It’s finally happened – Traveloka, the Indonesian online travel agency, that’s been streaking ahead in the world’s fifth largest domestic market, has received a US$350 million minority investment from Expedia, with analysts saying this values it around US$2 billion, making it Southeast Asia’s first travel unicorn.
With this, you could say Traveloka’s co-founder and chief executive officer Ferry Unardi’s aggressive strategy of buying market share and growth at the expense of profit has paid off, as well as his belief to stick to being an OTA. In the early days, pre-its launch in 2012, I recall conversations with investors advising him to play in the meta-search space.
He however resisted, believing Indonesia was too immature a market for meta-search to work at that time and he and his team have relentlessly executed their way to this milestone, which gives it serious funds to compete at scale.
There was talk that it wanted to take on Agoda as the leading OTA in South-east Asia, and that was probably the incentive for Expedia to put its weight behind Traveloka. Through this investment, Expedia is clearly also eyeing markets like Philippines, Thailand, Malaysia and Vietnam, markets that are similar to Indonesia. All have high sir fragmentation and need deep localisation particularly in payments.
Expedia’s investment comes with an agreement to cooperate on global hotel supply and this will give Traveloka the ability to expand its hotels business – it is currently air heavy but it is making strides in building hotel content and this partnership will give it that extra push to become the accommodation brand for Indonesians and other Southeast Asians, and beyond. Traveloka clearly not only has South-east Asian ambitions but global ones with this partnership.
The fact that Traveloka has also built a mobile-first business is also attractive. At Travelport Live in Sydney this month, Caesar Indra, senior vice president and business development of Traveloka, said 60% of travel bookings in Indonesia are now made online and of that, 71% are on mobile. With this shift to mobile, customers have higher expectations of what can be done on mobile and the Indonesian company experimented with a social feature that allowed its users to share their trip planning before booking.
Ferry Unardi (seated 3rd left) now heads ASEAN’s first travel unicorn. Panel discussion at WIT Indonesia 2015 with Gaery Undarsa, Tiket.com (left); Kohei Nakajima, Pegi-Pegi (2nd left); Hans Ebenhahn, Nustatrip (4th left) with Brett Henry (standing)
It’s undoubtedly not been easy for Traveloka to get to this milestone. In the past few years as it outperformed its competitors, Unardi and his team took a lot of heat. At a couple of the WIT Indonesia events, Traveloka was called out for “throwing money, buying share and spoiling the market” and Unardi looked visibly shaken but resolved to stick to his guns.
There was talk that he was backed by funds, which were only looking for an exit and competitors said it was hard to compete against those that did not have to make money.
Unardi was taking a bet that he’d be able to build an interesting enough business for the likes of players such as Ctrip, Expedia or Priceline which were all looking for entry into the Southeast Asian market.
Indonesia’s travel market is dominated by a handful of family-held traditional travel companies, each of which have made moves into the online space, but have not been able to scale as fast.
Kusumo Martanto: Buying Tiket.com to build Blibli Travel.
Tiket.com was the first real online player to make a dent in travel and last month, was acquired by ecommerce platform, Blibli.com, for an undisclosed amount. Blibli had set up Blibli Travel and it was evident it needed more scale.
Of the acquisition, CEO Kusumo Martanto said, “Tiket.com has had a good track record; in a relatively short amount of time, it has transformed into one of Indonesia’s biggest online travel agents, equally focused on customer satisfaction, as well as being considered consistent in running its business.”
Tiket.com was co-founded by Gaery Undarsa, Wenas Agusetiawan, Dimas Surya Yaputra and Natali Ardianto in August 2011, and has five main products, namely flights, train travel, hotel accommodation, car rental, as well as events and entertainment tickets.
The moves by Blibli and Expedia into Indonesia, a market of immense opportunity with its 260 million population and rapidly growing middle class big on social and mobile, signals a time for consolidation and other players such as Dwidaya’s ezytravel, Pegi Pegi (owned by Japan’s Recruit) and Nusatravel will have to figure out their next moves.
With the bulk of its population under 30 and huge secondary cities promising that next tailwind of growth, Indonesia has long been eyed by travel companies who get its opportunity – AirAsia and AccorHotels among them, for example.
For Expedia, the move makes sense. It would have taken it too long for it to build any business of scale in Indonesia – the family-held travel companies such as Panorama, Smailing and Dwidaya, have deep roots and wide branches – and picking a leader like Traveloka which knows how to execute in Indonesia falls in line with its “Go Global” and Asia strategy.
Greg Schulze: I have been with Expedia more than a decade, but have never been more excited about our future.
“We’re excited to partner with and learn from Traveloka, which has made significant strides in the region. Our investment in Traveloka is complementary to our organic growth plans in the region, which include continued expansion for Expedia group brands like Expedia.com and Hotels.com, said Greg Schulze, senior vice president, commercial strategy and services, Expedia Group.
“Partnering with the world’s leading online travel company will allow us to focus on our continued growth in the online travel space to meet our goal of providing travellers the best travel options and highest quality booking experience,” said Traveloka’s Unardi.
“The expanded partnership gives Traveloka travellers access to a unique and diverse set of international accommodations and we are looking forward to working with Expedia to expand our services in Asia and beyond.”
“For our brand teams, including Expedia and Hotels.com, this news does not change the way they work: they will compete vigorously at a brand level to deliver great travel experiences, as they do today,” said Schulze.
The question remains of course as to whether Traveloka can execute as well in other markets as it has in its home country, but its journey in the last five years has given it a good track record.
