Paytm, a leading mobile wallet and ecommerce company in India is now readying itself to launch an Online Travel Agency or commonly known as OTA. The company is said to have been in talks with the Chinese e-commerce giant Alibaba to raise $600 million so it’s no surprise the blueprint suggests a Alitrip model for the Indian travel consumer.
Vijay Shekar Sharma, Co-founder and CEO of Patym confirmed it saying, “Our approach is to build an Alitrip kind of business in India. We are building a digital commerce business of new categories to counter scale of physical commerce and logistics.”
Sathish Mani, co-founder and Chief Technology officer at Zovi will be abroad to help formulate plans for the new OTA and will act as a mentor. Mani, having worked as a VP in Cleartrip before founding Zovi, sure has quite a few tricks up his sleeve for the new OTA venture.
The financials of Paytm have been a source of joy for most investors, especially Alibaba, so why this sudden interest in OTA? As an author said once, “Go where the money is and go there often”, Mr Sharma has done his homework.
Why OTA is the way to go?
The Internet & Mobile Association of India estimated the online travel market to be a mindboggling $8 billion and all this steep rise has happened in a matter of 3-4 years. In a study titled Indian OTA Market Overview done by RedSeer Consulting, some surprising statistics came to light, Here are some of them:
- India is the world’s second fastest growing GDP and the rise in households earning annual income more than $50,000 has seen a 10.6% CAGR rise. Following the same, the Indian travel market is expected to growth at 10.2% CAGR in the next 10 years ie by 2020.
- The increased flexibility, lower pricing, compact deals, less time consumption on selecting destination due to compiled information and user reviews, hotel and air ticket bookings and easy commuting packages, the OTAs are much sought over physical tour bookings.
- With the 3 pioneers in OTA space, MakeMyTrip, Cleartrip and Yatra.com are generating more than 70% of travel bookings, international OTAs such as Travelocity and Expedia, TripAdvisor, Hotels.com still aren’t gaining much ground.
- MakeMyTrip is the market leader in this segment that is the first OTA to be listed on the NASDAQ and just 2 days back, MakeMyTrip has announced that it will increase it’s hotel accommodations to 35,000 to 40,000 in 2 years.
The way ahead
As of now, Paytm hints at providing hotel and travel bookings, packaged tours, making price their USP and provide a DIY interface for users on the Paytm app itself. Paytm wants to implement the Alitrip type of model here owing to the great business Alitrip has been doing in China. Since it’s inception in October, 2014, Alitrip has stirred up the Chinese travel market commanding a huge share in the pie.
However, though that’s what Paytm prays for, it claims that the users will find it easy to book a travel as the hotel/taxi vendors will be allowed to bid on the go. All of the services can be availed from the Paytm app itself which allows easy payment gateways for mobile recharging, merchandise buying and will now also make travel easy.
Pleased by the upcoming model, Sharma said, “The US concept is one app for one thing. The Chinese concept is one app for many things. We believe that Indians will follow the Chinese”
This may not be a bad idea given that a Google report confirms that search queries on smartphones for hotels grew by 30 times between 2011 and 2014. IMAI also backs the upward trend in Travel shopping where out of the Rs.81,525 cr of e-commerce shopping in 2014 that happened, nearly 62% of the revenue was generated from the OTAs.
If ever Paytm is coming out with an IPO in the near future, buying a little stake will surely be value for money!
