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DreamFolks India: Airport Services Platform

Founded in 2013 by Liberatha Kallat and Dinesh Nagpal, DreamFolks started by simplifying lounge access for
Mastercard customers. This niche focus, however, laid the groundwork for a revolutionary shift. DreamFolks
recognized the growing demand for a seamless airport experience and evolved into a one-stop shop for all things
airport-related. Their 2022 public listing on the Indian stock exchange marks not just growth, but a validation of
their innovative approach.

Today, Dreamfolks (DFS) is India's leading airport services aggregator and tech platform, connecting lounges
and premium airport facilities with users of bank credit/debit cards. It provides services to all the card networks
operating in India including Visa, MasterCard, Diners/Discover, and RuPay and many of India's prominent card
issuers including ICICI Bank, Axis Bank, Kotak Mahindra Bank, HDFC Bank and SBI Cards. DFS holds a
volume market share of over 75% in domestic airport lounges. It has a global footprint extending to 1,416
touchpoints in 121 countries across the world out of which 244 touchpoints are in India and 1,172 touchpoints
overseas. With 100% coverage across all 54 airport lounges operational in India, DreamFolks has gained a
market share of over 95% of all India-issued card-based access to domestic lounges in India. In FY22,
DreamFolks facilitated access to 35.3 lakh out of 52 lakh passengers accessing lounges in India (i.e. ~68% total
share).

It is the go-to partner for banks seeking to provide complimentary lounge access and is highly profitable
and asset-light. DreamFolks doesn't just compete with the traditional method of buying direct lounge access,
they're locked in a multi-faceted battle. On one hand, established players like credit card reward programs (e.g.
Priority Pass) offer similar lounge access benefits. On another, airlines might bypass platforms altogether by
forging direct partnerships with card companies.

 Traditional Rivals: Direct lounge access purchased from individual lounges or airlines.
 Other Platform Rivals: Credit card reward programs offering complimentary lounge access (e.g.,
priority Pass programs offered by banks), Private Airports creating their own app ( E.g. Adani One,
etc.)

Keys to Success

1. Bankable Population and Airline Growth: India's growing middle class has a rising disposable
income, leading to an increase in air travel. This creates a larger pool of potential customers for
DreamFolks' services. The expansion of airlines and airports in India further fuels this growth. More
flights and travel options translate to more people seeking the comfort and convenience of airport
lounges.
2. First-Mover Advantage: DreamFolks entered the market early and established itself as the go-to
solution for airport lounge access in India. This gave them a significant head start in building brand
recognition and partnerships with key players like banks and credit card companies. By the time
competitors emerged, DreamFolks had already secured a dominant market share and a strong network
of lounges, making it difficult for others to catch up.
3. Market Leader: Dreamfolks is the market leader by providing proprietary tech and being the first
mover has practically no competition in the domestic lounge market.
4. Loyalty Points and Services: DreamFolks leverages existing bank loyalty programs and credit card
reward points. This allows them to tap into a vast customer base already accustomed to using points for
travel benefits.By offering lounge access as a reward option, DreamFolks incentivizes credit card usage
and encourages banks to partner with them.Additionally, DreamFolks' own membership program with
various tiers caters to different travel needs and budgets, further increasing customer loyalty.

5. Aggregation: DreamFolks' core strength lies in aggregation. They bring together a diverse range of
airport services under one roof - lounges, spas, meet-and-greet, and more. They connect the lounge
providers/airport service providers to the Credit Card issuers (Banks) and accordingly the bank
customers. This convenience factor is a game-changer for travelers, eliminating the hassle of juggling
multiple bookings across different providers. An asset light model coupled with a first mover advantage
helped them to garner large market share and consolidate on the same.

6. Commissions and Subscriptions: DreamFolks' revenue model is a win-win. They negotiate terms
with the lounges/aiport service providers given the sheer volume of customers they onboard through
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the card issuers(banks), and charge a commission to the banks. Given the sheer volume, they have a
high negotiating power and banks don’t have the hassle of negotiating with invidual lounge/airport
service providers. Additionally, the "DreamFolks Club" subscription model caters to frequent
travellers, offering a set number of complimentary lounge visits and other benefits. This combination
ensures a sustainable revenue stream.
7. Partnerships: Collaborations with banks, airlines, and other travel service providers expand their reach
and user base.

Sources of Revenue

 Commissions: DreamFolks charges a commission to banks for access provided to the card holders of
banks at the lounge/airport service
 Subscription Model: DreamFolks offers paid memberships ("DreamFolks Club") with varying tiers
that provide a set number of complimentary lounge visits and other benefits. Users likely pay for these
subscriptions directly.

Here, neither side is explicitly subsidized. Lounge owners/Service providers are benefitted as they have
access to a large group of travelers/bank card users. Banks are subsidized as more users apply for debit
and credit cards to avail the complimentary lounge service and they earn in MDR, loans, etc. and other
credit card revenue.

The company is expected to benefit from the rapid growth in the Indian airline industry, driven by competitive
fares, rising leisure travel, new airports, and government push. Further, the increasing adoption of bank cards
(with lounge access as a key benefit) is boosting the pay-per-use revenue model of DFS. This should help it
deliver a strong 20% revenue/28% PAT CAGR over FY24E-26E, despite a high base and near-term setbacks
due to revised airport charges. It could venture into international markets as a lucrative long-term opportunity
carrying significant potential value.

Value Proposition
 For Banks: Since customers of banks are provided complimentary service, they line up to apply for
more and more cards (Debit Cards or Credits Cards). For Debit card holders, the bank earns in terms of
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Deposits kept with the bank or various investment products. For Credit Card customers, Bank earns in
terms of Merchant discount rates, Loans, etc.
 For Service Providers (Lounges, Spas etc.): Access to a larger pool of potential customers through
DreamFolks' platform.
 For Dreamfolks: Commission from banks, Subscription model to Dreamfolks Club

Positive and Negative Network Effects

DreamFolks thrives on network effects. As more service providers join, the platform becomes more attractive to
Banks and their customers(travellers), attracting even more providers. This virtuous cycle fuels growth.
However, oversaturation in specific airports could lead to a race to the bottom, impacting service quality.

 Positive Cross-side Network Effects: More service providers on the platform attract more Banks and
their customers(travelers), and more bank customers (travelers) incentivize more service providers to
join, creating a growth cycle.
 Positive Same-side Network Effects: More Bank customers(travelers) fuels banks to provide more
complimentary services and more complimentary services attracts more Customers .
 Negative Same-side Network Effects (Potential): Oversaturation of service providers in specific
airports could lead to competition amongst them, potentially impacting service quality or pricing.

Strategies to Contain Negative Network Effects

 Curation: DreamFolks can select service providers based on quality standards and user reviews to
maintain a good user experience.
 Dynamic Pricing: DreamFolks can use dynamic pricing to manage demand and ensure service
providers remain profitable.
 Segmentation: Offer various service packages or memberships catering to different traveller segments
and accordingly curate caried propositions for banks to offer their clients.

Network Effects: A Double-edged Sword

 DreamFolks thrives on network effects. As more service providers join, the platform becomes more
attractive to travellers, attracting even more providers. This virtuous cycle fuels growth. However,
oversaturation in specific airports could lead to a race to the bottom, impacting service quality.
 Unique Perspective: Here, DreamFolks' focus on curation becomes crucial. By implementing a
rigorous selection process based on quality standards and user reviews, they can ensure a consistently
positive user experience.

Addressing Key Risks

While DreamFolks enjoys a dominant position, several factors could impact its future success. Let's delve into
these key risks and explore how DreamFolks can mitigate them:

 High Dependence on Travel Industry: The travel industry's vulnerability to economic fluctuations
and airline failures can affect DreamFolks' business. (E.g. Covid and post covid has reduced business
travel)
 Dependence on Credit/Debit Cards: Growth in alternative payment methods (e.g. UPI) could
decrease credit card usage, impacting DreamFolks' customer base.
 Market Saturation in India: DreamFolks' high market share in India might lead to saturation,
necessitating a strong international push.
 Collinson Group: Priority Pass is trying to make a foray into India and has set up an entire leadership
team. This will eat into the market share of Dream folks as Collison group has deep pockets and can
provide fine margins to gain market share.

Strategies to Counteract Risks:

 International Expansion: DreamFolks' initial forays into Singapore and Malaysia demonstrate a
strategic move to diversify geographically and mitigate dependence on the Indian market.
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 Data-Driven Personalization: By leveraging user data, DreamFolks can offer targeted promotions and
encourage alternative payment methods, like digital wallets.
 Corporate Partnerships: To provide DreamFolks Club subscription to corporate employees (business
and bleisure travellers)
 Set up of Road and Railway Lounges: Given the Governments expenditure on Road and Railway
infra in India, setting up Lounge facilities here can new avenues to DreamFolks.

The Encroachment Threat: Staying Ahead of the Curve

Two main threats loom:

 Airline-Card Company Partnerships: Airlines might bypass DreamFolks by offering lounge access
directly through partnerships with credit card companies.
 New Aggregator Platforms: New players might emerge, offering similar airport service aggregation,
fragmenting the market. E.g., Priority pass already is a big player internationally and has plans on
entering the Indian market.
 Airport Privatisation: With privatisation of airports, the airport owners are foraying into apps and
platform to provide lounge/airport services (E.g., Adani One)

Addressing Encroachment:

 Focus on Technology and Innovation: Continuously improving the platform's features and user
experience is crucial to maintaining a competitive edge.
 Strategic Partnerships: Forging strong partnerships with airlines and service providers can secure
exclusive deals and benefits for DreamFolks users.
 Expansion of Service Offerings: Staying ahead of the curve by adding new airport services (think nap
pods or entertainment zones) keeps DreamFolks relevant and valuable to travellers.

Threat of Envelopment

Online travel booking platforms: Platforms like MakeMyTrip, ClearTrip, etc. could potentially expand their
offerings to include airport services, becoming a one-stop shop for travelers.

Countering Envelopment:
 Specialization: Remain focused on airport services and become the leading expert in that specific
niche.
 Data and Personalization: Leverage user data to personalize service recommendations and create a
more tailored travel experience.
 Customer Loyalty: Implement loyalty programs or exclusive benefits to retain users and encourage
repeat business.

Opportunities Ahead
 Expansion to New Markets: DreamFolks could expand its services to airports in other countries
beyond India.
 Partnerships with Travel Tech Companies: Collaborate with travel technology companies to
integrate their platform into travel booking workflows, creating a seamless user experience.
 Focus on Emerging Airport Services: As airports offer more services like nap pods or entertainment
zones, DreamFolks can become the platform for booking and managing these experiences.

Challenges:

Challenges in Maintaining Service Quality and User Experience:

 Standardization across a Diverse Network: DreamFolks partners with various service providers across
different airports. Ensuring consistent service quality across this diverse network can be challenging.
 Managing User Expectations: Travelers might have varying expectations of service quality based on
price points and lounge/spa options. DreamFolks needs to manage those expectations effectively.
 Scalability and Maintaining Efficiency: As DreamFolks expands its platform and user base,
maintaining a seamless user experience and efficient booking process can be a challenge.
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Challenges in Market Dynamics and Competition:

 Negotiating Competitive Rates: DreamFolks needs to negotiate favorable commission rates with
service providers while ensuring competitive pricing for travelers.
 Competition from Established Players: Traditional methods of booking lounge access directly or
through credit card reward programs remain strong competitors.
 Evolving Airport Regulations: Airport regulations and security protocols can change, requiring
DreamFolks to adapt their platform and services accordingly.

Challenges in User Acquisition and Retention:

 Building Brand Awareness: DreamFolks, especially in new markets, might need to invest in building
brand awareness and educating travelers about their platform's benefits.
 Encouraging Repeat Usage: Encouraging users to book multiple services or become paid members
requires strategies to enhance customer loyalty and engagement.
 Data Security and Privacy: DreamFolks manages user data for bookings and travel preferences.
Ensuring robust data security and user privacy is critical.
 Additional Challenges:

Managing Dependence on Technology:

 The platform's success relies heavily on technology infrastructure. System outages or technical glitches
could disrupt user experience.
 Attracting and Retaining Talent: The travel-tech sector requires skilled professionals. Attracting and
retaining top talent is crucial for DreamFolks' continued growth and innovation.