Indian online travel industry to reach $2-billion mark next year

By Vipin Agnihotri

The Indian online travel industry is in full form. It has come into the notice of The India Street that the industry grew at 126 per cent from a base of $295 million in 2005 to $796 in 2006. This year, there is a good chance that it will record a 66 per cent growth to $1.3 billion. According to sources, by 2008, online travel is expected to be a $2-billion industry. Interestingly, more than 17 per cent of all the flight tickets booked in India are done via Internet websites.

But there is still one issue with the Indian online travel industry. Unlike in plenty of Asia-Pacific countries, where these online intermediaries start as hotel consolidation platforms, their Indian counterparts have followed the US and UK model where air has been the driver for growth.

Because of this reason, barring a couple of companies large chunk of these sites have 80-90 per cent of their numbers coming from air alone and the rest from hotel booking. It is worth mentioning in this regard that air is a volumes-driven, low-margin normally 2-5 per cent business. On the other hand, margins in hotels are higher, at 10-12 per cent.

Taking this into account, there is hardly a surprise that majority of portals have now started focusing more sharply on hotels. For example, Travelguru, with around 4,000 hotels in its database, intends to double the hotel-booking segment by March 2008. If experts are to be believed, on any given day these portals see around 750 hotel transactions and another 2,000 in flights.

Apart from Travelguru, Cleartrip, which at the moment has 3,500 domestic hotels, is also looking to add more domestic hotels across categories in all major locations in India. According to company officials of Yatra Online, at present, hotels comprise 6 per cent of their business, which they want to scale up to 20 per cent by December 2008.

MakeMyTrip is also interested in increasing the hotel bookings business from the current 20 per cent to 50 per cent in a phased manner. In my opinion, such a shift will go a long way in assisting plenty of these online businesses enter the black.

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