Next frontiers in Online Travel

Online travel market has been one of the most exciting ones over past few years from a growth standpoint. Starting with IRCTC, and then followed up by Online travel agents (OTAs), this category has seen a decisive shift online. Amongst other things, it has also helped bring a large base of shoppers online, and demonstrated the viability of the “assisted ecommerce” model in India through retail points.

As a category becomes large, specialized plays become feasible – focus on specific products, business models, customer segments or experiences can create a second tier of businesses that can create and realize value. In my view, online travel is reaching that stage. Following are some of the opportunities that we are seeing in the market and in many of these, entrepreneurs have started to build new businesses.

  • Product centric online properties: Be it bus ticketing or hotel bookings, India still does not have large swathes of inventory available electronically. New startups are working to bring this inventory online. Typically, this involved automating the inventory management of primary suppliers (bus operators and hotels) as well, unless the startup works on allocation basis. The key risks in this area include scale questions with regards to online adoption, and ability to amortize customer acquisition costs over few products. However, global success stories exist, and if successful, these businesses would be ripe acquisition candidates by large OTAs. In some cases, such startups are taking a character of GDSs, and the margin concerns might be more acute there.
  • Metasearch is becoming a reality – once you have multiple supplier websites and OTAs, the customer wants to be able to search across those and find the best deal. Again, a globally proven model, the key risk here is perhaps the ability of these businesses to compete with relatively large marketing spends of OTAs, since the central promise of both remains “cheapest fares”.
  • Experience driven sites – such as content sites and travel planning sites. Timing and business model risks are the most significant here, though with the right consumer driven model, it could be a very valuable play over time.
  • New segments – Corporate travel and B2B businesses are coming up to service different segments of the market, other than the consumer segment that has been most focused on so far. This space has the potential to get crowded quickly, given that most OTAs are also servicing these segments in part. Intimate understanding on unique needs to these segments (such as expense management) and ability to cater them well lead to success here. Similarly products focused on travel suppliers themselves, such as revenue optimization or cross-sales enablers could be interesting opportunities.

Travel is the biggest and one of the fastest segments to take off on the Internet. Entrepreneurs and investors are now looking for niche opportunities that can scale over time. Would love to get your views on what plays you find most interesting and scalable.

crossposted here.

14 Responses to “Next frontiers in Online Travel”

  1. Yoplr launched Automatic door to door tours for Tirupati as well. Come and make your tour.

  2. Deepankar: I just saw – awesome! I’ll keep watching. I’m not religious, but that space attracts so many people it’s difficult to not find it interesting 🙂

  3. Deepankar: Sorry, saw this late. Yeah, I agree. Shirdi, Tirupati and the like are interesting but are very competitive. At least you can expect certain facilities for staying and crowds large enough to ask for details. The play here could be online, including details for the clueless (I can think of a GPS based app that might tell you where to go, what to do etc.)

    Plus there’s the unknown/not-so-famous, like Murudeshwar and Om Beach, Shringeri, Badami etc.

    But I just saw the online space. This idea’s been implemented by multiple niche portals already – and its various subsites for instance. Their only downside, I guess, is that you need to contact a tour operator, so arranging stuff online is not an option; I think what they might do is just intermediate the local operators online.

    Not a bad option then for the redbus type deal where bookings can be made online if the tour operators can be made to cooperate.

  4. Typo.. Shirdi is 500K, and not 5500K

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