Online travel agencies claim profits

Online travel agencies claim profits
Comment E-mail Print Share
First Published: Fri, May 15 2009. 12 00 AM IST

Internet bookings: For online travel agencies, hotel deals are good business, offering up to 18% margin, closely followed by air tickets.
Internet bookings: For online travel agencies, hotel deals are good business, offering up to 18% margin, closely followed by air tickets.
Updated: Fri, May 15 2009. 12 00 AM IST
Mumbai: Despite a fall in passenger numbers dogging India’s aviation industry, at least four of five leading online ticketing sites have said they made profits—albeit small—in the three months ended March.
These are MakeMyTrip (India) Pvt. Ltd, Cleartrip Travel Services Pvt. Ltd, Travelguru.com and Yatra Online Services Pvt. Ltd.
Click here to watch video
The fifth—Ezeego One Travels and Tours Pvt. Ltd—declined comment. Internationally popular Travelocity.com Lp. and Expedia Inc. have set up Indian units but are yet to scale up.
None of the online travel agencies (OTAs), except MakeMyTrip, shared earnings data with Mint as they are privately held entities and not legally required to disclose financial performance. Deep Kalra, chief executive and founder of MakeMyTrip, said his firm had made net profits of Rs1.5 crore for the latest quarter.
Internet bookings: For online travel agencies, hotel deals are good business, offering up to 18% margin, closely followed by air tickets.
The fourth quarter’s performance, however, is not reflective of the full fiscal year because all the OTAs have registered losses for the year ended 31 March.
“We have made a small profit after taxes for the quarter ended March 2009,” said Stuart Crighton, chief executive officer of Cleartrip.com. The firm had, in mid-2008, pulled back on its offline booking locations for which it had a tie-up with retailer Future Group in select malls after the effort lost Rs1.5 crore.
Chief executive and co-founder of Yatra, Dhruv Shringi, said his firm posted a net profit for the March quarter, but declined to give details, only attributing it to high volumes and internal efficiency.
Travelguru.com’s chief executive Ashwin Damera said his firm’s profits in the March quarter had continued into April. “This was mainly because of our focus in hotel business. The 26/11 incident had derailed our original break-even deadline of November,” Damera said.
Ezeego1.com, which was launched by travel firm Cox and Kings India Ltd in April 2006, did not comment on its financials.
Some analysts, however, are taking the claims of profitability with a pinch of salt because these firms are unlisted and not tracked by brokerages. “It’s surprising to hear that they are making money when the domestic passengers are falling and (there is) no growth in international traffic,” said a senior travel analyst with a domestic brokerage, requesting anonymity.
India’s airlines posted a drop of around 10% in passenger traffic in the fiscal gone by, hit by slowing economic growth and high oil prices that prompted them to raise fares.
Kalra presented a different view. “First, there is a clear shift happening from offline to online. Second, the hype and buzz about several online players had vanished. Now there is a polarization happening, resulting in leaving a couple of big players rather than having more small players,” he said. He said airline tickets, which account for 60% of business, remains the backbone of online bookings. These, however, often work as a hook for other, higher-margin products such as travel packages and cruise holidays.
Hotel deals are high-margin business for OTAs as the former offer up to 18% margin. This is followed by international and domestic air tickets. Package holidays are another source of higher margins. Sites such as Makemytrip and Ezeego1.com already offer these, while Cleartrip is set to introduce the same in a few weeks.
Online travel revenues in India will likely reach $5.7 billion (Rs28,386 crore) by 2010, according to Bhatia, who quoted figures from travel consulting firm PhoCusWright Inc .
Sandeep Murthy, partner, Kleiner Perkins, Caufield and Byers, and Sherpalo Ventures, which had invested in Cleartrip, said the profitability at OTAs was expected and may be sustained in the months ahead as the firms start covering costs. “When an offline agency’s catchment is confined to the area nearby, we cater to the whole country. Earlier there were very few online buyers. Now there are more,” he said.
He added that OTAs have cut marketing expenditure and focusing on customer service.
Comment E-mail Print Share
First Published: Fri, May 15 2009. 12 00 AM IST
More Topics: Travel | Tour | Revenue | Profits | Aviations |