Download - India Online Travel Market
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www.redseerconsulting.com [email protected] 2010 RedSeer Consulting Confidential `and Proprietary Information
Indian OTA Market
Industry Overview
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India, which has the worlds second fastest growing GDP,will produce one of the worlds largest high income pool
Indian households with annual income >USD 50k
(2005-2015)
Source: EIU, RedSeer Analysis, web search
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2005 2007 2009 2011 2013 2015
CAGR
10.6%
Years
Num
berofhouseholds(inmillions)
1.0
1.5
2.0
2.5
3.0
3.5
2005 2006 20 07 2008 2009 2 010 2011 2012 201 3 2014 2015
China
India
Thailand
Germany
UK
USGrowthRate(Base=2005)
Years
Real GDP Growth
(2005-2015)
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Indian upper and middle class is increasing which will givea boost to the travel sector
Source: EIU, RedSeer Analysis, web search
Household IncomeClass
Annual
disposableincome (USD)
Segment Size (Households
MM- 2007) and % CAGR (2000-2007)
Common Occupation Travel habits
Upper class >$25,000
Middle Class
Tier-I$15,000-$25,000
Middle Class-Tier-II
$5000-$15,000
Lower class $500-$5000
23
2
2 9.7%
1.8
9.7%
1.7
18.7%
22.6
Business owners insmall and mediumenterprises
High level corporate/Government employees
Salaried Employees New service employees
(e.g. IT media) Shopkeepers Rich farmers
Shopkeepers
Non-urban smallbusiness owners Lower level employees
23 0.7%
187 Shopkeepers Non-urban small
business owners Lower level employees
Minimum one foreignleisure trip annually
Multiple foreign businesstrips
Frequent domestic flyers Prefers luxury hotels (4-5
stars)
Either a budget foreign tripor a lavish domestic tripannually
4-5 domestic round tripsannually
Stays in 2-3 star hotels
Travel by train-AC or low
cost carrier Prefers to stay in budget
hotels
Travels in general train andbuses
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Indian travel and tourism market is 42 billion USD industrygrowing with a CAGR of 10.2% over the next 10 years
Source: EIU, RedSeer Analysis, web search
Indian Travel and Tourism Industry- Market Size(2010-2020)
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2010 2012 2014 2016 2018 2020
CAGR
10.2%
Years
Marketsize(inUSDbillion
)
42
55.6
69.2
82.8
96.4
111
Discussion
Governments boost to tourism,
rising middle class andincreasing aggregate disposableincome will lead to a significant
growth in travel and tourismindustry in India
Indian middle class is expectedto increase by 10 times between2005-2025
The aggregate disposableincome from Indian householdsis expected to increase with aCAGR of 7% between 2005-25
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Changing dynamics of Indian travel industry
Source: EIU, RedSeer Analysis, web search
Changing Attitude of
Indian traveller
EARLIER
Online research
Social Media
New Information
sources
Personal knowledge Word-of-mouth
NOW Plan-it-yourself
flexible trips
Increased Flexibility
Standard packages Lack of options
Unexplored
destinations
Less frequent & longtrips to famous places
Weekend getaways
Explore the
unexplored
Since OTAs provide increased flexibility, lower pricing
and more options in terms of destinations, it is beingincreasingly adopted by new-age Indian traveller
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Indian online travel industry is growing with 49% CAGR;OTAs account for 17.5% of total gross bookings
Source: EIU, RedSeer Analysis, web search
Indian Online Travel Gross bookings(2007-2010)
0
1000
2000
3000
4000
5000
6000
7000
2007 2008 2009 2010
CAGR
49%
Years
M
arketsize(inUSDmillion
)
1750
2738
4041
5739
OTA-
17.5%
IRCTC-
14%
68.5%,Others
Indian Online Travel Gross bookings- Breakup(2010)
1 billionUSD grossbookings
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Three major players account for 90% of Indian OTA marketshare, with Make My Trip as market leader
Notes:
1. Market share by gross bookings
Source: RedSeer Consulting
48%,Make my Trip
18%,Cleartrip
24%,
Yatra
10%,Others
OTA Market Share1
- by Players(2010) Discussion
OTA industry is very competitivewith more than 30 players in themarket.
The industry is very price-sensitive especially in air-travelsegment, due to which Netrevenue margins are low.
While global giants likeTravelocity and Expedia still haveto make a mark in the industry,bigger Indian companies areventuring out into countries withhigh NRI population.
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The competition is shifting towards non-air travelsegments like hotel bookings due to high margins
Notes:
1. Market share by gross bookings
Source: RedSeer Analysis, MMYT Investor presentation
Net Revenue Margins
(2010)
0
2
4
6
8
10
12
14
16
Air t icket Hote & package tours
Discussion
Air travel Net revenue marginsconsist of commissions fromairlines, service fees fromcustomers and fees from Global
Distribution System (GDS)partner.
Margin on Hotel & package tourbookings come from mark-up onservices.
Hotels and package tour servicesalso give OTAs an opportunity todifferentiate themselves in theindustry
7.6%
14%
Netrevenuemargin(%)
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Recent Trends In OTA Industry
Consolidationamongst players
Description
Major companies are acquiring smaller companies to expand their services Makemytrip acquired Ticketvala.com, Travelocity acquired Travelguru andYatra acquired Ticket services International
For the industry leader Make My Trip, while gross bookings for Air-travel andtours grew by 45%1each (2008-10), net revenue grew by 49% and 84%,respectively
Trends
Focus on hotels
and tours
One-stop
solution mantra
Merging online
and offline
Creating online
ecosystem
Global expansion
of players
Notes: 1. 2008-2010Source: RedSeer Analysis
Most OTAs have partnered with IRCTC for rail bookings to generate traffic OTAs are also partnering with bus ticketing websites and car rental
companies to become one-stop solution for travel needs
Yatra has started 50 lounges across India while Make my trip has an agentnetwork across 450+ cities
Yatra has also partnered with Reliance World (120 centers across India)where customers can book tickets and hotels
Makemytrip has created online communities of tourists throughoffisialatyachaar.com and oktatabyebye.com while Cleartrip has associatedwith Tripadvisor.com
OTAs are expanding globally in countries with high NRI population. Makemytrip started trading on Nasdaq to raise money for global operations
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Enablers for industry growth
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting
Emergence of new online
segments like car rentals
Growth in Civil
Aviation market
Increasing internet
and credit cardpenetration
Growth in tourism
Internet users in Indiagrew 2.5 times from2006-2010
Number of credit cards inIndia grew by 3 timesbetween 2006-2010
Airline industry in Indiahas grown by 400%(2004-2010).
By 2020, India will bethird largest aviationmarket after US andChina
OTAs are integrating theirportals with online busand train ticketingservices and car rentalservices
Indian OTA industry has ahigh potential, andopportunity for growth.
Governments boost totravel and tourism,combined with increased e-commerce penetration, willhelp OTA industrys growth
OTAs are increasinglyintegrating services likerail, bus and car rentals togenerate higher number oftransactions
Discussion International tourist
arrivals in India hasincreased by 8% CAGR(2004-09), compared toworld average of 3%
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Enabler: Growing internet and credit card penetration
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting
0.0
50.0
100.0
150.0
200.0
250.0
2006 2007 2008 2009 2010 2011 2012 2013 2014
Credit card
Internet
Discussion
Internet penetration in Indiais 7% (compared to 31% inChina) is set to increasedrastically
Indian Government hasallocated 10 billion USD forBharat Nirman, a project toextend internet in rural areas
Increasing urbanization inIndia will also lead toincreased internet and creditcard penetration
Credit cards and Internet users- India
(2006-20141)
Years
N
umberofcreditcardsand
internetusers(inmillion)
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Challenges faced by Indian OTA industry
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting
Challengesfaced by OTA
Industry
Lowoperatingmargins
Non-reliability of
offlinepartners
Limitedreach in
tier-II andtier-III cities
Paymentprocessing
issues
Discussion
OTA industry is low-margin, high volume. Dueto low internet penetrationin India, their reach to tier-
II and tier-III cities is limitedwhich affects the volumes
Incompetence of hotelsand tour operators reflectsbadly on OTA forconsumers who bookthrough them. Controllingtheir quality is a majorchallenge
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Major Industry Players
Established: 2000 Gross bookings: 480 million USD (2010) Largest market share in Indian OTA industry First Indian OTA to be traded on NASDAQ Sister websites: Offisialatyachaar.com,
oktatabyebye.com Global presence: US, Canada, UAE Covers 450+ cities in India through travel agent
partners Investors: SAIF, Helion, Sierra
Make my trip
Established: 2006 Gross bookings: 240 million USD (2010) Partnered with Reliance World for ticket
distribution Started Holiday Lounges in 50 major cities in
India Global presence: US, UK Investors: Reliance, TV18, Norwest, Intel
Capital
Yatra
Established- 2006 Gross bookings: 180 million USD (2010) Partnered with Tripadvisor.com and Lonely
Planet Global presence: Middle East (UAE, Oman,
Qatar, Bahrain, Kuwait) Investors: KPCB, Sherpalo ventures, DAG
Ventures, DFJ
Cleartrip
Established- 1996 (US); 2007 (India) Gross bookings: Global- 10 billion USD (2007) Acquired Travelguru, India based OTA with
focus on hotel bookings, in 2009 Owned by: Sabre Holdings Global acquisitions: site59.com,
lastminute.com Global presence: US, Canada, Germany
France, Scandinavian countries, UK andMexico
Travelocity
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