April 2018, San Francisco
Up and away for an African OTA
If there is one thing that African e-Commerce companies, like Jumia Travel, would like for Christmas this year, it is for visa free travel between African countries to be accelerated
While many regions are looking to close their borders, one of the goals of the African Union’s 2063 agenda is to allow visa free travel between different countries on the continent. Progress has been slow, but African e-Commerce company Jumia Travel believes that accelerated visa liberalisation could increase tourism on the continent by as much as 25%. Already travel and tourism contributes 7.8% to GDP.
That would be good news for African companies, like Jumia Travel, as they head into 2018. Already airline association IATA is predicting stronger growth in passenger numbers - 4.8% over the next five years, from the current 3% that Africa contributes to global air traffic. But intra-African travel, which has been notably slow, could boost this higher still.
Today just 10% of Africans are internet users, so Jumia Travel, formerly Jovago, is one of many companies, both local and international, that is pitching a stake in this wide-open market for online travel.
EyeforTravel put some questions to Joe Falter, a former McKinsey management consultant and the new CEO of Jumia Travel, to find out more.
EFT: Although the numbers are quite contentious, the African middle class is said to be growing rapidly. Who is your target audience and how are you meeting their needs?
JS: At Jumia our target audience is mostly the growing African middle class and we are tapping this by providing services adapted to realities on the continent. For instance, we’re incorporating flexible payment methods, have local customer service teams, and are translating our website into local languages. And we’re seeing results. Today we have over 1.5 million impressions monthly from all over Africa, and even more than 3 million during campaigns like Black Friday, which ran from November 13 until last week. Interestingly, we’re seeing 90% of these originating from within Africa, and 10% from other continents.
EFT: In South Africa, which is said to be one of the more advanced online travel markets, the competition to domestic companies like Travelstart is becoming quite fierce. Who is your competition and how do you differentiate?
JS: There are some other local OTAs but international OTAs are also entering the market, but our main competition is still offline, because this is where 95% of travellers still are.
What we understand is that online travel relies on good relationships between all players in the ecosystem. As we grow, we believe we must ensure that we take our partners, like hotels, with us. From the very remote to the most popular, and across all star-ratings, our aim is to bring as much business as possible to hotels. We have also established other initiatives such as resident rates, corporate rates, and a ‘travel smart’ loyalty programme.
For our booking customers, we have a ‘best price guarantee', and work continuously towards improving the customer experience. For instance, we have fully integrated customer service for Facebook Messenger with Salesforce, for a live chat experience. We see our competitive advantage as being present in the countries we operate in, and we have operations in East and West Africa, but are gradually expanding elsewhere. For the moment, however, our South African hotels are listed in partnership with Expedia. With hubs in some major centres - Lagos, Nigeria, Accra, Ghana and Kampala in Uganda, to name a few, we are working to adapt our services to African needs. The main lesson is to be relevant, to provide relevant services and to adapt these to each market. In the hotel business trust is important too. Initially we relied entirely on our team to acquire hotels, but now they are reaching out to us to partner.
EFT: You seem to have built up quite a substantial hotel inventory. What is the business model?
JS: Yes, we have one of the largest in Africa, with more than 30,000 hotels on the continent and over 300,000 hotels around the world. We also have over a hundred flight companies as partners. Our aim is to connect all hotels in Africa to our platform, and provide them with online visibility. For 50% of these hotels, this is their first online connection. We charge commission based on sales, like other OTA models. We don’t have parity agreements.
EFT: By some accounts, less than 10% of the total population uses the internet, so clearly there is a huge opportunity. How are you addressing this and what are the challenges?
JS: Yes, by comparison to Western and Asian counterparts, internet penetration rates are still considerably low (28%), and yes there are currently around 345 million internet users on the continent. Most customers are still offline, which makes the number of people we can reach quite low.
While the concept of online travel is increasingly being embraced, we are still tapping offline marketing channels, and are even opening physical travel agencies
So, while the concept of online travel is increasingly being embraced, we are still tapping offline marketing channels, and are even opening physical travel agencies to convert more offline customers to the online platform. We also have a sales force, known as JForce, on the ground.
Another challenge is the perception in some African countries that any online businesses are not legit; perhaps because they have been a victim of fraud. Most people still feel insecure transacting online and opt to pay cash or through other familiar means. We have worked hard to build trust with clients and businesses, and have also adapted various payment modes including mobile payments like Mpesa in Kenya, and bank transfers.