Innovations, deals, slowdown, growth, if anyone has been tracking the Online Travel Agents and Portals space lately it is abuzz with news of all kinds. The highs and travails of being one of the few successful business models on the web in India I guess.

The online travel segment has been one of the best performing in the e-commerce space in India and has been amongst the fastest growing as well. If a government driven portal can make money by the millions then surely there is no question about its scale and success. Recently, the sector has seen a flurry of activities including newer features, potential mergers, international deals, funding and even pink slips which strangely didn’t stuck out as a sore thumb. WATBlog decided to do a follow up of our much appreciated Bird’s eye view of the Indian online travel niche we covered in May.

In this post we discuss

• The latest buzz surrounding the sector
• The current outlook of the industry
• The way forward for the segment
• Potential perils and opportunities and any other surprises it may hold

The Latest News

The past couple of weeks (months actually) had its share of news circulating in the Indian blogosphere covering the OTA space. Right from Travelguru reportedly being picked up international giant Expedia, to the launch of bus search services by Rediff and Ixigo, to the launch of Tripadvisor and hotels 2.0, to Zoomtra and Yatra going international, along with m-ticketing being made available by Ticketwala and Cleartrip laying off nearly 42 employees despite getting heavily funded and to complete the circle a middleman entrant in the form of Gosinbad - an ad network focusing in the online travel niche.

And add to this the latest cup of news coming out that perhaps the Travelguru-Expedia deal which was never officially confirmed has been called off. And we also had the big launch of Cleartrip’s train booking service. It is big, because train bookings currently seem the most lucrative market and almost all portals were are eyeing that pie, and CT would certainly drive home the first mover advantage.

While the train booking service was expected since the announcement by IRCTC to open its API way back in January this year, the apparent call off of a deal which finally seemed like the harbinger of consolidation in the niche is certainly a dampener. Apparently, Expedia developed cold feet on the value of Travelguru at the last moment. The initial reports which came around in July had suggested Expedia to invest as much as $17 million into Travelguru to take its valuation to nearly $75 million. The deal unfortunately though has been called off.

The idea and impact of these news pieces can be seen only when we understand the current scenario of the entire industry and the atmosphere surrounding it.

The Current Outlook and Enviroment of the Space

The rising fuel prices can be held responsible for almost all that is happening in the online travel segment whether good or bad. Aviation driven traffic on these sites has slumped considerably in the domestic market owing to the hike in prices by almost all airlines (by as much as 40%) which was a direct fall out. This meant a slowdown in the entire OTA sector because they were primarily driven by airline ticket sales, the reason of course being IRCTC monopoly over railway ticketing. And if rising fuel prices were not enough, the zero percent agent commission policy also fluttered the wings of the ‘high flying’ online travel space.

Therefore they began looking for newer alternatives. The OTA space began looking offline to drive ticket sales while travel portals added more flavor to their service on their way (no pun intended) to become aggregators. We then saw Rediff and Ixigo launched bus search service; Ixigo in fact took it a notch higher by bringing hotels 2.0 into the picture.

Seeing the dwindling airlines market perhaps, and the fact that railways wasn’t open, bus ticketing services went on an overdrive with Ticketwala leading the pack. It opportunistically added mobile ticketing services and hired a big gun to fire a nationwide advertising campaign.

Players like Cleartrip and Makemytrip, Yatra and Travelguru though began facing the crunch with the rising fuel costs, lesser sales and the lack of an opening to generate scale. Cleartrip chopped a big chunk of its team and Travelguru first tried to find a buyer and now as we know finds itself without one. However, the growth in the internet usage, added with the lucrative and now spending Indian middle class shining bright it attracted both new players as well as innovative packages. For all said and done, the online travel market was expected to touch a pleasing $6 billion by 2010.

So we had, Expedia which had already entered the Indian market earlier in the year now bring in Tripadvisor. The fact that it was an international player with an established Indian audience gave it a quick edge over Oktatabyebye and Raahi (MMT and Yatra owned respectively). And earlier in the year we saw Makemytrip launch special holiday plus package while Travelguru went the affiliate route. It thus added a much needed new dimension to the fast crowding market.

And to this, the much awaited opening of IRCTC API which happened in July, and all eyes were on who would push the gates first. Cleartrip took the honours while it is anybody’s guess to know that others will follow suit soon. Considering the fact that Makemytrip was the first to launch the much blogged about rail search service early this year, Cleartrip has certainly taken the wind out of their sails with this move.

Makemytrip had commented on livemint.com on how important it for them to get into the rail segment amplifying the impact of Cleartrip’s launch. Deep Karla of MMT had in fact quoted that, “You cannot be in the travel space without rail ticketing. We were away from the scene (till now) since railways did not allow us.” (Source: livemint.com).

Therefore it is obvious to expect similar news with perhaps innovative added features coming out in the near future as to that of Cleartrip.

The Way Forward

Besides expected features as mentioned above, maybe we can expect a lot of innovation in this segment both technologically as well as in terms of marketing, services and their approach in general.

Thinking out loud here,  a tie up or some sort of consolidation surely on the cards. In a market which has all players with perhaps the same level of experience and with little to call in terms of technology difference, they are bound to provide similar core services. We already see players going all out to cater to all kinds of users right from the big ones to the lesser known talking the same jargon and same services. Something has to give here. On the other hand we might also see individual tie ups happening to create unique packages and offers in an attempt to distinguish and create an USP. But things can’t continue the way they are now. Everyone is a ‘leading travel site‘, everyone offers ‘the best deals‘, everyone gives ‘unmatched packages‘, why are so many of you there then?

The situation also calls for aggressive marketing tactics which can be expected in a highly competitive market. While the downside of course is the dwindling pie, on the other hand it can drive up growth of the online segment which will be good for the entire Indian e-commerce industry in general. Aggressive marketing will also bring in VAS into play with added dangling carrots for the user. So one can expect travel discounts, combined holiday packages, convenient booking systems and perhaps more intuitive and hassle free interfaces. This essentially would be good news for all of us who use the web for our travel arrangements.

Where Does the Potential Lie?

Niche portals or services perhaps, something like luxury products on the lines of what Yatra introduced recently. Then we have news of state governments trying to push tourism further with innovative products and experiences themselves, which might open a lot more options for travel websites to carve out a difference. We might also see a lot of middle players offer value add services either enabling a certain technology or opening up a new vertical like how Gosinbad did with its ad network.

Beyond the services of course, as is the case with any online entity, the content and level of engagement which extends to building trust in the brand will matter a lot in the long run. Efforts like that of Cleartrip in having a tutorial explaining the ticket booking process even before launching the service through their blog will certainly help push visitor loyalty and usage in an excessively competitive and in demand market.

To conclude the online travel space seems ripe at the moment for innovation to come into play. User experience and value addition to the core products might be the differentiating factor for the market players to look at implementing. Either way, for the end user the industry certainly carries some good news.

Bookmark this post to:

Related Posts

• Travel Update: Travel Portals Looking at Models Beyond Ticketing as Margins Dwindle. A Birds Eye View of Online Travel in India and Insights on the Future
• iXiGo Now To Power Flight Search & Booking On TravelGuru.com
• Online Travel Update: Cleartrip Lays Off 42 & Zoomtra Goes International
• Exclusive WATShow With Hrush Bhatt - Founder Cleartrip.com
• Online Travel Portals Taking Flight To Offer Cool Discount Deals