As Ram described it, India is just entering Web version 1.0. This is characterised by similar concepts we saw in the late nineties in the US and Europe:
- lots of start up and entrepreneurial activity;
- focus on flights; and
- commission driven business (rather than media or merchant model).
- Air is not the only transport game: While flights are the high profile business to look at, there is enormous activity in ground transport – rail and road. RedBus claim 20% of the bus market is now booked online. Indian Railways in the largest online travel business in Asia (according to Ram) measured by transaction numbers. However in both cases the average booking value is very low – measured in the tens of cents;
- The OTAs and LCCs play nice: Unlike the battles in Europe and the US between low cost carriers and the online travel agents, in India OTAs such as Makemytrip and Yatra are critical to the distribution of LCC inventory. According to Ram’s research, 10-15% of the low cost carrier volume in India is coming through OTAs.
- Localised but English: When western companies expanded across Europe the key guideline was to localise as much as possible – language, look’n’feel and product. In the case of the Indian OTAs the best way to reach the target market of middle class Indians is to keep the product in English, not in one of the many local languages. This is not true for the lower booking value RedBus but very true for the full service providers; and
- Hotels need dramatically more technology support: It took a long time and arguably the economic after effects of the 9/11 attacks for hoteliers in the US and Europe to be convinced of the need for online distribution. The barrier was to convince them to join the channel, the barrier was not technology. In the case of the Indian market technology is an issue. Indian hotels tend not to have the CRS, PMS and Internet connected architecture that you expect to see in a US/Euro hotel. Yatra are approaching this problem by building a property management software suite and giving it away to hotels. Naturally it comes with means to connect to Yatra but the suite also stands alone as a property management system (according to Yatra’s Shringi). Nice idea.
Yatra’s Shringi and Makemytrip’s Joshi were dismissive of these efforts by Expedia and Travelocity in India. They very confidently claimed victory for the big local players (I presume including Cleartrip and Travelguru) over the global giants. When I put this to Jens Uwe Parkitny of Expedia later in the day (new Managing Director-Distribution, Asia Pacific), his quick reply with a smile was “that is exactly what they [competitors] said when we entered Germany and France”.
What’s next? If the trends of Europe and America apply then we should see the large local Indian players move into hotels and cross sell, frenetic consolidation and investment activity, PPC cost inflation and the arrival of the of the media model. Fun times ahead.
FYI - Ram has just published a very good report on the Indian market for PhoCusWright (costs money).