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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

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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

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Questions, please.

Travel More. Thank You.