Friday, November 10, 2006

Online Travel India: Size of business

Following my earlier posts on online travel:

Crowded skies or crowded online travel space?
Action in Indian online Travel space

I have tried to calculate the size of India business of all the travel portals.

I estimate that close to 1,00,000 Air tickets are being sold every day in India. Out of this nearly 20,000 are being sold online. Online tickets are sold by Online Travel Portals / Agents & Directly by the Airlines Websites. Out of this 20,000 I believe that Online Travel portals are selling around 4-5000 tickets per day.

At an average ticket value of Rs. 3,000 the total revenue (Gross revenue) earned by Online Travel Portals from sale of Airline Tickets would be in the range of Rs 430-540 Crores. The portals would be getting a net commission ranging from 0.5% to 7.5% from various Airlines. At an average commission rate of 3-4%, the net revenue would be between Rs. 13-22 crores.

www.MakemyTrip.com has emerged as the clear leader enjoying more than 50-55% of the market share. Indiatimes travel and Yatra follow behind with close to 10-15% market share each. Other prominent players include Travelguru, Cleartrip , Xplorz etc.

The Air Tickets business would be forming almost 90% of the total revenues of the online travel portals. 10% revenues would be coming from Hotel bookings, Taxi rentals Packages etc. The margins on these products would be much higher going up to almost 20%. This would give them another Rs 10 crore in net revenues. This makes the total business size around 25-30 crores in net revenues.

What will be very interesting to see is how the market shares will pan out once the global biggies like Expedia & Travelocity come in (Both of them are going to soon launch their India business) as well as the larger brick & mortar players like SOTC/ Kuoni & Thomas Cook throw their hats into the ring.

However, one thing is very clear - the volumes of business being done by Online Travel Portals will continue growing exponentially over the next 2-3 years.

25 comments:

Anonymous said...

Hi Anurag/All,

Very interesting article. I have been doing some research on this industry for the past few weeks.

It really sounds like the market to be in. One thing I wanted to find out do any of you guys know what it would take to Integrate with networks like Abacus and tieing up with airlines? I am looking for information in terms of Cost and time ?

It will be great if any of you guys can share some information?

Madhur Khandelwal said...

Interesting analysis Anurag. This reminds me of a market research paper by Evalueserve that I had read a few weeks back. They had estimated that by 2010, the total travel booking done online is going to become $1.2 billion, leading to the conclusion that the actual revenue and profit will be only around $75 million and $9 million respectively, which is quite miniscule (esp. if you consider the number of players and investment that is going in)

Looks to me like this sector is getting too overheated already (even before the entry of global players) Thoughts?

Ravi Venkatraman said...

Very good analysis.
Since most Airlines have online presense, the commission could decrease further.
(Similar to what happened in the US market)
I feel Expedia and Travelocity will buy one the existing companies, especially for their back office support.

Anonymous said...

Dear Anurag

I read your most recent web blog, "Online Travel India: Size of Business" with great interest.

Whilst you quote figures re the gross revenue for this business model and the translation of that into profitabilty, there appears to be a glaring gap in your article with regard to advertising revenue.

The questions that your article raises in my mind are:-

1) What sort of gross ad revenue do these sites generate?
2) What sort of ad rates do they achieve vs they would like to charge?
3) What ad rates will be justified based on the value they generate for advertisers?
4) Looking at the Makemytrip site there is a distinct lack of advertising from airlines, hotels, potential detsination cities etc Why is this?
5) Also looking at a wider picture surely you would expect that other advertisers like, credit card issuers, travel insurance companies would see a commercial benefit in advertising on such a site. Why don't they see this as a potential marketing avenue.

Do advertisers not see a value in internet advertising?

Given your area of expertise and operation and your advisory role, influence on clients, I hope you are able to throw light on some of the questions raised above.

I think the answer to your question, Where is the global Indian Internet Consumer Brand? may be contained in your thoughts on the issues I have raised?

You mention Alibaba and Sohu in China. I would venture to say that international interest in them followed only after success in domestic markets.

Looking forward to your response.

Regards

Sunil

Siddharth Puri said...

Hi Anurag,

the online travel industry does provide lot of opportunity as business model is migrating from offline to online models where vendors becoming more efficient with adoption of technology.But with estimates working on making indian traveller dependent on online model still looks far fetched. I m following the travel 2.0 india trends on my blog. Would surely love to get a comment from you on the posts made.

Anonymous said...

hey if you can write about same thing but at world level it ll be really nice!!

Anonymous said...

Very interesting analysis. Could you do a similar take on the state of online hotel bookings in India? or is it early days for that?

hersh said...

Hi Anurag,

Interesting article, would you be able to share the authentic data sources. Im trying to figure out the market share between the airline online ticketing Vs the aggregator among other things

Soham Malik said...

Hi Anurag,

I'm living in Canada presently, but moving back to India in few weeks.... Just can't ignore what all has been going on in India.... Have to be there or feel left out after 10 years... I want to set up Online Travel Agency... Can you recommend me any consultant or company which can help me set up this shop...I still feel makemytrip,yatra,travelguru etc. are not very user friendly in many areas and don't offer lot of things which other ,arket leaders in the world offer....
Any help or guidance on this would be highly appreciated.

Thanks,
maliksoham@gmail.com

Azher Memon said...

Hi Anurag Nice to see you here..
Today I am reserching about Internet Marketing and i found your Blog and little happy to see you in Same Occupation..Yes I am also Working as Internet Marketing Executive at one of IT Company in india..but i am not From IIM any way i found really good stuff from here which increased my Knowledge and confidence too that i am at right place...
Keep Posting Dude..
Waiting for your new post :)
Thanks

Anonymous said...

hi Anurag
the better way to arrive at Indian market size is to check the segments that are being booked by various GDS like Amadeus/Galileo etc...Flight sales still drive the revenues for any Online travel company and the money lies in selling consolidated packages with hotel/land arrangements included.

For Primetravels.com - we are an hybrid company having gone Online in early 1999...while we dont have the adspend that most of these OTA's spend, but whatever little budgeted we spend - we are growing at over 25% per annum over the last 8 years. Yes market size is huge for Online sales out of India, but we need to mature to selling dynamic packaged products than just having OTA's who sell only flights.

In fact, as per some unconfirmed reports all of these Indian OTA's are losing money by the hour and will not survive a potential shakeout sometime in coming 2years.
regards//a1varma@hotmail.com

Anonymous said...

Hi Anurag!

Great Article but i am skeptical about data. i.e

According to IAMAI data the online travel industry market is 7000 crores (2007-08)

And if you take makemytrip case its expected turnover is 1250 crores at 2007-08.
(http://www.financialexpress.com/news/MakeMyTrip.com-targets-Rs-1-250-crore-turnover/212240/)

And in this blog as per your study you are saying that sales would be between 430-540 crores

How it could be big difference? May be i am not expert like you but Kindly clear my doubt!

Thanks

Dinesh said...

Great and useful Analysis report on Indian travel industry which also useful for business owner too.

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Vikash said...

Hi Anurag,

Thanks for the informative article but I am still confused on the revenue model of Travel 2.0. Is it only through Travel Advertisements that you can get returns ?

Anonymous said...

Its a growing business and I don't think its only restricted to only air travel , trains are largely booked by online payments , also a survey conducted on bus travel have show that from a small sample size of 200 , 120 respondents felt that www.ticketvala.com is ideal for booking Volvo bus tickets.

Its a large industry now , and the value chain is long , we have cars, hotels , customized solution etc everyone a part of this huge industry.

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