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Online Travel Industry

Presented By: GROUP 7 Ajai Govind (191065) Ambika Gupta (191067) Ankit Jain(191074) Bhanupriya Deswal (191081) Chandrika Mittal (191082) Kulvir Gill (191092)

So What s of Porter s 5 Forces

1. While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power. SO WHAT :: Companies not just need to meet traveler s needs, but also please their tastes and sensibilities and do it for less 2. Many buyouts may be seen in coming years as cash rich international players enter the market SO WHAT :: Current players need to tap significant scale to negotiate profitable deals, in order to tap maximum domestic market share and enter international market as well 3. Rivalry intense but not cutthroat due to good market growth (28% Y-O-Y) SO WHAT :: Players need to focus on increasing both margins and market share before market enters its Mature state 4. As 60% of the business comes from Air ticket bookings, airlines enjoys high bargaining power, while other suppliers loose on this aspect SO WHAT :: Entering into partnership with airlines in the Growth state of the market as well as Innovative product offerings of Packages to be focused upon 5. Travel moves up the list of household spending, thus substitutes like Education and Recreation not to affect much 6. Increasing internet penetration further lowers the threat of substitutes SO WHAT: No need to worry about any substitutes at least until the market reaches a Mature state

Threat of Substitutes: LOW, as travel moves up the list of household spending

1. Discretionary spend on travel as % of income to increase from 30% in 2005 to 70% in 2025 2. Unlikely to be substituted by a durable purchase or investment 3. % Spend on Education & Recreation to increase by 4% from 2005 to 2025 4. Increasing penetration of Internet (from 4.5% in 2005 to 8.5% in 2010)

Bargaining Power of Buyers: REASONABLE

1. Fragmented Profiles: Diverse corporate, religious and economy and luxury segment travelers 2. Low switching costs leading to low brand loyalty 3. Not many alternatives for online rail bookings 4. Option of buying online directly from airlines and hotels

Industrial Rivalry: INTENSE but not Cutthroat

2. 1. Intense because, low levels of product differentiation Not Cutthroat because, low exit barriers, low fixed costs, and good market growth

Bargaining Power of Suppliers: REASONABLE for Airlines, LOW for Rest

3. 1. Airlines selling direct 2. Lowest commission on air tickets (2% - 9%), highest on Hotel bookings (8% - 25%) Bulk of the business (60%) comes from air tickets, least from Hotel bookings and Tour packages

Threat of New Entrants: MEDIUM

1. Low minimum efficient level allow small start-ups, however significant scale is necessary to negotiate profitable deals 2. Threat of international players entering domestic market 3. Private equity players investing into industry 4. Threat of buyouts and acquisitions as cash rich international players enter the market Commission from air tickets which account for the bulk of the business are the lowest and range from between 2% and 9%


Online travel is a fast emerging business segment, attracting enormous investments from private equity players

Online travel market in India valued at INR 2529 bn in 2010 Online travel contributes 70% of all e-commerce activities globally (Business Standard 2011) Total online travel market was INR 15000 bn in 2010 and India accounted for only INR 2529 bn Globally, it is expected to grow 13 % year-on-year while in India it is growing at 28 % Percentage of population online / Mobile penetration / % travel booked online / value of online travel market: India: 4% / 36% / 25% / $4 billion

Online Market Share by Channel

Market Size & Growth

Supplier Website OTAs

Supplier Website OTAs

40000 30000 20000 10000

37890 25258 6250 10500 14953

22% 78%

40% 60%

0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Market Value (in Rs. Crores)


Online travel market valued at INR 2529 bn in 2010; Expected to reach INR 3789 bn by 2011 Online airline ticket booking share is more than 67 %, where Domestic 63%, International 4% (for 2009) Online Travel Agency (OTA) is the most sort after segment by the private equity players with huge investments in the past two years


Drivers and Challenges

Proliferation of internet Growth in low-cost carriers Rising income Secure payment mechanisms Indian Railways online portal Rise of Medical Tourism

Low margins & high operating costs Poor internet and credit card penetration Lack of technical awareness and reliability on online transactions


Online railway bookings becoming the preferred segment in online travel Emergence of corporate travel packages OTAs looking for offline counters leveraging on their brand value Emerging travel information portals backed by OTAs Religious travel is becoming a hot segment in online travel Rising international travel OTA s serving as a preferred search tool for checking fares and ticket availability Online travel industry will see consolidation in the coming years owing to stiff competition


Economic Travelers Mostly domestic travelers Advance booking Extensive web search No preferences Less importance for travel duration & time Economic class travelers High price sensitivity Preferences for premium services Travel duration & time very important Business/First class travelers Medium price sensitivity

Business Travelers

International/domestic travelers Advance & last minute booking Less extensive web search


Holiday/Business Mostly domestic Last minute booking Minimal web search

Travel duration & time very important No preference Economic class travelers Zero price sensitivity


 Travel boom  Improving Technology  Growing acceptance of e-Commerce  Proliferation of internet  Low cost travel options  Innovation & Differentiation

Low margins High Operating costs Poor internet and credit card penetration  Changing the mindset and habit is the OTA market leader

Makemytrip Yatra Cleartrip

OTA Market Share India (2010-11)

Cleartri Others p 5% 5%

Amadeus Galelio Abacus

Meta Search Engines

IXIGO Ezeego1 Zoomtra

Yatra 42%

Makem ytrip 48%

GDS Market Share Global (2010-11)

Amadeus alileo



Number of unique visitors in March2011 (in million)

Number of unique visitors in March2011 (in million)


10% 25%



3.1 is the winner because of its First Mover Advantage

Company Franchise Associate Program to expand its business
The Winner Makemytrip
Fully automated and robust mechanism for its Preferred Sales Agents Only Indian Travel Portal having headquarters in USA. First mover advantage Keeping a close tab to blog reviews related to MMT (e.g., thus listening to customer expectations

Continuously evolving user-friendly methods of using website to

Catching Up - Yatra
tap Internet unfriendly customers Transparency by showing fare rules leading to increasing customer trust No provision for customer feedback yet Unwanted and illogical stoppages e.g. stoppage at Delhi/Hyderabad for flight from Ahmadabad-Mumbai

Trying to keep up Cleartrip

Not following advertisement revenue model

Management interacts directly with customers Market share is low, thus not able to negotiate for higher margins


Online travel market is the most crowded arena in the E-commerce segment with many new players Air travel dominates the current online travel industry in India with 60%+ market share. Railway bookings are also now a days increasing and has a 20%+ market share in online travel industry in India IXIGO, Ezeego1 and Zoomtra are the leading meta search engines in online travel is the market leader in OTAs, but facing a stiff competition With the existing competition online travel space is expected to see consolidation Added to that airline companies like SpiceJet, IndiGo and KingFisher in India are coming up with their own portal Rang7, which will affect OTA s Current domestic players need to capture the maximum market share to safeguard from international buyouts To face competition, partnerships formed b/w OTAs and airlines in the current Infancy state of the market will reap long term benefits Innovative product offerings and pricing models can help in gaining competitive advantage