Yatra Online Pvt Ltd, which launched Yatra.com in September 2006 (it does business of $10 million every month and claims it will break even by the end of this year or early next year) will also focus on hotel bookings, but in budget hotels. It has also decided to enter 20 cities other than the metros. “We plan to launch a combination of products in the hotel and package segment as well as new technologies to retain an edge in this highly competitive market,” says Dhrun Shringi, founder of Yatra.com.
Critical mass
The biggest hurdle travel companies face in breaking even is acquiring enough customers, says Amal Purandara, head India operations for Arzoo.com. The company, promoted by Sabeer Bhatia, the co-founder of Hotmail.com, launched its travel portal eight months ago. Purandara says that its emphasis right now is on “acquiring more customers” and that the firm does not “want to make money in the next two years.”
Flightraja’s Kakkar is convinced that using DTH and mobile phones is one way to acquire more customers. “The issue here is that the total number of computer owners in India is 44 million, credit card owners, 23 million and broadband users, three million. Though all these are necessary conditions for someone to book online, they do not have a mass appeal. On the other hand, mobile phone users in India are at 200 million and this is where the potential is,” he says. Kakkar claims that Flightraja is already profitable and does business of Rs1 crore a day.
With the number of travel portals poliferating, the sector could see consolidation in the next 10-12 months, says Ankur Bhatia, executive director of the Bird Group that provides software solutions to the travel industry. “This will happen after foreign players enter the lucrative Indian market,” Bhatia adds.
Executives at travel portals, however, say that it will take time for the foreign firms to establish themselves in the market. “They will have a difficult time,” says Kakkar. “The tax structure in India is complicated and they are not used to the system of issuing passports and visas in India, which is very different from the global market place,” he adds.
The noise made by travel portals, all of which advertise heavily on TV and print, is encouraging traditional travel agencies to look at their own online strategies. Kuoni Travel (India) Pvt. Ltd (sales of Rs 350 crore in 2006-07) is redoing its website. Of the firm’s business, a mere 5% comes from the Web, but this will increase, says Himmat Anand, chief operating officer for India and South Asia at Kuoni’s destination management division and co-chair of industry chamber Ficci’s tourism committee.
“The online-travel model is what is going to drive the future and our online business will increase to 15% in the next three years. Any middleman such as a travel agent or tour operator will find it difficult to survive in India in the next five-seven years,” he adds.