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IAMAI Travel Conference >
Challenges in Bringing Hotel Bookings Online; Understanding
Consumer 2.0

When: 5/22/2007
3:51:51 PM
By Rajesh Barnwal

Knowing that online booking of airlines ticket
is a low-margin business and that the online booking of
hotels has just started picking up, from where will the
profits for online travel portals come? Responding to
that question, Deep Kalra, founder and CEO,
MakeMyTrip.com said, “This is a question we tend to
think ten times a day.” Obviously, there is not an easy
answer! Still, Kalra said the focus has to be on selling
non-air products such as accommodation and package
deals. According to him, MakeMyTrip has already tied up
with 1500 hotels and plans to further increase its hotel
inventory to give a thrust on selling non-air products.
Deep Kalra was addressing a conference on online travel
organised by Internet & Mobile Association of
India in New Delhi on 18th May 2007.

Ashwin
Damera, CEO, Travelguru.com, said online travel really
started in India with IRCTC (which enables online
booking of railway tickets), and in case of air tickets,
it took off from Air Deccan. According to him, the basic
foundation in the case of e-booking of air tickets was
built by suppliers (airlines). But who will build the
basic foundation in the hotel segment, he wondered! Will
it be suppliers (hotels), OTAs (online travel agents) or
customers?

“Hotel business is both high tech and
high touch. In this business, customers are
looking for both low cost and a handshake with a
manager.”

While
talking about the challenges in bringing hotel business
online, Ashwin Damera said, selling hotels is not a
commodity business. Unlike air tickets where price is
often the deciding factor, in hotels it’s just one of
the criteria. According to him, the major challenges in
bringing hotel business online are 1) how to convince
hotels to go online when the demand for hotel rooms
outstrips supplies; 2) how to get all hotels on a common
platform; 3) how to help customers select a hotel where
price is not the only criteria, other related
information such as staff curtsey, hygiene factors and
distance from airport, and waiting time at the hotel
reception often play a vital role; and 4) how to connect
hotels to enable instant online booking, especially when
many hotels don’t even have internet connection. In some
cases, a customer books a hotel and when he lands at the
hotel, there is no room.

No wonder, hotels form a
small percentage of the online travel business! But
there is a silver lining though. “In spite of all these
challenges, our business for hotels is growing,” CEO of
Travelguru.com said.

In
India, unlike in China, the hotel segment is a
long tail product. “In China you will find one
hotel with 600 rooms but in India there will be 60
hotels with 10 rooms
each.”

According
to Ashwin Damera, the market size of total accommodation
business in India is $8 million out of which the hotel
business constitutes $4 million and is growing by 2.5
times a year. According to Himanshu Singh, managing
director, Travelocity India, the total travel
accommodation market in the country for the year 2007 is
estimated at $6 billion out of which the total hotel
business constitutes $1.8 billion. The online
accommodation business for the year 2007 has been pegged
at $100 million. According to Singh, today hotels are
getting 1.5 per cent of their total business from their
own websites and 2.5 per cent of their business from
other websites including travel portals. Clearly, there
is a great opportunity for bringing online travel
business online! But what’s stopping the stake holders
from tapping this great opportunity?

John
Kuruvilla, executive vice president, marketing, Oberoi
Hotels & Resorts, said, “It’s not about consumers
looking for deals online, but information like hygiene
and water.” One challenge is how to provide such
information? Another challenge is how to reach customers
when they are seeking a holiday. He said, “We are making
a mistake by using the Web as a media; we should use it
to dig information online.” Today, customers are
dictating the market through blogs and community sites.
And so, brands have to chase their customers and be
loyal to them and not the vice versa, Kuruvilla
said.

Rahul Pandit, vice president, operations
& people, The Lemon Tree Hotel Company, said,
“Consumers are cash rich and time poor.” The challenge
before hoteliers is how to personalise customers’
experience. Pandit talked about the need for hoteliers
to recognise that customer is king; accept that the word
of mouse is word of mouth; respond to critical feedback;
and market consumers’ comment posted
online.

Suresh Kumar, president, Fortune Park
Hotels India, asked, “Are hoteliers so stubborn that
they do not understand the benefit of internet?” Not at
all, Kumar responded to his own rhetoric. According to
Kumar, hotel business is both high tech and high touch.
In this business, customers are looking for both low
cost and a handshake with a manager. This is very unlike
airlines business where cost is often the only deciding
factor to choose a flight.

“As
long as India remains a complex destination where
hotels remain unorganised and scattered we (SITA
Travels) are going to
stay.”

Highlighting
the fundamental difference between airlines business and
hotel business, Suresh Kumar said, “See the reaction of
human beings checking in at an airport and a hotel
reception when they are told that it will take 5 minutes
for them to get their rooms ready versus a 4-hour delay
in boarding their flight.” And this is when the price
for an air ticket is considerably higher than the price
paid to book a hotel room.

As if the hotelier,
with 30 years of experience, still needed reinforcement
to drive his message across, Kumar said, “In the hotel
business we charge for what you say in the evening and
not for the bed.” “Hotels are considered a luxury, where
you are looking for comfort. This is very unlike a
commodity market. We are not slow, we are very personal.
We are high tech and high touch.” Ashwin Damera agreed,
the commitment to go online is there but there is a long
way to go. But it seems the long way is going to be very
long indeed!

Jaideep Khanna, vice president,
sales, SITA Travels, said, “As long as India remains a
complex destination where hotels remain unorganised and
scattered we (offline travel players) are going to
stay.” Khanna said, “Customers do enjoy researching
online, but when it comes to selling bundled travel
service, wonder how much of that gets generated online.”
He said the human interface, people selling to people,
is going to stay.

Oh, the Human Interface! Suresh
Kumar rightly said, “In western countries, you have to
drive 10 km to look for a man. But in India you have to
drive 100 km and say when can I look away from a man?”
Wonder, if the comment somewhat explains why internet is
still at a nascent stage in the country! After all, when
you can easily talk with another man and get to know
about the desired information or even ask the person
(who might be very well a travel agent) to book a hotel
room for you, why would you go online? Don’t say to get
cheap price, because we are talking about hotels here,
not a standard air ticket!

“In
western countries, you have to drive 10 km to look
for a man. But in India you have to drive 100 km
and say when can I look away from a
man?”

Ram
Badrinathan, senior analyst, PhoCusWright, said, “In
India, unlike in China, the hotel segment is a long tail
product. “In China you will find one hotel with 600
rooms but in India there will be 60 hotels with 10 rooms
each.” That explains why it’s a real challenge to
automate online booking of hotels in India.

While
talking about the technological aspect of online travel
business and if an online travel player should go for
build, buy or partner options, Amit Taneja, CEO, and
co-founder, Desiya Online, said, “It’s not as simple as
build, buy or partner; it’s more of a balance.” Gaurav
Chiripal, chief executive officer, Quadlabs, said, “It’s
a mix of all the three. Buy a tech, customise it
according to your need and get into a partnership to get
support.” Syiem Banshanbor, travel industry manager,
Akamai Technologies, showed through a graph how building
a technology in-house is relatively costlier, more risky
and has a longer gestation period than to buy a
technology. According to Banshanbor, getting into a
partnership makes most sense from both cost and risk
point of view and the best thing is that this also
enables an online travel company to quickly enter the
market.

While talking about the need for securing
online payments and transactions Vivek Nayak, chief
operating officer, Avenues India, said the life blood of
any business is money and the success of the business
depends on how this money flows safely and
securely.

Talking about the sensitive issue of
credit card frauds, Sanjay Aggarwal, general manager
(operations), IRCTC, appealed to the Press to present
the right picture to the public. He said, “It’s not the
customers but the merchants who have suffered the credit
card frauds.” He further said that most of the credit
card numbers are stolen not online but offline. He said
banks should invest in technologies to minimise credit
card frauds. He also advised merchants to introduce 3D
security. Aggarwal also mentioned how in his personal
experience with an OTA, he got refund after 30 days. He
said that kind of thing is not going to help the online
travel business!

Consumer 2.0: A new group of internet
users who are not looking for low-price deals but
want more value with the same
price.

Belson
Coutinho, head, eCommerce & Distribution, Jet
Airways, advised stake holders to formulate bank charge
back policies, introduce fraud management tools and
advanced payment gateway options, devise standard
policies to report credit card frauds, make it mandatory
to implement VBV (Verified By Visa) and MSC (MasterCard
Secure Code), share non-competitive data (negative
listing), educate credit card users, and alert card
holder through SMS after every transaction. He felt all
the stakeholders should be held accountable in a case of
credit card fraud and not just the
merchant.

Anupama Salvi, director, new business
development, Avenues India, said, online travel portals,
the poster boys of e-commerce, are the worst culprits
for whom customer service takes precedence over customer
verification. According to her, there is no adherence to
card data security standards, no adequate risk
management team or policies in place, no unity among
stake holders and also there is no action plan for
prosecution. Salvi also highlighted the need for
promoting safer payment options like netbanking. Shekher
Srivastava, vice president, marketing, ITZ Cash Card,
talked about yet another online payment option in the
form of pre-paid cash cards that could be used to make
safe online transaction.

V Ramani, CEO,
Connecturf, said the company, during a study of online
travel portals, found that close to 30 per cent of the
total people who had transacted online during the study
went to the offline model because they felt that their
needs were better understood there. Wonder, if travel
portals are not already in communication with Ramani to
get hold of a copy of the report!

“The
life blood of any business is money and the
success of the business depends on how this money
flows safely and
securely.”

Nikhil
Rungta, head, marketing, Yatra.com, talked about
Consumer 2.0, a new group of internet users who are not
looking for low-price deals but want more value with the
same price. They are willing to pay money for saving
time. For them the new currency is Time. These new age
internet users are willing to experiment with new
things. They have money but are short of time and
attention. They are suspicious of everything, especially
the Net. Rungta said, “We need to provide more and more
values to these consumers and show less number of ads to
them.” Nikhil Rungta advised online travel players to
create unique value proposition for these consumers and
engage them in an interactive way. Ashwin Damera of
Travelguru.com would agree, after all his question “Do
online travel portals add much value to hotels?” could
not be just for effect!

Harish Bahl, chief
executive officer, Zoomtra.com (a travel search engine),
said customers want free and neutral information and
best deals. According to Bahl, 73 per cent of online
travel purchase is initiated by search, and over 3
million travel leads are generated in US by travel
search engines. The more and more he talked about his
vertical search engine, the more and more it became
apparent that travel portals would have to seriously
look beyond selling cheap air tickets.

“Online travel portals, the poster boys
of e-commerce, are the worst culprits for whom
customer service takes precedence over customer
verification.”

On
being asked how an online travel portal will respond if
Zoomtra captures 80 per cent of ticket bookings, Nikhil
Rungta of Yatra.com said, “We will cross the bridge when
it comes.” When asked why there is no perceptual
difference between various travel portals, unlike in the
airlines business where there is a clear positioning of
Air Deccan and Kingfisher, Rungta said it’s because the
industry is nascent and that with time the online travel
players would be able to differentiate their
offerings.

The one thing that became quite
obvious during the IAMAI conference on online travel was
that it would be very difficult for OTAs (online travel
agents) to survive if they continue to focus on domestic
air tickets. But how to address touch point, while
dealing with online hotel business? How to answer
questions like “Does the carpet smell?” Obviously, the
answer lies in leveraging user generated content and
encouraging travellers to share their experiences
through blogs and community sites.

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Bookings Online; Understanding Consumer
2.0

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