I have found an interesting post on tnooz by Serge Faguet, co-founder of Ostrovok, a Russian-based hotel-focused online travel agency explaining why local players can beat global online travel market giants like Expedia, Orbotz, eDreams and others. Accroding to Serge, the pre-existing global players have the following advantages:
Funding: According to Serge, capital is no longer an advantage over local startups that know how to raise capital. Startups in the BRICS countries can easily raise millions wit a good product. Many investors are looking towards establishing a footprint in the BRICS, so with a good product, the money will follow.
Supply: Global supply is freely available through local and global market leaders through affiliate/lead generation programs.
Customers: Global customer flow into BRICS hotels and airlines are quite important but local customers eventually become dominant source of local demand for flights and hotel services. A second advantage is that global customers have little brand loyalty to global OTAs and will choose whatever offers the best rates. This creates room for new players to carve a niche in the online travel industry and compete with established players.
Legacy: They say on the internet, no one knows you are a dog. While some of the established OTAs have build business for 15 years, an innovative player with a unique value proposition can easily capture a good portion of the market and attract clients. Established players for example struggle with exploiting new distribution channels such as mobile and social media. Local players have the following advantages over the more established global players in the online travel market:
Local players can leverage the following advantages in their emerging markets that global players might not be able to exploit:
Local Payment Solutions: How people make payments vary from one country to another. While the developed world has the credit card as King, markets in the developing world have broader access to other payment systems that are not integrated into the global service distribution systems. In Kenya, MPESA is King and many airlines accept MPESA along with other mobile money services as valid form of payment; In China, the country's leading online travel agency has a group of messengers who collect cash from clients have booked services with the travel agency something that might not be as feasible in the Western countries or Africa but is feasible in China's unique business culture, in Brazil, the country's and region's leading online travel agency Despegar accepts payment via installments and so on. Existing players do none of these thus losing a huge chunk of potential customers.
Local Customer Support: Customers in BRIC countries need help with telephone support and transactions, visa applications and help in trusting the internet, help with online booking and security etc. They can maintain Call Centres in the host country and handle calls from consumers and help them organize their travel. Some players like MakeMyTrip have local offices where customers who are afraid to complete large transactions for fear of fraud can visit and get help and assurance with their booking. These increase the customers' trust in the product.
Marketing:
Local Channels: Local marketing channels give online travel agencies in the emerging markets considerable advantage. While global players rely mostly on Google and Bing to drive bookings on their website, local players can leverage knowledge of local products for example Yandex in Russia, Baidu in China and other local online directories to get an advantage over global rivals.
Local Offline Marketing: Local players can rely on local offline marketing includinng targeted TV ads that resonate with local audiences, newspaper adverts, brochure marketing in local corporate markets and more; resources that global players cannot mobilize in multiple local markets.
Local Culture Focus: Local Online Travel players speak the language and understand the local cultures of the markets that they serve, as a result, they are able to leverage this to build stronger relationships and understanding of their local market and client travel needs.
Supply:
Local Focus: Local Online travel agencies can build local relationships with travel providers in the local market and also due to the their understanding of the local players, they are able to lead in terms of the breadth of coverage of the local travel providers and also in offering more competitive rates for local travel providers than global travel agencies.
Local Travel Solutions: By being responsive to the needs of local travel providers, local travel agencies can deliver superior results.An example given by Serge is of China's CTrip and eLong "which work with hotels in an on-request fax-based way, as well as via an extranet, and even today approximately 40% of Ctrip’s bookings are done this way."
What determines which local players will win?
According to Serge, the following factors will lead to the success of the Online Travel Agencies in the emerging markets:
Email Us at FlightAfricablog@gmail.com
- Large pools of capital
- Established global supply bases appealing to BRIC consumers
- The ability to direct significant flows of global customers to BRIC hotels
- Experience developed over many years of success.
Funding: According to Serge, capital is no longer an advantage over local startups that know how to raise capital. Startups in the BRICS countries can easily raise millions wit a good product. Many investors are looking towards establishing a footprint in the BRICS, so with a good product, the money will follow.
Supply: Global supply is freely available through local and global market leaders through affiliate/lead generation programs.
Customers: Global customer flow into BRICS hotels and airlines are quite important but local customers eventually become dominant source of local demand for flights and hotel services. A second advantage is that global customers have little brand loyalty to global OTAs and will choose whatever offers the best rates. This creates room for new players to carve a niche in the online travel industry and compete with established players.
Legacy: They say on the internet, no one knows you are a dog. While some of the established OTAs have build business for 15 years, an innovative player with a unique value proposition can easily capture a good portion of the market and attract clients. Established players for example struggle with exploiting new distribution channels such as mobile and social media. Local players have the following advantages over the more established global players in the online travel market:
- Local Fulfillment
- Local Marketing
- Local Supply
Local players can leverage the following advantages in their emerging markets that global players might not be able to exploit:
Local Payment Solutions: How people make payments vary from one country to another. While the developed world has the credit card as King, markets in the developing world have broader access to other payment systems that are not integrated into the global service distribution systems. In Kenya, MPESA is King and many airlines accept MPESA along with other mobile money services as valid form of payment; In China, the country's leading online travel agency has a group of messengers who collect cash from clients have booked services with the travel agency something that might not be as feasible in the Western countries or Africa but is feasible in China's unique business culture, in Brazil, the country's and region's leading online travel agency Despegar accepts payment via installments and so on. Existing players do none of these thus losing a huge chunk of potential customers.
Local Customer Support: Customers in BRIC countries need help with telephone support and transactions, visa applications and help in trusting the internet, help with online booking and security etc. They can maintain Call Centres in the host country and handle calls from consumers and help them organize their travel. Some players like MakeMyTrip have local offices where customers who are afraid to complete large transactions for fear of fraud can visit and get help and assurance with their booking. These increase the customers' trust in the product.
Marketing:
Local Channels: Local marketing channels give online travel agencies in the emerging markets considerable advantage. While global players rely mostly on Google and Bing to drive bookings on their website, local players can leverage knowledge of local products for example Yandex in Russia, Baidu in China and other local online directories to get an advantage over global rivals.
Local Offline Marketing: Local players can rely on local offline marketing includinng targeted TV ads that resonate with local audiences, newspaper adverts, brochure marketing in local corporate markets and more; resources that global players cannot mobilize in multiple local markets.
Local Culture Focus: Local Online Travel players speak the language and understand the local cultures of the markets that they serve, as a result, they are able to leverage this to build stronger relationships and understanding of their local market and client travel needs.
Supply:
Local Focus: Local Online travel agencies can build local relationships with travel providers in the local market and also due to the their understanding of the local players, they are able to lead in terms of the breadth of coverage of the local travel providers and also in offering more competitive rates for local travel providers than global travel agencies.
Local Travel Solutions: By being responsive to the needs of local travel providers, local travel agencies can deliver superior results.An example given by Serge is of China's CTrip and eLong "which work with hotels in an on-request fax-based way, as well as via an extranet, and even today approximately 40% of Ctrip’s bookings are done this way."
What determines which local players will win?
According to Serge, the following factors will lead to the success of the Online Travel Agencies in the emerging markets:
- Prior knowledge of the local market in executive teams: Having executives with local experience for example will help bring more suppliers to the local travel solution.
- Technical engineering ability on the team: Build a strong team with rich engineering talent. Technology is always the bottleneck of many tech companies and it's crucial to have an engineering talent to drive research, innovation and product development and improvement in your organization.
- Ability to raise capital on the team. Online travel agencies require injection of millions of dollars to compete against established players in the market. Ability to raise that capital from local and foreign sources will be crucial to success.
Email Us at FlightAfricablog@gmail.com
0 comments:
Post a Comment