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Online travel leaders set tone for the future

Posted on 23 Nov 2010 at 15:37 pm by Bojan Tercon
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At the WIT conference, we sat down with online travel leaders from Agoda, Hotels.com, Yatra and Elong to discuss OTAs and what the future holds for them. Times are good now but competition is increasing and the challenges are mounting.  Are they ready?

The discussion touched on what role would mobile have in their business, whether they are gearing to become more media-based businesses or were they still focusing on transactions; the changes in their marketing spend; and their views on social media.  

Given that the panelists represented global, regional and local players, the discussion also touched on the question is it even possible to be a global leader these days?

Here's what the experts had to say:
 
 
Dhruv Shringi, CEO, Yatra, India

Mobile is playing an ever more important role for Yatra. Online coverage and bookings are quickly becoming a saturated market in India, thus the next big growth is going to happen in mobile.  Especially in the bottom of the pyramid products such as rail and bus, which is easy to book on mobile. As of Jan 2011, India is seeing the roll-out of the 3G network which means that for most people in India, their very first online experience will come on a hand-held device.

When it comes to social media, Dhruv mentioned that it plays an active role in customer acquisition but it doesn't necessarily help you transact.  For transactions, a customer will have to go to an OTA or a supplier directly.  However, it is true that customer acquisition costs can be supplemented by using social media vs paid search.
  
Yatra also has no desire to become a global player at this point. Its focus is solely on India and similar developing markets. There are a lot of opportunities in India to build depth into the market, given its huge market size. Rather than North America, Dhruv sees Yatra focusing on African and Latin American countries that are more akin to the Indian market and, thus, more interesting.

In India today, roughly half of the marketing spend is online. Yet surprisingly, Dhruv states that in the next three years, more will be happening offline in this large country.  It is important to start looking at other means for customer acquisition.  Brand direct has huge potential, especially in the nascent market of India which is heavily fragmented.

Unfortunately, if you want to scale up at a certain pace, you have to also manage all the different platforms out there, such as apps, touch screen devices and computers.  Customers have to be viewed more and more as individuals –you can't treat anyone as a homogenous mass anymore.  Groupings are breaking down into smaller and smaller fragments, thus you have to maintain multiple platforms and multiple product types for each consumer segment.  This complexity, of course, comes at a cost.

A lot of innovation happening in India has to do with customer retention.  As an example, Yatra is pulling all call centers internally.  Call centers in India have been typically outsourced to employees that are earning anywhere between US$200-300 per month, while they're working for a brand that is spending US$10-15 million on building the brand. When a customer calls, the line is likely to be picked up by someone who doesn't really care much about your brand. Thus they have decided to pull the call-centre in-house and invest in well trained, well spoken and more product knowledgeable staff.
 
 
Johan Svanstrom, Managing Director & Vice President, Asia Pacific, Hotels.com

Expedia-owned Hotels.com certainly comes with size. Johan outrightly states that being the largest in the market is not a bad spot to be. However, you have to earn the right to stay in the spot.  As such, Hotels.com is now a global company playing a large travel portfolio game, trying to serve any type of travel needs:  leisure, corporate, flights, hotels, etc.  It is also very rapidly expanding into the Asia Pacific market.

In today's online travel market, there are a lot of players which means that consumers can jump from one OTA to another with no problem. This adds a lot of costs to a given OTA.  Will this change in the future? Difficult to say. Fragmentation is definitely happening in the market along the lines of apps, browsers, mobile, computers which is adding to the complexity. Expedia is thus spreading its ocus to make sure it has all the different segments covered.

In terms of marketing spend, the strategy for Asia is quite varied.  Asia is a label for the region, yet the fact is that the markets are very different.  In some markets, starting offline makes sense to get the business going and then you commence shifting online.  While in other markets you can start online immediately. Hotels.com strategy varies from country to country.

Adrian Currie, Chairman, Agoda

Priceline, the parent company of Agoda, is in a great position these days.  Only three years ago, it was still focused on the North American domestic market.  Today, its focus is on the international market and, more specifically, hotels.  In recent years, it has acquired Active Hotels in the UK, bookings.com in Amsterdam and Agoda from Bangkok. This combination and focus has allowed it to achieve remarkable results and growth rates in the online hotel market.

Priceline spends over US$100 million on advertising in each quarter, out of which less than 10% is spent offline. Every marketing dollar in Europe and Asia is spent online through distribution partners.  It prefers focusing on the online market which is much easier to measure than print ads. True, it's an expensive channel, but if you get the mix right you will attract a lot of customers and with that a lot of data, which you can use to buil -up your business.

Mobile bookings are definitely on the rise.  Agoda sees a trend where more and more customers are booking hotels last minute via their hand-held.  The stays tend to be shorter and in higher star hotels.  Yet this is a nascent market and has great potential, says Currie.
 
Cui Guang Fu, CEO, Elong, China

Elong is the number two OTA in China, focusing primarily on hotel bookings; however it is the largest OTA in terms of number of hotels provided. Last year it had 15,000 domestic hotel bookings.

So how does it create value for tcustomers? Guang Fu mentioned three areas where OTA's have to provide value in order to remain in business:  1. provide great content and ease of selection to make decisions easier; 2, its main task is transactional so it has to make transactions easier and more intelligent; and 3, the customer has to feel like they're getting value for their money after staying in a hotel or taking a flight.  Its strategy is simple:  It wants to acquire, serve and retain its customer online.

Customer satisfaction is also very important, which is achieved by creating customer value.  Every transaction is measured, every complaint handled.  Elong takes customer satisfaction very seriously which is clearly visible in its 'very satisfied' rate, which is over 92%.  

Elong made its first profit last year and growth has started to accelerate. The strategy for China is also changing. Many foreign investors thought that China was call-centre based.  When Expedia, a majority shareholder of Elong, came to China, it was not committed to make the shift and invest in online. Given the high perceived risk, tit was sitting on the fence by investing in both and hedging their bets.

Previously, Elong used to invest 100% of its marketing dollars into offline.  Since Guang Fu arrived at Elong, he has turned that around 180 degrees. Today, all the marketing dollars are spent online. He states that people often perceive that the Chinese market is so different to the West that they are afraid to take bold steps.

Online bookings represent a third of Elong's revenues, however, the pace is growing fast.  Much faster than offline. And Internet impacts two-thirds of its business.

When it comes to new features such as apps, Guang Fu says they're not a priority now.  Speed and availability are more critical and Elong's first priority, and there is still much work to be done there.

As the debate came to an end, each panelist was asked to state one prediction or keyword for the year 2015.  Ready?

 Johan said speed. Adrian was hoping that we would drop the 'online' word, after all it's all about travel, experiences and relationships – it doesn't matter if they're online or offline. Guang Fu was all about conversion, since higher conversion means you're doing something right. And Dhruv?  He wants to offer a personalized experience. 

 

Tags: Yatra , Agoda , Hotels.com , Elong , mobile , social media , OTA , marketing spend
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