In October 2016, MakeMyTrip and Ibibo, India’s two largest online travel agency groups, agreed to merge. Investors expected the deal would stem the rampant promotional offers that have bled away profits in the sector. But that didn’t happen.
The deal united the brands MakeMyTrip, Goibibo, and RedBus. Together, they could have translated their market heft into profitability.
Unfortunately for them, new entrants emerged. Paytm, a digital wallet provider, began selling flights and rail. Oyo, a hospitality company, received a $1 billion funding round in 2018 that let it continue to drive 95 percent of its bookings through its direct online channels through various promotions.
Meanwhile, a few older players revved up their games. Booking.com doubled its lodging inventory and doubled down on its domestic marketing. The price-comparison search brand Ixigo turbo-charged its customer and inventory acquisition efforts. Yatra and Cleartrip continued to fight, while other smaller players debuted.
Global powerhouses like Booking.com that rarely compete with promotional offers participated in a fierce one-upmanship in other ways. They dispersed workers to sign up inventory, created marketing messages aimed at different customer segments, and localized online tools to meet the distinctive needs of India’s mobile-first customers.
Today’s battles over India’s $2 billion online travel market may not be as bloody as the ones depicted in Mahābhārata, an ancient Sanskrit epic poem of combat. But they are sacrificing profits.
MakeMyTrip and GoIbibo continue to lead the market, and they continue to narrow their losses. But they need about three more years to achieve enough market power that they can reach levels of profitability similar to what online travel companies enjoy in more established markets, according to a research note by Arya Sen, an equity analyst at investment bank Jefferies.
How online travel shakes out in India, with its internet-savvy and growing middle class, will teach the global sector lessons on competition, pricing, and marketing — and on how to tailor products locally.
One “caricature of India’s travel sector” is that identical types of companies are “in a self-defeating price war over identical customers,” said Satish Meena, an analyst at research firm Forrester.
“The reality is India’s customer segments break out into multiple clusters,” said Meena. “That allows new and indirect competitors to enter the business and find fresh ways to solve customer problems, whether it’s on the tech side, the product side, or the marketing side.”
India’s story is all the more remarkable because no other country, not even China, left its industry leaders with a blueprint for tackling its unique, contemporary challenges.
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Who’s Up and Who’s Down
We can’t state the rankings of India’s online travel players definitively. Transaction data isn’t available in an apples-to-apples form. But experts with views of representative slices of online booking volumes, plus some figures revealed by major executives, enable us to infer some.
MakeMyTrip Group remains the heir apparent.
It’s the largest online seller of international outbound airfare by the number of transactions. It has two-thirds of domestic air tickets sold online.
In the domestic air market, other competitors — Yatra, Cleartrip, Paytm, and Expedia — jockey for lower share positions of between 8 and 12 percent each, experts estimated.
MakeMyTrip Group has about half of online travel agency sales of hotels, the industry’s product with the richest commissions.
In the domestic hotel market, MakeMyTrip and Goibibo process about double the number of transactions a year as Booking Holdings brands Booking.com and Agoda do. Expedia and its sister brand Hotels.com rank significantly behind, experts estimated.
For outbound international hotel bookings, Booking.com is believed to be neck-and-neck with MakeMyTrip, while Expedia is some distance behind, experts estimated.
What about with foreign visitors to India? Booking.com probably leads over MakeMyTrip.
“In terms of inbound market share for hotels, Booking.com has recently stolen a lot of Expedia’s market share,” said Dhruv Shringi, CEO of Yatra.
Most of MakeMyTrip’s sales are domestic. Roughly 80 percent of its air tickets are for intra-Indian routes. For the hotel market, three out of four of its hotel bookings are domestic, while approximately 60 percent of its vacation package revenue comes from domestic travel, experts said.
“In the coming year, the lodging offerings from Airbnb.com, Booking.com, and Oyo, and the flight and rail sales from Paytm will combine with pressure from rising new players like Musafir and they’ll together present a major challenge for MakeMyTrip,” said Shekhar Anand, an analyst for Euromonitor International.
A Big Prize to Come
What are all these companies fighting for? They are betting that India’s middle class will adopt online travel booking at a pace that’s faster than the global average.
This year, forecasters say India’s $2.3 trillion economy will surpass the United Kingdom’s. Barring a surprise, the economy and its online travel sector will continue to snowball at double-digit rates.
Morgan Stanley has estimated that Indians book only 10 to 15 percent of their hotel stays online, compared to 25 to 30 percent in China, and about 41 percent in Europe and 46 percent in the U.S.
One problem has been the small size of the pie of middle-class Indians with internet access.
Consider these figures: As of today, about 500 million Indians have at least some internet access, typically by phone, according to the Internet And Mobile Association of India (IAMAI). Of those, about 150 million Indians are economically well-off enough to travel long-distance for leisure with any frequency.
But only 35 million customers have transacted with MakeMyTrip Group brands — the largest and oldest online travel agency, and something of a proxy for the market.
While India’s online pie is small, travel takes up the largest slice. Travel accounts for the majority of its e-commerce sales, estimated Meena at Forrester. That’s a remarkable inverse of the ratio in countries like the U.S. where retail dominates e-commerce.
What’s more, those who book travel online tend to be savvy. In November 2018, technology firm Travelport named India as the country with the most digitally advanced travelers, based on its survey of 16,000 travelers from 25 countries.
The survey found that 69 percent of the country’s travelers surveyed use voice searches via platforms like Apple Siri, Google Home, and Amazon Alexa. It found that 85 percent of Indians surveyed have used a payment app while traveling and that more than 60 percent of them want digital room keys at hotels.
Jolts to the Ecosystem
Two surprise factors upended MakeMyTrip’s path to quick dominance: a sudden flood of new customers into the market, and changes in the supply-and-demand curves for airlines and hotels.
First, mobile internet became cheaper and more widespread. While a long-term blessing, in the short-term the move upended the marketing strategy of MakeMyTrip.
In September 2016, a mobile network from Reliance called Jio launched a service that provided high-speed internet data for cheap. Telecom rivals raced to match the offer. The resulting price war and marketing blitz boosted mobile internet connection by 41 percent to 491 million in the short span between late 2016 and mid-2018. Most of the new users never had personal internet access before.
“I would give Jio a lot of credit for the massive spike in mobile internet adoption in the past two years,” said Aloke Bajpai, co-founder and CEO of travel price-comparison service Ixigo.
Many of the new internet users were in smaller cities and towns. Many hadn’t used established brands like MakeMyTrip, so they were up for grabs as customers.
In October 2016, Paytm, a company that provides digital wallets, began selling flights and intercity rail travel. The company introduced a couple hundred million customers to online travel booking.
The second big jolt to the system and MakeMyTrip came from hoteliers.
Some hotels have begun to rebel against MakeMyTrip’s approach to marketing, saying that MakeMyTrip and its sister brand GoIbibo have now added too many charges to hoteliers. In November 2018, a lobbying group representing about 250 hotels in the western state of Gujarat said they would stop taking bookings from MakeMyTrip and its sister brand GoIbibo because of what they called excessive commissions. Those hotel groups are now favoring Booking.com, Yatra, and Cleartrip.
MakeMyTrip has countered that it charges commissions at a level that allows it to afford dangling promotions, such as cash back offers, to woo customers to book.
“We are starting to convince some of our hotel partners that we’re happy to take a lower take rate [commission],” said Deep Kalra, co-founder and CEO of the MakeMyTrip Group. “But if they want to continue seeing similar volumes of referrals as they see now they’ll have to become more active on discounting and promotion themselves.”
The hotel rebellion in Gujarat is only a small skirmish. But it may warn that, over time, other hoteliers will seek a rebalancing in their relationship with online aggregators, too.
“For many years, occupancy rates in hotels have been low,” said Dhruv Shringi, co-founder and CEO of Yatra, an online travel agency. “But we’re going into an environment where hotel supply is growing only at 4 or 5 percent while demand is growing at 10-plus percent thanks to a rising economy. So we’ll get to a stage in the next year or two where occupancy in many hotels will be north of 70 percent.”
Strengthening economic growth could generate enough demand that hoteliers will gain the power to maintain their rates, said Aditya Sanghi, CEO of Hotelogix, a Bangalore-based tech vendor, who speaks regularly with hoteliers across the country.
If those executives’ views prove right, India’s era of heavy promotions funded by excessive commissions may not be sustainable.
Online aggregators will have to have more modest commissions of about 20 percent, depending on the size and nature of the property. That would be a sharp cut from the ones north of 30 percent that have sometimes appeared after the MakeMyTrip and GoIbibo merger and Oyo’s sudden domination of the branded budget hotel market.
It remains to be seen if there will be a broad push toward direct booking marketing campaigns. In India, chain hotels comprise about 15 percent of hotel inventory while independents make up the balance. Without market power, chains will struggle to outflank the aggregators.
Yet even without chain power, hotels with high occupancy could become more selective about which online brands they choose as partners.
Shringi saw echoes in how, about two decades ago, Expedia insisted on a hard line of 25 percent commissions to hoteliers in Europe, which gave an opening to Booking.com as an upstart charging less.
Rail As a Locomotive for Growth
Rail will be a critical factor that will likely determine who leads in India’s online travel race. Companies that take advantage of the country’s significant leap in online train ticketing could use that as leverage to gain a commanding lead overall in online travel.
MakeMyTrip, Paytm, Ixigo, Yatra, Cleartrip, and other companies will, to varying degrees, try to use rail as a gateway drug of sorts to lure people into buying flights, hotels, or other products.
Passenger rail is an afterthought in the U.S., the home of the world’s two largest online travel conglomerates — Booking Holdings and Expedia Group. Those global giants only modestly focus on rail bookings in their portfolio of brands. But long-distance, non-commuter rail is a product as deserving of online booking company interest as flights, hotels, or activities.
“More Indians use trains for long-distance, intercity, non-commuter travel than they do than planes or buses,” said Sunil Thomas, CEO of tech vendor CleverTap. “But online booking of rail tickets has only recently hit the mainstream.”
To be sure, the Indian government, which owns the country’s railways, has let third-parties sell its tickets as long ago as 2003.
On the other hand, it has taken time for private resellers to develop rail ticketing offerings that are more intuitive to use than the one on the National Railways site.
Looking ahead to the next few years, online rail sales in India will grow at a double-digit pace, predicted Shekhar Anand, an analyst for Euromonitor International.
In response to this rail opportunity, in late 2018, Google acquired Sigmoid Labs, the Bangalore-based startup behind Where is my Train, an app that lets travelers keep tabs on the status of trains run by Indian Railways.
Google liked the technology that let the startup provide updates offline — without the need for satellite or internet connectivity — to passengers traveling in rural parts of the country. The tech giant reportedly paid around $35 million.
Given that many parts of India’s rail network pass through areas with weak internet data signals, Ixigo, a travel price comparison service, launched in October a similar offline function in its Android mobile app that lets users see train status details and route information for other trains even if internet access is temporarily unavailable.
The Ixigo rail app crowdsources information about millions of cell towers in the country and then triangulates where the mobile device user is in relation to those points based on the last-received signal.
For its part, Booking.com didn’t hint at any plans to start offering rail in India. But in other countries it is becoming a full-service player by selling an array of travel products beyond hotels. Logic dictates, though, it will enter the rail market in India someday, too, though it may let its sister brand Agoda do the heavy lifting first.
MakeMyTrip Group has ramped up its sales of rail. In the fiscal year 2018, it boosted its net revenue from train ticketing by 42.7 percent, year-over-year, to an undisclosed amount.
In 2018 it did a soft launch of a mobile app Go Train that has been in development since late 2016. The Android app lets users speak or write in Hindi or English to check on train status or book buses or hotels. The app, which eats less than 2 megabytes of space, aims to respond to requests such as “I need a train ticket from Bangalore to Chennai for tomorrow.”
But the app is not promoted on GoIbibo’s main site, which instead promotes a more feature-heavy, multi-product tool, suggesting some hesitancy in the company at marketing the app for some reason.
A view of the top of the Vistadome coach that, since November 2018, has offered a panoramic view of the Kalka-Shimla route through the mountains of Northern India. The route has United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage status.
Source: Ministry of Railways and Coal, India.
Paytm Storms the Market
Market leader MakeMyTrip didn’t anticipate the quick rise of Paytm in flight and rail bookings.
Paytm, whose name is a shorthand for “pay through mobile,” is mainly an Indian mobile-payment company and online retailer. But it was quick to see the opportunity rail and flights presented for cross-selling other products and services.
In October 2016 Paytm began offering rail bookings. That move mattered because Paytm had millions of users. The company helps users pay bills, transfer money, and recharge phones. The company provides more than 130 million digital wallets — more than six times the number of credit cards account holders in India.
Paytm moved fast. “Today Paytm is the largest private seller of train tickets by booking volume,” said Abhishek Rajan, head of its travel unit.
Paytm has since expanded into the sales of inter-city bus rides, and, most recently, foreign currency exchange services.
Paytm sold 38 million tickets across the categories of flights, rail, and [intercity] bus in its fiscal year ending June 2018. In 2018, Paytm became the second-largest online travel agency in India after MakeMyTrip Group if you focus on ticket volume, said Rajan.
Paytm — which has minority backing from Berkshire Hathaway and Ant Financial, a payments company affiliated with China’s e-commerce giant Alibaba — didn’t break out its revenue. Yet by roughly estimating its revenue based on public statements, Paytm is now third after leader MakeMyTrip and Yatra in online travel sales in India, estimated Anand at Euromonitor.
Today Rajan said that, if you look at bus tickets, his company is the second-largest online seller by booking volume. MakeMyTrip, along with its sister brand Redbus, would be the second-largest by Skift Research’s reckoning.
Last year Indians bought about $3.5 billion in bus tickets, mostly offline.
“If you look at flights, we’re among the top three or four players by booking volume,” Rajan of Paytm said. MakeMyTrip, Yatra, Cleartrip, and Expedia also jockey for position, though facts are hard to pin down.
Paytm competes with pure-play travel companies on ease of use, Rajan said. For example, it claims it can typically offer faster refunds than some other players because it doubles as a payments company.
Another example: other companies have charged fees of typically 250 to 500 rupees, or $3 to $6, for canceling flights above the fee an airline might charge. In June 2017, Paytm decided to skip cancelation fees for flights. The company also offered, for a cost, insurance in case of cancellation for any reason, which was a relatively new product in the market and which proved popular.
Paytm Defies Its Skeptics
Will Paytm branch into other types of travel products? In good news for MakeMyTrip, it’s not likely to in the near term.
“For hotels and homestays, we’ve been tentative and cautious because the major online players have been aggressively discounting on price,” said Rajan.
“Another reason we’ve held back is that the hotel category is a lot more fragmented and unstructured than, say, airlines,” said Rajan.
Paytm has eight domestic airlines that it connects to directly and about 52 international airlines it reaches mostly via Amadeus, the travel distributor and tech giant. Compare that coverage with hotels.
“We would have to contract with each of thousands of hotels, and many hotels wouldn’t have the technology to connect with us, and even then we might not get the best inventory at the best price,” Rajan said.
One criticism of Paytm is that the company’s customers are buying low-margin travel products.
Other critics fear Paytm will lose share over time to rival payments-providing platforms. Since May 2018, about 1 million Indians have trialed a payments function in WhatsApp, the most used messaging service in India, which could threaten Paytm’s growth. Other tools like Obopay and Mahindra Comviva might also get in the act.
Another critique of Paytm is that it enjoyed a short-term, one-off boost after November 2016, when the Indian government surprised the nation by withdrawing 500 rupees and 1,000 rupees banknotes from circulation. That move prompted many Indians` to try Paytm’s digital wallet.
Defying its skeptics Paytm plans almost to double the headcount of its travel unit, Rajan said.
Rajan said Paytm’s growth is sustainable. The company doesn’t offer cash back to customers for booking rail. For flights, it has only provided money back and similar promotions that come out of its commissions. So it is not running at a loss, he said.
In September 2018, for instance, Paytm ran a promotion giving customers who bought two flights cash back worth 1,200 rupees (about $17). This month it’s offering 250 rupees ($3.60) cashback on Oyo budget hotel rooms.
Rajan added that the company hadn’t done TV or print advertising campaigns for its travel offering to the extent that other companies have. Yet Paytm has “a fairly decent” retention rate of travel customers nonetheless, he said.
Rail’s online growth may slow somewhat as the government considers introducing a fee of about 12 rupees on every ticket booked via resellers.
But Paytm may retain customers by adding enhanced service relative to the government’s site.
For instance, Paytm recently allowed customers to join waitlists for sold-out trains. It’s now working on using machine learning to give travelers predictions about their chances of moving off a waitlist whenever other customers cancel at the eleventh hour.
MakeMyTrip Group CEO Deep Kalra has run the company since its founding in 2000. Source: MakeMyTrip Group.
MakeMyTrip Leads for Now
As noted, MakeMyTrip’s merger with Ibibo Group created India’s largest online travel company. The union enabled the combined company to report a sequential reduction in losses, but the financial improvement has not been as high as hoped.
A lack of overlap in customer bases excited investors. Before the merger, MakeMyTrip had estimated its overlap in customers with GoIbibo would be about 30 percent. But it discovered afterward that the overlap was less — much closer to 20 percent.
On the hotel side of the business, MakeMyTrip had a sweet spot in four-star hotels, while GoIbibo customers tended to be younger and more budget-minded. So the brands now only compete around the three-star hotel mark, and not much in flights.
But investors didn’t count on new entrants like Paytm keeping competitive pressures at a low boil, post-merger.
MakeMyTrip Group is finding profitability elusive. In the fiscal quarter ended September 30, the company’s marketing and sales promotion expenses rose by 139.8 percent year-over-year, to $115.9 million. The company passed much of its commissions to its customers through promotions. But it wanted to change that trend.
Its digital marketing costs seem manageable in the sense that roughly 80 percent of visitors to its website and mobile app come directly. MakeMyTrip has achieved this by building brand recognition through commercials, email marketing, and search engine optimization for organic results. It also spends a relatively small amount on ads on price-comparison platforms like Google, Trivago, and TripAdvisor, without too much dependence on any one channel.
MakeMyTrip Plots Its Next Moves
MakeMyTrip’s profitability forecasts depend on a few factors that are less-than-sure bets, The company’s management has a stellar reputation among investment analysts for its acumen. Founded in 2000, MakeMyTrip has fared well through worse times repeatedly.
But MakeMyTrip will surely be tested as it tries to win its share of the flood of new mobile-first customers into the market and adjust to changes in the supply-and-demand curves for airlines and hotels.
MakeMyTrip has funded its hotel expansion out of its air business. Its air ticketing is cash-flow positive, thanks partly to India’s unusually high commissions for airline tickets. While the margins and commissions are lower in air than in hotel, automation and higher volumes enable it to take out cash to invest in its hotel business.
But airline commissions risk being trimmed due to financial turmoil. India has an airline crisis due to the financial mismanagement at Air India and Jet Airways, as Skift Airline Weekly has analyzed. Even well-managed carriers like IndiGo recently dipped into the red due to discounting.
MakeMyTrip Group spent a massive proportion of its revenue on sales and marketing — 88 percent over the last 12 months versus 53 percent and 34 percent at Expedia and Booking Holdings, respectively, as first noted in September 2018’s Skift Research report, The State of Online Travel Agencies 2018 Part III: India and Latin America.
But unlike the global giants, it spends a large proportion of its marketing dollars on cash back offers, discounting, and similar promotions.
MakeMyTrip has also bet significantly on loyalty programs introduced since 2017. It hopes that loyalty programs drive more repeat business and reduce its customer acquisition costs.
In July 2017 flagship brand MakeMyTrip debuted MMT Black Loyalty, which lets travelers earn vouchers redeemable toward future bookings. More than 960,000 customers have joined the free program.
MakeMyTrip separately debuted a loyalty program called MMT Double Black, where consumers pay a fee in the style of Amazon Prime to get access to members-only benefits, such as no fee for canceling trips. The program has about 41,000 paying members.
MakeMyTrip has faced some rare-to-India challenges in persuading more offline hotel shoppers to buy online through it.
At the risk of sounding like a stereotype, a lot of Indians habitually haggle or hunt for the best deal as a point of pride. So many are in the habit of showing up in person at a hotel and negotiating with a clerk at a front desk, said Sanghi. They don’t trust that online sites have the lowest possible rates.
To combat this skepticism about online deals, MakeMyTrip has spent much more on traditional marketing than on its loyalty programs. Since early 2017, MakeMyTrip has had a TV, print, and digital branding campaign in Hindi, English, and other languages targeted at the country’s smaller cities, so-called tier-two and tier-three cities.
For flights, Indian consumers also balked at high cancelation fees. When they debuted in the country, low-cost carriers underwrote their cheap fares in part by charging hefty fees in case of cancelation or other ticketing changes. The fees surprised some travelers and gave a bad reputation to online booking in general among many offline shoppers.
MakeMyTrip has attempted to neutralize this concern about surprise fees in various ways, such as a recent program that lets customers choose a “zero cancelation fee” offer by paying an additional fee per passenger of about $1.40, or 99 rupees upfront.
Shown here is the lobby of the Taj Aravali Resort & Spa in Udaipur that opened this month. Source: Taj Hotels
Like at Paytm, rail is another significant category for the group. MakeMyTrip hopes to use rail and bus ticket sales as a way to introduce some offline shoppers to travel booking and its brand so that, in the future, they’ll think of MakeMyTrip when choosing to book a flight or hotel online.
Bus tickets are now the fastest growing segment for MakeMyTrip. In the first fiscal quarter of 2019, the company sold $187.6 million in gross bookings of bus tickets, up 50 percent year-on-year –primarily through its RedBus brand.
Kalra said the size of the bus market is $3.5 billion. But Indians book most tickets offline.
In July 2018, MakeMyTrip took a step to bring more of that content online by taking majority ownership of Bitla Software, a Bengaluru-based travel technology company, that claimed to serve India’s most abundant direct inventory of intercity buses and bus operators.
MakeMyTrip has also sought alternative forms of revenue, such as in custom advertisements and business intelligence. For example, in May 2018 it signed a contract with Radisson Hotel Group to market its 1,400 plus hotels and resorts, providing help with how to advertise to the local market and reporting on details about the types of travelers who look and those who book at the group’s properties.
Some critics speculate that MakeMyTrip’s next move should be to market itself more outside of India in countries with high-disposable incomes like the United Arab Emirates. But others argue it should focus on its core markets first rather than get distracted.
Despite some worries, the publicly listed company appears to have the wherewithal to survive competitive pressures, given its significant backing from Ctrip, Naspers, and Chinese tech giant Tencent.
Booking.com is also a worry. In an interview, Kalra said his team watches that company closely.
“Booking is probably the smartest company in the OTA [online travel agency] space worldwide,” Kalra said. “But there are many nuances about Indian customers that we believe we understand better, and we are working in various ways to connect more strongly with our customers.”
In 2018, MakeMyTrip tried to counter the rise of Paytm and Booking.com by signing a deal with India’s largest online retailer, Flipkart, to begin selling travel to the platform’s claimed 100 million customers.
India’s hotels aim to compete in style. Shown here is The Park Somajiguda Hotel Hyderabad. Source: The Park Somajiguda Hotel Hyderabad.
Booking.com Booms
Today Booking.com lists about 52,000 Indian properties, mostly hotels. India is a small but growing subset of the 28.8 million listings the online giant claims worldwide. But it’s a big gain from having only a few thousand properties about six years ago. And the inventory is not far from the 58,000 domestic accommodations that MakeMyTrip Group reported as having as of October 2018.
More importantly, the company used to only have success at wooing foreign visitors, but more recently has gained market share among Indians.
“We’ve made a large dent, growing a ton,” said Vikas Bhola, regional director – South Asia Pacific. “A majority share of our bookings comes from customers based in India.”
Reaching that position took time. In 2012 Booking.com opened an office in Mumbai. Today it has four offices in Delhi, Mumbai, Bangalore, and Calcutta. The regional offices have enabled the company to onboard lodging across the country, even in the rural parts of Eastern India.
“The competitors pushing discounts tend to push them on the properties that aren’t the best located or have the best user reviews,” said Bhola. “This is where we gained a bit.”
“The hotel groups with good control over their price distribution through smart revenue management do not, in general, allow online resellers to undercut their offers,” said Bhola. “So they will favor us as a channel by giving us superior availability for their most desirable inventory.
Booking.com’s recent strategy in India has been to always have the most room availability at the highest-quality properties, as first reported by The Ken, a business analysis publication.
Booking.com’s managers bet that the type of consumers who will be attracted by broad inventory and availability will tend to be more loyal, and thus more lucrative, over time.
“We create demand for partners that is more progressive than what they’ll find elsewhere,” Bhola said.
Price and incentive wars have put Booking.com in a tight spot nonetheless. Like elsewhere, Booking.com offers a best-rate guarantee policy, which helps it compete on rates. But the guarantee doesn’t count for incentives like cash back or vouchers for future travel that are heavily provided by Indian competitors.
For a smattering of high-end properties, Booking.com does negotiate typically 10 percent discounted rates available via its so-called Genius program that requires users to join a free program, as it does in other markets.
More than other players in India, Booking.com relies on so-called performance marketing, which primarily means buying AdWords and Google Ads, but it also does programmatic ad buys to help market its brand on digital publishers’ websites and apps and it experiments with videos on YouTube.
The company’s globally available services for help with digital marketing and running online businesses have been particularly popular in India, where entrepreneurs have studied them to learn to do better.
“We help our partners grow their bottom line as well as their top line,” Bhola said. That effort helps woo hotels to sell via Booking.com more intensively.
Expedia Hangs Back
Expedia has less of a presence than its global rival Booking.com and local players in India when it comes to domestic sales. It entered India in 2008, running operations out of Singapore, then out of Hong Kong, and more recently out of Sydney. While its domestic Indian business has been growing, it has only been growing modestly, experts believe. The company hasn’t broken out numbers.
“Expedia chose not to compete by discounting or with incentives, which is understandable, but they also haven’t done enough marketing of its brand in India,” said Anand of Euromonitor. “So they haven’t gained as much as Booking.com lately, though they are still a presence.”
While Expedia CEO Mark Okerstrom told investors in February 2017 that he thought India was “a possible market where we could potentially be a little bit more aggressive in 2017 and 2018,” that doesn’t seem to have panned out, except perhaps for inbound packages. Expedia Group declined to comment for this story.
Airbnb CEO and CoFounder Brian Chesky with Indian celebrity designer duo Shantanu and Nikhil at an event in New Delhi. Source: Airbnb.
Airbnb Boosts Alternative Accommodations
Indians have a reputation for superior hospitality as a cultural element emphasizes the importance of providing guests with treatment as if they’re a family member. Atithi Devo Bhava, a popular Sanskrit phrase, captures a concept of how a guest should be respected as if they were like a god. While originating in Hindi, the notion of welcoming the guest has become a national standard, as illustrated in that, for centuries, Indians have rented out homes, havelis, and other non-hotel lodgings.
Yet alternative lodging has been an offline business to date. The online booking of short-term rentals, vacation rentals, and timeshares that has become common in some other parts of the world has been relatively late to arrive in India. But, like a guest, online booking has received an exceptionally warm reception.
Airbnb doesn’t share transaction or revenue growth for India or elsewhere. But the platform enjoyed rapid growth in the past couple of years, according to officials and experts at other companies speaking anecdotally.
“Airbnb represents lodging that’s often more affordable to hotels, especially in parts of the country with few hotels relative to demand,” said Anand, the analyst for Euromonitor.
In spring 2017, Airbnb reportedly said the average host in India earned “at least $1,000 per year,” compared to about $6,000 a year as a global average, the Economic Times reported. India accounted for “more than 30,000 listings” on Airbnb. A spokesperson was unable to respond to this story with updated numbers by our publication deadline.
In a sense, Airbnb is an online-to-offline business in India. The company hoped to reach “50,000 host entrepreneurs” this year.
Chesky has reportedly told Airbnb team members in the past, “Don’t edit your imagination.”
That’s a good catchphrase for understanding the Indian opportunity, which Chesky has said will be enormous.
The company’s biggest rival in India might be Booking.com today, as home-sharing, short-term rentals, heritage homes, and vacation homes together form Booking.com’s fastest-growing category.
But a new competitor called Oyo may be a growing indirect threat.
Ritesh Agarwal, Oyo Rooms Founder and CEO in Bengaluru, India, on Tuesday 11th September, 2018. Photographer: Samyukta Lakshmi/Bloomberg
The Unicorn Called Oyo
Oyo is the most in vogue travel company in India. The startup renovates and brands budget hotels typically having less than 100 rooms.
It’s worth mentioning Oyo alongside the pure-play online travel brands because the company says that about 95 percent of its bookings come through its direct channels, making it an online player in its own right.
Plus, in October 2018, Oyo said it had raised $1 billion in fresh funding.
Oyo has defied the odds since its founding in 2013. At first, it aggregated budget hotel rooms run by independent owners in a scarily unprofitable model. Today it earns a majority of its revenue from properties under lease or that it runs on revenue-share deals. In effect, it is an asset-light hotel franchisor, but one that typically controls both inventories and rates and is the primary seller of its rooms.
Oyo said it had more than 101,000 rooms branded in India as of June 2018, which was more than managed by the largest legacy hotel brands in India: Marriott and Tata Group-owned Taj.
Using technology to wring efficiencies out of all aspects of the budget hotel business — from managing housekeepers to warehousing furniture to setting rates to distributing rooms — has given Oyo a cumulative edge on established rivals, said its founder and CEO Ritesh Agarwal in a Skift interview this month.
For example, during the past seven months, Oyo has added several functions to its mobile app that let guests handle most requests, such as claiming a refund, without needing an agent’s help.
The startups’ focus on direct bookings saves it enormously on distribution costs, though it has costs for marketing its brand, website, and mobile app. The company said it operates at double-digit positive net margins in its key segments in India.
Oyo has risen quickly by targeting properties with low occupancy rates of, say, 30 percent, and then delivering occupancy boosts up to levels like, say, 70 percent. Agarwal said in the interview, “Remember, for hotels, the return is based on two multipliers: price and occupancy. Even if you keep the price 10 percent lower, and increase the occupancy three times, the return is still roughly 2.8 times. Not bad!”
An unspoken, implicit part of Oyo’s business plan is to reshape the supply and demand for budget lodging. When successful, Oyo shifts a lot of share in a town or city, which cuts off the oxygen to unbranded properties.
After unbranded independents see their occupancies implode to unsustainable levels, they’ll be forced out of the market, cementing the Oyo property’s long-term edge. At that future date, sustainable profitability would presumably appear.
A key worry about Oyo is overextension. Rather than focus on scaling up in India, the company has chosen to expand in unfamiliar markets like China, London, and Indonesia and to experiment with other business lines like co-working spaces and home rentals.
Oyo suffers from “a Ponzi scheme of ambition,” according to Sumanth Raghavendra, a long-time skeptic of Oyo.
Raghavendra borrowed the phrase a Ponzi scheme of ambition from Anand Sanwal, Co-Founder and CEO of business intelligence firm CB Insights, who has used it to describe how startup founders drop focusing on a core competency to open up new lines of business to keep justifying requests for higher sums of venture capital. Raghavendra has written that Oyo suffers from “egregious excesses.”
Oyo’s sprawl of enterprises might be unmanageable for many management teams. Faith in Oyo probably depends on whether one believes 24-year-old college dropout Agarwal has a genius for business at the level of, say, Elon Musk or of Mukesh Ambani, the managing director of Reliance Industries, a sprawling conglomerate that includes the Reliance Jio company mentioned earlier that ramped up India’s smartphone adoption. (Judge for yourself with Agarwal appears on-stage at Skift Forum Asia on May 27, 2018.)
Branded budget hotels like Oyo and home-sharing have made some players cautious. Yatra, for example, has tread slowly in adding this inventory, despite being the leader in domestic hotel inventory.
“There’s an oversupply that keeps margins low right now,” said Shringi.
“But over about the next three years we expect a favorable rebalancing toward stability in supply and demand, especially in some pockets of the market,” said Shringi. “So we are on-boarding inventory strategically to prepare for that.”
Around April 2018, MakeMyTrip, India’s largest online travel company added back properties from lodging booking company Oyo to the websites and mobile apps of its flagship MakeMyTrip brand as well as its recently acquired Goibibo brand.
The move represented an about-face for the company. In October 2015, MakeMyTrip had blocked its main competitor in the budget category, Oyo, from displaying listings on its platform.
MakeMyTrip had boycotted Oyo to nurture its attempt at branded budget booking properties, GoStays, and because it didn’t like how Oyo was using deep discounting to woo travelers to book directly instead of via agencies.
But the record-breaking growth, fueled by record-breaking funding, appears to have caused MakeMyTrip to change its mind about the fight. Smaller Oyo competitor brands, such as Fab Hotels and Treebo, have since disappeared from MakeMyTrip.
Chhatrapati Shivaji International Airport – Terminal 2, shown here in a photo before its 2014 opening from its architect and structural engineer, Skidmore, Owings & Merrill. The airport represents the ingenuity of India’s travel scene. India’s online companies also demonstrate ingenuity. Skidmore, Owings & Merrill.
Metasearch’s Promise
One type of company that is absent from the MakeMyTrip Group stable is a price comparison search, or so-called metasearch, brand.
India’s largest homegrown player in metasearch is Ixigo, founded in 2007 in Gurgaon, and it claims consistent growth.
Travel price-comparison services like Google, Kayak and HotelsCombined (owned by Booking Holdings), Skyscanner (owned by Ctrip), Qunar (held by Ctrip), and Trivago (controlled by Expedia) have enjoyed popularity among segments of the traveling public in many parts of the world.
In recent years, travel metasearch companies have tried to shift away from referring customers to other sites to complete transactions. So-called instant booking — where customers stay on a site like Ixigo for booking — is more seamless for consumers. It provides a less jarring experience on mobile devices because there is no switch in sites and interfaces.
Ixigo, one of the pioneers of instant booking, now plausibly claims to be the only travel metasearch company to only offer instant booking for all of its flights.
Ixigo persuaded companies to cooperate with bookings on its site because it delivered on promises to boost the conversion rates, meaning the share of bookings completed relative to searches, on average for the approximately 120 travel suppliers and online travel agencies participating.
Given that India has a split between its upper class and middle class, Ixigo has built separate apps to serve the two demographic segments. One focuses on train ticketing and the other serves up more expensive travel products.
The apps combined have been downloaded more than 100 million times, more than any other India-based online company has claimed for their apps. About a fifth of the company’s revenue comes from rail ticket sales.
Because long-distance railways rarely offer entertainment systems, Ixigo has added live streaming radio broadcasts and other content to its app, to boost user engagement and positive brand association.
“We have users spending up to two hours a month in our mobile apps, similar to engagement levels seen at social and messaging apps,” said Bajpai, Ixigo’s CEO.
Ixigo said it had 25 million unique users in November alone on its site and mobile apps, and about 90 percent of those users were on mobile. It processed more than a million tickets in November across flights, rail, and bus, it said.
Bajpai believes Ixigo has fared well recently — after rebounding from a near collapse
after the 2008 global financial crisis — for a few central reasons. But the biggest one, he said, was that Indians are very deal-conscious — which makes online price-comparison services popular.
Another reason is that it didn’t promote its brand at the expense of suppliers when marketing deals, a mistake he said other companies elsewhere have made.
Ixigo remains unprofitable, despite having only about 150 employees. In the fiscal year ending March 31, 2018, Ixigo booked $9.21 million in revenue, doubling its revenue from the previous fiscal year, according to paperwork the private company filed with the state. For the fiscal year, it suffered a net loss of $5.62 million.
Ixigo, which has reportedly raised about $25 million to date has MakeMyTrip as one of its minority investors. Adding a price-comparison service to its portfolio might bring two benefits: diversification — because the customers attracted to metasearch tend to differ from the ones who directly go to an online travel agency — and business intelligence — because data generated by price-comparison platforms can inform how to approach advertising auction markets such as Google’s.
However, the chance for MakeMyTrip to be able to buy it at a reasonable price may be elapsing. Ixigo said that in recent months it has been in talks with investors to close a Series C investment in the startup in the range of $75 million.
A still from director Imtiaz Ali’s film Tamasha, shot in Corsica, Italy. Bollywood movies inspire many Indians to research and book travel online.
Cleartrip Thinks Outside the Box
Cleartrip, an online travel agency, has faced fierce competition since MakeMyTrip merged with rival GoIbibo.
Dreams of a debut on the public markets vanished for the company. That’s probably a disappointment to travel and expense management giant Concur, which reportedly backed Cleartrip through a $68.3 million investment.
Cleartrip responded to heightened competition by looking abroad for opportunities and by investing in new products, such as the sale of tours and activities. It also cut costs. In late 2018 it also laid off about 10 percent of its 1,000-person workforce.
In June 2018, Cleartrip, bought Flyin, the largest online travel agency based in Saudia Arabia. Cleartrip plans to invest further in Middle Eastern markets, where many well-off travelers are about to adopt online booking en masse. The company, post-merger, now derives about 40 percent of its revenue from outside of India.
Cleartrip’s other major push is to expand beyond flight and hotel sales to other products. In 2016 it started selling tours and activities.
Today it offers more than 15,000 experiences in a few dozen Indian cities. For example, in June 2018, Kerala became the first Indian state tourism board to sign a deal to have Cleartrip be its exclusive online reseller for local tours.
Cleartrip does face some competition, of course. In July 2018, Headout, an experiences marketplace based in India, raised $10 million in a Series A round. In the second half of 2018, MakeMyTrip introduced tours and activities sales.
A look at India’s famous Taj Mahal. Many Indians and foreign visitors turn to tour operators like G Adventures for visiting the country’s major sights. Source: G Adventures.
Yatra Bets on Business Travel
Home-grown travel company Yatra, which listed on the stock exchange in 2016, continues to claim to have the largest domestic Indian hotel supply of online players, with more than 100,000 listings. In the past half-year, Agoda, the Booking Holdings brand based in Asia, has been sourcing Indian properties from it.
Yatra has had to fight hard since MakeMyTrip merged with rival Ibibo. In 2017 and the first half of 2018, it invested heavily in a marketing campaign to cement consumer brand recognition with the help of a Bollywood star. Since then, it has tapered that investment.
In the past, Yatra turned to mergers and acquisitions to grow. In 2012, it acquired a smaller rival, TravelGuru, a hotel aggregator, from Travelocity. At the time TravelGuru had about 6,000 hotel suppliers working with it, and now it has more than 100,000 and is the sourcing engine for Yatra.
As a separate countermove, Yatra has invested more in cracking the corporate travel market
In 2017, it acquired Air Travel Bureau, a corporate bookings company that served more than 400 large and medium-sized businesses across India.
Yatra said it was the largest independent provider of self-booking tools to corporations for booking flights, hotels, and insurance as measured by gross booking volume. It recently began offering expense management as an affiliate of Los Angeles-based Chrome River.
“The overall Indian economy is growing at about 7 percent,” said Shringi. “But business travel is growing at about 12 percent and is also ripe for the adoption of more efficient technology.”
For Yatra, a side benefit of catering to corporates is that it could help to grow the brand’s recognition among frequent travelers with disposable income.
Yatra Faces Business Travel Rivals
Yatra isn’t alone in trying to bring business travel bookings online. Booking.com is one example.
As a global rule, Booking.com rarely provides incentives. But in India, it has experimented with exceptions. One promotion targeted unmanaged business travelers who book their trips through select affiliates, or third-party resellers. If those customers booked rooms sourced by Booking.com through those providers, the travelers could get cash back underwritten by Booking.com. The travel giant has targeted these trial promotions particularly at local online travel resellers used by employees working for technology and finance companies.
Cox & Kings, whose mostly offline leisure unit generated net revenue of $114 million for the fiscal year 2018, said it had seen 15 percent a year growth for the past four years. One of the unit’s key growth areas has been meetings and events. “For example, we might help create a trip that’s used by a company as an incentive for salespeople to meet year-end goals,” said managing director Kerkar.
Uniglobe, a network of corporate travel agencies headquartered in Canada but a market leader in India, is another of the leading rivals.
“India represents a massive growth opportunity,” said Gordon Wilson, CEO of travel technology firm Travelport that provides reservation systems to many agencies. “The government of India is predicting that the number of annual domestic air journeys will triple to 300 million a year by 2022. The country is already the second-biggest air global distribution system market in the world after the U.S.”
Travelport has exclusivity as fare content distributor of IndiGo and Air India (domestically) to travel agencies. It also has contracts with MakeMyTrip and Jet Airways. Wilson estimates that such deals give it exposure to roughly 70 percent of booking volumes in the market.
In October 2017, Ebix, a payments tech company based in the U.S., bought Indian online travel company Via for $75 million. At the time, Via had 85,000 home-based travel agents in India.
Ebix has since built out a travel unit which it sees as an opportunity to cross-sell currency exchange, insurance, and other payment tech services. Ebix already had about 75 percent market share of Indian airport foreign exchange services.
In August 2018, Ebix bought a controlling share in two companies — Mercury Travels and Leisure Corp. — for a combined sum of $14.2 million. Leisure Corp.’s flagship service was corporate meetings and conferences, and Mercury Travel had a mix of corporate and adventure travel sales. Ebix set about creating a new travel division called Mercury based on the components.
Cultural Localizations Online Players Need to Have to Win
One distinctively national issue that online travel companies need to address more adequately to avoid a missed opportunity is culinary travel.
Surveys suggest between a fifth and a third of India’s middle-class is vegetarian, and many of these turn to offline travel agencies for help in booking outbound travel because of concerns of about finding restaurants they’ll like, said Kerkar of Cox & Kings.
While still reflecting a minority of the country’s approximately 60 million passport holders, this dietary factor presents a mostly as-yet-untapped opportunity for online travel companies, including ones in restaurant recommendation such as Gurgaon-based Zomato and other global players such as OpenTable, TripAdvisor, and Ctrip Gourmet List.
Another national issue for many urban millennials and workers in the tech or finance industry is a desire to be able to travel as romantic couples without being married. The law allows this practice. But a mix of religious beliefs, cultural practices, and old habits have pressured many hotels into not honoring the online reservations of people who show up at check-in desks as unmarried couples.
More than others, Oyo has marketed itself to this community, promising a transparent and quick search of its listings to fetch properties that allow unmarried couples to stay in the same room. A small startup, StayUncle, has built its business premise around this very issue, with service in several major cities. As a separate issue, in September 2018, India decriminalized gay sex, but gay travelers still face stigma at many hotels.
Adventure travel is another potential growth area, said Mohit Poddar, founder of travel agency Shoes on Loose. But it tends to cover trips in off-beat locations like Karnataka, Himachal Pradesh, Uttarakhand, and Kashmir, and often requires agencies to conduct hands-on visits to small vendors to develop end-to-end management.
Wellness is another theme that resonates particularly loudly in India within certain strata of society. Indians perfected and popularized many of the most popular practices in wellness worldwide — Ayurveda, yoga, acupuncture, and herbal massages. Online travel companies could seize an opportunity to try to appeal to people interested in this market.
Traditional medical tourism also fits under the wellness label, with India’s cost-effective, well-trained doctors appealing to many foreign visitors. Chennai-based hospital chain named Apollo has been marketing itself to ailing domestic and foreign customers in need of hip replacements or chemotherapy along with spa treatments. The chain’s hospitals now claim to treat 20,000 international patients a year, but the majority of their customers are domestic.
Language Barriers Online Travel Players Need to Fix
The players mentioned above compete in India, which is not a homogenous market. The consumer companies across industries that have thrived in India have been ones that have adapted to local needs, often by tackling subsets of customers by behavior and preferred language or by smoothing out points of friction that hold back sales.
Booking.com is one example. The world’s largest online seller of hotels had relied on a model of typically requiring customers to provide a credit card to secure a booking. But many Indians don’t have credit cards. So Booking.com enabled a workaround requiring only a confirmed email address and a phone number.
Yatra has led other companies in the sales of foreign currency exchange services online, something that travel companies elsewhere tend not to offer.
India’s broad diversity of languages offers opportunities and challenges.
In September 2017, Google added offline translations for speakers of Bengali, Gujarati, Kannada, Marathi, Tamil, Telugu, and Urdu, having offered Hindi offline since 2015. Given the unreliability of internet coverage in rural areas, the translation service is a potential boon.
MakeMyTrip has, since 2014, provided some travel offerings in a handful of languages.
“It’s kind of easy to say, ‘Lots of people read English, so we don’t have to get into the local languages’,” Kalra said.
“But what we’ve found is the affinity is much higher when you present content in the local languages,” he added. Bookings are more likely to be completed when people feel comfortable with the language, and that means the potential size of India’s market could expand beyond many current estimates.
In MakeMyTrip’s case, Kalra thinks eventually getting to about five of the most widely-used largest of the country’s 22 official languages would make sense.
Data Issues Online Travel Players Need to Fix
Today India is one of the most mobile-first markets in the world. About 80 percent of internet usage is via mobile according to web analytics company StatCounter.
But a few factors affect how Indians typically download and later uninstall mobile apps to save precious memory on cheaper smartphones.
On cheaper smartphones, memory capacity is limited. That helps explain why Indians delete one in three travel apps within a month of downloading them, on average, according to a study by AppsFlyer, a marketing tech firm, published last year.
Booking.com has relied heavily on making its mobile website lightweight, removing some of the applets and tools found in markets where internet data is more readily available.
“We’ve made our mobile website and our mobile app very lean,” said Bhola. “That has resulted in a great boost in conversion rates for us.”
MakeMyTrip has recognized that the vernacular market, or people whose primary language is not English, has tended also to be users of cheaper phones. So in 2018, it introduced Goibibo Train, the Android mobile app mentioned before that conducts voice-and-text-based interactions with train and hotel bookers in Hindi and English.
Other ways to reach the so-called vernacular market include Alexa-powered voice integrations. Since fall 2017, MakeMyTrip’s tech team has been working to develop Alexa-powered travel booking commands in various languages.
Since around July 2016, the company has worked on text-powered trip-planning in a format similar to WhatsApp, the most popular messaging app in India. In the tests, a user answers several questions. The tool then presents the customer with proposed itineraries they can “like” and flight and hotel lodging they can buy.
Given India’s mobile-first usage and language diversity, chatbot interfaces and conversational commerce could be significant drivers in India’s online travel scene.
Ixigo, for example, has created versions of its app in seven languages and says that its non-English versions are growing faster than in adoption than its English one.
Another failure point in India’s online travel scene has been communication between customers and the lodging providers via the resellers. A customer who books through an online agency may want to ask at the last-minute how late they could check in at a hotel or how could an airport transfer be arranged but the resellers might not be good at facilitating the answer.
Chatbots can help automate the answering of some of standard questions.
Ixigo has also embraced chatbot-powered customer service faster than some metasearch peers in other markets. It has automated roughly 80 percent of customer queries, said Bajpai. Voice-based customer service is the next goal.
In 2017, Booking.com launched the chatbot in a pilot version, including in India, and it’s now available to all English-language bookings globally. The chatbot can respond to 60 percent of customer inquiries automatically in English, the company claimed. The company didn’t break out usage in India but, given the mobile-first preference of many Indians, the ability to resolve issues quickly by text or voice gives an edge over companies who still must send people to expensive call centers.
To make chatbots work, you need data and the ability to tease insights out of data. Established players like MakeMyTrip, Cleartrip, Ixigo, and Yatra are betting heavily on outmaneuvering new players by hiring India’s best technical workers and putting them to work. For example, all of these companies are building data lakes, or customer data platforms, that unify data from multiple sources within their IT systems that have previously siloed.
By applying machine learning to their data sets, these companies will tease out more accurate predictions to help run their businesses efficiently, said Sunil Thomas, CEO of CleverTap, a tech provider to Cleartrip, Ixigo, and other players in India and elsewhere.
Travel Companies Try to Instill a Reviews Culture
Another block online travel players have had to overcome from some offline customers was a perception that the information they saw online when booking a hotel was not reflective of what they always got when they showed up at the properties.
India has a relatively low level of chain ownership, so there’s a lack of brand consistency.
Reviews culture is still nascent, too, though one doesn’t want to overstate the point. Homegrown online travel community HolidayIQ claims more than 11 million travelers a month use it to plan their trips, but data from analytics services suggests that TripAdvisor is catching up with it in traffic and reviews content. Other players include Tripoto and TripHobo.
Still, many consumers are still not in the mode of checking online reviews from user-generated portals. In the past couple of years, TripAdvisor earnings calls with investors have rarely mentioned India at all.
MakeMyTrip reportedly owns about a fourth of HolidayIQ. But to build confidence in travelers on its own, MakeMyTrip has actively solicited verified images from hotels and reviews exclusively from its paying customers. Other online players have done the same.
Queen is a 2014 Indian comedy-drama film directed by Vikas Bahl where the main lovelorn character visits Paris, France. A remake of the film, Paris Paris, is upcoming in the Tamil-language. Bollywood movies inspire many Indian travelers. Source: Viacom.
New Entrants Will Add to the Energy
As we’ve seen, companies like Paytm can come out of nowhere in India and reshape the balance of power. Here are some other companies experts have their eyes on, looking ahead.
One fast riser is Musafir, an online travel agency based in the United Arab Emirates, and whose name means traveler in Arabic, has been expanding in India since it appointed Rajesh Pareek as group CEO. Pareek doubled the size of the company’s technology team, partly by investing $10 million in a technology center in Pune, India.
In 2018 Musafir acquired many customers by signing cross-promotion deals with banks like HSBC and Standard Chartered to provide discounts or cash back to customers who book their tickets using those banks’ credit cards. Customers with credit cards tend to be more likely to travel on average, and the return on investment for the promotion could be high.
Another fast-rising player, though through ample use of cashback promotions, is HappyEasyGo. If the company’s claims that it is selling about 200,000 plane tickets a month on average are true, it may soon challenge Yatra and Cleartrip in ticketing volume.
In January 2019, India’s Ministry of Tourism began requiring online travel companies to apply for accreditation for the right to operate, with the goal of identifying unethical businesses.
Surfing the Swelling Outbound Wave
The real jump in Indian outbound travel is probably some years away. In 2017, the country only received about 10.2 million foreign tourists. Foreign tourist numbers and receipts can grow with an expected target of doubling its annual visitor totals within three years, said the tourism ministry.
The Narendra Modi government has aimed to speed this up by expanding a service enabling electronic visa applications instead of embassy visits from 43 countries in November 2014 to 166 countries today.
Despite the growth potential, some destinations and global travel brands have begun preparing for it through strategic partnerships, as Skift Research glossed in its State of India Outbound Travel 2018 report.
At the start of 2018, Japan relaxed its visa requirements for Indian tourists and began issuing multi-entry visas for short-term stays, which encourages repeat visitation. In April 2018, Morocco launched a plan to open tourism board offices in Indian cities, relax visa policies, and teach Indian travel agents about Moroccan tourism —with an ambitious goal of double its number of Indian tourists in 2019. In 2018, Mexico ran advertising campaigns, too.
Perhaps the most significant opportunity that destination marketing organizations (DMOs) have yet to exploit fully is to tap into India’s love of movies. A large stratum of Indian society equates any place a top Bollywood star visits in real life, as seen via social media, or in films, with a top-notch experience.
Since its founding in 2013, the India International Film Tourism Conclave (IIFTC) has played matchmaker between tourism boards and the film production houses. In February 2019, it will hold its annual three-day movie tourism event in Mumbai. Tourism boards from dozens of countries are expected to attend.
A few factors have held back foreign destination marketing growth in India, according to Rati Dhodapkar, CEO of East West Marketing India, a company that helps tourism brands and organizations market themselves to outbound travelers in India.
One is that print and TV campaigns in India have become prohibitively priced for many tourism boards and smaller companies because of the booming national economy, she said.
The second is that internet tourism marketing still hasn’t quite come into full flower. But the latter situation is changing rapidly and will counter the first problem.
One hurdle hampering outbound travel has been that India has a controlled currency. When traveling abroad, Indians must file paperwork about the amount of money they’re taking out of the country, said Peter Kerkar, managing director at Cox & Kings.
The more money, the more paperwork, which adds an offline component of an email, call, or in-person visit to most trips. If the government is serious about expanding outbound travel, it will need to streamline this process.
China’s Market Isn’t a Fair Comparison
Some investors want to know why the MakeMyTrip and its homegrown rivals haven’t already become profitable as Ctrip in China. The answer is complicated but mainly has to do with broad economic and political factors.
India’s potential growth story has been overshadowed in some people’s minds by China’s extraordinary rise. China’s quick concentration of profitable power in the hands of Ctrip and its sister brand Qunar has made India look more like a wild west in comparison.
Some foreign companies have soured on India’s online travel prospects by comparing its growth rates with China’s. But, while India is far poorer on average than China, the comparison is partly misleading.
India may be in some ways a better long-term bet for sustained growth than China.
A democratic, multi-ethnic country like India can’t run roughshod over the rights of its individuals and laborers the way authoritarian China does when it comes to seizing land or forcing workers to hit targets, such as building dramatic new airports. India’s relatively more privatized system also struggles to compete in the short-term with China’s recent years of state-backed, debt-fueled investment in an economy in a way that tends to favor state-backed companies.
Such factors have led to a smaller online pie for India’s travel players to fight over.
But the long-term may expose structural problems and imbalances in China’s economy and politics that, compounded by higher levels of public and private debt, could put the breaks on China’s growth and allow India a chance to catch up in the pace of growth and, eventually, even market size.
Travel Will Win by Betting on India’s Middle Class
The long-term trend shows India’s middle-class growing, which is a reliable predictor of booming online travel growth, based on the patterns in countries elsewhere.
In 2015, Amazon founder and CEO Jeff Bezos talked about the importance of investing with a mind toward long-term structural trends. Bezos said that you want to build a business strategy out of events that are stable.
“I very frequently get the question: ‘What’s going to change in the next ten years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next ten years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time.”– Jeff Bezos, Amazon.com founder and CEO.
Applying this logic to India’s online travel sector, we often wonder, what’s going to change in India in the near decade, but the more relevant question may be what’s not going to change. In India, the underlying drivers of a growing middle-class that is rapidly adopting the internet create a persuasive argument for seeing a bright future for India’s online travel market.
India will become the world’s third-largest travel and tourism economy by 2028, following China and the U.S., according to the World Travel & Tourism Council (WTTC).
Today, the hotel market may be under-developed relative to demand, which is an invitation for more investment. Indian cities had a low supply of hotel rooms compared to several other leading cities, with New Delhi having only about 72 rooms under hotel brand names per its city gross domestic product (GDP, a measure of economic output) and Mumbai having only 75 branded rooms per GDP. Compare those figures to Bangkok’s 98 branded rooms per city GDP and Hong Kong’s 91 branded rooms per city GDP, according to a report by HVS, a consultancy originally known as Hospitality Valuation Services.
India’s story is remarkable because many of the tools and strategies that online travel companies are deploying in India today will be applied elsewhere tomorrow, such as innovations in mobile-first conversational commerce.
The day may even come by then that a company built in India goes abroad and defeats an American or a Chinese company in an external battle. Having been battle-hardened in one of the world’s fiercest online travel markets will have prepared that ultimate victor well.
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