On India’s growing OTA market

A recent Google India-Boston Consulting Group report has projected the overall Indian travel market to reach USD 48 billion by 2020 at a CAGR of 11 per cent. According to India Brand Equity Foundation, the online travel market alone is expected to account for around 40 to 50 per cent of these total transactions by 2020. We find our more about this growing segment of online travel aggregators in India

The world of travel has changed immensely over the last 20 years. Like many other industries, it’s gone from a largely manual process to an increasingly digital one. From some of the largest Online Travel Aggregators (OTAs) like MakeMyTrip - Goibibo (Go-MMT), Booking.com, Expedia, Cleartrip and Yatra. com to the growing clout of newer ones like OYO Rooms, Airbnb, and Paytm, the OTA segment has grown by leaps and bounds in the travel industry. Parikshit Choudhury, Chief Business O cer, MakeMyTrip Limited, says, “As India’s digital economy takes wings, intermediary platforms play a critical role in the travel and tourism value

chain as we create an avenue for higher visibility to businesses by building an online marketplace that brings unparalleled ease and e ciencies.”

Experts in the industry believe that this upsurge in the Indian online travel space in the last few years has been fuelled by many key drivers — the increase in household incomes, rise in e-commerce and digital/smartphone penetration, and the Government’s attempts to ease out on-arrival visa policies in other countries, among others.

Ritu Mehrotra, Country Head, Booking. com, says, “Technological advances coupled with growing consumer appetite will further compel the industry to go beyond

conventional travel experiences as we move ahead in 2019. India as a travel market itself is nascent with only 1 in 100 people going for a vacation out of the country which is far less as compared to other emerging markets.”

OTAS: THE GROWING CLOUT

E-commerce giant MakeMyTrip covers over 60,000 hotels including over 40,000 small or budget hotels across India; over 1 billion guest nights have been booked from Booking.com averaging 15,50,000 room bookings on the website every day, and Expedia Group’s 2018 Q3 results show gross bookings increased USD 2.5 billion or 11 per cent year-over-year to USD 24.7 billion. Revenue increased 10 per cent year-over-year to USD 3.3 billion.

A er the global success of Airbnb, various startups and branded budget companies have mushroomed over the last few years — OYO Rooms, Treebo, among others. e latest addition to this is Paytm, which has entered the domestic hotel booking segment with the acquisition of NightStay, a luxury hotel-booking platform o ering deals on last-minute bookings. Following this, the digital payments platform aims to expand its operations in the travel service segment.

HOSPITALITY CHAINS AND BUDGET HOTELS

Ankit Rastogi, Head – Activities and Accommodation, Cleartrip, says, “ere exists a kind of a barter relationship between hotels and OTAs, wherein OTAs direct customers to their brands and in turn get a commission from them. is method should continue and we must proceed in a harmonious manner creating a win-win situation. is requires a close collaboration in revenue management between OTAs and hotels.”

For some hospitality chains, OTAs are the only source of digital sales. Of course, premium hotels have the capacity to attract customers through their own websites and apps. Rastogi adds, “is is also fuelled by the loyalty programmes; if you are a Marriott, a Taj or e Oberoi or e Leela, the loyalty framework is pretty strong. ese chains have been running since ages, so the capacity of a customer to come in directly and reap in the bene ts is higher. e online in uence of these hotels is still marginal in India, but it will continue to grow.”

Luxury hotels have various ways to attract customers on their own. rough loyalty programmes and other such initiatives, luxury brands carry out their own branding. As a result, Rastogi says that the contribution of OTAs to a luxury chain will be lesser as compared to a budget hotel or a mid-tier chain. For a budget hotel in India, a majority of the bookings is driven through OTAs. For these hotels, OTAs will continue to in uence a lot more customers from the digital bucket on the OTA's side than the property can, directly, on its website.

Budget brands cannot invest heavily on the digital front, owing to monetary constraints.

THE DOMESTIC LANDING

OTAs have grown to become a major force in the distribution of domestic travel. As per the Expedia - CAPA Report, tier-II cities have seen faster growth over the last four years, with a CAGR of 16.8 per cent compared with 9.1 per cent for tier-1 cities such as Delhi, Mumbai, Bangalore, Chennai, Hyderabad, and Kolkata.

According to Manmeet Ahluwalia, Marketing Head, Expedia in India, “eir presence in the international segment is rising, with OTAs estimated to account for around 14 per cent of international

ight bookings. e research also indicates that many Indian travellers prefer to use OTAs than airline/hotel websites. ‘Ease of booking’, ‘ability to compare prices’ and ‘better deals’ were the key reasons.”

OTAs have grown to become a major force in the distribution of domestic travel. As per the Expedia - CAPA Report, tier-II cities have seen faster growth over the last four years, with a CAGR of 16.8 per cent compared with 9.1 per cent for tier-1 cities

THE DISPUTE

It all began when around 270 hoteliers in Ahmedabad decided to boycott MakeMyTrip and Goibibo over the commission and indiscriminate discounts. ey complained that the websites overcharge the hotels and even give out o ers without consulting the hotel management. Similar issues have been observed in other parts of India like Bengaluru, Odisha, Chandigarh, Indore, Sikkim and Mysuru.

What is the issue? Gurbaxish Singh Kohli, Vice-President – FHRAI & President, Hotel and Restaurant Association of Western India (HRAWI), gives his own opinion on the matter, “Over a period of time, these two OTAs (Go-MMT) went on to capture a larger share of the tourist spend by o ering unbelievably good discounts through their online platforms and apps all at the cost of hotels they represented. Now that they had the biggest share, o ering the kind of unreasonable discounts out of their own pockets obviously had to stop somewhere. It is here that the hoteliers found themselves at a disadvantage. Initially, it was the smaller and the budget segment hotels that did not have any e ective marketing options, which were coaxed into parting away higher commissions.”

What’s the current status? e Federation of Hotel & Restaurant Associations of India (FHRAI) has been asking for these two OTAs to hold talks to amicably resolve the issue. Independent associations from di erent regions in the country as well as its regional chapters have written to them. However, there is no progress and no one in authority from the OTAs has made any e ort at taking things forward. We have also written to the Tourism Ministry informing them about the on-going issue and have requested its intervention. In a media communication, the CEO of MakeMyTrip has plainly stated that FHRAI has no say in this matter and that they will directly resolve the dispute with hotels.

Presently the situation is status quo but this will not remain for long. As you are aware, many regions have boycotted Go-MMT and have written to them stating that they will not continue their business relationship under prevailing, one-sided conditions; and this is only the beginning. We are sure that if the OTAs do not come forward to resolve this, the issue will snowball and may lead to an undesirable consequence to them.

FHRAI is playing the role of a mediator at the behest of the industry at large, and is working towards creating a level playing ground for di erent segments existing in the hotel booking sector