My first thought on arriving at Delhi airport was how different things are today for a visitor. Firstly, the visa application process was a breeze compared to two years ago when I last visited. Secondly, immigration was smooth with separate counters for those with e-visas.
My impression of the changes happening in India’s travel industry was confirmed over the last two days as I sat through the sessions at Phocuswright India, as speaker after speaker suggested that an inflexion point was about to happen in India’s online travel sector – a point when disposable income would reach a level where many more Indians would be able to afford to travel and when Internet and mobile penetration would get to a point when more people would book online.
Here are some quick observations from the discussions that took place at Phocuswright India.
Corporate travel is where the new battle is
Yatra’s co-founder Dhruv Shringi, speaking about the ups and downs of his company – from startup to going public – said there were times when they had felt the time was near and that capital would run out in a couple of months.
Other than the intense competition, he said one reason was that travel consumption in India was still low compared to other markets. “Travel is linked to disposable income and at $1,700 per capita, that’s still low.”
He said the point when the market inflects is at $2,400-$2,500 level and it would take some time for India to reach this level, so in setting its course for the future, Yatra went “where the money is” and that’s in corporate travel, slower growing but more lucrative and where opportunities exist for disruption.
It’s built a platform not only to serve travellers but corporations, in particular, SMEs and has built up a network of 16,000 agents to penetrate the unmanaged travel segment. In so doing, it seems to have managed to carve out a niche for itself and insulate itself from the competition and consolidation happening in leisure travel.
Indeed, corporate travel seems to be where the new battleground is. Uber’s launched its U4B division to create a new business segment described as a profit leader by its head for APAC, Arjun Nawar. Integration with Concur and International SOS means business travellers link their rides direct to expenses and corporations get to save on expense reports, with substantial cost savings.
Branded budget accommodation players are also proving a hit with business travellers with Treebo’s co-founder Sidharth Gupta, for instance, saying almost 50% of its customers are corporates while Ginger Hotels’ Rahul Pandit pegged corporate’s share at 60%. Gupta said Treebo’s mantra of “Guests First, Partners Second, Dreams Third” meant giving customers a consistent experience at its 200-plus hotels was top priority, and this plays well into the corporate travel segment.
According to GBTA, India remains the 10th largest business travel market in the world, moving up five spots since 2000. GBTA expects India will continue to ascend the market rankings and is likely to jump four spots over the next five years, becoming the 6th largest business travel market in the world by the end of 2019.
Consolidation will increase online market penetration
The biggest news of course is the merger between MakeMyTrip and Goibibo. Ashish Kashyap of ibibo Group, recounting how the first idea for a merger took place over couple of glasses of wine on a cold winter’s night in a farmhouse, said “it got us talking about how given that the Indian market was underpenetrated, we could increase the penetration velocity if we joined up”.
The intention now is to build up the three key brands, RedBus, MakeMyTrip and Goibibo, and expand their reach and in the meantime, the merged entity is branching out into the sharing economy with its new brand, Ryde, which is ride sharing, as well as alternative accommodation.
Deep Kalra, CEO of MMT, said the Indian market had definitely changed a lot since he and his partners started the OTA. “We went public at $70 million but that’s chump change compared to today’s amounts being raised.”
OYO Rooms for instance has raised a total of $187.6m in five rounds and while many would question how sustainable its model of chasing growth at rhe expense of profits is, Abhinav Sinha, COO and co-founder, said the company was knuckling down – “no more distractions”, he said – and its launch of a new brand, OYO Townhouse means it’s moving up the value chain.
Head of Travel Abhishek Rajan (pictured right) represented Paytm.
Enter Paytm, the new disruptor
But the biggest change could come from a new disruptor, the payments company Paytm. In 2015, it raised over $625m at a valuation of $1.5b, the biggest stakeholder being Alibaba. In August 2016, it received another round of investment from Mountain Capital, one of Taiwan-based MediaTek’s investment funds, which valued Paytm at of over US$5b.
Making his first appearance at an online travel conference, Abhishek Rajan, head of travel, said he did not see Paytm as competing with incumbents. “Our strength is lots of traffic, theirs is domain expertise,” he said. “The question is, how can we monetize our 500m users for new verticals?”
As the leading payments gateway, it has access to millions of Indians who are not currently booking travel online but could be encouraged by a simple app. Paytm’s idea is to create 450 million new customers for travel.
While some called this figure over-optimistic, others said they could be the ones to shift customer behavior in a massive way because they’ve solved one of the hardest pain points in travel – payment.
Its focus now is on flight, bus and rail tickets, the low hanging fruits.
Asked how it was acquiring customers, he said without spending much on branding, the last three months had seen exponential increases in its customer database. “Our bank is our customer acquisition strategy.”
And therein lies the biggest change in India’s online travel market when a payments company comes in from the outside to create a travel marketplace. Let the disruption begin as consolidation continues apace and new players compete for a slice of the corporate travel market.