The nearly Rs 2,56,000 crore ($35-40 bn, 2016) Indian travel market has been significantly disrupted in the recent past by the 46 crore (2016) mature internet user base. (See box) Propelled by this, the online travel market increased to $15 bn (about Rs 96,000 crore) in 2016 — 40% of overall travel. Within online travel, hospitality segment, which is about $2-3 bn (nearly Rs 19,200 crore), has seen significant action lately with the entry of large global players. This has altered the competitive landscape with hotel aggregators and home grown OTAs both having to fend off their aggressive global counterparts. The travel market in India will see four mega-trends, which will likely reshape its contours:
Trend #1: Demanding customer
OTAs are likely to face the heat from hotel aggregators due to their lack of control of customer experience. Customers of aggregators rate them far better than any offline hotels at same price point. Aggregators are likely to make a bigger dent in the market as their property networks expand and focus on quality control increases.
Trend #2: Growing interest in experiential travel market
OTAs are likely to face stiff competition from the likes of Airbnb. While we expect OTAs brand recall and traffic volumes to provide some respite, Airbnb is likely to steal away a significant share of customers — typically who are globally exposed, metro-based and in the upper income group.
Trend #3: Digitisation and economisation of corporate travel
Both OTAs and global players face challenges in cracking the corporate market, especially at the lower price points, where aggregators perform well. We expect hotel aggregators to continue to make a dent in this segment with their high quality and reliable accommodation at budget prices.
Trend#4: Package trips and interest in travel+stay deals
Home-grown OTAs are well positioned to leverage this trend due to their strong portfolio, high traffic share to enable cross-selling and deep understanding of local consumer needs. This should help them fend off global competitors while shoring up their profitability within the package segment.
As the online travel market is set to reach more than Rs 1,92,000 crore by 2020, we believe that home-grown OTAs need to better tailor their offerings and understand customer behaviour shift. Also, aggregators have strong strengths and moats due to their consumer experience focus and corporate customer base, which should help defend them against the global assault.
(With inputs from Anil Kumar, founder & CEO, RedSeer Consulting)
The author, Mrigank Gutgutia is engagement manager, RedSeer Consulting