india online travel market

8/11/2019 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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2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 2

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


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


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


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


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


7/14 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 7

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.



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(%)



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



Enablers for industry growth

NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones


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%



Enabler: Growing internet and credit card penetration



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)



Challenges faced by Indian OTA industry



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



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


14/14 2009 R dS C lti C fid ti l d P i t I f ti d lti 14RedSeer ConsultingRedSeer Consulting

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india online travel market

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