| Holidays click | |
| Sayantani Kar / May 26, 2009, 0:13 IST | |
Yatra.com is focussing away from online ticketing in search of better margins
They display the wrong hotel picture. Never book holidays through travel websites,” warns an irate customer on the popular social network for reviews, www.mouthshut.com. “I had to stay at this hotel because of the travel website’s mismanagement,” adds another not-so-happy customer. Those who make their travel bookings online have a bagful of complaints which range from accountability to unpleasant hotel experience. These are challenges that bother Yatra.com, one of the two leading online travel agents in the country (the other being MakeMyTrip.com), which commands a share of around 30 per cent of the online travel market. The company is banking on holidays to improve its profit margins. But service and delivery standards need to match the promise.
The online travel business is growing at a fast clip. Portals saw transactions worth Rs 2,355 crore in 2007, Rs 3,600 crore in 2008 and are expected to log Rs 8,215 crore in 2010, according to PhoCusWright which comes out with regular reports on the online travel market. This does not include the large online ticket sales logged every year by the Indian Railways or other suppliers such as airlines on their websites. A large chunk of these volumes come from selling air tickets, where the margins are wafer-thin — between 2 per cent and 4 per cent.
Holiday high
The answer that the Yatra brass has hit upon is to target the holiday market — hotel and excursions in addition to selling air tickets. Sanjay Tiwari, co-founder and CEO of JuxtConsult, a research organisation, observes, “The move towards hotels and holidays would improve the bottom-line of online portals. While their top-line would still grow because of ticket sales, to be viable and profitable they have to rely less on low-margin ticketing.” The problem is rival portals too have latched on to the same business model. Moreover, almost all portals offer the same rates for travel and hotels. This is crucial because every customer compares rates across websites. This makes the challenge tough for Yatra to look for a differentiator.
The website has gone for a revamp to don a modular look with tabs for all its different products, making it more search-friendly for the first-time visitor and those who are not Internet-savvy. Yet, holidays and international travel are often not for the first-timer to book online. Not because of any restrictions but because most are uncomfortable trusting a site with large payments. “It is usually customers who have made at least three purchases or shopped for more than a year with us who go in for holidays and hotels. Their confidence gradually goes up from booking domestic air to domestic hotels and then to
international bookings,” says Yatra Co-founder and CEO Dhruv Shringi.
Nikhil Rungta, the company’s head of marketing, estimates 60-70 per cent of its customers are repeat customers. Direct marketing, discount coupons and points through the Yatra Miles scheme, which takes after the travel miles given out by airlines but is applicable across airlines, are all devised to increase the stickiness of Yatra’s customer.
Short is in
Yatra has realised that in these days of economic slowdown, people prefer to take shorter but more frequent holidays. Thus, it has decided to focus on short packages to hit the right chords. It has termed its four-day international packages as Quickies which, claims Rungta, have seen brisk sales, accounting for no less than 55-60 per cent of its holiday bookings. Low prices for short holidays abroad allay customer fears and build confidence to go for longer tours with the same travel portal subsequently. Yatra is also highlighting itineraries different from the usual that it has put together with the help of the tourism boards of states and national parks.
To improve its relevance to travellers from all socio-economic categories, Yatra recently added Railways tickets. This is a huge market: As many as 64 per cent of online travelers in the country prefer to travel by train, according to PhoCusWright. But the first-mover advantage in this sector has been bagged by Cleartrip.com, another popular online travel agency, which began this service almost six months ago. Still, Yatra can now boast of all three choices to travelers: Air, road and rail.
PhoCusWright found that international hotels were flush with online information and were easier to book for Indian travelers than domestic hotels. Since a large chunk of its business comes from domestic travel, Yatra has moved to allay these fears. For travellers who want to dig up more details about a hotel, Yatra has managed to post 500 hotel videos on the site. Rather than five-star hotels, the bulk of the videos are of budget hotels. “It was often of budget hotels that customers felt they didn’t know what to expect,” says Shingri.
But one of the heaviest crosses that travel portals bear is the Indian traveller’s unwillingness to transact online. Holidays and international tickets (which enjoy slightly higher margin than domestic air tickets) can be complex products and involve large sums of money. It is a mental block that needs to be brought down.
Assurances on international air fare such as a fair-deal promise let Yatra’s customers determine a ballpark figure for their plans. A year ago, it introduced a window for the customer to pay just 25 per cent of the ticket price at the time of booking and the rest closer to the date of flying. This saw international ticket sales through the website shoot up by three times. When booking hotels in India, customers need pay only 10 per cent of a booking and the rest once they reach the hotel. Taking a leaf out of the Railways’ website, Yatra has a range of payment options such as pre-paid cash cards and net-banking, which helps in a country with a miserly credit card penetration of just three per cent.
Click and mortar
While Yatra’s core remains that of an online company, it is difficult for any travel portal at this stage to ignore a brick and mortar presence if it wants to graduate to selling holidays and international travel. As Ram Badrinath, the Asia-Pacific head of PhoCusWright, points out: “Outbound travel is mostly done offline because it is more comforting for the customer, given visa issues and credit card limits.” Neither does the sparse presence of Internet connections (only 15 million subscriptions) help. To bring about the offline interaction that Indian travellers look for before finalising travel itineraries, Yatra has put in place its retail outlets or lounges where its counsellors advise customers on holidays, both international and domestic.
The offline initiative has helped the company expand in Tier II towns where customers are still reluctant to transact on the Internet. According to Rungta, small towns now account for almost 40 per cent of Yatra’s revenue. Tiwari agrees the potential in such markets is huge since the small towns are not serviced by many offline players, though the average spend per customer may be smaller than metros. Yatra has also done tie-ups with Sify i-way and Reliance Retail World outlets to place its travel desks. All told, these touch points bring in 6 or 7 per cent of Yatra’s transactions.
Not everybody is convinced that this is the way to go. While Yatra’s arch rival, MakeMyTrip, has also gone down the route, Cleartrip resolutely plans to remain an online player and wait for the customers to become more comfortable with a full-fledged online travel agency. Says Cleartrip Vice-president (marketing) Noel Swain: “We are 100 per cent online. We will wait till the time customers are ready to buy holidays online. The scalability will come with technology.”
To be fair, Yatra is not thinking very differently either. Its offline presence may be for the next three to five years only. “For us, going offline with our lounges is an intermediate step. We won’t bank on them 10 years down the line. Through help screens and our agents, we are also familiarising those who step in to our stores with the portal, so that they gradually start using the website more,” says Shringi.
Innovation on the buying experience solves only half of the stickiness puzzle. Factors such as after-sales service and back-end support matter a lot in the competitive market. Yatra protects its turf by beefing up its call centres with more people ahead of weekends that see heavy bookings for the much-in-demand short holidays. It has around 20 destination management consultants (salespersons) across the country, who liaise with the hotels and other service providers to field any customer query. For international destinations, the company has tied up with local travel agents to help its customers out on the trip. It has also incorporated a hotel review section on its website where customers can go on record their experience with Yatra’s hotel bookings.
Tiwari feels that while Yatra’s marketing vigour might have helped it edge out MakeMyTrip in mindshare over the last few months, “what will be worth seeing is how long the portal continues to be perceived as a ticketing site.” With a ticketing to holiday ratio at 85:15, Yatra has its task cut out for the time to come.
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