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www.redseerconsulting.com [email protected] © 2010 RedSeer Consulting Confidential `and Proprietary Information

Indian OTA Market Industry Overview

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India, which has the world’s second fastest growing GDP, will produce one of the world’s largest high income pool

Indian households with annual income >USD 50k

(2005-2015)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2005 2007 2009 2011

Years

2013 2015

CAGR

10.6%

Nu

mb

er

of household

s (

in m

illio

ns)

1.0

1.5

2.0

2.5

3.0

3.5

2005 2006 2007 2008 2009 2010 2011 2012

Years

2013 2014 2015

China

India

Thailand

US

Germany

UK

Gro

wth

Ra

te (

Base=

20

05)

Real GDP Growth

(2005-2015)

Source: EIU, RedSeer Analysis, web search 2 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

















Indian upper and middle class is increasing which will give a boost to the travel sector

Household Income

Class

Annual

disposable

income (USD)

Segment Size (Households

MM- 2007) and % CAGR (2000-

2007)

Common Occupation Travel habits

‘Upper class’ >$25,000

‘Middle Class –

Tier-I’ $15,000-$25,000

‘Middle Class-

Tier-II’ $5000-$15,000

Lower class $500-$5000

23

2

2 9.7%

1.8

9.7%

1.7

18.7%

22.6

• Business owners in

small and medium

enterprises

• High level corporate/

Government employees

• Salaried Employees

• New service employees

(e.g. IT media)

• Shopkeepers

• Rich farmers

• Shopkeepers

• Non-urban small

business owners

• Lower level employees

23 0.7%


187 • Shopkeepers

• Non-urban small

business owners

• Lower level employees

• Minimum one foreign

leisure trip annually

• Multiple foreign business

trips

• Frequent domestic flyers

• Prefers luxury hotels (4-5

stars)

• Either a budget foreign trip

or a lavish domestic trip

annually

• 4-5 domestic round trips

annually

• Stays in 2-3 star hotels

• Travel by train-AC or low

cost carrier

• Prefers to stay in budget

hotels

• Travels in general train and

buses

















Indian travel and tourism market is 42 billion USD industry growing with a CAGR of 10.2% over the next 10 years

Indian Travel and Tourism Industry- Market Size

(2010-2020)

0.0

20.0

42

40.0

60.0

80.0

69.2

100.0

120.0

2010 2012 2014 2016

Years

2018 2020

CAGR

10.2%

Mark

et siz

e (

in U

SD

bill

ion)

55.6

82.8

96.4

111

Discussion

• Government’s boost to tourism,

rising middle class and

increasing aggregate disposable

income will lead to a significant

growth in travel and tourism

industry in India

• Indian middle class is expected

to increase by 10 times between

2005-2025

• The aggregate disposable

income from Indian households

is expected to increase with a

CAGR of 7% between 2005-25


















Changing dynamics of Indian travel industry

Source: EIU, RedSeer Analysis, web search

Changing Attitude of

Indian traveller

EARLIER

• Online research

• Social Media

New Information

sources

• Personal knowledge

• Word-of-mouth

NOW • Plan-it-yourself

flexible trips

Increased Flexibility

• Standard packages

• Lack of options

Unexplored

destinations

• Less frequent & long

trips to famous places

• Weekend getaways

• Explore the

unexplored

Since OTA’s provide increased flexibility, lower pricing

and more options in terms of destinations, it is being

increasingly adopted by new-age Indian traveller

5 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

















Indian online travel industry is growing with 49% CAGR; OTA’s account for 17.5% of total gross bookings

Indian Online Travel Gross bookings

(2007-2010)

1000

0

2000

3000

4000

5000

7000

6000

2007 2008 2009 2010

CAGR

49%

Years

Mark

et siz

e (

in U

SD

mill

ion

)

1750

2738

4041

5739

OTA-

17.5%

IRCTC

- 14%

68.5%,

Others

Indian Online Travel Gross bookings- Breakup

(2010)

1 billion

USD gross

bookings


















Three major players account for 90% of Indian OTA market share, with Make My Trip as market leader

18%,

Cleartrip

48%,

Make my Trip

24%,

Yatra

10%,

Others

OTA Market Share1- by Players

(2010) Discussion

• OTA industry is very competitive

with more than 30 players in the

market.

• The industry is very price-

sensitive especially in air-travel

segment, due to which Net

revenue margins are low.

• While global giants like

Travelocity and Expedia still have

to make a mark in the industry,

bigger Indian companies are

venturing out into countries with

high NRI population.

Notes:

1. Market share by gross bookings

Source: RedSeer Consulting 7 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

















The competition is shifting towards non-air travel segments like hotel bookings due to high margins

Net Revenue Margins

(2010)

16 14 12 10

8

6

4

2

0

Air ticket Hote & package tours

Discussion

• Air travel Net revenue margins

consist of commissions from

airlines, service fees from

customers and fees from Global

Distribution System (GDS)

partner.

• Margin on Hotel & package tour

bookings come from mark-up on

services.

• Hotels and package tour services

also give OTAs an opportunity to

differentiate themselves in the

industry

Ne

t re

venue m

arg

in (%

)

Notes:

1. Market share by gross bookings

Source: RedSeer Analysis, MMYT Investor presentation 8 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

14%

7.6%

















Recent Trends In OTA Industry

Consolidation

amongst players

Description

• Major companies are acquiring smaller companies to expand their services

• Makemytrip acquired Ticketvala.com, Travelocity acquired Travelguru and

Yatra acquired Ticket services International

• For the industry leader Make My Trip, while gross bookings for Air-travel and

tours grew by 45%1 each (2008-10), net revenue grew by 49% and 84%,

respectively

Trends

Focus on hotels

and tours

Notes: 1. 2008-2010

Source: RedSeer Analysis 9 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

One-stop

solution mantra

Merging online

and offline

Creating online

ecosystem

Global expansion

of players

• Most OTAs have partnered with IRCTC for rail bookings to generate traffic

• OTAs are also partnering with bus ticketing websites and car rental

companies to become one-stop solution for travel needs

• Yatra has started 50 lounges across India while Make my trip has an agent

network across 450+ cities

• Yatra has also partnered with Reliance World (120 centers across India)

where customers can book tickets and hotels

• Makemytrip has created online communities of tourists through

offisialatyachaar.com and oktatabyebye.com while Cleartrip has associated

with Tripadvisor.com

• OTAs are expanding globally in countries with high NRI population.

• Makemytrip started trading on Nasdaq to raise money for global operations

















Enablers for industry growth

Emergence of new online

segments like car rentals

• OTAs are integrating their portals with online bus and train ticketing services and car rental services

Growth in Civil

Aviation market

Increasing internet

and credit card

penetration • Internet users in India

grew 2.5 times from 2006-2010

Growth in tourism

• Number of credit cards in

India grew by 3 times

between 2006-2010

• Airline industry in India has grown by 400% (2004-2010).

• By 2020, India will be

third largest aviation

market after US and

China

• Indian OTA industry has a

high potential, and

opportunity for growth.

• Government’s boost to

travel and tourism,

combined with increased e-

commerce penetration, will

help OTA industry’s growth

• OTAs are increasingly

integrating services like

rail, bus and car rentals to

generate higher number of

transactions

Discussion

NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones


• International tourist

arrivals in India has

increased by 8% CAGR

(2004-09), compared to

world average of 3%

















Enabler: Growing internet and credit card penetration

0.0

50.0

100.0

150.0

200.0

250.0

2006 2007 2008 2009 2010 2011 2012 2013 2014

Years

Credit card

Internet

Discussion



• Internet penetration in India

is 7% (compared to 31% in

China) is set to increase

drastically

• Indian Government has

allocated 10 billion USD for

Bharat Nirman, a project to

extend internet in rural areas

• Increasing urbanization in

India will also lead to

increased internet and credit

card penetration

Credit cards and Internet users- India

(2006-20141)

Nu

mb

er

of cre

dit c

ard

s a

nd in

tern

et users

(in

mill

ion)

















Challenges faced by Indian OTA industry

Challenges

faced by OTA

Industry

Low

operating

margins

Non-

reliability of

offline

partners

Limited

reach in

tier-II and

tier-III cities

Payment

processing

issues

Discussion



• OTA industry is low-

margin, high volume. Due

to low internet penetration

in India, their reach to tier-

II and tier-III cities is limited

which affects the volumes

• Incompetence of hotels

and tour operators reflects

badly on OTA for

consumers who book

through them. Controlling

their quality is a major

challenge

















Major Industry Players

Make my trip

• Established: 2000

• Gross bookings: 480 million USD (2010)

• Largest market share in Indian OTA industry

• First Indian OTA to be traded on NASDAQ

• Sister websites: Offisialatyachaar.com,

oktatabyebye.com

• Global presence: US, Canada, UAE

• Covers 450+ cities in India through travel agent

partners

• Investors: SAIF, Helion, Sierra

13 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

Yatra

• Established: 2006


• Partnered with Reliance World for ticket

distribution

• Started ‘Holiday Lounges’ in 50 major cities in

India

• Global presence: US, UK

• Investors: Reliance, TV18, Norwest, Intel

Capital

Cleartrip

• Established- 2006


• Partnered with Tripadvisor.com and Lonely

Planet

• Global presence: Middle East (UAE, Oman,

Qatar, Bahrain, Kuwait)

• Investors: KPCB, Sherpalo ventures, DAG

Ventures, DFJ

Travelocity

• Established- 1996 (US); 2007 (India)

• Gross bookings: Global- 10 billion USD (2007)

• Acquired Travelguru, India based OTA with

focus on hotel bookings, in 2009

• Owned by: Sabre Holdings • Global acquisitions: site59.com,

lastminute.com • Global presence: US, Canada, Germany

France, Scandinavian countries, UK and Mexico

















RedSeer Consulting 14 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.

Thank You!

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