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A trip into the black

May 12, 2008

There are at least a dozen portals in the online travel market, which is pegged at around $2 billion (Rs 8,000 crore) today and expected to grow to $6 billion (Rs 24,000 crore) by 2010.

Cleartrip’s Murthy: Hone user experience
Sandeep Murthy
Venture capitalists, too, are queuing up to invest in such firms as wanderlust-struck Indians are visiting these sites to hunt for the most affordable airline tickets, hotel rooms and tour packages. Cleartrip, a company founded three years ago by venture capitalist Ram Shriram’s Sherpalo, claims to be leading the way in this market. What’s making it easier for Cleartrip is the third round of funding, all of $18.5 million (Rs 74 crore), that it recently closed. Of this, $10 million (Rs 40 crore) came from Draper Fisher Juverston, while other investors, including the Mahindra Group, Kleiner Perkins and Sherpalo, bought in the rest. With this funds infusion (reportedly the largest such VC funding in 2008), Cleartrip has so far raised $30.2 million (Rs 120.8 crore) in funding. It also helps Cleartrip join arch-rival MakeMyTrip in planning to break even later this year; Cleartrip also says it should be ready to go public in 12 months.

Internationally, portals such as Expedia and Travelocity have been successful selling cheap airfares and hotel rooms to tourists, with the former boasting of operating margins as high as 25 per cent, as its customers opt for the lower costs afforded by the internet. “We will focus on developing our technology platforms and will also acquire offline agencies to boost our inventory,” Sandeep Murthy, Cleartrip’s 31-year-old Chief Executive, told BT in Bangalore, when he visited the city on a family holiday. According to him, Cleartrip is perhaps the only portal to have “99 per cent of its business” online and Murthy claims customers will spend just 20 seconds booking their ticket, tour or hotel room on his site. “The focus of an online travel business has to be on the browsing-booking-payment routine and our focus is on enhancing user experience,” Murthy adds. The portal has already overhauled its interface to make it simpler for visitors and to give it an edge in an overcrowded and some would say overheated market. He lists Cleartrip Calendar (airlines fares across the month at a single click) and Graphs (graphical representation of rates across the spectrum from carriers) as some of his technical advantages.

The online travel business isn’t entirely new to Murthy, who studied in Delhi before going to the US for his undergraduate studies and an MBA from Wharton. Prior to setting up and running Cleartrip, with three other co-founders, Stuart Crighton, Matthew Spacie and Hrush Bhatt, he worked at Interactive Corp, the firm behind online travel major Expedia, and others like citysearch.com and gifts.com. Sensing the opportunity to invest in India-based businesses, Murthy moved first to Kleiner Perkins, Caufield & Byers, before moving to Sherpalo as a partner and finally to Cleartrip as its CEO.

Three years after he started the company, Cleartrip has now grown into a 350-person business, attracting around 100,000 people to its site every day and converting 5.5 per cent of them into customers. “We have 70 per cent repeat business and earn around Rs 2.2 crore revenue every day,” says Murthy.

Although Cleartrip averages 7,500 air bookings and around 2,000 hotel reservations daily, Murthy is well aware of the lowmargin business he is operating. “The online airline ticket business has wafer-thin margins and we need to become a much broader and higher margin outfit to be profitable,” he says. This could come from going into hotels, packages and ensuring much higher traffic to the site. “There is an issue with hotel reservations, too; the total room inventory in India is perhaps 100,000 and that is just as much as a place like Macau. What’s worse, these rooms are poorly-categorised and customers are often left feeling in the dark when they make reservations,” says Murthy. For now, he plans to buy offline travel businesses and is also considering acquiring boutique technology firms in areas such as search and travel to sharpen his technology edge. With the company expected to grow its business by over 100 per cent this year (and close with $300 million in revenues), Murthy will have his hands full ensuring he can build a large and profitable online travel business.

Rahul Sachitanand


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