According to a Forrester Research cited in The New York Times, fewer people (down 9%) are booking travel online in 2007 compared to 2005. The report pins the blame on the online media that by nature is meant for mass consumption of uniform goods. Travel, let it be said again, is a very personal product.
The result? American travelers are getting tired of spending two or three hours browsing the Internet, trying to find an airline, a hotel or a vacation package that exactly matches their needs. In other words, they are fed up of the ?commoditisation? of holiday packages online.
As a consequence, online travel booking in the US have begun to fall slightly (62% in 2006 against 68% in 2005) despite the fact that offline bookings continue to increase?it went from 25% in 2005 to 31% in 2006 (Source: PhoCusWright, cited by the Times report).
Does this give the heebie-jeebies to the Indian Online Travel Distributors (OTD) who had just begun to take off in a booming market? The travel industry in India is pegged at $20 billion, and online travel expected to close at $2 billion in 2007-08. Travel portals, which currently have a 7% share of the market, are expected to grow to 28% in a year. The essential question is, will they?
?Yes, we will, provided we also strengthen our offline presence,? says Sachin Bhatia, co-founder and chief marketing officer of MakeMyTrip.com, one of the key players in the sector. ?If we do that, online travel sales in India could grow from $500 million in 2005-06 to $2 billion in 2007-08,? he maintained.
His prediction is based on the fact that while in the early part of this year flight bookings contributed in a big way to online travel sales, there is now a lot of traction for hotel sales. ?Smaller and lesser known properties that had little chance of promoting themselves nationally have found a good ally in OTDs,? he says.
This presents both a challenge and an opportunity for Indian OTDs. There is so much variation possible in a combo sale of flight and hotel bookings, that even the US OTDs are grappling with the issue of customisation.
For instance, the Forrester report reveals that although travel revenues from online sales are still strong in the US?because the average booking amounts are rising?instead of booking online, the customers are now doing it offline, because the service is more personalised there.
Will the same thing happen in India, spelling doom for the newly-launched OTDs? ?No,? says Ram Badrinathan, senior analyst with PhoCusWright. ?This is not true for the Indian travel industry, for sure.?
Agreeing with him, Hari V Krishnan, vice-president, product and marketing, travelguru.com, says, ?The US OTDs are operating in an advanced and mature space. Online travel there is, by far, the dominant contributor to travel. Traditionally, the market there is also very ?standardised? with reliable and consistent products.?
This may be prompting the US consumers to demand greater efficiency from their systems and personalisation in service, but in India most OTD have maintained a strong offline presence, as well, which continue to bring them big business.
Travelguru, for instance, sells about 50% of its hotels and holiday bookings offline (through the reservation centre call-ins). This is very different from the US market where sales are often totally online. ?The mix of offline and online sales has resulted in a strong 20% month-over-month sales growth for us over the past few months,? says Krishnan. Meanwhile, revenues from online travel sales are increasing in India as well, at a pace greater than in the West. The reason is obvious. While only 40 million are online?that is, only 3.5% of the total population?travel search and bookings online take up 58% of their surfing time.
?We have seen the average transaction size increase by up to 20% this season. We now average sales of 1,050 room nights per day, which is over 300% growth over last years numbers,? informs Krishnan.
Sandeep Murthy, CEO, Cleartrip.com, accepts that individual consumption of unique travel packages is a growing demand even in India. ?We have observed it in the response to our hotel-plus-air combo. The combo is popular because it gives travelers the option to design their individual packages.?
?When ticketing is a low margin business and travel portals have to compete with their vendors, it is no more about making things available in a searchable and comparable format,? adds Mrutyunjay Mishra, co-founder Juxtconsult, an online research solutions company. ?It?s also about providing travel solutions with an edge.?
Right now, although most airlines are shifting to 100% e-ticketing, railway e-ticketing is available only in 203 cities and hotel and holiday booking is still driven by offline agents. ?Online travel portals have just started scratching the surface of the hotel business,? explains Mishra.
To this Bhatia concedes, ?The Internet is not an ideal medium to sell holidays, especially multi-destination holidays that also have a lot of activities like sight-seeing thrown in, since these can get fairly iterative.? He admits that what really sells online is flight and to some extent hotel bookings. ?But when it comes to domestic and international holiday packages these are sold mainly through our call-centre and walk-in locations.?
This is one reason why makemytrip.com encourages people to call on its national toll-free number or walk into any one of its branch offices in Gurgaon (near Delhi), Mumbai, Bengalooru, Ahmedabad, Kolkata and Surat for a one-on-one with its representatives.
?We are set to open in 20 more locations over the next five months,? informs Bhatia. ?Currently 20% of our revenues come from non-Internet sales; this percentage is growing each quarter,? he adds.
Catching on to the same trend of having a strong offline presence, Cleartrip.com recently joined hands with Future Group to open travel retail outlets across five Big Bazaar outlets in Mumbai as a pilot. ?If it?s successful, we will extend this model to 66 malls in 44 cities over the next 12-15 months,? informs Murthy.
?The attempt is to change the way travel is retailed by positioning it in a pure retail environment. On an average, a Big Bazaar outlet receives 25,000 footfalls per day. Our aim is to convert that into travel,? he explains.
The company is also working on other customer-centric offerings, such as fast search results (average search results in 20 seconds, compared to industry standard of 45 seconds) and price transparency, wherein taxes are clubbed in the air fare displays, which is not a common practice at most Indian travel portals.
Most OTDs agree that in holiday packages at least, there can be nothing but customisation. When one stretch of a trip is by air, the next by train, then by bus or taxi, followed by a night in a budget hotel to the final arrival at a good package destination with food of his family?s choi- ce and then back to the starting destination, it?s a bit too much for one OTD to handle. That?s when a traveler begins to do separate bookings for travel, stay, food (no booking though).
The problem is not so acute in the US where just a few big chains account for a major chunk of the US hospitality market. The customer can easily book the hostel herself. In India, since there is more variation, the resulting confusion over where and how to book is more pronounced. This is the need that OTDs with their extensive data-bases and customer reviews can meet with aplomb. In fact, some OTDs in India have begun to specialise in just this category of bookings, that is, hotel bookings. But, if a combo offering is available with one OTD, it does save a lot of time and money for the traveler.
?Combo is definitely the way forward in the Indian scenario,? says Mishra. This is rather a cultural factor. ?There is always a demand for more value for money. However, they are not necessarily looking for the lowest price, which is a trend noticeable over the past year or so,? chips in Krishna.
The other factor that works in the Indian scenario is good deals and discounts. Travelguru, for instance, offered cash backs of up to 50% on flights, hotels and holidays on the entire VISA credit and debit card base (which has 70% of the total credit card market in India) a few months ago and the response was extremely good, according to company sources. Its festive season offer, which just came to an end also offered 30% off on all hotel bookings, along with flight bookings.
?We partnered with MasterCard to give 30% cash back on Kingfisher, Jet Airways and Indian airlines, and the response was great,? recalls Mishra.
Other OTDs also work with hotel partners to organise free airport pick-ups or room upgrades for regular or big-ticket customers. ?This is one sure way to get the Indian customer to book online,? says Bhatia.
The moral of the story: even if you are doing it through just the Internet, up sell the consumer and give him what he wants!
The big picture
Juxtconsult?s track findings for 2007 suggest the following:
* 58% of urban (20,000-plus population towns) Indian Internet users are into online travel search and booking;
* 79% of these are active users (used Internet in the last three months);
* 62% of them searched and booked online;
* 17% them only searched for travel products and solutions online;
* In the next three months online buying of train, air tickets and tour packages is expected to increase significantly, while purchase of souvenirs and picture postcards is likely to fall.
?Us? versus ?Them?
Typically, the US consumer looks for the following in her online travel booking:
* Either flight or a hotel booking based on price and timing/date;
* Car booking for the destination;
* A reliable brand of hotel (few big chains account for a major chunk of the US market;
* Fast and easy booking experience.
In contrast, the typical Indian customer looks at the following:
* Flight/hotel/rail booking based largely on price and promotions;
* They look for as many inclusions as possible-free breakfast, airport pickup, sightseeing etc;
* The focus is on overall experience rather than a brand of hotel;
* The focus is on a rich and interactive booking experience rather than a mechanical and efficient one.
