While a marketplace is a fast way to boost listings without directly tying up with hotels, the amount of commission per booking is much lower than what the likes of MMT get, say industry experts.
Moving beyond alternative accommodation, Airbnb recently launched a marketing campaign Live There to highlight its new travel vertical Trips (tours and activities), which was unveiled in March this year. The campaign, shot in Paris, showcases curated local experiences and exotic travel itineraries. Or consider Goibibo’s latest high- decibel IPL campaign starring Deepika Padukone for GoContacts and MakeMyTrip’s campaign featuring Alia Bhatt and Ranveer Singh for Assured Hotels, which guarantees neat and clean rooms, delightful services and a 24×7 hotline service.
With the online travel space getting highly commoditised and players looking beyond pricing to differentiate themselves, unique service offerings are becoming the order of the day. The trend is seen across the sector with other major players such as Cleartrip launching local, priority flying or ‘pay at hotel’ services. Within the online travel space, the Rs 12,800 cr-Rs 19,200 cr (2016) hospitality segment (RedSeer Consulting) has especially seen considerable action lately with the entry of large global players such as Airbnb. This has altered the competitive landscape significantly.
BrandWagon looks at whether services can emerge as a major differentiator in a category where winners are decided based on deals and discounts.
A home away from home
Alternative accommodation is increasingly seen as a major disruptor in the category. Experts see homestays as more than just a way to fill vacuum in the budget segment, and agree that standardisation of services and government guidelines will further boost the sector.
From MakeMyTrip (MMT) to Yatra, Cleartrip and Paytm, domestic players are looking at homestays to attract experience-seeking travellers. “The alternative accommodation space is expected to be ‘the next big thing’ in the hospitality sector. While domestic players have a presence in it, the entry of international giants could be the game changer due to their established global brand and deep pockets,” notes Jaideep Ghosh, partner, KPMG India.
However, discounting strategies in this segment too are likely to make it hard for smaller players to continue being in business. The hotels’ market in India is highly fragmented with online penetration of 16% in 2016 (according to Millward Brown). While players continue to create compelling reasons such as great pricing, variety of choices, zero cancellation charges and so on, the rise of alternative accommodation is expected to address the demand-supply gap in the segment. “A homestay as a budget option is still underpenetrated,” observes Devangshu Dutta, chief executive, Third Eyesight.
Dutta further says, “While it could be a disruptor from the hotel industry’s point of view, the service standards are still not up to the mark despite the increase in capacity and accommodation options,” adding, “Issues of inconsistency could be higher in homestays because they are individual- run properties.”
No wonder top players in the space are working on addressing this concern. Airbnb, which calls itself the people- powered platform, has more than 24,000 home stays in India and includes properties like penthouses with a sea view in Mumbai, villas in Goa, mini palaces in Rajasthan, etc. The model works on harnessing genuine consumer reviews. “Airbnb is not just about unique properties, but also about uniqueness of hosts,” says Amanpreet Bajaj, country manager, Airbnb India.
While that solves some issues related to trust in the homestay segment, MMT handpicks each property for better experience. It currently has 10,000 properties listed on its homestay offering, RightStay, which provides alternative stay options like villas, residential apartments, homestays and guest houses.
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“All hosts have been personally handpicked for an authentic, local experience,” says Rajesh Magow, co-founder and CEO, India MMT-Ibibo. “Alternative accommodations also bring forth options in remote parts of the country where conventional stay option of hotels are scarce.” On its part, Yatra.com has signed MoUs with six state governments of Uttarakhand, Andhra Pradesh, Gujarat, MP, Odisha and Chhattisgarh to promote state-approved homestays. It intends to establish itself as the largest curator of over 3,000 homestays in 130 cities across India. Another dominant domestic player, Cleartrip also has homestays on its platform but only offers properties that can be booked instantly.
Thanks to the rising disposable income, experience-led travel is driving the travel industry in India. Take Airbnb, which has 15 listed local experiences such as Bollywood dance and home décor. “Our aim is to inspire people to move away from the templatised way of bucket-listing destinations. This is our biggest differentiator in the Indian market,” says Bajaj.
With 3.5 million homes across 191 countries, over 800 experiences in multiple cities, Airbnb’s focus is on outbound Indian travellers. “We are primarily looking at 230 million urban millennials in India,” says Bajaj. “Until now we have been all about homes. With the launch of Trips, we are expanding beyond travel and taking our people-powered approach to launch new services.”
Cleartrip, which launched Local last year, sees it more as a customer acquisition strategy. Currently, 75% of customers on Local are new customers. The platform includes services such as spas and wellness, cycle tours, rafting and camping with a focus on frequent use cases and has a far younger TG of 25 years compared to travel which has a median age of 35. “Travel is a need-based vertical. The frequency of travel in India is, on an average, two trips per year compared to western countries where it is 10-12 trips a year,” says Subramanya Sharma, CMO at Cleartrip.com. “I don’t see our Local offering contributing more than 15% by next year as the average ticket size of Local is one-tenth that of travel.”
While Cleartrip doesn’t plan to launch any new products this year, its focus will be on digital marketing and ATL to boost its existing products. Yatra on the other hand, is pivoted to become a marketplace with a change in brand identity this year. While a marketplace is a fast way to boost listings without directly tying up with hotels, the amount of commission per booking is much lower than what the likes of MMT get, according to industry experts. Overall, the travel marketplace model just acts as a small additional revenue stream.
Aggregators are also getting aggressive with a focus on pricing and varied options. Paytm, which launched its travel marketplace last year, recently tied up with Booking.com to add over one million hotels and BnB properties across 227 countries. “We will differentiate ourselves by driving growth in tier 2 and tier 3 towns,” says Abhishek Rajan, VP, Paytm.
As the Indian online travel market gets consolidated at the top, only deep-pocketed players can make a dent in the market. “Discounting strategies will further put pressure on all players, forcing the weaker ones out,” sums up KPMG’s Ghosh.