Indian Online Travel Market Continues to provide new opportunities for intrepid travel companies
07/08/2007|12:19:00 PM|Eyefortravel
2006 saw a huge amount of activity in the online travel space in India - and this year the market is showing no sign of cooling off. Far from it in fact. Unprecented economic growth, a burgeoning middle class, rapidly expanding access to the internet and favourable e-commerce conditions are all contributing factors in making India the most exciting and dynamic online travel market on the planet. (7/5/2007)

The competitive nature of the market is fuelling growth and innovation. Low-cost air travel continues to expand at an incredible rate and has now surpassed domestic rail travel as the key driver of travel e-commerce in India. The Indian airline industry has witnessed a growth of nearly 20% in the last five years, primarily led by low-cost carriers like Air Deccan, SpiceJet and IndiGo. These airlines are steadily taking away market share from full service carriers like Jet Airways and Indian Airlines and experts believe this trend will continue.

However, as the air travel space becomes more and more crowded, consolidation is inevitable. The Centre for Asia Pacific Aviation (CAPA) recently projected that the industry will consolidate to around two-three full service carriers, three-four large national LCCs and three-four niche, regional operators. Early signs of this are already apparent. Kingfisher Airlines recently bought a 26% stake in leading budget carrier Air Deccan, and earlier this year Jet Airways bought out Air Sahara, creating India’s largest private airline.

The emergence of a raft of new and well funded online travel agencies is also driving more and more Indian travelers online. OTAs such as Yatra, Cleartrip and Travelguru are now all competing for market share with ‘veteran’ Indian OTA MakeMyTrip, as well as traditional intermediaries such as Thomas Cook and Cox & Kings who are increasingly moving parts of their business online. In a recent interview with EyeforTravel, Urshila Kerkar, CEO, Cox and Kings, defended the traditional players and said that “offline players have stronger brands and a much wider physical presence, intergrate this with online and you have a formidable competitor”. She also said that whilst there was a lot of noise surrounding the new OTAs, most of their revenues came from air bookings, a business model she believed to be unsustainable in the long term.

Apparently, the OTAs seem to agree. Whilst the hotel sector currently accounts for a small slice of the online travel pie in India, this portion of the market is growing and is ripe for consolidation. Indian OTA Travelguru has focused on this sector since its launch last year, and Travelocity has recently entered to Indian market with a hotel only booking platform. The global OTA is traditionally strong in this area, particularly in Asia, and as Rasan Mendis from Travelocity, put it, “hoteliers have embraced the programme and opportunity to distribute in India and globally via our new online channel. Further, hotels globally have the opportunity to benefit from India-based sales, and if they like, advertising-lead merchandising via the Travelocity India site and direct channels.”

However, whilst the opportunities are huge, the challenges and obstacles should not be underestimated. As Don Birch put it at EyeforTravel’s recent Summit in London, “at this point of its evolution I would characterise India as a high risk/high return market.” In order to succeed, travel companies need to understand what Indian consumers want and how to target them effectively. They also need to make the right partnerships that will ensure their businesses thrive in the long term in this complex and diverse region.