Travel firms gobble up startups to stay on top

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You need not open separate browser windows while for booking tickets and planning the dream holiday you are looking to take shortly. Your usual travel, hotel and car bookings site may be offering an elaborate list of innovative travel solutions you won’t even have thought of.

As more and more start-ups enter the travel space, the existing big players are gobbling them up or forging partnerships to increase consumer reach and stave off competition.

Last month, travel meta-search engine Skyscanner entered into a partnership with travel planner TripHobo to allow users to compare prices of hotels, flight and car rentals along with planning their trips and itineraries on the platform.

In April this year, MakeMyTrip acquired travel-guide portal Mygola to help customers plan their trips on their website along with booking tickets.

According to industry experts, until recently the online travel agents (OTAs) were largely into flight and train bookings, car rentals and hotel bookings. With start-up acquisitions and tie-ups is allowing them to offer more services and tap more consumers online.

Shiju Radhakrishnan, founder & CEO, iTraveller, an online travel start-up, said, “OTAs were largely into flight bookings and somewhat into hotel bookings. The packaged deals vertical is different and is largely dominated by traditional offline tour operators. While some of the leading online players offer group tours and certain other categories, acquiring or partnering with start-ups that offer online holiday planning helps in leveraging their key competencies.”

Compared to an established player, for a start-up to come up with a new innovative model and do a test run is relatively easier, Radhakrishnan said. iTraveller, which is growing at 20% month-on-month for the last 8-9 months, makes around Rs 2 crore of gross topline a month. The company is planning to raise $10 million in the next 2-3 months from existing and new investors.

Saket Newaskar, CTO and co-founder, TripHobo, said MakeMyTrip’s acquisition of Mygola is an interesting sign. “It is basically an acqui-hire but it shows that big players are interested to acquire a start-up for its innovations.”

Newaskar said for a small start-up, the challenge is to understand the true values it can offer to their customers, so they stick to them.

“If consumers do not find value in smaller start-ups, they will not buy from them. If they are seeing a lot of discounts coming from larger players, they will move to them. So for smaller start-ups, it is important to figure out what are the true values that they can offer their customers apart from discounts, other freebies. That primarily lies in technology. Unfortunately, most of the start-ups are not trying to innovate technologically. This could lead to a roadblock for them in the future,” Newaskar said.

His company, which has an inventory of 7 lakh hotels and 3 lakh restaurants in 500 cities globally, gets around 10 lakh users every month. The company is planning to raise upward of $15 million, going ahead.

The total hotels and travel packages industry is about $120 billion, with both segments enjoying equal shares. Of that, the online hotel segments has a share of less than 7-8%, while the online travel package segment is about less than 2%. There a handful of serious start-ups in the holiday space category with an average run rate of Rs 1-3 crore.

Rajesh Magow, co-founder and CEO, MakeMyTrip, said, “New start-ups are actually helping the eco-system evolve, and the push is happenings more from offline to online. These start-ups are all playing in the niche where they are acting like a supplier because what they are trying to do is to aggregate the inventory and standardise a particular hotel category and then put it on our online distribution platform.”

Because of this, the market comes online. But not necessarily, they will be full-blown OTAs like us where we have all products offering from consumers’ point of view right from flight booking to rail booking to bus booking to hotel booking.”

Magow said packages market in India is a complex market which is highly fragmented and highly offline. “There is some hope that this space can move online, and that’s why we are seeing more movements. But it is not an easy journey though there are a lot of opportunities,” he said.

So, is survival a challenge for these start-ups?

Radhakrishnan of iTraveller said, “Most of the acquisitions that we saw, one might conclude that they were unable to scale up beyond a point and so they got acquired. But if they had a proper revenue model in place where they are having a decent monthly transaction happening in place then that will give them a solid reason to sustain for a longer time.

“But if the funds are over and there is no growth which is making it difficult to raise more funds, then that’s a bad situation for us. Otherwise, survival will not be a problem if transactions are happening since the industry, though scalability could be a problem. So an acquisition may not depends on lack of survival ability but because the model layout,” Radhakrishnan said.

According to Magow, all OTAs looking at start-ups are from more a part of growth strategy, and for start-ups after a point it becomes hard for them to sell inventory on their own, so acquisition and partnerships provide them with economies of scale.

Read the original article at http://www.dnaindia.com/mumbai/report-travel-firms-gobble-up-start-ups-to-stay-on-top-2104043

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Founded by two travel and technology professionals with years of experience in Asia, Representasia specialises in sales & marketing representation throughout Southeast Asia for travel/hospitality technology providers and travel-related startups, as well as providing marketing consultancy services for hotels and travel businesses in the region.

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