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May 1, 2006 4:50 pm

Online travel bookings set for take off in India

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Ashwin Damera’s business plan for a travel website for the Indian market took second place at a Harvard Business School competition, losing out to a plan for a lingerie company for plus-sized women in the US.

Mr Damera does not know what happened to the winning proposal but his, called Travelguru, went live in January and is poised to generate $75m in ticket receipts in its first year of operations, adding up to commission revenue of about $2m.

A boom in e-commerce, increasing credit card use and a surge in domestic travel have fuelled the growth of Mr Damera’s business at a pace of 200 per cent a month, according to the internet entrepreneur.

Domestic tourism has expanded at a rate of 20-22 per cent a year for the past four years, up from earlier growth of 4 to 5 per cent.

“It’s very encouraging that there is such high adoption [of online travel booking],” Mr Damera says, noting that 75 per cent of his site’s users had already begun booking tickets directly from airline websites. “The fact that space itself is so young means so many people are ready to switch.”

Like Expedia, Orbitz and other similar websites in the US or Europe, Travelguru offers consumers a chance to compare prices among different air carriers and choose from among a range of hotels. Such sites in the US now account for about 30 per cent of the country’s total travel industry. Mr Damera says that a mere 5-10 per cent of the addressable market is currently logged on to his site or a small number of others like it in India.

About 20,000 people visit Travelguru every day, buying about 500 airline tickets or hotel stays worth about $25,000. Given the current growth rate, Mr Damera expects the site to become cashflow positive by the middle of next year.

During the summer between his first and second year at Harvard Business School, Mr Damera worked at JetBlue, the successful US low-cost airline. At the time, he explored the idea of starting a similar company in India but realised that a few budget carriers had already launched or had plans to do so. Also, India’s aviation sector is so thick with red tape that not having the right connections would have put him at a disadvantage. So he turned to the internet.

“The real opportunity is in the internet space. You don’t need anybody’s approval to work here,” Mr Damera says, noting that when he wrote his business plan nobody else was operating a similar business in India.

By the time Travelguru went live, Makemytrip.com, a site that had previously catered to the US-to-India travel market, had already introduced an engine for domestic travel on its site.

Deep Kalra, founder and chief executive of Makemytrip.com, had tested the waters for a domestic online travel site back in 2000 when he started his US-India travel service. He eventually had to shut it down because there was no business.

“The Indian market wasn’t ready. People weren’t buying on the internet,” he says. “People were still toying with the medium and using it for research.”

Now, he says, 2,000 of the 2,500 tickets sold every day on his site are for domestic travel. Travelguru and Makemytrip.com could not have existed without the recent introduction of low-cost airlines, such as Air Deccan, SpiceJet and IndiGo, in a previously uncompetitive and tightly regulated Indian market.

“It was great for aggregators like us,” says Mr Kalra. “We want lots of choices. There wasn’t a lot of value you could bring to the table before.”

Both entrepreneurs expect more players to enter the field in coming years, with Mr Damera putting the country’s online domestic travel booking industry, including the websites of travel agents, at $1bn by 2009. Mr Kalra thinks India’s $20bn travel industry is still too small to sustain more than two or three players.

William Bao Bean, a regional internet analyst for Deutsche Bank in Hong Kong, has high hopes for domestic travel websites in India and believes the market is even more evolved than China’s because of India’s relatively high credit card usage. For example, while Ctrip.com, the Chinese travel site, has a market capitalisation approaching $1bn, 80 per cent of its bookings are transacted over the telephone.

“E-commerce in India has better infrastructure be-cause of wider use of credit cards,” he says. “Hotels are slowly starting to work with the online guys.”

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