Indian OTA Market Industry Overview

© 2010 RedSeer Consulting Confidential `and Proprietary Information www.redseerconsulting.com [email protected] India, which has the world’s second fastest growing GDP, will produce one of the world’s largest high income pool

Real GDP Growth Indian households with annual income >USD 50k (2005-2015) (2005-2015)

3.5

12.0 China

3.0 10.0

CAGR

10.6%

8.0 2.5 India

6.0 2.0 Thailand 4.0 Growth Rate (Base=2005) Rate Growth US

1.5 Germany millions) (in households of Number 2.0 UK

1.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2005 2007 2009 2011 2013 2015 Years Years

Source: EIU, RedSeer Analysis, web search © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 2 Indian upper and middle class is increasing which will give a boost to the travel sector

Annual Segment Size (Households Household Income disposable MM- 2007) and % CAGR (2000- Common Occupation Travel habits Class income (USD) 2007)

• Minimum one foreign • Business owners in 1.8 leisure trip annually small and medium • Multiple foreign business ‘Upper class’ >$25,000 9.7% enterprises trips • High level corporate/ • Frequent domestic flyers Government employees • Prefers luxury hotels (4-5 stars)

• Either a budget foreign trip Salaried Employees • or a lavish domestic trip 1.7 New service employees ‘Middle Class – • annually $15,000-$25,000 2 (e.g. IT media) 9.7% • 4-5 domestic round trips Tier-I’ Shopkeepers • annually Rich farmers • • Stays in 2-3 star hotels

22.6 • Shopkeepers • Travel by train-AC or low ‘Middle Class- • Non-urban small cost carrier $5000-$15,000 18.7% Tier-II’ 23 business owners • Prefers to stay in budget • Lower level employees hotels

187 • Shopkeepers • Travels in general train and • Non-urban small buses

$500-$5000 23 Lower class 0.7% business owners • Lower level employees

Source: EIU, RedSeer Analysis, web search © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 3 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) Discussion • Government’s boost to tourism, 120.0 111 rising middle class and increasing aggregate disposable 100.0 96.4

CAGR income will lead to a significant

10.2% 82.8 growth in travel and tourism 80.0 industry in India 69.2 • Indian middle class is expected 55.6 60.0 to increase by 10 times between 42 2005-2025

40.0 Market size (in USD billion) USD (in size Market • The aggregate disposable

20.0 income from Indian households is expected to increase with a CAGR of 7% between 2005-25 0.0 2010 2012 2014 2016 2018 2020 Years

Changing Attitude of Indian traveller

New Information Increased Flexibility Unexplored sources destinations

• Standard packages • Less frequent & long EARLIER • Personal knowledge • Word-of-mouth • Lack of options trips to famous places

• Weekend getaways • Online research • Plan-it-yourself NOW • Explore the • Social Media flexible trips 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

Source: EIU, RedSeer Analysis, web search © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 5 Indian online travel industry is growing with 49% CAGR; OTA’s account for 17.5% of total gross bookings

Indian Online Travel Gross bookings Indian Online Travel Gross bookings- Breakup (2007-2010) (2010)

7000 1 billion 5739 6000 IRCTC- USD gross

14% bookings

5000 CAGR 49% 4041 4000 OTA- 17.5% 2738 3000 68.5%, Others 1750 Market size (in USD million) USD (in size Market 2000

1000

0 2007 2008 2009 2010 Years

Source: EIU, RedSeer Analysis, web search © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 6 Three major players account for 90% of Indian OTA market share, with Make My Trip as market leader

OTA Market Share1- by Players (2010) Discussion

• OTA industry is very competitive 10%, Others with more than 30 players in the market.

18%, • The industry is very price- Cleartrip sensitive especially in air-travel 48%, segment, due to which Net Make my Trip revenue margins are low.

• While global giants like 24%, Travelocity and Expedia still have Yatra 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 © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 7 The competition is shifting towards non-air travel segments like hotel bookings due to high margins

Net Revenue Margins (2010) Discussion 16 14% • Air travel Net revenue margins

14 consist of commissions from

12 airlines, service fees from customers and fees from Global 10 Distribution System (GDS) partner. 7.6% 8

6 • Margin on Hotel & package tour

Net revenue margin (%) margin revenue Net bookings come from mark-up on 4 services.

2 • Hotels and package tour services also give OTAs an opportunity to 0 Air ticket Hote & package tours differentiate themselves in the industry

Notes: 1. Market share by gross bookings

Trends Description

Consolidation • Major companies are acquiring smaller companies to expand their services • Makemytrip acquired Ticketvala.com, Travelocity acquired Travelguru and amongst players Yatra acquired Ticket services International

• For the industry leader Make My Trip, while gross bookings for Air-travel and Focus on hotels tours grew by 45%1 each (2008-10), net revenue grew by 49% and 84%, and tours respectively

• Most OTAs have partnered with IRCTC for rail bookings to generate traffic One-stop • OTAs are also partnering with bus ticketing websites and car rental solution mantra companies to become one-stop solution for travel needs • Yatra has started 50 lounges across India while Make my trip has an agent Merging online network across 450+ cities and offline • Yatra has also partnered with Reliance World (120 centers across India) where customers can book tickets and hotels

Creating online • Makemytrip has created online communities of tourists through offisialatyachaar.com and oktatabyebye.com while Cleartrip has associated ecosystem with Tripadvisor.com

• OTAs are expanding globally in countries with high NRI population. Global expansion • Makemytrip started trading on Nasdaq to raise money for global operations of players

Increasing internet Growth in tourism and credit card penetration Discussion • Internet users in India • International tourist grew 2.5 times from arrivals in India has • Indian OTA industry has a 2006-2010 increased by 8% CAGR (2004-09), compared to high potential, and • Number of credit cards in world average of 3% opportunity for growth. India grew by 3 times between 2006-2010 • Government’s boost to travel and tourism, combined with increased e- commerce penetration, will Emergence of new online Growth in Civil help OTA industry’s growth segments like car rentals Aviation market • OTAs are integrating their • Airline industry in India • OTAs are increasingly portals with online bus has grown by 400% integrating services like and train ticketing (2004-2010). rail, bus and car rentals to services and car rental services • By 2020, India will be generate higher number of third largest aviation transactions market after US and China

NRHM :National Rural Healthcare Mission, SEZ: Special Economic Zones Source: RedSeer Consulting © 2009 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com. 10 Enabler: Growing internet and credit card penetration

Credit cards and Internet users- India (2006-20141) 250.0 Discussion

• Internet penetration in India 200.0 is 7% (compared to 31% in China) is set to increase

150.0 drastically

Credit card • Indian Government has Internet 100.0 allocated 10 billion USD for Bharat Nirman, a project to extend internet in rural areas 50.0 • Increasing urbanization in Number of credit cards and internet users (in million) (in users internet and cards credit of Number India will also lead to 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 increased internet and credit Years card penetration

Discussion Limited Low reach in operating tier-II and • OTA industry is low- margins tier-III cities margin, high volume. Due to low internet penetration in India, their reach to tier- II and tier-III cities is limited Challenges which affects the volumes faced by OTA Industry • Incompetence of hotels and tour operators reflects badly on OTA for consumers who book Non- Payment through them. Controlling reliability of processing offline their quality is a major issues partners challenge

Make my trip Yatra • Established: 2000 • Established: 2006 • Gross bookings: 480 million USD (2010) • Gross bookings: 240 million USD (2010) • Largest market share in Indian OTA industry • Partnered with Reliance World for ticket • First Indian OTA to be traded on NASDAQ distribution • Sister websites: Offisialatyachaar.com, • Started ‘Holiday Lounges’ in 50 major cities in oktatabyebye.com India • Global presence: US, Canada, UAE • Global presence: US, UK • Covers 450+ cities in India through travel agent • Investors: Reliance, TV18, Norwest, Intel partners Capital • Investors: SAIF, Helion, Sierra

Cleartrip Travelocity • Established- 2006 • Established- 1996 (US); 2007 (India) • Gross bookings: 180 million USD (2010) • Gross bookings: Global- 10 billion USD (2007) • Partnered with Tripadvisor.com and Lonely • Acquired Travelguru, India based OTA with Planet focus on hotel bookings, in 2009 • Global presence: Middle East (UAE, Oman, • Owned by: Sabre Holdings Qatar, Bahrain, Kuwait) • Global acquisitions: site59.com, • Investors: KPCB, Sherpalo ventures, DAG lastminute.com Ventures, DFJ • Global presence: US, Canada, Germany France, Scandinavian countries, UK and Mexico