Online Travel's Second Wind
A clutch of travel
startups are veering away from a well trodden path
For the past 15 years travel portals
have revolutionised a hidebound industry, giving consumers the power to search
for and book air, rail and even bus tickets online.
Not content with that, these
ventures then took the next step, giving users a platform to find ways to book
hotel rooms and even holidays without the discomfort of long queues or visits
to offices.
Having seen these businesses grow
and redefine the contours of travel, a new clutch of entrepreneurs is buzzing
about trying a range of new business models. If the MakeMyTrip-driven phase was
mostly transaction driven, this time around start ups are taking a crack at
something new.
“Most online travel ventures have
been traditionally transactional in nature,“ says Deepak Wadhwa, chief
executive and co founder of WeAreHolidays, an online travel discovery startup.
“Holidays aren't transactional...we focus on discovery of holidays, itineraries
and real trips taken by our community members.“
According to industry veterans, the
growth of the first generation of online travel companies has helped show that
big ticket transactions can happen online, pricing can be transparent and
credit cards and bank details are (mostly) safe on the internet. This new
generation of start ups is looking to build on this base to grow their
businesses. “Travel is no longer an annual, planned expense,“ says Sachin
Bhatia, a cofounder of MakeMyTrip and more recently of dating app TrulyMadly.
“People now go on impulse holidays
and are constantly looking for something new to do or to go somewhere new.“
The cold realities of business too
have persuaded these new startups to look beyond the traditional market for
online travel. According to industry estimates, flight bookings command a
margin of barely 3%, while it is 15% or more for hotels and holidays. What was
a browser-centric business has also gone mobile rapidly and younger, nimbler
startups are racing to prove that they can build their ventures only around
this platform. “Technology adoption across mobile is hitting the roof,“ says
Mayank Khanduja, vice-president of venture capital firm SAIF Partners. “This is
especially the case for last-minute hotel deals and hunting for local tourist
sights, most of which happen on the mobile.“ Investors such as Khanduja have
flocked to these ventures. While SAIF Partners has backed TravelTriangle, which
has built a platform to connect travellers and experts and agents, IDG Ventures
has backed Tripoto, which is positioned as a one-stop destination for
travellers. Elsewhere, TripHobo, a provider of crowdsourced trip-planning
services, has raised funding from Mayfield Ventures and Kalaari Capital, while
Sequoia Capital has invested in PressPlay, a Delhi-based provider of onthe-go
entertainment services.
The cofounders of Snapdeal, Kunal
Bahl and Rohit Bansal, along with Nikunj Jain, founder of FranklyMe, a
celebrity chat app, have waded in too, by investing in Routofy, a
technology-led travel routing firm. WeAreHolidays has raised venture capital
backing from Matrix Partners, while OYO Rooms, an online market place for
budget accommodation, raised $25 million from Lightspeed Venture Partners and
Sequoia Capital.
According to data from Red Seer
Consulting, a boutique consultancy in Bengaluru, India's travel and tourism
industry is expected to grow from $89.2 billion in 2015 to $111 billion in
2020. This growth is on the back of growing spending, with the size of the
Indian middle class expected to increase 10-fold between 2005 and 2025. While
internet-based travel commerce accounts for around three-quarters of India's
ecommerce market, online travel firms account for around a third of all
bookings, as per industry estimates.
Industry executives say this
proportion will only increase. A recent paper by telecom gear maker Ericsson
forecast that the number of mobile broadband users would be 600 million in five
years. With travel established as the most familiar ecommerce op tion in India,
these startups are betting that this is just the beginning of rapid growth,
with up to 50 different firms jousting for attention from consumers. While
traditional online travel companies may have cornered most of the market for
travel tickets, newer startups believe there is plenty of headroom for growth.
There are, for instance, opportunities in holiday dis covery and planning, new
forms of ac commodation, content and re views, and technology used by
hospitality businesses themselves. “We are build ing a global travel commu nity
and see ourselves as TripAdvisor 2.0,“ says An irudh Gupta, chief execu tive
and cofounder of Tripo to. The original TripAdvisor, an American travel web
site, was an early adopter of user-gen erated content, and provides reviews and
in teractive travel forums.
“We believe there are lots of
improvements over a global brand, especial ly around the use of mobile and so
cial media,“ adds Gupta.
Started around 18 months ago by
Indian School of Business classmates Gupta and Michael Lyngdoh, Tripoto has
seen its traffic double in the last three or four months, raised funding from
IDG Ventures and Outbox Ventures and put together the building blocks for a
global community from India. Already, the firm has around a million visitors
and will soon raise a fresh round of funding to sustain this breathless growth.
If Tripoto wants to be a mobile and
social media-driven reviews venture, then SeekSherpa wants to be your local
guide once you reach your destination. “At every place we went to as
travellers, we had an issue about what to see and where to go,“ says Dhruv Raj
Gupta, cofounder of SeekSherpa, along with Sukhmani Singh. “New-age travellers
want to have their plans defined, but want someone else doing it for them.“
A Shift in Market
Some startups are also sensing other
shifts in the market. HolidayIQ, with an online community of three million
travellers and backed by Accel Partners and Tiger Global, is one such venture.
“Historically, leisure travel was a 27-plus segment ... but in the last six
months to a year, we have seen a much younger crowd entering this market,“ says
Hari Nair, chief executive and founder of HolidayIQ. It isn't just a younger
crowd he's wooing, but a more discerning one too. “For a long time, people
associated online travel with discounts...increasingly, people are turning to
online for choice -this is a fundamental shift in consumers' minds.“
Times Internet, part of the same
group that publishes this magazine, launched HappyTrips in February last year
to tap this opportunity. The trip planning and accommodation site was launched
with some 200 Indian destinations (and 100 around the globe).
As these startups begin to break the
rules of the game (again), the first flush of travel portals is watching the
changing scene with a mixture of worry, interest and expectation.For example,
the most recognised name in the business, MakeMyTrip, acknowledges that it
can't be everything for everyone. In late April this year, it acquired Mygola,
an online travel guide to try to keep pace in a fastchanging market.
“We established the foundation for
the industry over the past couple of decades,“ says Mohit Gupta, chief
operating officer, online for MakeMyTrip. “But many of the new innovations may
yet come from these upstarts.“ MakeMyTrip has set up a $15 million fund to back
fledgling ventures looking to disrupt this space, he adds, and expects to
announce a couple of investments in the next three or four months.
On the ground, MakeMyTrip has been
slammed by investors, with its share price losing some 41% of its value since
its muchvaunted IPO in August 2010. The share price had soared nearly 90% when
it was listed, but has had its struggles since -it has reported losses for the
last eight quarters.
As an investor in Yatra, an early
entrant, and more recently in Tripoto, VC firm IDG Ventures has seen both
phases up close.“Older firms such as Yatra have seen the growth of these
startups and are keen to work and partner with them,“ says Karan Mohla,
vice-president of IDG Ventures.“From a broad horizontal focus on travel, these
companies will profit by focusing on specific niches.“
Not everyone is content playing in
their own little corner. Many startup founders say they are ahead of the game
compared to many larger and older companies. These startups looking to eat the
lunch of MakeMyTrip and its peers aren't backing away in sympathy. “The online
travel industry is broken...ticketing and hotels are commoditised and beyond
that the market is highly fragmented,“ says Tripoto's Gupta. “There's a lot of
innovation waiting to happen and we want to build on the sharing economy
pioneered by the likes of Airbnb and Uber as this segment is completely
re-invented.“
Dhruv Raj Gupta's SeekSherpa is
under a year old, but is already thinking big. The startup's app has already
been downloaded some 5,000 times and the founders have begun the process of
reaching out to 10 new international markets to expand its services.Tripoto,
meanwhile, is further ahead, with plans to double its page views in the next
quarter itself, even as it prepares to raise a fresh round of funding. Founded
in late 2012, WeAreHolidays is growing rapidly and expects to expand its team
from around 80 to 200 or even 250 to keep pace.Budget room provider OYO Rooms
wants to have 1,00,000 rooms in 100 cities across India. “The market in India
is massive and I think all of us are just finding our feet,“ says cofounder
Wadhwa of WeAreHolidays. “We could revolutionise the way people think of
travel.“
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Rahul Sachitanand
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ETM17MAY15
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