Indian OTA Market

Industry Overview

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India, which has the worlds second fastest growing GDP, will produce one of the worlds largest high income pool
Real GDP Growth (2005-2015)
3.5
12.0 China

Indian households with annual income >USD 50k (2005-2015)

Number of households (in millions)

3.0 Growth Rate (Base=2005)

10.0 CAGR 10.6% 8.0

2.5

India

6.0

2.0

Thailand US

4.0

1.5

Germany UK

2.0

1.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0.0 2005 2007 2009 2011 2013 2015

Years

Years

Source: EIU, RedSeer Analysis, web search

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Indian upper and middle class is increasing which will give a boost to the travel sector
Household Income Class Annual disposable income (USD) Segment Size (Households MM- 2007) and % CAGR (20002007) Common Occupation Travel habits

1.8

Business owners in
9.7%

Minimum one foreign Multiple foreign business Frequent domestic flyers Prefers luxury hotels (4-5
stars) trips leisure trip annually

Upper class

>$25,000

small and medium enterprises High level corporate/ Government employees

Middle Class Tier-I

1.7 $15,000-$25,000
2

Salaried Employees New service employees

9.7%

Either a budget foreign trip

or a lavish domestic trip annually 4-5 domestic round trips annually Stays in 2-3 star hotels

Shopkeepers Rich farmers

(e.g. IT media)

Middle ClassTier-II

22.6 $5000-$15,000
23

18.7%

Shopkeepers Non-urban small

business owners Lower level employees

Travel by train-AC or low Prefers to stay in budget

hotels cost carrier

187

Lower class

$500-$5000

23

0.7%

Shopkeepers Non-urban small Lower level employees

business owners

Travels in general train and

buses

Source: EIU, RedSeer Analysis, web search

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Indian travel and tourism market is 42 billion USD industry growing with a CAGR of 10.2% over the next 10 years
Indian Travel and Tourism Industry- Market Size (2010-2020)
120.0 111 100.0 96.4 82.8 80.0 69.2 60.0 42 40.0 55.6

Discussion
Governments boost to tourism, rising middle class and increasing aggregate disposable income will lead to a significant growth in travel and tourism industry in India Indian middle class is expected to increase by 10 times between 2005-2025

Market size (in USD billion)

CAGR 10.2%

20.0

0.0 2010 2012 2014 2016 2018 2020

The aggregate disposable income from Indian households is expected to increase with a CAGR of 7% between 2005-25
Years

Source: EIU, RedSeer Analysis, web search

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Changing dynamics of Indian travel industry

Changing Attitude of Indian traveller

New Information sources

EARLIER

Increased Flexibility
Standard packages Lack of options

Unexplored destinations
Less frequent & long trips to famous places

Personal knowledge Word-of-mouth

NOW

Online research Social Media

Plan-it-yourself flexible trips

Weekend getaways Explore the unexplored

Since OTAs provide increased flexibility, lower pricing and more options in terms of destinations, it is being increasingly adopted by new-age Indian traveller
Source: EIU, RedSeer Analysis, web search
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Indian online travel industry is growing with 49% CAGR; OTAs account for 17.5% of total gross bookings
Indian Online Travel Gross bookings (2007-2010)
7000 5739

Indian Online Travel Gross bookings- Breakup (2010)

6000

Market size (in USD million)

IRCTC - 14%
CAGR 49% 4041

1 billion USD gross bookings

5000

4000 2738 68.5%, Others 2000 1750

OTA17.5%

3000

1000

0 2007 2008 2009 2010

Years

Source: EIU, RedSeer Analysis, web search

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Three major players account for 90% of Indian OTA market share, with Make My Trip as market leader
OTA Market Share1- by Players (2010)
10%, Others

Discussion
OTA industry is very competitive with more than 30 players in the market. The industry is very pricesensitive especially in air-travel segment, due to which Net revenue margins are low. While global giants like Travelocity and Expedia still have to make a mark in the industry, bigger Indian companies are venturing out into countries with high NRI population.

18%, Cleartrip 48%, Make my Trip

24%, Yatra

Notes: 1. Market share by gross bookings Source: RedSeer Consulting

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The competition is shifting towards non-air travel segments like hotel bookings due to high margins
Net Revenue Margins (2010)
16 14

Discussion
Air travel Net revenue margins consist of commissions from airlines, service fees from customers and fees from Global Distribution System (GDS) partner. Margin on Hotel & package tour bookings come from mark-up on services.

14% 7.6%

Net revenue margin (%)

12

10
8 6 4 2 0 Air ticket Hote & package tours

Hotels and package tour services also give OTAs an opportunity to differentiate themselves in the industry

Notes: 1. Market share by gross bookings Source: RedSeer Analysis, MMYT Investor presentation 2009 RedSeer Consulting Confidential
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Recent Trends In OTA Industry

Trends Consolidation amongst players Focus on hotels and tours One-stop solution mantra Merging online and offline Creating online ecosystem Global expansion of players
Notes: 1. 2008-2010 Source: RedSeer Analysis

Description
Major companies are acquiring smaller companies to expand their services Makemytrip acquired Ticketvala.com, Travelocity acquired Travelguru and Yatra acquired Ticket services International
For the industry leader Make My Trip, while gross bookings for Air-travel and tours grew by 45%1 each (2008-10), net revenue grew by 49% and 84%, respectively Most OTAs have partnered with IRCTC for rail bookings to generate traffic OTAs are also partnering with bus ticketing websites and car rental companies to become one-stop solution for travel needs Yatra has started 50 lounges across India while Make my trip has an agent network across 450+ cities Yatra has also partnered with Reliance World (120 centers across India) where customers can book tickets and hotels Makemytrip has created online communities of tourists through offisialatyachaar.com and oktatabyebye.com while Cleartrip has associated with Tripadvisor.com OTAs are expanding globally in countries with high NRI population. Makemytrip started trading on Nasdaq to raise money for global operations

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Enablers for industry growth

Increasing internet and credit card penetration Internet users in India
grew 2.5 times from 2006-2010

Growth in tourism

International tourist
arrivals in India has increased by 8% CAGR (2004-09), compared to world average of 3%

Discussion

Indian OTA industry has a

high potential, and opportunity for growth.

Number of credit cards in

India grew by 3 times between 2006-2010

Governments boost to
travel and tourism, combined with increased ecommerce penetration, will help OTA industrys growth

Emergence of new online segments like car rentals OTAs are integrating their
portals with online bus and train ticketing services and car rental services

Growth in Civil Aviation market Airline industry in India

has grown by 400% (2004-2010).

OTAs are increasingly

integrating services like rail, bus and car rentals to generate higher number of transactions

By 2020, India will be

third largest aviation market after US and China

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Enabler: Growing internet and credit card penetration

Credit cards and Internet users- India (2006-20141)
Number of credit cards and internet users (in million)
250.0

Discussion
Internet penetration in India is 7% (compared to 31% in China) is set to increase drastically
Credit card Internet

200.0

150.0

100.0

Indian Government has allocated 10 billion USD for Bharat Nirman, a project to extend internet in rural areas Increasing urbanization in India will also lead to increased internet and credit card penetration

50.0

0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014

Years

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Challenges faced by Indian OTA industry

Low operating margins

Limited reach in tier-II and tier-III cities

Discussion

OTA industry is lowmargin, high volume. Due to low internet penetration in India, their reach to tierII and tier-III cities is limited which affects the volumes

Challenges faced by OTA Industry

Incompetence of hotels
and tour operators reflects badly on OTA for consumers who book through them. Controlling their quality is a major challenge

Nonreliability of offline partners

Payment processing issues

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Major Industry Players

Make my trip Established: 2000 Gross bookings: 480 million USD (2010) Largest market share in Indian OTA industry First Indian OTA to be traded on NASDAQ Sister websites: Offisialatyachaar.com, oktatabyebye.com Global presence: US, Canada, UAE Covers 450+ cities in India through travel agent partners Investors: SAIF , Helion, Sierra Yatra Established: 2006 Gross bookings: 240 million USD (2010) Partnered with Reliance World for ticket distribution Started Holiday Lounges in 50 major cities in India Global presence: US, UK Investors: Reliance, TV18, Norwest, Intel Capital

Cleartrip Established- 2006 Gross bookings: 180 million USD (2010) Partnered with Tripadvisor.com and Lonely Planet Global presence: Middle East (UAE, Oman, Qatar, Bahrain, Kuwait) Investors: KPCB, Sherpalo ventures, DAG Ventures, DFJ

Travelocity Established- 1996 (US); 2007 (India) Gross bookings: Global- 10 billion USD (2007) Acquired Travelguru, India based OTA with focus on hotel bookings, in 2009 Owned by: Sabre Holdings Global acquisitions: site59.com, lastminute.com Global presence: US, Canada, Germany France, Scandinavian countries, UK and Mexico

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