals. Indian railways online portal has proved to be extremely efficient and user friendly, instilling confidence among people to book tickets online. Other drivers identified include rise in low cost airlines which has paved a way to travel by air for the large middle class segment in India thus increasing traffic to these online portals. Secure payment mechanisms have given people the desired confidence to carry out transactions online. On the other hand tremendous rise in medical tourism has led to influx of foreign travelers to India which again gives rise to increased traffic. Challenges identified include stiff competition coupled with low margin and high operating costs which has caused profit margins to shrink. 

In addition, limited awareness about portals adds to the woes. Trends identified are emergence of value added services among various OTAs including discount vouchers to woo customers and gather a large market share. Emergence of corporate packages is another trend identified. Many OTAs are following a hybrid model constituting online and offline stores to penetrate the market even further. OTAs are also moving towards better technology so as to cater to the increased traffic and offer a user friendly experience to its clients. They are also becoming more responsible and addressing customer queries and complaints swiftly through social media interfaces. It has been identified that OTAs are also a means of information verification and cross checking among customers. One more trend identified includes an increase in PE/VC investments in this sector. 

The competition section begins with an overview of the competitive nature of the market drawing comparisons across players based on pages viewed per session as well as average loading time, ranking them based on presence. Operational segments for each of the players have also been highlighted. It also offers a bubble chart where the relative positions of the players are depicted with respect to their revenue, net profit and market capitalization. It also includes profiles of the major players in the market along with their financials. Key ratios and list of important contact persons are also listed. Key geographic areas and major business segments are also included. Key developments that have taken place in the market have been identified. The last section

deals with the strategic recommendations where the critical success factors important to this industry have been depicted.

Total tickets sold by all OTA’s per day- 30% of the inventory

Railway ticket booking-Indian Railway Catering and Tourism Corporation (IRCTC) have proven to be a success and had demonstrated that Indians are warming up to booking online and ready to pay a premium for convenience.Railway bookings are increasing and have a 28% market share of the online travel category.

Other segments-The non-air ticket booking segment is growing rapidly with many OTAs providing bus tickets online. Demand for tour packages has increased among both domestic and international tourists. A large number of hotels have online portals where prospective guests can book their inventory.ComScore’s study of the online travel industry in India in 2011 found that the number of visitors to travel sites had increased 32% in the past year to 18.5 million visitors as more Indians turned to the Web for their travel needs.

‘India is at a cusp of another boom in online travel industry, this time it will be fueled by hotels’

Hotels.com currently operates 85 Hotels.com sites around the world including 15 sites in 10 languages across Asia Pacific alone.Rajiv Malhotra, head of marketing, South East Asia, Hotels.com talks about the expectations from the India market in terms of exceptional growth in standalone hotel bookings made online via OTAs. By Sudipta Dev

In a market that is crowded with OTAs, what is the greatest competitive advantage of Hotels.com?

As the name suggests, Hotels.com, focuses on providing the best and widest selection of hotels to our consumers. I feel it’s our focus and almost obsessive dedication to providing the best user experience for our customers is what sets us apart. This philosophy is reflected in the width of hotels, B&Bs and service apartments one can book on hotels.com, over 149,000 worldwide, our unique ‘Price match guarantee’ – i.e. if the customer can find the same deal we offer for less on a prepaid hotel, Hotels.com will pay the difference. Coupled with over three million reviews from users who have actually stayed in the hotels to ensure customers make an informed choice when booking. These and several other real and tangible benefits we offer to our users.

And now, adding to that list is our most innovative and yet simplest offering, The Welcome Rewards programme. It is one of the simplest and straightforward loyalty programmes in the industry where one can earn a free night for every ten nights collected through Hotels.com. The value of the free night stay is the average of the ten nights collected. Hotels.com allows customers to accumulate their ten nights across independent and chain hotels and to redeem their free night at more than 65,000 eligible hotels around the world. The eligible hotels are clearly marked on the website. We focus on only hotels category supported by excellent consumer benefits which have given us an edge with our consumers in a crowded market.

What has been your focus on the India market? Have you launched any initiatives / programmes specifically for India?

India is an extremely important market for Hotels.com. At this stage, our focus is to provide our customers great value through special offerings through our widely popular 72 hour and seasonal promotions. On an average we offer at least two of these sales promotions every month for popular destinations such as Goa, Delhi, Dubai, etc. Through these sales customers can avail of up to 30-50 per cent discounts on hotel prices. In the last few months we have added a variety of Indian hotels and local payment options to the website. We plan to aggressively expand our inventory of domestic hotels and payment options in India in 2012.

Additionally, we are constantly striving to positively enhance user experience on Hotels.com by adding more hotel images, user reviews, etc. Such activities are high on priority since they help our customers in making more informed decisions. As mentioned earlier The Welcome Rewards Programme recently launched in India is a significant pro-customer innovation that will benefit corporate and leisure travellers alike.

How significant is the India market for you vis-à-vis other countries in APAC region?

Over the last few years India has fast evolved as a huge travel market; both inbound and outbound and an increasing number of Indians are purchasing travel products online. Widespread access to the internet, massive growth in online payment options, increase in disposable income among Indians, plus a growing interest in travel and the desire to experience new destinations are the key driving factors for this growth. The large market size with potential for exponential growth makes India a very important market for Hotels.com.

What kind of growth opportunities are you expecting here in the near future?

We are expecting a significant growth in online travel purchase; however we expect an exceptional growth in standalone hotel bookings made online via OTAs like us. The first boom in online travel industry in 2005-2006 was lead by domestic air travel, but with more people planning and booking their travel themselves, India is at a cusp of another boom in online travel industry. This time we feel it will be fueled by hotels. Mobile applications are also changing the way in which customers interact with brands. Since smart phones are becoming increasingly popular among Indians, we have launched free apps for iPhone, iPad and android phone users. We feel we mobile apps will become an important point of sale for us in the near future.

Any special initiatives for the corporate sector?

The Welcome Rewards programme has a perfect fit for the corporate sector. Through this programme, one can avail a free night for every ten nights booked on Hotels.com. So it is advantageous for frequent business travellers as the free night can also be shared as a corporate reward since the free night is transferable. Since the cost benefit is very real and measurable unlike point based loyalty programmes, I am sure the corporate sector will find our offerings even more attractive.

What has been your focus on innovation - in terms of services and technology implementations?

Service to our customers has been and will always be the core of our offerings. Our focus on technology is to ensure constant improvement in our service standards. Hence, we are developing applications for more mobile platforms. We have also added debit cards and net banking transfers to our bouquet of payment options in India for which we have received very positive feedback. Enhancements to contact centre operations and improvements in online booking process are a constant at Hotels.com. Our customers might see some very exciting product enhancements coming their way shortly. This is all I can reveal at the moment.