Hurt by heavy discounting, Booking.com readies more funds to take on Indian challenge

As Indian operators give it a good challenge with their aggressive couponing and heavy discounting, global travel portal Booking.com says it will have to tweak its business model to adapt to the Indian reality even though that goes against its core capabilities.

"Where we are being challenged is that we operate on a model where we take a rate and availability from a hotel/property partner and that is what we display. So the aggressive couponing and discounting our Indian peers adopt is not something that we've a core capability to do yet because of our model.

"But in environments like India, I think without doing it will be very hard," Booking.com senior vice-president and chief marketing officer Pepijn Rijvers told reporters here during a global media interaction.

The Netherlands-based travel giant had reported roughly 38 per cent operating profit in 2017 and considers India to among the top 5 growth market for them.

"That in itself allows us to compete also on the discounting front. Whether we want to do that is questionable though," he added.

The Indian travel market is pegged at USD 12 billion and is rowing at 30 per cent annually. Of this, online space is 20-25 per cent and is also growing at a similar percentage.

Admitting that discounting gives quick access to acquire new customers, he however, does not believe that this will help the rivals build consumer royalty in the long term.

Noting that the average price difference, including coupons and discounting in India is only 7-8 per cent, he said this is only half of his margins and makes him still be profitable.

"I don't know whether that is the game that creates most consumer value. The perceived value is high... It gives them a quick access today but it doesn't really build loyalty for the future," he said.

Rijvers further said, "I don't know if this will be the game that we will be playing. For sure, we will be playing some of it but I would like to think that we might have the ability to also satisfy other components of what customers think is valuable."
Stating that he is ready to take the challenge, he said, "We will need to change our business model to adapt to the Indian reality and we will change our game."