Travel firms seek hybrid model to boost revenue

Travel firms Seek Hybrid Model To Boost Revenue

Online travel agency Musafir has decided to launch its first offline

agency this year with the intention of having a hybrid model.

#DigitalErra Thought Corner

With 14 stores in the GCC region, Musafir wants to create a

similar model in the Indian market. The Mumbai-based travel

agency felt that while it is easy to achieve scale in its online

model, having a brick & mortar presence will assure profitability

in the long run.

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In the case of global travel management company FCM Travel

Solutions, they entered the country with its brick & mortar stores

under Flight Shop in 2014 by acquiring a local company. Now,

they seek to have an online presence on the back of its couple of

profitable offline stores.

Adoption OfHybrid Model By Travel Firms

Travel companies are vying with the opinion of having both an

online and offline presence to cater specific segments of travel

sector. While most online travel agencies are used for ticketing

purposes but when it comes to booking holidays, which comprises

the bulk of the travel business, it is offline agencies which

continue to dominate.

“We believe in a hybrid model where the customers can choose

how they want their services delivered. Today, 30 per cent of our

inquiry is sourced online. While we remain on investment mode,

we will consider an online initiative as well since a few Flight

Shops are already profitable,’’ says Rakshit Desai, Managing

Director, FCM Travel Solutions, which owns the Flight Shop stores.


For instance, the Indian travel agency Orbit Tours & Travels was

acquired by PE fund- Emerging India. However, it will continue

with its 14-odd brick & mortar stores, while a new online

consumer facing brand under Goomo is being created for an

online presence.

Varun Gupta, CEO, Goomo, said: “While the OTAs are reeling

under losses, we would be setting up a travel tech company and

are ready to face the challenges in the Indian market.’’

Other names include new online companies like Travkart.com,

which has the backing of its offline profitable parent Sahibji Tours

& Travels.

At the same time, there are online companies like Yatra and Clear

Trip who are steering clear of the offline model.

“We started our offline stores to bring credibility to our online

brand of travel. Though we have a physical presence, it is not

easy to scale up like an online model,” said SharadDhall, COO,

Yatra.com.


Why Both Online And Offline Model Good For Business?

Research shows that the Indian consumer’s path-to-purchase of

anything travel-related online is driven by the best deals. 95

percent of consumers search online before making a purchase.

While Indian users are willing to book travel tickets online,

booking hotels and stays are still more of an offline habit. Trust is

a key issue here, with consumers not fully happy with what they

are promised online and what is actually delivered when it comes

to hotels. Even as more people are coming online to book tickets

in tier II, tier III cities, offline stores are doing well for the when it

comes to the holidaying segment. There are several other

reasons for this like credit card limit that might not be sufficient

when it comes to international holidays and processes like visa

assistance and customization, which need offline assistance.They

are often aimed at increasing the comfort level of those wary of

booking online.This is where startups like Oyo Rooms are working

out to help Indian and international travelers alike.However, great

deals are still a huge driver of India’s travel ecommerce.


“Offline travel companies tend to be profitable due to

consolidated bulk deals they strike with airlines for ticketing,

while online companies tend to have mark-ups on the net cost to

sell the inventories of hotels and airlines,” observes Manheer

Singh Sethi, Co-Founder, Travkart.

India’s Travel Industry Size

According to a research, India’s travel industry is worth around

$27.5 billion. The online bookings’ slice of the entire Indian travel

booking market is expanding, expected to make up 46 percent in

2017, up from 41 percent in 2014. Before the year 2020, over half

the Indian market will be booking their next holiday online.

Also, the mobile travel sales in India are on a high; and are further

expected to rise at 67.1 percent CAGR (Compound Annual Growth

Rate) from 2017 to 2020, reveals a study by Criteo conducted by

Euromonitor International.

Conclusion


With Indians increasingly using smartphones in their daily lives,

travel tech has to tap the smaller screen for the Indian consumer.

Hybrid models bring its own challenges, but the speed and scope

for growth is unparalleled globally.


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Travel firms seek hybrid model to boost revenue