Japan’s Recruit Holdings, which has three travel joint ventures in the Philippines, Indonesia and Vietnam, sees great opportunities in these emerging markets but realizes competition is also getting stiffer as more players, both global and local, enter the space.
Kohei Nakajima (left), who is COO of Pegipegi.com, said Indonesia, in particular, was becoming a very competitive market “with many talented Indonesians who have returned from overseas starting up travel businesses. They are highly skilled and they are good quality competitors”.
Pegipegi.com, a three-way partnership with Recruit holding 40% equity, was set up in May 2011 and offers flights and hotels through a white label partnership with booking.com. In Japan, Recruit operates Jalan.net, one of the two top OTAs in the market along with Rakuten Travel.
Its core business is domestic, middle class and Kohei says it is this market that is super competitive with many players – tiket.com, rajakamar.com andnusatrip.com, among them – all going for the same segment.
“However we are more focused on domestic, offering local hotels and low cost flights,” said Kohei. The site offers flights from Lion Air, AirAsia, Tiger, Citilink and Sri Vijaya.
The majority owner is AMG (45%), a company that owns outbound advertising assets and Pegipegi.com has leveraged these assets to build its brand offline to drive traffic. 
Online, it relies on SEO and SEM and it leverages on Recruit’s expertise in this field with two Recruit staff based in Indonesia looking after this area. However it’s reducing its spend on SEM. “CPCs have become crazily high and we are investing more in SEO or other aggregator websites such as Wego andTripAdvisor.”
Social is one area where it’s tried several times “but we don’t see returns and so we don’t push it”.
Pegipegi.com was first launched on Recruit’s Jalan.net platform but it’s had to localize to adapt to the Indonesian market. “When we started, we took staff from Indonesia to train in Japan but after two years, we see that the system is very different from the Japanese model and we do training locally now.”
One key area of difference is in the payment. In Japan, Jalan.net does not collect money from users but earns commissions from hotels. “We don’t require our customers to register their credit cards in advance. They pay at hotel and we collect commissions.
“In Indonesia, we need customers to pre-pay and so the payment system has to be built differently.”
The big opportunity is in mobile which he says is really growing, with half of visits to the site coming from smartphones. It now runs a mobile-optimised site and is working on building apps for iOS and Android. “No Blackberry, it’s almost gone,” he said.
The biggest challenge, says Kohei, is hiring good talent, especially engineers. “Salaries are spiraling. They change jobs every one or two years and each time, their salary jumps 30-40%. It’s tough to keep good engineers.
“We have to look at ways of offering them more than monetary benefits. People here are eager to learn, to look for new challenges and we must offer them those opportunities.”
Note: Kohei Nakajima will be speaking at WIT Indonesia and is also a judge and coach for the WIT Indonesia Start-Up Pitch. Recruit Holdings, with a base in Singapore, is looking for investment opportunities in the region.
