Indian online travel players hit accelerator....again!

The Indian online travel industry seems (in market designed to produce mixed metaphors) to burst in waves. Back in 2008- the four leading companies of India - Makemytrip, Cleartrip, Yatra and Travelguru seemed to have created a $2bb plus online travel market from a near standing start.

In their recent India report, PhoCusWright now puts the 2010 online travel market (leisure and un-managed business) at more than double 2008. $4.3bb is their size estimate, as much as 25% of the total travel market. They predict a rise to $7bb in 2012 (you can buy the report here). That would put the India of 2012 at the same size as the online market of Australia in 2010. An almost unrivaled acceleration in online travel. Like many markets online, the buying of low cost carrier tickets is a huge driver. But, unlike many markets, rail is a significant part of the grow story in India. Online rail in India is already more than a $1bb a year and is more than a quarter of the online travel industry's total turnover. In India (according to PhoCusWright), the percentage of rail online is twice the percentage of hotel online.

Corporate activity is accelerating alongside the market acceleration.

Number one player MakeMyTrip (MMYT) has been public for less than a year (IPO in August 2010). They went to the market at $14 and are still trading above $30 (Apr 21 at $32.23) with a valuation in excess of $1.1bb.

Cleartrip is chasing hard. They have just raised $40 mm from travel travel expense and management solution provider Concur (you remember them, they bought TripIt in Feb for up to $120mm).

Not to be left out, a day later Yatra announced they were raising $45mm from raised from Valiant Capital Management, Norwest Venture Partners, Intel Capital and others (WSJ story here). According to the WSJ this eclipes the $33.8mm they raised in the last round. The article quotes sources saying that a float in the next 12-18 months is very likely.

Expedia is also refusing to be left out. They have added India to their list of markets covered by their JV announced with Asian low cost carrier giant Air Asia.

Via is trying to argue there is room for more players. With $15mm raised so fare from NEA Indo-US Ventures, Sequoia Capital India and others, Via (also known as Flightraja) has mega bucks in their sites announcing last month they intend (emphasis on intend) to raise another $100mm.

Travelocity are trying to peek their head above the noise through a marketing relationship with Mastercard.

A very busy 30 days in a fast growing market. Did I miss anything? For the Tnooz latest list of top travel sites in India care of Hitwise click here.

Thanks to FriskoDude for the great photo via flickr

Cleartrip CEO : 15 months in the black. Targeting hotels, display advertising and Dubai

Cleartrip may be the smallest of the big 3 (ok medium 3) of the online Indian full service OTA business but Founder & Director, Product and Strategy Hrush Bhatt is far from worried. During a coffee break chat at eyefortravel TDS in Singapore last month Hrush told me that he is not taking being number 3 too hard. In fact he is celebrating the size difference. He tells me that although MakeMyTrip may have 1,300 employees to Yatra’s 8-900 and Cleartrip’s 260 Hrush is unworried having reported his 15th month in a row of profitability.

[UPDATE - since publishing this post I have been told that Cleartrip is bigger than Yatra and the clear number two to MakeMyTrip. I don't have numbers to confirm but it clear that the battle has only just started]

Air is still a critical part of the business but like much of the online world he and Cleartrip are targeting hotels for growth. Again like much of the online travel world he is using some creative hiring practices to help Cleartrip get there. Cleartrip have hired the founder of the Travelguru to lead their hotel contracting efforts. Travelguru was bought by Travelocity in August 2009. Current hotel count is 1,400, when it gets to around 1,800 to 2,000 Hrush says that Cleartrip will begin a marketing push.

I was interested to hear that one of the main marketing efforts for Cleartrip was display advertising. After each of Yatra, MakMyTrip and Cleartrip reached a “gentlemen’s agreement” to not bid on each other’s brand terms in search advertising it freed up a lot of marketing spend to invest in display.

This is not the only way that the Indian market has a different twist to emerging online travel markets. While India maybe smaller than the more mature Asian online travel markets Japan and Australia the target population have been online since 1996. That means by the time online travel started to take off in India in 2006, the population had already been online for ten years, allowing for speedy growth and rapid adoption. PhoCusWright reported this week that the 2009 Indian online travel market was US$3.4 billion (Indian Online Travel Intermediary Review).

On functionality, Cleartrip have taken a Kayak look and feel approach to travel (as opposed to the more traditional OTA look of MakeMyTrip). This is deliberate according to Hursh. They are looking to new approaches to travel search, targeting the image lite Google like approach of text boxes.

Hrush is also looking to expansion beyond India. Cleartrip.ae is now live and targeting consumers in Dubai. Not a traditional place of expansion for an Asian online travel company but in Hrush's view Cleartrip already have some awareness and it is a small enough market for Cleartrip to test expansion

Want to read more on Cleartrip? I was not the only one to catch up with Hrush in Singapore. Check out Siew Hoon's piece called "Cleartrip out to make the world smaller".

901 not out

100 more posts live on the BOOT. 4 years, 200,000 plus words, 150,000 visitors, 240,000 page views and still going. In my regular "not out series" recap I post a few reminders and highlights form the last 100 posts. It started with 101 not out and continued with 201, 301, 401, 501. 601, 701 and 801 not out. Here we go....

Buy buy buy. We may still be waiting for the mega deal but the tuck-ins are everywhere

• Zuji/Travelocity bought Indian based Travelguru
• WRI went for $340mm
• TripAdvisor went further into China with Kuxun
  

Bust bust bust. The Global F'n Crisis had casualties

• Roamfree went into administration as the BOOT had to press delete on comment after comment
• Offline travel maybe dying but I had 3+3 recommendations on how it can save itself
  

Talk talk talk. The BOOT went conference crazy

• Talked EveryYou at WebInTravel - even though a back injury prevented by from actually going
• Joined the Kevin and Gene army of nodes and wrote 8 tnooz posts on subjects as varied as Augmented reality, Lonely Planet, Google, New Zealand and the Do over
• Overheard intermediaries and suppliers sharing war stories at NoVacancy
• EveryYou launched at TRAVELTech (see below)
• Another amazing week at PhoCusWright
• Spoke at Ad:Tech
  

Track track track - kept my eye on big Asian online players that are active in the market but quiet in the results arena.

• Tracking Google - broke the story first that Google meta-search was coming
  
• Tracking AsiaRooms and their TUI A&S stablemates
• Tracking Agoda, finally getting my hands on a Citi reporting estimating their turnover at $244mm for 2009 and early integration with Booking
  
• Tracking MakeMyTrip and claims they have made US$5mm off $500mm in gross sales
• Tracking Lonely Planet and their online plans
• Tracking Kayak and the private sale plans and follow up with Jetsetter CEO Drew Patterson
  

Theory theory theory

• Laid out my predications for 2010
  
• I introduced the concept of EveryYou - arguing that the future of online travel is “The development of a specific and targeted recommendation of one based on the unique combination of desires, needs and interests of each individual at any moment in time”
• Posted my thoughts on the secrets of innovation
• Mused on my 3 rules for a UGC start-up
• Pondered what next for Google in online video marketing
  

Puff Puff Puff - away from the industry I also posted

• More business traveller tips
• More seat reviews
• Introduced the SkyMall follies
• First Class is dead!

I haven't run out of things to say yet, so if you're still listening, then I will keep typing.

MakeMyTrip in India - US$5mm in profit off $500mm in gross bookings

Came across an post today called "MakeMyTrip.com: The Story of Online Travel Booking Startup" on the WorkHomeMoney blog. Is an interview with MakeMyTrip founder Deep Kalra. MMT is the biggest of the four local OTAs (other three are Yatra, Cleartrip and the now Travelocity owned Travelguru).

Assuming the quotes are correct there are some interesting size and performance metrics in the post.

"1. Makemytrip.com is now making $5 million in US dollars of profit this year.
2. The gross booking reached about $500 million.
3. Revenues are up 88% during the recession.
4. One-out-of-every-twelve domestic flights in India is booked via MakeMyTrip.com.
5. It sells 2,500 of railways tickets (the second largest category in travel) every day."

Other facts from the post I did not know is that MMT have 20 physical stores

For more background info on Indian market see my post from last year here.

Also Interview with Travelocity/Zuji regional boss Roshan Mendis on Travelguru acquisition here.

Gnome Speaks: Sam Gilliland Interviewed in Dallas News

With Travelocity private and execs being very quiet of late, is has proven harder and harder to find out what is going on at the land of the gnome. The Dallas News has a two part interview from Sabre Holdings CEO Sam Gilliland. Highlights from the interview are:

• On sales to forecast: "...in terms of our planning we've come out basically even" - meaning leisure travel sales growth has offsett steeper declines in corporate travel;
• On marketing: "...I'm imagining we'll spend up" - meaning that he doesn't have to disclose how much he spends on marketing but will tell us that he is spending more than last year;
• On 2010 plans: "We're investing a lot in the hotel sector" - meaning that the airline sales business continues to be only borderline profitable
• On private vs public future (ie IPO): "It will depend a lot on where the market is and where the economy is, but I do also think that we'll be looking for revenue growth before we do it," - means no timetable or immediate plans

thanks to B Tal over at flickr for the gnome shot

Zuji boss Roshan Mendis on Travelocity buying Travelguru

Ease of adjustment in logo colours is never a factor in an acquisition but it has not taken long or much design work to add a few Travelocity stars to the logo of the newly acquired Indian online hotel player Travelguru. Thankfully they avoided the branding redundancy of adding the Zuji tag line of "your online travel guru".

A week or so after the purchase by Travelocity/Zuji of Travelguru I had a chance to sit down (virtually) with Zuji boss and Travelocity regional head Roshan Mendis to talk about the deal, the Indian market and regional plans generally. Roshan took over from former Zuji boss Scott Blume in June and now has a portfolio of brands to manage including Zuji in Australia, Hong Kong and Singapore , Nextour in Korea, Travelocity in India and New Zealand, and now Travelguru in India. [note that the Travelocity owned brand of Lastminute.com does operate in Australia and New Zealand but is not owned by Travelocity. Instead the business operates under a franchise structure wholly owned by the Wotif group].

Roshan is very bullish about the acquisition, as he should be for something he has likely just paid tens of millions if not a hundred or so for. He feels the Indian market is at the right time for acquisition and expansion. But he is also upfront that the deal is not without risk. He admits that integration will be a challenge especially on the people front.

Here is some more detail from our interview

BOOT: This acquisition was your first big move as the new regional lead for Travelocity. Why India and why this company?

Roshan : Couple of reasons. We see India as a top three market in region. Looking ahead to 2012 – research indicates will be right next to China, Japan and Australia as top online travel market. In addition the OTA, general market and accommodation market growth rates in India are attractive. But it is still an emerging market. So this is not a deal without risk.

BOOT: you have plenty of competition to contend with. Expedia is in India and the local big three - Cleartrip, Makemytrip and Yatra are very aggressive.

Roshan: Absolutely – big three make up 80% of market. Competition is stiff and irrational at times. Certainly attractive bits in online space but domestic flights are unattractive and that is where competition is most fierce. Looking to compete differently through Travelguru.

BOOT: Will you bring the supply facing teams together?

Roshan: Putting integration plans together now. The Intent is for a unified partner marketing [Travelocity name for supply team] to represent Travelocity India for all brands.

BOOT: I read there were a lot of challenges in integrating Travelocity and Lastminute supply operations in Europe, are you concerned about the integration task here?

Roshan: I won't comment on the Travelocity and Lastminute integration but generally acquiring and integrating a company particularly on the people side is not a small job. [We are going into the integration effort] with a common purpose and goal between Travelocity.co.in and Travelguru. [Including] clear expectations in leadership between the two. Under no allusions that going to be a cake walk putting people, processes and culture together.

BOOT: In the press release Travelguru founder and CEO Ashwin Damera, said "he was excited with the deal and would want to replicate the story in other Asian". Tell me more about this idea?

Roshan: Purpose of the deal and intent is to focus on India and make success in India – over and above that – the model might work in other market but don’t think that is where short term effort will be.

BOOT: Ram Badrinathan of PhoCusWright asked this question in his blog post "Travelocity Acquires TravelGuru—Will it Change Anything in India?" [Will Travelocity] back TravelGuru and Travelocity with at least a $2.5 million annual marketing budget (to build the brand and business)?

Roshan: [regarding the marketing plans of Travelocity and Travelguru in India] past behaviour is the best indication of future behaviour. If you look at Travelocity.co.in, it is has grown in last few years. [On marketing we are] very analytical and invest in those channels that allow for growth and maximise profit. [BOOT I took this to mean a focus on online channels rather than offline spend]

BOOT: At last year's TRAVELtech your predecessor Scott Blume said that Zuji was firing in Asia on "most" cylinders. "when one country is firing, other aren't" he said. You have a large portfolio now in Asia. What are your plans for firing on all cylinders?

Roshan: In our portfolio in AP have a number of assets and they have certain kinds of potential determined by size of market, size of online pie, balance between supply.com and intermediates etc. Different expectations for the different markets and invest in those markets according to our expectations on what it should and can deliver. [delicately keeping with the analogy] We have a set of cylinders that are not the same size and horse power. Need to recognise and pump with the appropriate level of fuel to achieve the maximum potential. We take a portfolio view – have a place and role for each asset in the portfolio and will support to meet full potential.

BOOT: Finally - what worries you? What things do you want to make sure you get right?

Roshan: The acquisition. Lots of things to determine success of acquisition. There are social and economic events to keep track of as well as the maturity of the space, consumers, online penetration etc.

What do you think? Bold move? Too soon? Wrong market? Right time?

PS - looks like we can finally kill off the rumours of Expedia's investment in Travelguru

Roshan Mendis replaces Scott Blume as Zuji Boss (Travelocity in Asia)

Have been deep in work so missed the story from a a week ago that Travelocity in Asia (operating under the brand name Zuji) has a new Boss. Scott Blume was CEO for about six years leading up until 1 June this year. Roshan Mendis is the new internal appointment. He is not listed as CEO on the Zuji site, instead they list him as President of Zuji and Regional Vice President of Travelocity Asia Pacific. Prior to this role, Mendis was the Zuji Director of Supplier Relationships.

Siew Hoon over at the WebInTravel blog has an interview with Scott Blume on his thoughts on life post Zuji and the outlook for the industry for the rest of 2009.

"The AsiaRooms of 2009 is not the AsiaRooms of 2005": Interview with John Fearon, AsiaRooms Head of Marketing

AsiaRooms is one of the region's largest online hotel retailers. With 81, 908 hotels and counting (according to the site today) and a parent company that is the largest travel company in Europe (TUI), AsiaRooms is clearly a player that the BOOT should be paying attention to. Historically the company has made this hard as it has been very secretive with its numbers and plans and (to be frank) was not a company we wanted to pay attention to. Prior to TUI buying the company, AsiaRooms built up an unwanted reputation on online customer care forums for complaints and among the trade for scoffing at rate parity and associated price guarantees. Rumours of wholesale group rates being market up $5 and sold online became the standard trade fair post-session beer story when AsiaRooms came up in the conversation. The brand buzz was all bad. In fact the customer and industry complaint forums became the only source for profile information on the secretive company.

John Fearon the (relatively) new Head of Marketing for the Pattaya based AsiaRooms is determined to change all that. Determined to build on the TUI brand and infrastructure support to change the market perception of AsiaRooms and to bring the company out from behind the secrecy curtain. As John told me “we are not the AsiaRooms of 2005”. I had a chance this week to (virtually) sit down with Fearon and hear his plans for changing the reputation of AsiaRooms, overhauling their marketing plans, ditching meta-search and taking on all comers in a press to be number one in Asia.

In marketing, John's first target is to change the approach to paid search marketing. SEM and SEO is the frontier that John believes will sort out the winners from the losers in Asia (I agree). Is also the place he was happy to share numbers and metrics with me. After only three months of work Fearon is claiming to have doubled the amount of business coming form the search engines on the same level of spend. Not much of a metric to share but an indication of his marketing plans. He had a lot less praise for and desire to continue to invest in meta-search. Has pulled AsiaRooms out of Kayak and has no plans to go with hotelscombined. For the moment is sticking with Wego but as general rule does not believe that meta-search builds a brand or helps the business. Claims it forces you into “killing yourself” on pricing at the expense of the consumer experience. This is an interesting point. I am working on a separate post on my thoughts on the meta-search model but from what I am seeing the arbitrage gap (difference between price meta-search players buy traffic from Google and sell it to suppliers) is narrowing.

In supply the plan is to continue to gain access to cheap inventory - but with less (he did not say none) of the rate rule breaking.

Asia is a tough place to play but Fearon is not worried. AsiaRooms claims that profitability and support from the rest of the TUI nline Destination Services (ODS) group will prove another important factor. [FYI the TUI ODA group includes the UK based LateRooms and Spanish Hotelopia].

They will need more than good paid search plans and mothership support to make it in this market. Fearon says he is aware of this, especially with the Global F’n Crisis hitting Asia hard. He predicts the GFC will bring down a number of smaller brands (we off the record speculated which ones). But for Fearon this is the opportunity to bring AsiaRooms out and take competitors head-on. He has not been impressed by any of the marketing activities of competitors from the big four (Expedia, Orbitz, Travelocity and Priceline). "There is nothing they have done that made me say Wow".

Was interesting to finally hear a (confident) voice from AsiaRooms and one not afraid to admit to the reputation. He acknowledged that AsiaRooms broke a lot of the pricing rules in the past (and maybe that they still do) but is now looking to invest in brand and customer satisfaction (heck they even have a facebook fan page now!).

So what do you think? The consumer forums still don’t paint a pretty picture for AsiaRooms but the company is claiming a lot of changes since 2005. Either way the Asian online travel market war has moved to a different level.

Travelocity to remove air ticket fees on 31 March: the razor blade model and online travel

Back in December 2002 Travelocity announced that it had joined the industry trend for fees on airline tickets by introducing a modest $5 fee (original CNET story). Six or so years later, the WSJ has the story that fees will be removed on airline tickets by Travelocity starting 31 March. As I mentioned in the post on Expedia's decision to do the same, the industry is changed forever by this move. The media model will get a boost from this decision and become more important. So do the produce efforts around cross sell.

I recall in the early days of airline commission reductions and online hotel sales (around 2000, 2001). The industry was a-buzz with analogies for describing the new models taking hold. Milk at the back of the store" and the "would you like fries & a coke with that" were being used by online travel strategists as we planned moves to following offline retailers into the world of cross sell and margin managementl. The message being that the low margin product (air/milk/burger) was the lure to sell the high margin product (hotel/candy/post mix soda).

Now I believe that the airline ticket business in online travel is more like the Razor Blade/Razor model. This is where component one of a product (razor/polaroid camera/game console/air ticket) is sold at a loss to drive sales of the second component of a product (razor blade/film/game/hotel). With this model change comes substantive industry change.

thanks to B Tal over at flickr for the gnome shot

Travel Discovery, Triporati and the music business

Through post commentators and email exchanges with readers I have been thinking about whether or not we should be classifying all the travel content, planning, community and search sites that have emerged in the last year. Classification will help to identify competitor sets, clarify business models and help with predictions as to who will be the winners and losers. Also we need something to differentiate all the companies that have launched since 2006 with the word 'trip' in their name.

The first category I have decided to turn my attention to is "Travel Discovery & Inspiration". These are companies that help with the very first part of trip planning - coming up with the inspiration for where you want to go and what you want to do. That help the potential traveller narrow down a world of opportunities and possibilities into a basket of ideas to be explored and researched further. Another reason I want to start with this category is that I have been thinking about the general area of web supported discovery for some time now.

At WebItTravel 2008 in Singapore last October, Ram Badrinathan of PhoCusWright asked me to name my three favourite start ups. One of those I highlighted was not a travel company (and is not even a start-up any more). I talked to him about music social network and discovery site last.fm. Last.fm is the best product I know for discovering music. It tracks the music you listen to, then looks around for other last.fm users that listen to the same music. Then it recommends tracks to you that people listen to who like the music you like. In effect it crowd sources music recommendations based on the similarity of your music tastes with others in the network. A great manifestation of this is your ability to listen to a 'neighbours' radio station. A neighbour being someone with similar tastes to yours and their radio station being a collection of their favourite songs.

Last.fm's chief rival, Pandora, has the same aim - helping you discover new music- but instead of using crowd recommendations like last.fm Pandora has teams devoted to the genomics of music (Music Genome Project). That is breaking down a song or artist into the elements or themes ('genes') and matching to artists or songs with similar genomics.

While they approach it in different ways the concept is the same - bringing to the web and technology the power of word of mouth and trusted advice as a tool in pre-purchase discovery.

The applications to travel are clear. Helping consumers to answer questions of "where to go next?" and "help me find somewhere to go" through networking with other consumers or expert fed technology based query engines.

Triporati is a company that has really impressed me in their efforts to undertake a Travel Genome Project and build a query engine for recommending travel destinations. I first came across Triporati at PhoCusWright 2008 in LA where they participated in the Travel Innovation Summit. They made the short list of six (out of thirty two) at that conference as well as being one of my picks for a top six spot.

Triporati was launched by online travel industry founding fathers/mothers Jim Hornthal (Chairman) and Sharlene Wang (Chief Product Officer). I call them that as they were the builders of Preview Travel, who's sale to Travelocity in March 2000 (announced in Oct 1999, closed in Mar 200o) marked the beginning of online travel as a serious economic force (and temporarily consolidated Travelocity's early lead in online travel). Like Pandora did with music Hornthal and Wang have drawn from travel writers and experts to identify 62 elements of choosing a destination. A user selects (and ranks) up to ten of the elements that interest them and some other data (like home airport and number of travellers). Triporati recommends destination options. For example I chose a number of beach, swimming and snorkelling themes. Recommended for AsiaPac were Fiji, Tahiti and Queensland. For Europe Gran Canaria, Catalonia and the Italian Lakes Region. None of this is surprising but then I know the areas well and generating recommendations on sea, sun and sand is not that challenging. But in regions and search combinations that I am less familiar with I was presented with destinations and travel ideas that were new to me and intriguing. For example, selecting "Wine Tasting", "Zoo" and "Foreign Languages" I was presented with the Cuyo region in Argentina - near the border with Chile - which sounds amazing.

I have been trying to find others in the content/planning model that have followed this Travel Discovery & Inspiration path in using destination idea generation as the means for taking travellers down the trip planning (and therefore eyeball monetisation) path. There are plenty of sites using combinations of editorial and user generated content to provide advice and recommendations on what to do in a (known) destination but I have yet to come across another like Triporati which recommends destinations based on broad traveller . I did come across want2bethere.com in an email exchange last year and in 2007. They claimed to be working on technology that allowed a customer to outline the requirements they were looking for in a trip (through drag and drop), which would then be matched to recommended destinations. Unfortunately their website now seems to be down.

What do you think of my first efforts at classification? Do you know of other companies building discovery engines like Triporati (and last.fm/Pandora in the music world)?

FYI is an interview with Triporati Chairman Jim Hornthal at PhoCusWright last November.

No Vacancy Conference Sydney March 19

MartinKelly of TravelTrends has been kind enough to offer me a media pass to attend the No Vacancy accommodation industry conference in Sydney on March 19. If you are going, look out for me in the back blogging away.

Speakers include Wotif CEO Robbie Cooke, HotelClub's head of central marketing Jon Wild, Adrian Currie of Booking.com and Agoda, Cyril Ranque of Expedia and Grant Colquhoun of Travelocity/Zuji (full list here).

Alfonso Castellano Interview - current TripSay Board member, ex Travelocity and Lastminute (part 1)

Last week travel social network and planning site TripSay put out a press release announcing that former Travelocity Senior Vice President Alfonso Castellano (pictured) was joining the TripSay Board. Castellano spent nine years with lastminute/Travelocity and before than ten years with TUI. An impressive online travel resume.

I had a great chance to speak Alfonso last week about this new venture. This is the first in two posts from that discussion. In this post I will share with you the discussion we had around the online travel industry in general. In a later post will go through our discussions on TripSay and the travel content model.

Firstly to the OTAs

We started our conversation around the challenges facing the major online travel companies (OTAs). As Castellano said “Most [of the OTAs] are losing money in air” Castellano identified three themes/scenarios confronting OTAs today:

1. Complexity

The world is complex, the law, technology, fragmentation, environment, globalisation etc all ad complexity and with it costs to the big four OTAs (Expedia, Orbitz, Travelocity and Priceline).

According to Castellano, this globalisation investment bu the OTAs is not showing the benefits and gains in scale and volume and efficiency that were hoped. Instead this globalisation effort is bringing so much complexity that it is becoming a drag for the big four, placing increasing pressure on margins. Leading to theme 2…

2. Pressure on margin

Even in this economic demolition derby the OTAs are still under pressure from suppliers on margin. Castellano concedes that this pressure “might move a little now but underlying dynamic will remain. Car, air and even tour operators are becoming more and more discriminating in the on online channel.” This margin pressure is made worse due to the third theme…

3. Increasing cost of marketing

The global demand pressure will put pressure on margins but marketing costs will sill be there.

And….in a frightening prediction. Castellano is not surprised by the CEO changes recently “and am expecting more and more traumatic announcements out of the big four.”

Then to the Meta-search companies

He does not spare the bad news for other, newer players. Castellano also expressed views on the meta-search model. If we had talked months ago he would have said that the meta-search future was secured because meta-search supported the direct push by the suppliers.

Prior to this eco-madness (my words), the suppliers were able to be “discriminating about distribution”. Meta-search could play to this as “a marketing tool for supplier direct distribution rather than a complementary distribution” (ie unlike an agent). This meant suppliers could hold back from intermediaries. Today however, the “suppliers are running back to any player with distribution”. Castellano is expecting a shift “like the post 9/11 world”. Suppliers will be “desperate to pay for an extra bed to get back to profitability.” I found the discussion around the impacts on the industry of 9/11 versus this downturn very interesting. It was after the tragedy of 9/11 and resulting decimation in demand that the online merchant hotel business was born.

Finally to suppliers

I asked Castellano what advice he would give suppliers during this crisis to not repeat some of the mistakes of 2001 and 2002 where too much power was given to the intermediaries. He had even more grim news. This time for the suppliers (hoteliers). He sees a “fantastic future for hotel distribution for OTAs.” He goes on “If a hotel does not control big chunk of distribution today and is still dependent on high yield and hight cost distribution models [like agents]. It is too late, they have no room to maneuver. If they have not been building up distribution for the last 3 or 4 years, then the only option they [hoteliers] have is to keep ­ feeding the beast [online agents] then to come back and fight the bigger beast subsequently…Only a handful of hotel companies can get out of this.” Grim words indeed.

More from our discussion soon.

Expedia and Travelocity team up (in Asia at least): Zuji is carrying Tripadvisor reviews

Am sure you know by now that Travelocity is operating in Asia under a number of brands including Zuji in Australia, Hong Kong, Singapore, New Zealand and Taiwan. You definitely know that Expedia owns Tripadvisor (though I keep getting search engine travel from people that don't). But did you know that Zuji is now including Tripadvisor branded reviews in their hotel search results. In other words a content sharing deal between a Expedia company and a Travelocity company.

WebInTravel: Makemytrip and Yatra talk India online travel with PhoCusWright – very dismissive of Expedia and Travelocity

Ram Badrinathan of PhoCusWright hosted a panel at WIT this year with Yatra CEO Dhruv Shringi, Makemytrip CEO Keyur Joshi and Phanindra S the CEO of online bus ticketer RedBus.

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).

However, there are a couple of big differences in the Indian version of Web 1.0. A couple of highlights:

• 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.

The local players are not alone in exploring Web 1.0 in India. I asked from the audience what impression Expedia and Travelocity where making in the market. Both recently launched in India with localised approaches (in English) that match the expansion approach each has adopted in Europe.

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).

Financial Collapse. George Bush in charge. We're all doomed!

Lots of people are asking me about financial crisis. Two types of questions I get asked. The first is "how did this happen" and the second "is the travel industry doomed as a result"

On the question of "how" I have just read an article that gives the best explanation I have come across. In today's online version of the New York Times, Vikas Bajaj writes a great piece called "Plan’s Basic Mystery: What’s All This Stuff Worth?". In it he goes deep into the strange asset/securitisation products that were put together by Bear Stearns, Lehman etc and caused this whole mess. Worth a read (login required).

Despite the madness of these products and chaos that has resulted from their collapsed I am convinced that the Travel industry will not only survive this crisis but will come out the other end thriving. You might call me an optimist but my view is based on history.

The travel industry in America bounced back from 9/11 in a quarter. In fact the whole online merchant hotel business (and retail for that matter) was created out of the ashes of that tragedy. Hotels gave cheap rates to Expedia, Travelocity and Orbitz etc. Expedia completed its acquisition of Travelscape and soon after bought HRN/Hotels.com.

In Asia, the whole business ground to a halt during the SARs crisis. Hong Kong and the region around it could not pay travellers to come visit. Now Macau is the centre of the gaming and Asian hospitality market. Bali has suffered through two horrific attacks and proposals for bizarre religious laws. Yet manages to survive and fight back each time.

In Europe London and Madrid also suffered horrific attacks in recent years. Yet still the customers flock to Spain and UK the for holidays and breaks.

Travel has survived tragedy and shocks before and will do so because at the core humans love to travel. But the secret to survival is reinvention, not hiding and hoping to ride it out. Growing through 9/11 came from reinventing online hotel distribution. SARs from reinventing the Asian hospitality industry. To get out of this Wall Street induced melting Bull will require the industry to once again find efficiencies in distribution, marketing and supply management. Mobile anyone?

Note - an observant reader (ok my mother) has pointed out that my melting "bull" reference doesn't work given the obvious udder on our molten friend above.

thanks to my number one anonymous commentator for the photo

Lastminute has a turnover in the region of Euro 2 Billion (Guardian)

Historical piece by Zoe Wood in last weekend's Guardian on 10 years of lastminute.com. Have a read if you want to reminisce about London during the dotcom gold rush. But here is the important paragraph on the gross bookings numbers for Lastminute.com - especially as we have not seen a public result from the now private Travelocity for almost 2 years.

"McCaig [Lastminute CEO] is pleased the company is no longer beholden to the public markets. Sabre has since been bought out by private equity firms TPG and Silver Lake Partners. Lastminute.com has a turnover in the region of €2bn (£1.6bn) but McCaig refuses to be specific." (my emphasis)