"Argument around online as a transaction environment for travel is no longer an issue"
Published: 24 Oct 2007
But there are quite a few players, who are optimistic about their ventures and continue to improve their product offering.
For his part, Cleartrip.com's CEO Sandeep Murthy says the argument around online as a transaction environment for travel is no longer an issue.
"Along with Cleartrip we have seen a number of models successfully build a marketplace around online transactions in travel. What is more relevant is the continued evolution of this model," said Murthy.
"As more investment is made in technology and intuitive UI's coupled with deeper penetration of broadband will continue to be a catalyst for other product lines to move successfully online in the same manner as domestic Air and Domestic Hotel have done. This will however take time and a great deal of investment in fundamentally demonstrating to the consumer the value proposition. An increasing acquisition cost and a need to broaden the customer base are perhaps earlier drivers of a combined online / offline approach."
In an interview with EyeforTravel.com's Ritesh Gupta, Murthy spoke about the OTA segment, revenue matrix of OTAs and much more.
Earlier this year, in an interview with us, you had acknowledged that the company was on its way to close the first 12 months with 480,000 transactions with a gross sales of over US$100 million. Can you give us an update?
The response to Cleartrip and its simple approach had been overwhelming. I believe the approach of working with the customer continuously to help evolve the model has enabled Cleartrip to deliver a product that is both intuitive and relevant across its product line. This in turn has enabled Cleartrip to surpass its earlier projections and position itself well for the remainder of this financial year.
Talking of the OTA business in India , if OTAs have pure online business models and a player is managing an annual turnover above US$280 million, would it be right to say that Indian consumer's profile doesn't fit in with browse online and buy offline behaviour?
I think the argument around online as a transaction environment for travel is no longer an issue. Along with Cleartrip we have seen a number of models successfully build a marketplace around online transactions in travel. What is more relevant is the continued evolution of this model.
As more investment is made in technology and intuitive UI's coupled with deeper penetration of broadband will continue to be a catalyst for other product lines to move successfully online in the same manner as domestic Air and Domestic Hotel have done. This will however take time and a great deal of investment in fundamentally demonstrating to the consumer the value proposition. An increasing acquisition cost and a need to broaden the customer base are perhaps earlier drivers of a combined online / offline approach.
What is the staff to transaction ratio as of today and what percentage of booking is online as far as Cleartrip is concerned?
We currently have a staff strength of around 240 (all inclusive) with online / offline ratio of bookings about 98/2. That said we have recently introduced a pilot retail programme in partnership with the Future group India 's largest independent retailer so I would expect that ratio to change over the next six months.
In the revenue matrix for OTAs, hotel revenues contributed only a miniscule percentage last year. Mr. Murthy expected substantial increase in volume of hotel sales in 2007. How has this shaped up for OTAs or Cleartrip.com?
We have seen remarkable growth in this sector of our business. We have taken the same focused approach to hotels as we successfully did in air. A fast and comprehensive search a simple UI and extremely relevant content. Again the focus on the end consumer experience is critical in delivering a successful online product. In addition to this we have worked very strategically with our hotel partners conscious of the need to drive value to them when they most need it. Whilst the overall base of hotels is still small in India the need to understand the consumer and the supplier pain areas is critical now if we are to continue developing this active market place.
In your opinion, why hotel bookings is far less than airline booking in online travel business? Is due to approach of hoteliers in India or inventory/ commission/ content sharing issues?
There are three major factors influencing this:
1. The Airlines and the GDS companies have invested in technology to enable online distribution of the air product. In the hotel segment this has not happened at the same pace.
2. Customers need more information on hotels before making the right purchase decision. Online travel companies are now frankly getting better at integrating content around the product this should enable customers to make better-informed purchase decision.
3. The availability and accessibility of inventory on Air is far greater than hotel. So the online sale volumes reflect the inventory allocation between air and hotel in India .
OTAs in India which have predominantly focused on domestic air bookings. How do you see the battle going forward as traditional offline consolidators particularly air consolidators enter the online space?
At this stage I don't see any significant change. Building a consumer business is very different from a traditional consolidator business that is largely developed in a B2B environment. I don't think I have seen this successfully play out in other markets either. That said India is always full of surprises, so to ignore this as a potential competitor would not be wise.
You had shared that Cleartrip.com managed great recall through its dominant `Share of Voice' campaign across the print, online, TV and below the line activities. Considering brand awareness, transactions, and huge asset to being an online agency because loads of data can be compiled – shopping, purchase, etc., how do you think Cleartrip.com has leveraged the intelligence it has built through CRM to drive business to suppliers?
I believe there is a responsibility for the OTA's to work in a transparent fashion with its supply partners. The utilisation of data helps ultimately both the supply and the OTA in partnership, to position the right product to the right consumer. Doing this well has a significant impact on both your acquisition spend and your retention rates not to mention the overall value to the end consumer. We at Cleartrip work extremely closely without supply partners in achieving this.
It was shared that Cleartrip.com was the only OTA offering online booking of eight domestic carriers in India . How have you capitalised on this relationship to work on revenue streams mainly dynamic packaging via deals with hoteliers and ancillary revenues from insurance companies?
We are very focused on the core travel product as of now but will certainly look at opportunities that Insurance and other ancillary products will provide in the near future.
How do you assess the entry of the likes of Expedia and Bezurk.com in the time to come?
India is a unique and challenging market. Having said that, the opportunity in India is large and will attract many companies with different businesses models. Any contribution in building the marketplace direct or indirect has to be welcomed and encouraged.