Why online travel brands are failing to cash in on tourism boom in India

oth domestic and international travel grew 8% over the last 3 years | Photo: iStock
A quick look through the social media timelines of friends and family or the rapidly swelling body of travel writing (online and offline) will tell you that Indians are travelling everywhere, they are climbing mountains in Nepal, soaking in the sun in Goa and sampling the street food in Milan. Within the country and abroad, for business and pleasure, the travel bug is taking Indians places and thereby pushing the travel and tourism sector into one of the top revenue earners in the country, according to a report ‘How Does India Travel’, released by Bain & Company and Google India.

The travel and tourism business grew close to nine per cent in 2018 and at an average of 8 per cent over 2015-18, with the sector contributing 9.4 per cent to the country’s GDP, close to developed market levels. The boom has been fuelled largely by the digital ecosystem that helped travellers plan, research and discover new places and craft their identities on social media. But the report pointed out, online travel brands are unable to fully leverage the emerging opportunities, as a large part of the travel bookings are still offline.

Travellers spent nearly $94 billion on domestic and international travel in 2018. While 86 per cent of consumers said they are influenced by online brands, only 60 per cent went ahead and booked digitally.

The reasons for consumers dropping out are: insufficient penetration in the mass-budget segments of the industry, inconvenience at the payment stage, lack of trust in the brand and a perception that the digital brands cater to the premium-luxury traveller. Both Makemytrip and Yatra refused to comment for the story.

The digital travel and tourism business is losing customers on account of last mile friction. Consumer friction, according to Facebook that engages with the issue to advise its brands on how to maximise their digital potential, is the phenomenon of consumers dropping out during the path of purchase due to unnecessary additional effort, incremental step or inconvenience.

“There is a perception amongst consumers that online channels are geared towards premium customers, along with a marked distrust around payment and pricing terms,” Arpan Sheth, partner Bain & Company, said.

Such consumer behaviour flies in the face of traditional wisdom that dictates that digital shoppers are swayed solely by discounts. As the Facebook Zero Friction Future reports on the Indian fashion and fintech industry, based on a study by KPMG and Nielsen have shown in the past and as this one by Google and Bain indicates, consumers are giving up not because they are not able to find the right price, but because the process is flawed.

This suggests the need for a course correction. For brands that have focused mostly on discounted fares, it may be profitable to push convenience and consistency of experience while tackling the perception of a premium service.

The report states that during key research-heavy phase of interest, research and experience, digital plays a pivotal role with over 86 percent of consumers being influenced by online channels. In the booking and sharing phase, the report states that nearly 60 per cent book transport and lodging online, and over 50 per cent share feedback online with social media being the dominant platform.

Vikas Agnihotri, country director, sales, Google India, said, “New users perceive that online channels are geared towards the more frequent flyers and experience-oriented travellers; and existing travellers research online but the lack of trust in payments and booking experience make them end up booking offline. If travel players tap these online users through personalised marketing, messaging and travel plans, they can further augment online travel bookings.”

The report suggests that by overcoming four critical barriers, travel brands can unlock roughly $24 billion in incremental online travel spending by 2021. It has estimated that the industry will grow at a 13 per cent CAGR to $136 billion by 2021.

On the road

  • Indian travellers took approximately 2 billion domestic and international trips in 2018

  • Both domestic and international travel grew 8% over the last 3 years

  • Airlines dominated travel spending despite operational pressures, on account of improved connectivity and affordability

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel