More buck for the click

TRAVEL: Indian travel portals are flush with venture capital funding.

If one is to believe PhoCusWright, a travel-research firm based in the US, then our neighbourhood travel agents are in for a tough time in the next few years.

According to PhoCusWright, 32 per cent of the volumes of airlines in India came from travel agents, 7 per cent through online travel portals and the rest through airline websites in 2005.

Now look at the projections: the share of online portals is expected to grow to 25 per cent by 2008, while that of travel agents is expected to slide to 10 per cent. Direct airline website bookings will go up to 65 per cent.

If you're familiar with portals, it's not so difficult to imagine their doing a fourth of all air bookings. Even worldwide, it's a boom business.

Some more figures: worldwide, online travel is a $15 billion industry, set to become a $19 billion industry by 2008. In contrast, in India, the online travel industry is worth $300 million today (just 2 per cent of the Indian travel industry), set to go up to $2 billion by 2008 (10 per cent share).

No wonder, travel portals have been drawing venture capitalists heavily over the past year or so. In January, Norwest teamed up with Reliance Capital and TV 18 to fund Yatra Online, which was launched in June.

Venture capitalists Sherpalo Ventures along with Kleiner Perkins Caufield & Byers (KPCB) invested $3.5 million in Cleartrip, which was recently launched as a beta site. Sequoia Capital invested $10 million in Travelguru back in September 2005.

Its CEO Ashwin Damera says that a second round of investment is going to happen soon. "Ten million dollars more will be invested by Sequoia along with another US-based investor by the end of this month," he reveals.

In the online travel space, MakeMyTrip has got the largest investment from venture capitalists, till date. Hong Kong-based Softbank Asia Infrastructure Fund Partners invested $10 million in 2005, and in a second round of investment, the lead player is set to get another $12-13 million in all from Helion Ventures, Sierra Venture Capital as well as Softbank Asia Infrastructure Fund Partners.

According to Norwest Venture, India is currently witnessing a tremendous boom in both business and family/leisure travel. In 2006, the Indian travel market is estimated to reach about $40 billion, and could hit close to $50 billion by 2009.

Cleartrip is the latest in the line of online travel agencies to vie for a slice of the Indian market, and its strategy seems a bit different, at least in the venture capitalist's role in running the company.

Sandeep Murthy, CEO of Cleartrip, is also a partner with Sherpalo Ventures (which has invested in the startup). "We will stay and find value," he says, "We understand what to focus on as a business and we are not passive investors."