India is rapidly becoming a power market for online travel management as new suppliers push distribution and transactions directly online. Vendors and agencies tasked with transitioning legacy systems into Web-based platforms are losing ground to more nimble market entrants, according to one Internet commerce consultant, who also said traditional travel management companies are opting out of competition for the domestic market.

Market penetration of online travel booking in India is expected to reach 10 percent by the end of 2008, according to a PhoCusWright report released in September 2006. Multinational and local travel management companies of all kinds are looking to capitalize on the growing market. The corporate air market in India is expected to grow by 14 percent annually, from $2.17 billion in 2006 to $3.2 billion by 2009, according to a Carlson Wagonlit Travel forecast (citing International Air Transport Association data) presented last month at an Association of Corporate Travel Executives conference.

Backed by millions in venture capital, so-called online travel agencies are at the forefront of the boom, said PhoCusWright senior analyst Ram Badrinathan. In 2005 and 2006, at least eight OTA start-ups or subsidiaries launched services in India. Their share of the travel market is expected to more than triple–from 7 percent in 2006 to 25 percent by 2008, according to PhoCusWright. Traditional travel agencies are expected to lose ground, with their share of the market dropping from 32 percent in 2006 to just 10 percent in 2008.

“The traditional agencies were focused on the outbound market and domestic, but now they have completely given over the domestic market to the online travel agencies,” Badrinathan said.

The expectation of a rapid transition toward online booking technology is fueling the growth of OTAs. Social and economic forces are enabling suppliers to leapfrog development of their distribution channels directly into an online environment, Badrinathan said.
In 2006, the Indian government liberalized the air industry and a crop of new-entrant carriers appeared, Badrinathan added. These new carriers looked directly to online distribution and fulfillment. Many of the new carriers operate solely on Web-based platforms, he noted.

“Simultaneously, the online travel agencies also entered the market,” Badrinathan said. “There was this whole boom that happened in the past one or two years that we’re still in the process of. There’s been a quantum leap in how Indians book travel.”
However, there are still a few obstacles to overcome before buyers can fully book travel online in India, said Guga Saravanan, head of account management in India for Carlson Wagonlit Travel, during the ACTE conference. Electronic ticketing is not yet a norm. By the end of 2008, all airlines servicing the market are expected to offer e-ticketing, he said.

Internet connections are still more expensive than phone connections and the economy is still very much cash-based, but a rapidly growing middle-class consumer market is expected to push use of credit cards.

Badrinathan said another obstacle holding back online travel booking is the low cost of labor. The rise of online travel booking in the West was partly caused by corporations demanding automated tools to replace tasks previously accomplished by administrative assistants. With assistants paid an average of $150 to $200 a month in India, the cost savings through an online booking tool are not quite as impressive.
However, many companies in India face staff attrition rates of 30 percent a year due to low wages, Saravanan said, and agencies face high turnover in their staffs, as well. In that sense, the movement toward online booking tools may help agencies offer more consistent service, rather than spending time training new call center staffers.

Service expectations are extremely high in India, Saravanan added. While a TMC is expected to handle visa applications, medical insurance, foreign exchange and other high-touch services, there is still a heavy focus on transaction costs.
OTAs may not be known for high-touch customer service, but the convenient nature of online transactions appeals to Indian consumers, Badrinathan said.

“You have to look at what service means in India. The very fact that you can book online and not get stuck in a traffic jam is service,” he noted. “So actually, the online travel agencies can offer good service compared to the traditional agencies.”

information from : www.thetransnational.travel

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