Indian OTA Market - docshare01.docshare.tipsdocshare01.docshare.tips/files/16827/168277643.pdfThree...
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www.redseerconsulting.com [email protected] © 2010 RedSeer Consulting Confidential `and Proprietary Information
Indian OTA Market Industry Overview
India, which has the world’s second fastest growing GDP, will produce one of the world’s largest high income pool
Indian households with annual income >USD 50k
(2005-2015)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2005 2007 2009 2011
Years
2013 2015
CAGR
10.6%
Nu
mb
er
of household
s (
in m
illio
ns)
1.0
1.5
2.0
2.5
3.0
3.5
2005 2006 2007 2008 2009 2010 2011 2012
Years
2013 2014 2015
China
India
Thailand
US
Germany
UK
Gro
wth
Ra
te (
Base=
20
05)
Real GDP Growth
(2005-2015)
Source: EIU, RedSeer Analysis, web search 2 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
Indian upper and middle class is increasing which will give a boost to the travel sector
Household Income
Class
Annual
disposable
income (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 in
small and medium
enterprises
• High level corporate/
Government employees
• Salaried Employees
• New service employees
(e.g. IT media)
• Shopkeepers
• Rich farmers
• Shopkeepers
• Non-urban small
business owners
• Lower level employees
23 0.7%
Source: EIU, RedSeer Analysis, web search 3 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
187 • Shopkeepers
• Non-urban small
business owners
• Lower level employees
• Minimum one foreign
leisure trip annually
• Multiple foreign business
trips
• Frequent domestic flyers
• Prefers luxury hotels (4-5
stars)
• Either a budget foreign trip
or a lavish domestic trip
annually
• 4-5 domestic round trips
annually
• Stays in 2-3 star hotels
• Travel by train-AC or low
cost carrier
• Prefers to stay in budget
hotels
• Travels in general train and
buses
Indian travel and tourism market is 42 billion USD industry growing with a CAGR of 10.2% over the next 10 years
Indian Travel and Tourism Industry- Market Size
(2010-2020)
0.0
20.0
42
40.0
60.0
80.0
69.2
100.0
120.0
2010 2012 2014 2016
Years
2018 2020
CAGR
10.2%
Mark
et siz
e (
in U
SD
bill
ion)
55.6
82.8
96.4
111
Discussion
• Government’s boost to tourism,
rising middle class and
increasing aggregate disposable
income will lead to a significant
growth in travel and tourism
industry in India
• Indian middle class is expected
to increase by 10 times between
2005-2025
• The aggregate disposable
income from Indian households
is expected to increase with a
CAGR of 7% between 2005-25
Source: EIU, RedSeer Analysis, web search 4 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
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 & long
trips to famous places
• Weekend getaways
• Explore the
unexplored
Since OTA’s provide increased flexibility, lower pricing
and more options in terms of destinations, it is being
increasingly adopted by new-age Indian traveller
5 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
Indian online travel industry is growing with 49% CAGR; OTA’s account for 17.5% of total gross bookings
Indian Online Travel Gross bookings
(2007-2010)
1000
0
2000
3000
4000
5000
7000
6000
2007 2008 2009 2010
CAGR
49%
Years
Mark
et siz
e (
in U
SD
mill
ion
)
1750
2738
4041
5739
OTA-
17.5%
IRCTC
- 14%
68.5%,
Others
Indian Online Travel Gross bookings- Breakup
(2010)
1 billion
USD gross
bookings
Source: EIU, RedSeer Analysis, web search 6 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
Three major players account for 90% of Indian OTA market share, with Make My Trip as market leader
18%,
Cleartrip
48%,
Make my Trip
24%,
Yatra
10%,
Others
OTA Market Share1- by Players
(2010) Discussion
• OTA industry is very competitive
with more than 30 players in the
market.
• The industry is very price-
sensitive especially in air-travel
segment, due to which Net
revenue margins are low.
• While global giants like
Travelocity and Expedia still have
to make a mark in the industry,
bigger Indian companies are
venturing out into countries with
high NRI population.
Notes:
1. Market share by gross bookings
Source: RedSeer Consulting 7 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
The competition is shifting towards non-air travel segments like hotel bookings due to high margins
Net Revenue Margins
(2010)
16 14 12 10
8
6
4
2
0
Air ticket Hote & package tours
Discussion
• Air travel Net revenue margins
consist of commissions from
airlines, service fees from
customers and fees from Global
Distribution System (GDS)
partner.
• Margin on Hotel & package tour
bookings come from mark-up on
services.
• Hotels and package tour services
also give OTAs an opportunity to
differentiate themselves in the
industry
Ne
t re
venue m
arg
in (%
)
Notes:
1. Market share by gross bookings
Source: RedSeer Analysis, MMYT Investor presentation 8 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
14%
7.6%
Recent Trends In OTA Industry
Consolidation
amongst players
Description
• Major companies are acquiring smaller companies to expand their services
• Makemytrip acquired Ticketvala.com, Travelocity acquired Travelguru and
Yatra acquired Ticket services International
• For the industry leader Make My Trip, while gross bookings for Air-travel and
tours grew by 45%1 each (2008-10), net revenue grew by 49% and 84%,
respectively
Trends
Focus on hotels
and tours
Notes: 1. 2008-2010
Source: RedSeer Analysis 9 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
One-stop
solution mantra
Merging online
and offline
Creating online
ecosystem
Global expansion
of players
• 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 agent
network 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 through
offisialatyachaar.com and oktatabyebye.com while Cleartrip has associated
with 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
Emergence of new online
segments like car rentals
• OTAs are integrating their portals with online bus and train ticketing services and car rental services
Growth in Civil
Aviation market
Increasing internet
and credit card
penetration • Internet users in India
grew 2.5 times from 2006-2010
Growth in tourism
• Number of credit cards in
India grew by 3 times
between 2006-2010
• Airline industry in India has grown by 400% (2004-2010).
• By 2020, India will be
third largest aviation
market after US and
China
• Indian OTA industry has a
high potential, and
opportunity for growth.
• Government’s boost to
travel and tourism,
combined with increased e-
commerce penetration, will
help OTA industry’s growth
• OTAs are increasingly
integrating services like
rail, bus and car rentals to
generate higher number of
transactions
Discussion
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting 10 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
• International tourist
arrivals in India has
increased by 8% CAGR
(2004-09), compared to
world 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
Years
Credit card
Internet
Discussion
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting 11 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
• Internet penetration in India
is 7% (compared to 31% in
China) is set to increase
drastically
• Indian Government has
allocated 10 billion USD for
Bharat Nirman, a project to
extend internet in rural areas
• Increasing urbanization in
India will also lead to
increased internet and credit
card penetration
Credit cards and Internet users- India
(2006-20141)
Nu
mb
er
of cre
dit c
ard
s a
nd in
tern
et users
(in
mill
ion)
Challenges faced by Indian OTA industry
Challenges
faced by OTA
Industry
Low
operating
margins
Non-
reliability of
offline
partners
Limited
reach in
tier-II and
tier-III cities
Payment
processing
issues
Discussion
NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones
Source: RedSeer Consulting 12 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
• OTA industry is low-
margin, high volume. Due
to low internet penetration
in India, their reach to tier-
II and tier-III cities is limited
which affects the volumes
• Incompetence of hotels
and tour operators reflects
badly on OTA for
consumers who book
through them. Controlling
their quality is a major
challenge
Major Industry Players
Make my trip
• 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
13 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
Yatra
• 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
Cleartrip
• 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
Travelocity
• 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 and Mexico
RedSeer Consulting 14 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
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