At the recent Hotel Investment Forum India event, when Deep Kalra, CEO of India's biggest online travel agency MakeMyTrip, said that only four per cent of hotel bookings in the country are done online through online travel agents (OTAs), everyone in the room sat up and took notice. For an industry struggling with occupancies (last year it averaged just 58 per cent or so), poor online hotel booking penetration is yet another pain point inhibiting growth.
Global travel research firm PhocusWright has pegged online penetration (OTAs + Supplier Direct) of hotel inventory in India at 13 per cent. But according to MakeMyTrip, PhocusWright's survey focuses only on the 3-5 star category while its estimate includes the 1-2 star hotels. After including this segment, total online penetration of hotel bookings would be close to 6-7 per cent, of which the OTAs have just 4-5 per cent share.
Incidentally, a year ago Kalra had bet that a significant share of MakeMyTrip's revenues would come from hotel bookings. Indeed, most OTAs who bore the brunt of Kingfisher Airlines going off air and the severe competition in the airline bookings space were betting on the flight-plus-hotel bookings model to rev up revenues.
Interestingly, 45 per cent of airline bookings have migrated online. E-commerce sales of several other product categories are also buoyant. So what's inhibiting growth of online hotel bookings? Kalra had a long list of reasons ranging from connectivity to poor discoverability and lack of digital presence by hotels. Even branded hotels often have antiquated websites that don't support easy online booking.
Amit Taneja, Chief Revenue Officer of Cleartrip, agrees that there are plenty of challenges. Most notably it's the small hotel operators' lack of access to technology. On paper, hotel bookings are the biggest opportunity area for OTAs as 80 per cent of India's hotel room inventory is unbranded and suffers from poor distribution. It was this segment that OTAs like MakeMyTrip, Yatra and Cleartrip were targeting. "We are the brand for the unbranded hotels," says Kalra. MakeMyTrip claims to have a 50 per cent share of all hotel bookings done by OTAs.
Taneja says that all the OTAs in the country are working together to resolve the tech challenge by reaching out to small and medium operators and offering technology tools and support. "For many of them mobile - not even PC - is the only source to manage bookings and Cleartrip has apps they can use," he says.
But tech is only one part of the story. What the OTAs perhaps did not factor in during their gung-ho projections when they entered the hotel bookings space was the peculiar trait of Indians on holiday: not booking in advance. Places like Mussoorie and Goa thrive on walk-ins as Indian travellers still believe in checking out the rooms physically rather than book in advance. Taneja, however, is optimistic that the trend will change. He says Cleartrip is seeing a shift in its revenues with 35 per cent coming from non-air products (this includes hotels, trains and buses).
He also says that OTAs have to innovate to convert people to book online. Deals and discounts are one way. Flash sales and last-minute hotel stay offers are beginning to get a lot of traction, he says. Weekend getaways are also witnessing pick-up in demand, according to him. What makes Taneja optimistic about the hotel bookings business is that unlike airline bookings, which is ruled by seasonality, this is pretty much all-weather and throughout the year. "We are seeing a clear growth in the last 12-15 months," he says.
On the hotel owners' side, there is a clear traction. Take Anand Kataria, who runs Ananda Valley Resort near Pune. "100 per cent of our bookings are online," he says. But it's on the customer side that there is resistance, even from seasoned web users who would book online, especially when it comes to unbranded hotels.
For instance, Jessie Paul, CEO of Paul Writer Strategic Advisory, talks about the mismatch in expectation and the actual reality that she faced. While on the one hand the branded hotels are desperately trying to get the customer directly, bypassing the OTAs, on the other hand, the unbranded hotels - which could have formed the bulk of bookings for OTAs - fail the credibility test.
Now back to Kalra's statistics. US-based Priceline does nearly one million (900,000 rooms to be precise) room nights bookings a day. Compared to that MakeMyTrip does 11,000 rooms a day. ClearTrip does about 2,500 hotel bookings a day. Clearly, the OTAs have their work cut out to crack this challenge. Let's wait and see if the innovations set in motion do the trick.