Travel startups capitalize on the e-commerce boom
According to report released by Financial Express dated 5th June, 2015, the online travel sector comprises more than 50% of the e-commerce industry in India, which is estimated to be in the range of $ 11 to 16 billion. According to a report by UBS Securities India, India’s e-commerce market is estimated to grow 10 times by 2020 to reach $ 50 billion. The online travel segment also had the largest number of startups –all eager to cash in on the e-commerce boom that has been considerably driven by the travel segment in India. It was in 2000 that MakeMyTrip entered the travel domain, and now it has revolutionized the way Indians make use of travel services with its one-stop shop offering the broadest selection of travel products and services. Soon enough, the market was flooded by innovative startups Tripoto, TravelTriangle, StayZilla, WeAreHolidays, iTraveller, TripHobo, Railyatri and Seeksherpa, among others. As on September 2015, India was host to around 80 online travel startups generating total revenue of $ 9.7 billion and evincing a 31% year-on-year growth. As per Venture Intelligence, the January-April 2015 quarter alone witnessed the segment receive a funding of approximately $ 40 million, a massive increase compared to the $ 14.8 invested during January-April 2014. According to President of Yatra, Sharat Dhall, the scope of e-commerce has scaled up due to rising internet and smartphone penetration, rising disposable income of consumers and increasing online buying penetration which have cumulatively increased the valuations of e-commerce firms with growing interest of investors.
Changing face of travel ecosystem
The travel industry is growing in terms of value and volume due to multifarious factors. Packages and personalized deals offered by travel startups, their tie-ups with hotels and lodges, path-breaking solutions offered by new travel startups, use of innovative technologies, among others are some of the specific drivers of the industry growth. More and more, travel startups are opting for e-commerce with the popularity of online shopping growing among customers, helping them widen their reach domestically and even globally. The infrastructure and set-up costs have also decreased significantly due to startups going the e-commerce way.
Private equity firm SAIF Partners has been active in the travel space for a long time. It has invested in MakeMyTrip, iXiGO (travel search engine) and TravelTriangle (a platform for connecting travelers to service providers) due to their ability in building great mobile products and offering solutions beyond just information. As per LightSpeed Advisory Services India Prinicipal, Manindar Gulati, claims that venture capital firms generally looks for large markets, disruptive business models, and exceptional teams while funding. AngelPrime Partner, Amit Somani states that travel startup sectors which have been popular with investors include alternative accommodations, last-minute hotels, travel search and planning, and travel services marketplace. Greyhound Research, an IT analyst firm, states that investors vie in for startups which promise good profit returns. Moreover, customer acceptability and quick adaptability to respond to changing market dynamics is essential for startups to survive and retain its appeal among investors.
Travel Startup stakeholders share their learning experience
Despite funding support to expand and scale up their operations, startups need to be cautious on several grounds to avoid pitfalls. According to MakeMyTrip CEO, Rajesh Magow, startups need to focus on customer experience and better service (beside price advantage and tech-robustness) to stand out among others in the industry. Also, startups need to be wise and selective while choosing to raise funds for scaling up their business. iTraveller is online platform which allows users to discover, book customized holiday packages. It’s CEO, Shiju states that relatively new startups have to struggle to get the right pricing in order to attract Indian consumers who usually vouch for companies having a huge brand value. According to Magow, even though travel space offers a lucrative business, the success percentage for startups is very low since. Many startups flounder and fail due to their inability to differentiate their ideas, products and services in the market. Other reasons include inefficient allocation of funds, over promising and under-delivering, inadequate customer service support and unclear market strategy. According to deal advisory, KPMG Director, Girish Menon, startups face several challenges in the competitive travel industry such as uncertain and evolving regulatory environment, infrastructure challenges, limited payment ecosystems, declining airline commissions, and entry of international players with their global supplier networks.
Startups have the challenge of constantly innovating and measuring up what the new-age consumers are demanding and aim to become one-stop source for all their consumer’s travel needs by focusing on areas like community participation and deeper supplier engagement.