The online travel market surpassed US$ 2 billion (Rs 8,000 crore) by 2008—an almost seven-fold increase from the US$ 300 million market in 2005. This is expected to grow to US$ 6 billion (Rs 24,000 crore) by 2010. This unprecedented growth has been made possible by a new generation of urban Indians researching and booking travel on the internet and the partnership between the low-cost carriers (LCCs) and the online travel agencies. LCCs account for close to 40% of India’s domestic travel market. In addition to Air Deccan (now Kingfisher Red Airlines), which has been the pioneer, and Jet Lite (earlier Air Sahara), the opening of the sector has seen the emergence of six new airlines (Go Air, Spice Jet, Paramount Airways, Indigo, Indus Air and MDLR). These LCCs offer short-haul, point-to-point services on a no-frills basis. Most of them have single seating arrangements (all economy, no business or first), their fleet consists of a single aircraft model, and they do not pamper their clients with fancy cuisine. Their objective has been to reduce their cost by 35% to 40% as compared to legacy carriers.
With reduced operational costs, high passenger loads and low staffing, LCCs have aimed to break even within two to three years of their operation. On account of their emphasis on cost-optimisation, these carriers have vigorously embraced the internet and made online travel agencies their logical partners. Several demand and supply side factors propel this growth. On the demand side, India’s sustained economic growth has resulted in an expanding middle class and a cultural disposition attuned to travel. On the supply side, travel-supplier partnerships with the banking industry have promoted online payment; the information technology sector has allowed homegrown online solutions; the immense growth of online bookings of Indian railways and now the low-cost carriers have acted as a catalyst and the influx of venture capital in the online travel agency sector has given it greater momentum.
One of the biggest contributory factors has been India’s leadership in information technology and business process outsourcing. This has enabled online travel agencies and LCCs to host solutions, build technology platforms and customer service capabilities and provide secure booking engines. Another critical factor has been the huge opportunity available in the internet space, where permission from government agencies is not required. This has led to young entrepreneurs raising resources from venture funds and launching operations.
For instance, Makemytrip.com, has had three rounds of funding amounting to almost US$39 million from Tiger Fund, Gabriel Venture Partners, Sierra Ventures etc. Clear Trip.com has recently received its third round of funding, bringing the total investment to US$30.2 million from venture funds such as Draper Fisher Jurvetson, Sherpalo Ventures, Kleiner Perkins, Caufield & Byers (KPCB) and Gund Investment. Travel Guru has raised a seed investment of US$ 25 million from Battery Ventures and Sequoia Capital India. Other leading players are Travel. Indiatimes.com backed by Bennett and Coleman, Ezeegol.com driven by Cox and Kings and Travelocity India with Sabre as the key investor. These travel portals are aiming for profitability in 2010 with an initial public offering in the next two years.
The trend was earlier set by the Indian Railways, which runs the country’s largest e-commerce platform. It sells Rs 1,700 crore worth of online tickets per year and almost 78,000 tickets on a daily basis every day. Its online sales are growing at over 200% on a year-to-year basis. The railways have tied up with petrol pumps and Sify’s cyber cafe to make online railways ticketing services available across their networks. The use of technology by the Indian Railways has been responsible for radically reducing queues at railway stations. The Indian online market is likely to expand to US$ 6 billion by 2010. Its potential can be gauged from the fact that the US-based Expedia, the world’s largest online travel company, recorded transactions worth US$ 19.6 billion in 2007, earning US$ 2.67 billion in revenues and US$ 296 million in net profit. As Expedia and Travelocity set up shop in India , the market is likely to explode.
At present, the OTA’s business model relies heavily on air bookings. This is similar to matured markets like the UK and the US, with their high online penetration and competition between airlines. It is quite unlike other APAC markets, where a duopoly of airlines exists and the intermediaries have largely been hotel consolidators. The classic examples are those of Mytrip.net in Japan, Ctrip in China and Wotif.com in Australia. A recent study by PhoCus Wright has termed India as ‘the most dynamic APAC aviation market in terms of consumer choice. For example, the Indian traveler has options among eight airlines on high traffic routes like Mumbai-Delhi. The tendency towards price wars in markets with multiple competitive routes provides a major opening for online travel agencies to add value. The lack of a competitive air offering in more sophisticated markets such as Australia, Japan and Korea has prevented online travel agencies from achieving traction.’ This is, however, likely to undergo a radical change as air booking margins and commissions get squeezed. The next major opportunity will be for consolidation in the lodging industry and enhancing yield management by booking hotel rooms online. Travel Guru, which markets itself as ‘hotel ka guru’, has tied up with more than 4,000 hotels across the country with an inventory of over 2,000 rooms. It is today booking over 1,000 rooms a day.
This dynamic growth in the Indian travel and tourism industry has to be viewed in the background of various innovative trends. The PhoCusWright study has projected the idea that online channels would continue to outpace the total travel market growth and online penetration would surpass 23% in the total travel market by 2010. The supplier direct channel would dominate the online distribution with a market share of 65% in 2008, while online travel agencies would have increased their share to 25% from the present level of 7%. This growth would be at the expense of the traditional travel agencies, whose share would declined from 32% in 2005 to a mere 10% in 2008. According to the report, traditional agencies would ‘neither have the scale and financing, nor the brand equity and knowhow to compete with the venture fund backed startups and subsidiaries of multi-billion dollar international conglomerates.’
Now let me turn to the role played by information technology in promoting and marketing India. The ministry of tourism’s outlays for information technology were being utilised as Central Financial Assistance to assist state tourism departments in computerising and procuring hardware. Most states prepared project reports for installing Hark systems and kiosks. These were never updated and upgraded and in most states, the equipment lay collecting dust. In many ways, this was a classic case of poor utilisation of assistance provided by the central government. In 2002, with the launch of the ‘Incredible India’ campaign, this radically changed. Since then, outlays for information technology have been utilised for branding, positioning and marketing India as a destination of choice on the worldwide web.
Source : Financial Express
Tuesday, June 30, 2009
It is raining special fares at Jet group
Jet Airways, Jet Airways Konnect and JetLite have introduced special ‘Monsoon magic fares’ which allow passengers to travel for less on select domestic routes. The promotional scheme offers a seat on a Jet Airways flight between Mumbai and Kochi for Rs 2,500 while a passenger can fly on JetLite between Mumbai and Hyderabad for Rs 2,250. Jet Airways Konnect will offer a fare of Rs 2,500 for flights between Delhi and Chennai/Bangalore. Jet Airways Konnect is a sub-brand of Jet Airways. The traveller will, however, have to pay airport and other taxes plus the passenger service fee in addition to the ticket cost, the airline said in a statement.
Airport taxes vary from Rs 375 in Hyderabad to Rs 100 in Mumbai. Air Tickets will be on sale till July 2 and passengers can travel between July 15 and September 15.
Source: Hindu Business Line
Airport taxes vary from Rs 375 in Hyderabad to Rs 100 in Mumbai. Air Tickets will be on sale till July 2 and passengers can travel between July 15 and September 15.
Source: Hindu Business Line
Monday, June 29, 2009
Travel portals see a drop in sales after the fuel surcharge hike
The recent hike in fuel surcharge by prominent airlines of the country have led to a drop in bookings by about 10 to 15 per cent according to major travel portals.
While MakeMytrip.com has reported a 15 per cent drop in bookings after more than a week of the hike in fuel surcharge, Cleartrip.com has witnessed approximately 5 per cent drop in the bookings. Leading travel portal Yatra.com also reported an overall drop in the bookings after the increase in fuel surcharge.
"We have seen a 15 per cent drop after the airlines declared the hike in fuel surcharge. But the drop is been there historically. Whenever there is some increase in airfares, customers react like this for the first few days. Generally the customers take some time to accept the fare hike," said Mohit Srivastava, Head of On-line sales at MakeMyTrip.com.
"Some airlines may again come up with some offers in a couple of days to draw the passengers in July and August which are considered the poor months in terms of passenger traffic," Srivastava added. He also added the information that they have received clear hints from one low cost carrier and one full service carrier about some upcoming offers which will help the bookings to go up again.
"Just prior to the hike most of the airlines were showcasing some amazing monsoon offers which had boosted the bookings by 30 to 35 per cent. But as soon as they came up with the increase in fare the bookings dampened and they came back to normal. And now we can see around 5 per cent of drop in the bookings," said Noel Swain, Vice President, Marketing Cleartrip.com.
Airline officials, however, claim that the latest hike in fuel surcharge does not mean that air fares have increased.
“If one were to compare prevailing domestic air fares with what they were in July last year, then the current fare levels are almost 25 per cent lower,” said a SpiceJet official.
"The hikes are not substantial enough to bring a huge impact on the amount of bookings. Travel agents across the country are reporting a 3 to 5 per cent of drop in bookings but it is negligible. If you look at the air fare for the same period of the previous year then the current fares are still lower. And Indian customers are resilient to all these factors.," said Rajji Rai, President of Travel Agent's Association of India. Aviation Turbine Fuel prices have risen by 33 per cent since March. The two major private full service carriers, Jet Airways and Kingfisher Airlines increased their fuel surcharge by Rs 400 effecting from 17 June as a result of successive increase in the prices of Aviation Turbine Fuel.
State-run carrier Air India and budget air carrier SpiceJet also followed suit by increasing their fuel surcharge by Rs 400 from 18 June, a day after Jet Airways and Kingfisher Airlines announced their decision.
Source: MSN News
While MakeMytrip.com has reported a 15 per cent drop in bookings after more than a week of the hike in fuel surcharge, Cleartrip.com has witnessed approximately 5 per cent drop in the bookings. Leading travel portal Yatra.com also reported an overall drop in the bookings after the increase in fuel surcharge.
"We have seen a 15 per cent drop after the airlines declared the hike in fuel surcharge. But the drop is been there historically. Whenever there is some increase in airfares, customers react like this for the first few days. Generally the customers take some time to accept the fare hike," said Mohit Srivastava, Head of On-line sales at MakeMyTrip.com.
"Some airlines may again come up with some offers in a couple of days to draw the passengers in July and August which are considered the poor months in terms of passenger traffic," Srivastava added. He also added the information that they have received clear hints from one low cost carrier and one full service carrier about some upcoming offers which will help the bookings to go up again.
"Just prior to the hike most of the airlines were showcasing some amazing monsoon offers which had boosted the bookings by 30 to 35 per cent. But as soon as they came up with the increase in fare the bookings dampened and they came back to normal. And now we can see around 5 per cent of drop in the bookings," said Noel Swain, Vice President, Marketing Cleartrip.com.
Airline officials, however, claim that the latest hike in fuel surcharge does not mean that air fares have increased.
“If one were to compare prevailing domestic air fares with what they were in July last year, then the current fare levels are almost 25 per cent lower,” said a SpiceJet official.
"The hikes are not substantial enough to bring a huge impact on the amount of bookings. Travel agents across the country are reporting a 3 to 5 per cent of drop in bookings but it is negligible. If you look at the air fare for the same period of the previous year then the current fares are still lower. And Indian customers are resilient to all these factors.," said Rajji Rai, President of Travel Agent's Association of India. Aviation Turbine Fuel prices have risen by 33 per cent since March. The two major private full service carriers, Jet Airways and Kingfisher Airlines increased their fuel surcharge by Rs 400 effecting from 17 June as a result of successive increase in the prices of Aviation Turbine Fuel.
State-run carrier Air India and budget air carrier SpiceJet also followed suit by increasing their fuel surcharge by Rs 400 from 18 June, a day after Jet Airways and Kingfisher Airlines announced their decision.
Source: MSN News
Tuesday, June 23, 2009
Online air travel bookings fall post fuel surcharge hike
No sooner did airlines hike the fuel surcharge than customer interest in air travel has waned. While MakeMyTrip.com reported a 5-10 per cent drop in bookings on Wednesday and Thursday, Cleartrip.com saw bookings back to the levels of the week starting June 1. Yatra.com, however, says the impact is limited to leisure travel.
Jet Airways hikes fares by Rs 400
National carrier Air
Jet Airways and Kingfisher Airlines also raised fuel surcharge on domestic routes on Wednesday by Rs 400. Airline officials, however, claim that the latest hike in fuel surcharge does not mean that air fares have increased.
Air
"If one were to compare prevailing domestic airfares with what they were in July last year, then the current fare levels are almost 25 per cent lower," said a SpiceJet official.
However, customers seem to think otherwise. Cleartrip's Noel Swain told Business Line, "We saw a 35 per cent surge in bookings last week when the airlines announced promotional fares."
Whether the sentiment is here to stay or is just an immediate reaction to the hike will be known in week, said
Source: Sify
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