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Business News/ Companies / Start-ups/  Online travel agencies delist budget hotels businesses
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Online travel agencies delist budget hotels businesses

Move to build business independently pits them against Softbank-backed OYO Rooms and Tiger Global-funded Zo Rooms

While start-ups such as OYO Rooms have received large amounts, their revenue potential is unclear, and the entry of OTAs will add more competition in an unproven business. Photo: Pradeep Gaur/MintPremium
While start-ups such as OYO Rooms have received large amounts, their revenue potential is unclear, and the entry of OTAs will add more competition in an unproven business. Photo: Pradeep Gaur/Mint

New Delhi: Online travel agencies (OTAs) such as MakeMyTrip, Yatra and Goibibo are launching their budget hotel businesses, putting them in direct competition with Softbank-backed OYO Rooms and Tiger Global-funded Zo Rooms and potentially triggering consolidation among the start-ups.

In a joint move, OTAs delisted these start-ups from their platforms over the past two weeks, indicating their ambition to build a budget hotels business independently.

Almost 10 online budget accommodation start-ups have collectively raised over $180 million so far, with OYO Rooms and Zo Rooms raising $126.65 million and $36 million, respectively, according to Tracxn, a start-ups tracker.

While the start-ups have received large amounts, their revenue potential is still unclear, and the entry of OTAs, with their large customer bases, will add more competition in an unproven business.

Ixigo, run by Le Travenues Technology Pvt. Ltd, launched a meta-search service across curated budget hotels on its website, Super Value Hotels, on Monday.

MakeMyTrip Ltd last week launched a segment called Value+ offering budget hotels, citing bad reviews it received on its platform from customers of OYO and ZO.

Naspers-owned Goibibo, too, recently started a segment called goStays, a standardized budget accommodation platform, while Yatra.com recently rolled out TG Rooms and TG Stays.

MakeMyTrip is offering double the money back in case customers have an unsatisfactory experience or if they find similar hotel rooms at lower prices. The company has listed more than 1,000 hotels across 35 cities and plans to double the property count by the end of December.

“We will be promoting the segment online as well as offline but we have 12 million downloads and 10 million plus visitors to the site every month. We don’t need broad-based or banner kind of hogging; rather, our marketing budget will be much focused," said Deep Kalra, chairman and group chief executive officer.

“Our shift towards the accommodation is only growing and over the last few years, the percentage share in the product of hotels and packages have grown up to 45% and within that, if you look at what India needs most, there is a lot of budget travel; so it is fair to say that in the budget accommodation segment, you can expect tremendous growth," he added.

MakeMyTrip doesn’t have plans to brand these properties under its own name.

Rival Yatra said it will brand its properties under the recently launched TG Stays and TG Rooms, which will remain exclusive to the OTA.

“The branding is in the process of getting rolled out. We have over 700 odd hotels where we have already started selling those properties. Some of them have the internal merchandise already in place," said Sharat Dhall, president at Yatra Online Pvt. Ltd. Both the companies said they are open to acquiring companies and predicted a shakeout among budget hotel start-ups.

“There are probably far too many players for not that large a market," said Kalra, adding that the consolidation should begin in six months from now. “There are start-ups which grew too fast or there is issue of service quality, etc.," Kalra said. “I would be surprised if the same number of players were there, let’s say even six months from now."

An analysts said the large customer base of OTAs may prove to be a differentiator against their younger, smaller rivals.

“These are some of the largest players and they obviously have their dedicated customer base to talk to. Besides, they also have an integrated offering ranging from flights, buses, cabs and hotels on the same platform, unlike any of the young aggregators," said Rohit Bhatiani, director at consulting firm Deloitte in India. “It is likely to start impacting the start-ups soon."

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Published: 17 Nov 2015, 01:21 AM IST
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