Slowly and imperceptibly at first, but gradually picking momentum up, the pendulum is starting to swing in the $10.3 billion Indian online travel market.
Away from hyper-funded online travel agents (OTAs) and hotel aggregators, which are still fighting between themselves with venture money. Money that is used to get customers online, woo them with endless discounts and offers and keep them coming back.
Towards a new set of players till now seen as slow and flat-footed: the airlines and hotels themselves.
From suppliers to competitors
The balance of power is slowly shifting towards the original suppliers. Both airlines and hotels increasingly prefer to use their own websites to sell their own inventory, albeit for different reasons.
Airlines—which in India do not pay commissions to the OTAs to sell their tickets (which is why OTAs are forced to make money off the consumer as “convenience fees”)—are looking at enhancing the service and experience.
For instance, IndiGo, on its own website, offers special fares for students, senior citizens and those from the armed forces. Even services like web check-ins and in-flight meals can only be availed of on its brand website.
“For us, an OTA is the same as our own direct channel because there’s no cost involved. We prefer direct channels so that we can ensure IndiGo-level service,” says Stephan Tame, chief digital officer at IndiGo airlines. “We are trying to make some of these things available on the OTAs, which is not possible right now because of technical constraints.”
For hotels though, things are not as happy or simple.
Over the last few years, the OTAs have cornered a large share of the online hotel market in India, estimated to be $1.5 billion in 2016, as per travel research firm Phocuswright.
For context, the overall Indian online travel market in 2016 accounted for 37% of the $28 billion travel market, according to Phocuswright. And it is poised to grow to nearly $24 billion by 2021, or 35% of the overall $67 billion market.
OTAs acquired customers by bragging about the best (read: lowest) prices and then got them to come back as repeat customers using cashbacks and coupons.
This led to a vicious cycle. As more people started buying, the OTAs raised more money from VCs. And with more money, they splurged more on the promotional offers to acquire more customers.