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Travel firms use IT to beat recession blues

Amid downturn, India's travel industry adopts IT tools to lower costs, improve operational efficiencies and diversify product offerings to increase revenues.
Written by Swati Prasad, Contributor

INDIA--With local business fast moving online, players in the travel industry are compelled to innovate in order to diversify its offerings for the increasingly Net-savvy traveler.

The global recession has forced the Indian travel industry to adopt new IT tools to lower costs, increase operational efficiencies and, more importantly, diversify its product offerings to increase revenues.

Rajnish Kapur, chief innovation officer of online travel agency (OTA) MakeMyTrip.com, said in an e-mail interview: "The travel industry has seen a negative year-on-year impact of the slowdown, with both corporate and leisure spending going down."

Ram Badrinathan, Asia-Pacific general manager at PhoCusWright, told ZDNet Asia that the drop in consumer spending ability has led to decreasing passenger demands across all segments, including air and hotel. PhoCusWright is a research firm specializing in the travel industry.

Manish Amin, co-founder and CTO of Yatra.com, added: "Corporate travel is the worst hit since companies have cut down on travel and mandated their employees avoid travel unless absolutely necessary."

As a result, all stakeholders in the travel industry--from airlines, railways to hotels and OTAs--are adopting new IT tools to cope with the falling demand.

"Technology allows us to generate more transactions without adding corresponding costs that a traditional travel agency will experience," Kapur said.

OTAs are increasingly exploring non-airline services, such as hotel bookings, car and bus rentals and holiday packages, to boost revenues. Airlines are also tying up with global distribution systems (GDS) such as Amadeus and Galileo, to offer better customer service and competitive rates to travelers.

Even hotels are leveraging technology to increase revenues. While the bigger hotels are tying up with GDS providers, smaller one are looking for online channel management tools to help determine optimal rates for their hotel rooms.

According to a recent IBM study, Aviation 2010, various issues including rising fuel costs, economic uncertainty and the constant vigil against security threats, are expected to cause major changes for travel organizations over the next three years.

"Since risk and uncertainty are here to stay, travel CEOs must equip their companies with flexible processes and infrastructure that enable rapid change," noted the study, which polled over 1,100 CEOs worldwide.

Industry moving online
Despite the flattening of the travel market, OTAs grew over 50 percent in 2008. Yatra.com's revenues, for instance, increased from US$9.4 million in 2006 to US$240 million in 2009. During the same period, its employee strength expanded from 100 to 800. MakeMyTrip.com grew 100 percent between 2008 and 2009.

However, at 10 percent, India's online travel adoption remains low. While the travel market in India is US$20 billion, online travel is worth just US$2 billion. Amin said: "The Indian online leisure and unmanaged business travel market is projected to triple to reach revenues of US$6 billion by the end of 2010."

According to Kapur, with Internet usage increasing 50 percent per year, the market for online travel bookings in India is estimated to grow at around 40 percent per annum.

In North America, 55 to 60 percent hotel reservations were booked online and only 15 percent through GDS. In India, however, online hotel bookings are still insignificant.

For smaller hotels, it is also expensive to deploy GDS services, said Reuel Ghosh, founder and CEO of eRevMax Technologies, an online channel management technology vendor. Its flagship product, RateTiger, offers hotels access to information on hotel rates, consumer demands and market trends.

"With the growth of OTAs and other online ways of doing bookings, it is quite a challenge for hotels to efficiently allocate and manage their inventory on these channels," Ghosh said in a phone interview. This, he added, is where tools such as RateTiger come in, providing data that can help hoteliers make informed pricing decisions.

Global recession is also exerting pressure on the travel industry to innovate, the IBM study found. "CEOs of travel firms are convinced of the need for business model innovation. Without innovation, travel companies face a potential customer exodus to competitors with more engaging travel experience or more compelling rewards programs," it added.

Even the Indian Railways, which is government-owned and a monopoly, has added new features to its Web site. Train travelers, for example, can make bookings for hotels under the Indian Railway Catering and Tourism Corporation, through the Indian Railways Web portal.

The organization has also tied up with several OTAs, including Yatra.com and MakeMyTrip.com.

Its portal also allows travelers to purchase train tickets through mobile phones, where the service is available through GPRS (General Packet Radio Service). Dubbed IRCTCmobile, it allows consumers to access various services including booking their train tickets via their credit or debit cards, and checking ticket availability and fares.

OTAs are also allowing travelers to make bookings through mobile phones. For instance, MakeMyTrip.com users can search for a domestic flight, book their seats and pay for the ticket using their mobile phones.

"With a base of over 380 million subscribers, the use of mobile phone as another channel for travel distribution will completely change the dynamics of the industry in the near future," Badrinathan added.

Swati Prasad is a freelance IT writer based in India.

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