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Travel portals go the extra mile to grow big

Planning your travel online, at the click of a mouse, is getting smarter. With travel portals now offering a host of new services?putting forth their travel packages and providing safer mode of payments?booking travel online is no more confined to getting a low-cost airline ticket.

Planning your travel online, at the click of a mouse, is getting smarter. With travel portals now offering a host of new services?putting forth their travel packages and providing safer mode of payments?booking travel online is no more confined to getting a low-cost airline ticket. As these portals spread their wings and travel the extra mile, the result is that the online travel market is registering a strong growth in India.

As per comScore?s data for April this year, the number of visitors to travel sites increased by 32% compared to last year. The study by the digital market research company says that around 18.5 million visitors turned to the web for their travel needs in April. While the indispensable Indian Railways led the top ten list of travel sites, registering 8.4 million visitors this year, online travel agent sites (OTAs) secured the four top spots in the category. Interestingly, as online travel research is gaining popularity in the country, travel search websites or travel guides, such as mustseeindia.com and HolidayIQ, have also made the list.

The discerning Indian traveller is getting more and more accustomed to online booking. The increase in broadband penetration and the increasing focus by travel portals on selling non-air products have helped, too. According to the Internet and Mobile Association of India (IAMAI), the Indian e-commerce industry was estimated at R31, 598 crore in 2010, and it registered a growth rate of 60%. Undoubtedly, travel leads the country?s e-commerce growth, with over one-third of India?s total online population using the Internet to search and shop for travel.

As more and more options are available online?air tickets, holiday packages, hotels and other paraphernalias?are warming up to the idea and ease of booking travel online. Other factors like increased security of online transactions and usage of various modes of payments have also fuelled the growth,? says Mohit Gupta, chief marketing officer, MakeMy Trip. It registered around 3.9 million visitors in April, an increase of 63% as compared to last year. Yatra Online followed with 3.5 million visitors, registering 82% increase and ClearTrip.com had more than 2.1 million visitors, up by 80%. US-based Expedia witnessed 12% growth in visitors.

Even though the number of transactions registered for non-air products is still quite small, in these small numbers lies the opportunity for them to expand. While for MakeMy Trip and ClearTrip around 25% of the revenue comes from non-air products, for Yatra 40% of the revenue is being contributed by hotels, packages and non-air services. ?We have done significant investments in the last couple of years to increase our business from hotels and are also focussing on corporate travel bookings. We expect significant growth to come from corporate bookings this year and also international holidays,? says Tarique Khatri, senior VP, business development, Cleartrip.

The buzzword is still ?cheap? though, as most travellers turn to the internet for cheaper deals. ?We are doing regular monthly promotions with Visa, MasterCard, Amex and CitiBank. All this is adding to the already built perception that best travel deals are available online,? says Pratik Mazumder, head-marketing and strategic alliance, Yatra.

The increased pumping of money in the sector has also helped portals spend more to attract customers. In the last couple of years, most of the sites broke-even, securing a comfortable position. For instance, Nasdaq-listed MakeMy Trip registered a profit of $3.7 million in the fourth quarter as compared to a loss of $1.3 million in the same period last year. For the financial year ending March 2011, it had a profit of $4.8 million as against a loss of $6.2 million in FY10.

Of course, funding-wise also, the last one year has witnessed quite a few developments in this space. MakeMy Trip had a dream-listing on Nasdaq in August last year. The portal, which already had the highest market share of the online travel pie, raised $70 million by pricing 5 million shares for $14 each. It also exercised the green shoe option for another 15%, bringing the entire amount to $80.5 million. It had a dream debut on Nasdaq as the shares of the company surged by 80% to $25.16. The money is being used by the Gurgaon-based portal for acquisitions and also technology enhancement. MakeMyTrip also acquired a 79% stake in Singapore-based travel agency Luxury Tours & Travels (LTT) for $3 million in February this year.

In another development, in April this year, Nasdaq-listed, travel and expense management solutions company, Concur, entered into a strategic alliance with Cleartrip, investing $40 million for a minority stake in the website. ?You need capital to grow. And now with access to capital, portals are able to target the consumers the way they want to,? says Khatri of ClearTrip. Clear Trip claims to have attained break-even two years back.

In the same month, Yatra Online received funding of R200 crore from blue chip investors, Valiant Capital Management, Norwest Venture Partners (NVP) and Intel Capital. The company in its statement said that the funds will help in accelerating its sales and marketing activities, expanding its hotels and holidays business and selectively pursuing strategic acquisitions.

Also, in November last year, Bangalore-based travel information start-up HolidayIQ, merged with Singapore-based online travel meta-search engine Wego.com. The combined entity also raised series B capital from Tiger Global Management. Holiday IQ in April this year managed making it to the comScore?s top 10 list of travel sites based on visitor numbers. ?Unlike travel portals, we have managed this without advertising about our company. This underlines the fact that in India there is a growing demand for travel research online,? says Hari Nair, founder and CEO of Holiday IQ.

Even though the numbers are growing, these portals need to overcome a lot of hurdles. For starters, while many people do their research online, they still prefer booking offline. As a result the conversion rates are still low for these websites, though the portals maintain that in the last one year conversion rates have improved by 15-25%. The low penetration of credit cards is another handicap. Though the online travel market has its own share of challenges, the travel sector (both offline and online) is slated to become a $20-billion industry by 2012.

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First published on: 26-06-2011 at 00:23 IST
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