Online Travel agents – sign of changing times

Tourist Travel iPadOnline Travel agents (referred to as OTAs) across the globe have had the value proposition of helping travelers find the cheapest tickets/hotels. In India, till about 2005, air travel was restricted to the privileged few who could spend few thousands for a one way ticket to any metro city. And then was this sudden injection of low cost carriers coupled with smart (in hindsight suicidal) marketing tactics (remember Rs 51 ticket for Air Deccan), OTAs in India became consumers’ and investors darling overnight. Flush with funds from VCs, they became bullish at marketing and attracting travel newbies’ who were looking at taking up to the skies.

From there on, with high disposable income, affordable air travel and exciting launch schemes, Indian consumer was traveling like never before and each of the major OTA in India was looking at double digit MoM growth and within themselves wondering of an IPO.

Half a decade later, just one of the major OTAs (MakeMyTrip) has successfully managed to list on the bourses (with the current price nowhere close to the listing price) and rest are keeping low. Air travel in India has gone the global way wherein there is a trend of reduced commissions, reduced distribution costs (agents in hay days may earn upto 5-6% on the overall ticket price) and airlines spending money to build their own brand and reaching consumers directly.

The writing on the wall was evident for OTAs and hence the focus then moved to hotels & packages (global trend & high margin nascent categories), with Air Ticket being the cash cow then, there was money spent on the emerging categories (Hotels & Packages) to acquire customers. But the reality was different, Indian consumers were slow to react to online hotel booking (back then <5% of total hotel inventory was booked online) as there was lack of standardization there was slow growth. While the uptake was slow, most of the OTAs went the organic way and actually waited patiently (remember it was a change in consumer behavior back then) for consumers to move online for hotel booking

Two years later was the time when Flipkarts and Snapdeals of the world were busy advertising on TV/print, people moved out of their shell and started evaluating and booking hotels online. While the trend was in the right direction, it is nowhere close to the markets like US/Europe where hotels/accommodations account for more than 80% of revenues for OTAs.

OTAs happen to sell holidays – it wasn’t a part of their core when they began. Indian OTAs have carved an interesting model of selling holidays over the phone. While they had people coming to them for tickets, the same guys would want summer holidays and that is how it all started. But interestingly enough most/all of them are facing issues with scaling up because more holiday seekers mean more selling agents on the phone. Holidays are complex products and training on destinations, long planning/purchase cycle and other factors inhibits scale, contrary to tickets/bus/cab bookings (they are simpler and booking turnaround time is less)

Today while the consumer is moving in the direction of customized/tailor made products (Dining – Buffet vs. Ala carte, TV viewing – DTH vs. Cable TV etc) particularly travel products especially holidays, OTAs are have moved towards standardization/group offerings (focus on depth and not width of offering) that helps them to attain quasi scale. While tens of thousands came to buy air tickets back then, hundreds flocked to book holidays (when launched) almost overnight, and it was best to sell standard products that could move off the shelf fast and since then OTAs are grappling with servicing and fulfillment and leading to minimum or no product or technology discovery. This is a classic case where customer came before product and true this will be something that will continue for a while.

While there are a host of travel startups in the west solving different varied problems on the side of vacation planning, there are very few here in India. There are huge opportunities waiting to be tapped on the side of offering complementary technology driven solutions that enhance customer experience while booking a holiday. While globally Tripadvisor has been on an acquisition spree with Jetsetter, WanderFly and now GateGuru. Google has gobbled up ITA, Frommers and most recently Waze, the activity somehow is dormant in India.

Is it the lack of quality travel startups here or OTAs hyper focus on growing organically, only time will tell. The reality is that even with dollar touching 60, Indians are traveling like never before, while OTAs may be busy raking in the mullahs the traditional way, technology disruption can change the way people plan and buy holidays & experiences.

Recommended ReadWhat’s NextBigWhat for Indian OTAs? Consolidation, we say

About the Author: Deepak Wadhwa is the co-founder & CEO of WeAreHolidays , an an online leisure travel startup. He was earlier part of MakeMyTrip. Twitter: @DeepakWadhwa_DW.

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