IAMAI Travel and Tourism Summit calls for cohesive effort for boosting tourism

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The 4th Travel and Tourism Summit 2012, organised by Internet & Mobile Association of India (IAMAI) at Shangri-La’s – Eros Hotel, New Delhi, recently urged travel industry stakeholders to work together for boosting tourism. Addressing the participants, Himanshu Singh, Managing Director, Travelocity India, and Chairman, Digital Commerce Committee, IAMAI, said that the common problems plaguing the industry cannot be addressed through individual efforts alone. He pointed out that because of the differences among the stakeholders; the industry was not able to develop innovative business models to address customer-centric problems. The travel and tourism industry has continued to remain fragmented, he felt. “When the overall value of the travel and tourism industry is 800 billion dollars, the share of the biggest company is hardly 30 billion dollars,” Singh stated.

At the summit, it was also revealed that around 40,000 – 50,000 online tickets are booked by the Online Travel Agents (OTAs). The OTA segment is growing at around 30 per cent on a year-on-year basis with one-fourth of the domestic market handled by them, informed IAMAI. Vishnu Rajendran, Regional Head – Cathay Pacific Airways, added, “With internet penetration rapidly growing, we have to depend on OTAs. The best way forward is to create a platform that will be conducive for both airlines’ and OTAs to have a mutually beneficial relationship.”

Channel
Network Airline
Low-cost Carrier
Brick-&-mortar Travel Agent
55-60%
50-55%
On-line Travel Agent (OTA)
23-25%
25-27%
Airline.com
10-12%
15-17%
Airline ticket office/call center
7-8%
8-10%
Internet
35%
40%
Global Distribution Systems (GDS)
80%
0%

As per IAMAI Internet Economy Watch data, e-ticketing continues to grow with irctc.com recording 5.56 million bookings in April, 2012 as compared to 2.26 million bookings in April 2011. Airlines recorded 1.92 million bookings in April 2012, as compared to 1.01 million bookings the same month last year. Vikram Malhi, Country Head – Expedia India, said, “Travel and hotel is where the future lies. 30 per cent of our airlines booking are part of tour packages and that is very substantial. We have to work with airlines because the customer wants us to be there, it’s a mutual and beneficial relationship. For OTAs, investing in technology is a top priority and for airlines top priority is to run the business.”

The one-day conference discussed various issues related with travel and tourism in the country as well as subjects related with online travel technology. While delivering the keynote at the conference on ‘Partnering with OTAs: Challenges and Opportunities’, Aloke Singh, General Manager, Revenue Management and Pricing, Air India, said that in order to survive airlines have to reduce their distribution cost substantially.

“Airlines spend about 13 per cent of their distribution costs on tickets. Commissions and global distribution system (GDS) costs have to be reduced to allow airlines and OTAs become true partners,” he informed. He elucidated this statement with the following figure:

Distribution cost on a one-way Delhi – Mumbai advance purchase ticket sold through an OTA
Total ticket price
Airline retention
Distribution cost
Cost as % of retention
Rs. 5,248
Rs. 4,150
Rs. 550
13%

The future relationship between airlines and OTAs, Singh said, would be about “selling the right product to the right customer at the right price.”

Moderating a session on Technology and Payments, Marco Gorin, CCO, InterGlobe Technologies, said that user experience has now become a dominant factor unlike content which used to be the king till some years ago.

Although travel technology has evolved to a greater extent in recent years, people are still not comfortable making payments online. Amit Somani, Chief Products Officer, MakeMyTrip agreed that payment issues are still a problem while buying travel products online. “Payment success rate for IRCTC is 60 to 70 per cent which is much lower compared to the west and therefore efforts have to be taken to improve this,” he said. Brijesh Agrawal, COO, IndiaMart; Gaurav Chiripal, CEO, Guadlabs, Alok Mehta, Head Technology & International Sales, Atom Technologies were other speakers at this session.

The discussion on Airline & OTA relationship kick started with Amitabh Pandey, President & Head ecommerce, Thomas Cook India asking the panelists why there was a rift between OTAs and airlines since both are integral to each other’s survival. Vishnu Rajendran, Regional Head – Cathay Pacific Airways replied that it was difficult for airlines to ‘divorce’ OTAs. “Although international bookings are much lower than domestic bookings on OTAs, they play a crucial role in giving market insights,” Rajendran said.

Paul Dorai Raj, Manager, North India, Singapore Airlines stated that OTAs role should be to deliver volumes to make an impact. On the other hand, Shelly Egbert, General Manager – Sales, Japan Airlines recognised the role of OTAs in enhancing visibility of the airlines. Egbert said that airlines can partner with OTAs for destination management and promotion. Giving an OTA perspective to the subject, Samyukth Sridharan, President & COO, Cleartrip said, “OTAs provide trust and transparency to airlines and that needed to be recognised by airline partners.” While 50 per cent of the domestic airline bookings are handled by OTAs, Sridharan expressed the hope that international booking would also increase as comfort level increases.

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