Indian Travel Industry: Witnessing Penguin Effect?

• Tweet

• Tweet

Expedia (as earlier mentioned) has announced their Indian Operations (Expedia.co.in) and is targeting the outbound tourism industry (to start off).

As per the mentioned stats:

• Online travel bookings are just 11% of the total 16 billion-dollar travel market in India but is expected to grow exponentially in the next five years.
• Over nine million Indians travel abroad every year but only a few make reservations online
• The Indian online travel market is the fifth biggest in Asia and is likely to become one of the top three in the continent over the next five years and touch six billion dollars in terms of revenues.

Well, it’s good to see new players entering the market, but is “online” really the way to go in India? How many of those 9 million travelers are willing to purchase tickets online?

Isn’t there a ceiling to online transaction in India? If yes, is offline sustainable?

Maybe ClearTrip has already realized the ceiling and is going offline (i.e. setting up booking counters in airport) and raised funding too.

But, the basic question is:

• How sustainable is the offline business, especially when industry wide margins are going down?
• Most importantly, all of these OTAs started saying “online agents will bring in disintermediation in the industry”, but now everybody is trying to setup offline shops?

Are we witnessing a ‘penguin effect’* (i.e. one VC funds an OTA, others invest in some other OTA, because they don’t want to miss the bus)?

What’s your opinion?

*Penguin Effect: One penguin goes out, everybody follows. Flash a light @ a penguin- even if one gets scared and runs away, everybody follows (without a rhyme or reason) – a typical herd mentality.