Cleartrip has launched a segment called ‘local’ on its app. At a time when it is struggling in its core business, the addition of other segments seems to be its strategy to survive.
Online travel agency Cleartrip Pvt. Ltd has raised an undisclosed amount in a fresh round of funding from existing investors US-based Concur Technologies and Gund Investment, among others, according to a top executive at the firm.
The company declined to specify the amount.
“On the funding side we maintain that we have enough capital to run our business for the next couple of years,” said Samyukth Sridharan, president and chief operating officer.
According to Sridharan, the company has raised $75 million so far. “... Our last round was in February-March time frame. It was an internal round… (participated in by) not all existing (investors) but Concur and Gund for sure,” he added.
The company competes with heavily funded, Nasdaq-listed MakeMyTrip and Goibibo, which is backed by South African media company Naspers Group. In January, MakeMyTrip announced a $180 million fund-raising round from China’s Ctrip.com International Ltd. It was followed up by Naspers Group’s announcement that it would invest $250 million in Ibibo Group, which owns and operates Goibibo, in February.
“There is a fundamental difference in how some of our competitors are building their business versus ours. We have always believed that being capital-efficient is more important,” said Sridharan.
The two companies are spending heavily on their hotel and packages business to acquire customers.
On the other hand, according to multiple media reports, Cleartrip has been in the market to raise funds for a long time. However, it hasn’t been able to attract new investors.
The situation has not been very eventful either for Yatra, which was in news last year for preparing the ground for an initial public offering, Mint reported on 31 March 2015. According to a 30 March Times of India report, Alibaba-backed Paytm was also in talks to buy a stake in Yatra.
Cleartrip on Monday also announced an extended focus on its activities segment. The category offers customers a chance to book a place at different events and activities happening in a city, ranging from a family dinner to Zumba classes and adventure sports like go-karting.
It has launched a segment called “local” on its app. At a time when it is struggling in its core business, the addition of other segments seems to be its strategy to survive.
According to Sridharan, it is difficult for the company to scale transactions because of the large ticket size in the travel segment. Local, with its four segments—events, fitness, food and adventure—will help the company scale up faster.
The company says that people spend close to 40 weekends at home and it is a big market. “Activity is probably about half the size of the travel market itself in terms of consumers but it is extremely fragmented. Travel business in India is roughly $6-7 billion,” he said.
Cleartrip is targeting transactions from this segment to make up 50% of its total in the next three years. The segment currently reports 2,000-5,000 transactions per day, ranging from weekdays to weekends.
This is against 30,000 transactions per day happening in flight and hotel bookings.
While activities as a separate segment was launched in the middle of 2015, it is only now that the company has divided it into four categories. It has also lined up a television ad campaign with an estimated budget of $1.5 million. The commercial will be launched in July.
The average ticket size of these activities is Rs.300-350 per person, much smaller than travel.
Average ticket size in domestic travel is roughly Rs.8,000-9,000 while on international routes it is Rs.24,000-25,000.
Cleartrip claims to be earning a margin of 15-20% from its hotel and activities businesses and a margin of 5-6% from the flights business.
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