The online travel industry is on song. According to PhoCusWright, a Connecticutheadquartered travel, tourism and hospitality research firm (with an India office), the sector grew at 126 per cent from a base of $295 million in 2005 to $796 in 2006. In 2007, it is expected to record a 66 per cent growth to $1.3 billion. And by 2008, online travel is expected to be a $2-billion industry.
Another pointer to the rapid growth is that a little over 17 per cent of all the flight tickets booked in the country are done via internet websites.
But there’s still one nagging problem. Unlike in most Asia-Pacific markets, where these online intermediaries began as hotel consolidation platforms, their Indian counterparts have followed the US and UK model where air has been the driver for growth.
As a result, barring a couple of companies most of these sites have 80-90 per cent of their numbers coming from air alone and the rest from hotel booking. Air is a volumes-driven, low-margin—typically 2-5 per cent —business. Margins in hotels are higher, at 10-12 per cent.
That’s why most portals have now begun focussing more sharply on hotels. Travelguru, with around 4,000 hotels in its database, intends to double the hotel booking segment by March 2008. “Any given day we see around 750 hotel transactions and another 2,000 in flights,” explains Ashwin Damera, Founder & CEO, Travelguru.com.
Cleartrip, which currently has 3,500 domestic hotels, is also looking to add more domestic hotels across categories in all major locations in India.
Adds Dhruv Shringi, Co-founder & Director, Yatra Online: “Currently, hotels comprise 6 per cent of our business which I want to scale up to 20 per cent by December 2008.” MakeMyTrip founder Deep Kalra is also looking at increasing the hotel bookings business from the current 20 per cent to 50 per cent in a phased manner.
Such a shift will go a long way in helping many of these online businesses enter the black.