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Online Travel CommerceBY ASHISH DUA5TH DECEMBER, 2015
Never underestimate the power of a pretty travel picture with a wise sounding quote.
3Agenda
What is Online Travel Commerce? Trends The Indian Traveler 5 Stages of Travel Purchase Transportation
Flights Accommodation
Hotels Industry Players: OTAs & Others New kids on the block Future of travel
4What’s Travel Commerce
Travel Commerce refers to the buying, selling and renting of travel services via electronic channels, primarily the Internet.
An Online Travel Agency (OTA) is a company that engages in a business of selling online travel products. Eg. MakeMyTrip, Cleatrip, Expedia, etc.
Primarily consists of Transportation products, Accommodation products and Packages.
Rent a Bike, Rent a Car, Book a city tour, Book a flight, Book a package tour, Book an accommodation, Book a ride share, Book a Bus, Book a Bungee Jump, Book a Train, etc.
5Trends (1/2) Online Travel continues to be the largest contributor to e-commerce in India India is one of the fastest growing online travel markets in the world
2009 2010 2011 2012 2013 2014 20150
5
10
15
20
25
eCommerce & Online Travel (in $ Bn)
Total Ecommerce Online Travel
Source: eCommerce in India- Accelerating Growth, PWC, 2015
United States
Australia
Russia
China
Brazil
S. Korea
India
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%
CAGR Growth Rates (2011-2016)
Source: Web: Statista.com: Forecast of online travel sales CAGR
6Trends (2/2) Historically, online travel has been the largest contributor of
ecommerce sales across most countries. WHY? This number comes down as e-tailing catches up in the country
2012 2013 2014 2015E 2016E 2017E0%
10%20%30%40%50%60%70%80%90%
Travel as %ecommerce
India Spain Italy Brazil US UK China
7Why Online Travel Leads e-Tailing Service v/s Physical Product
No need for setting up complex sourcing, warehousing & logistics
Innately Online World’s largest supplier of flights have always been on interlinked systems even before being available on
OTAs
Standardized Product True more for transportation than accommodation, that the product is fairly standardized in experience and
thus augers well for online purchase.
Low barrier to entry Easy to get off the ground for a new business as integration with a few airline and hotel systems can
provide 50-60% of the inventory to get started
8The Indian Traveler: 2015 Travel is a Life Style choice
More people identify themselves as travelers and enjoy planning & preparing for their trips themselves
More discretionary income leading to more impulse trips Last minute travel, staycations & weekend-road trips are on the rise
Mobile Connected 24*7 via smartphones and using them to search & book travel.
More Demanding on customer experience & support Getting used to high quality, fast speed, robust and personalized experiences and are more impatient with cluttered design &
failures
Price Conscious Continue to be price conscious. Wants maximum value and seeks discounts.
Trusts her peers Rates & reviews her experiences. Also uses reviews & ratings from other travelers to plan her own travel.
95 Stages of Travel Purchase
Dreaming Planning Buying Experiencing Sharing
Subconscious, unstructured, inspired
Key Influencer: Friends & Family
Active, search of destination, hazy travel dates, hazy budget, collaborative
Key Influencer: Internet
Almost fixed budget, alternative evaluation, bargaining/deal-hunting
Key determinants: Product, price, convenience
Leisure, Adventure, Art & History, Purpose-led
Key determinants: Companions & Destination
Pictures, Videos, Tweets, Blogs, Albums, “Been There”
Key determinants: Companions & Destination
10
Jealousy: Making more people fly than airline ads, since 1914
11Transportation Compared to 78Mn Passengers (pax) on Domestic Airlines in
2015 (expected), Indian Rail carried 8500 Mn Passengers. The Domestic Flight Market is led by Indigo, followed by Jet &
AirIndia
1%
99%
Transportation: By Travel Mode
Air PassengersRail Passengers
Airline Market Share in India (Oct'15)
Air India Jet Airways Jet Lite Spice Jet Go AirIndigo Air Costa Air Asia Vistara Air Pegasus
12Flights | Key Constituents Domestic flight booking has high internet penetration- Almost 50% of the bookings are
done online (etail is <2% of retail for comparison)
Each airline faces the following challenges: Ensure all seats are sold on a flight. Currently average load factor is 80%. DISCUSS. Charge a consumer surplus to the business traveler while incentivize the leisure traveler to travel
more
Besides Price, Customers are looking for the following while buying flights: Departure Time Airline Flight Duration On-Board services Post Sales Service
13Flights: Competitive Landscape
Competition with industry players is HIGH with multiple OTA like MMT, Cleartrip, GoIbibo all active in this region
The buyer power is MEDIUM as the users have a few options to book from including others OTAs & the airline sites
The supplier power is HIGH since the supply is concentrated with a few airlines
Threat of new entrants is MEDIUM as airline integration and contracting is tough
Threat of close substitutes is LOW as the product is standardized and differentiated business models are tough
Overall it appears to be a highly competitive industry
14Flights: Key Ecosystem
Airline
Global Distribution
System
Other Supplier
Side Platforms
Online Travel Agencies
Full Service Carriers (FSC) like Air India, Jet Airways
Low Cost Carriers (LCC) like Indigo, Spicejet, etc.
Airline Site & Apps (like
goindigo.in)
OTA Site & Apps (like
makemytrip.com)
Customer
Consolidation
15Hotels| Key Constituents Hotel booking has low internet penetration- Less than 10% of the overall hotels bookings are done
online. A big part of this booking is on-call or walk-ins
The Hotel supply is highly segmented. Hotels face the following challenges Ensure all room are sold on a night. Currently occupancy levels vary between 60-80% How to price their hotels to make reasonable margins and yet fill all rooms Attract enough queries & walk-ins
Unlike flights, hotels is a high involvement purchase. The decision metrics for buying a hotel involve Review & Ratings Location & distance from key areas Room type & meal plan Room & hotel pictures Post Sales Service
16Hotels: Competitive Landscape
Competition with industry players is HIGH with multiple OTA like MMT, Cleartrip, GoIbibo all active in this region
The buyer power is HIGH as the users have several options to book from including smaller OTAs & offline travel agents
The supplier power is LOW since the supply is fragmented with a long tail of hotels
Threat of new entrants is MEDIUM as even though technology is a barrier to entry it is not high enough
Threat of close substitutes is HIGH as any of the suppliers, metas & offline agents can take up demand
Overall it appears that with the traditional contracting based reselling model you would be playing in highly competitive environment
17Hotels: Key ecosystemHotel
1,2…N Hotel GDS1
Hotel GDS 2 Online Travel Agencies
Hotel Site & Apps (like
vivantabytaj.com)
OTA Site & Apps (like
makemytrip.com)
Customer
Hotel N+1, M
Hotel M+1, P Individually Contracted
Fragmented Supply, Multiple GDSes
Most of the things you buy on Flipkart will only get used when you travel with MakeMytrip
19Industry PlayersTravel Search Engines
OTAs
P2P Market (Accomodation)
Hotel Aggregators
Global Distribution Systems (GDS)
Itinerary Planning
Rail Booking
Meta Search Engines
Multi-Modal
Car Rental/Sharing
Intercity Bus Booking
20New Kids on the BlockSome interesting start-ups in the travel domain: Trippy
Building a community of travelers and local experts helping each other out.
Hopper Hopper aggregates & analyzes billions of flight data points and tries to find the answer to the age old question- “when
should I book my flight?”
Off Track Planet A croud-sourced travel guide created by aggregating knowledge shared by a global community of experts
Options Away An innovative product that allows the customer to lock his fare for day or even weeks at an additional amount.
Dealbase Analyzes hotel deals and real savings are presented in a consistent way for “apples” to “apples” comparison
21Exercise
Pick up any product from the above & analyze:
1. Which of the 5 customer lifecycle stages does it primarily fall.
2. What’s the Customer Problem it is trying to solve.
3. What’s the biggest opportunity and threat for its business.
22Future of Travel More Peer to Peer
Rise in peer to peer offerings- homestays, ride-sharing, car-renting, travel-guides, audio-tours
Personalized & Mobile Smarter apps powered by data providing services like a personal assistant with
accurate recommendations. Personalized service delivery and friction-free experience across transfers through
airports, in-flight cab & accommodation
Cash & Cardless Pre-Agreed modes of payments and wallets
Sneak Peek into the future: https://www.youtube.com/watch?v=NNypFfPYWWs
23
Questions, please.
Travel More. Thank You.
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