Globaltrotters – Case Analysis

Deciding a target market for starting an Online Travel Agency (OTA), and that too from
scratch will depend on prospective no. of customers, growth prospects of the market and
government regulations.

Though India has the 2nd highest number of travellers among the three, the limited market
size is a retardant (very low as compared to USA and China). On the other hand USA has the
highest number of travellers as well as the largest market size.

Among the three, India is the only country where airlines still pay commissions and the
emerging urban middle class and rising low-cost carriers look promising, but the prospect of
the commissions going to zero neutralizes the opportunity.

As we are a new player, our revenues will depend mainly on commissions for in the short
run as it will take a great deal of time to contract hotels in the highly fragmented Indian
hotel market (large hotels chains < 8% in India as compared to 35% in USA). In China, cTrip
has a monopoly in hotel relationships.

Moreover, USA has quite high and India very low internet penetration which is primal to the
growth for any OTA. Though there is opportunity for offline business in India as compared to
China where cTrip leads in call centre bookings, this prospect will cease to so be profitable
as the commissions become zero. For a new player, there is hardly any opportunity in the
sponsored advertising segment (especially in India) and the revenues will largely depend on
commissions from hotels /airlines.

Hence, the most suitable market for a new player is USA with its highest internet
penetration (72.5%), most organized hotel supply and non-existence of a monopoly. An OTA
with a coupled travel agent network targeting mainly on hotel bookings and later sponsored
advertising seems profitable in USA.