MakeMyTrip, Yatra and Go ibibo to partner with Oyo to boost their business
Collaboration brings bigger gains than competition, and the leading players in the domestic online travel space seem to have understood this. When in October 2015, MakeMyTrip, Goibibo and Yatra jointly decided to de-list budding budget hotel room aggregator Oyo from their platforms, the stage was set for an Oyo versus OTAs (online travel agencies) showdown. Oyo, however, decided to ignore this unfair practice, which could well have become a matter of investigation at the Competition Commission of India. Instead, it turned its focus on improving its business proposition and expanding its reach. The hotel aggregator moved from a simple distributor model — where it sold some of the inventory of a hotel as Oyo Rooms, while the hotel sold individually on OTAs — to an exclusive model where all rooms were Oyo-branded. That helped it have better control on the systems and processes at the partner hotels.The growing scale of Oyo made Cyrus Mistry, former chairman of Indian Hotels Company, which runs the Taj group of hotels, refer to the startup as a ‘threat’.
While Oyo might not have turned a threat for the luxury hotel chain, its expanding dominance in the budget hotel space did take away some of the business from OTAs. The aggregator, started by Ritesh Agarwal in 2013, emerged with a network of over 7,000 hotels — more than 70 per cent (or 5,000) of which Oyo has exclusive tie-ups with. Since OTAs had de-listed Oyo, it meant that these 5,000 exclusive hotels were not available for the customers of these OTAs, limiting their offering severely. Further, because these hotels were in the budget segment, which has a significant share of the market, the OTAs were missing out on a big chunk of the customers. Oyo’s run rate, the metric for calculating its revenue based on number of rooms booked, reached 15 million room nights annually, forcing MakeMyTrip and others who had chosen to ignore it to sit up and take notice.“We believe Oyo poses meaningful competition for MakeMyTrip and is not being priced in by the market.Its recent fundraising , ability to grow with low cash burn, and aggressive business plans can further heighten the competitive intensity in India’s online travel market,” global financial firm UBS said in an October report. Oyo raised $250 million last September and with 15 million annual room nights currently is the second largest player in the market after MakeMyTrip, which is expected to sell two million room nights in FY18 (based on April-December data).KalaGato, a market intelligence firm, has called MakeMyTrip the ‘Goliath of the Indian travel market’, while referring to Oyo as ‘David’. Oyo is slowly eating into the hotel market and taking a larger share of booking volumes with each passing month, it noted. Oyo claims it is growing at a three-digit rate year-on year. It was anticipated that the battle for market share in online travel would end after the MakeMyTrip-ibibo merger in October 2016. However, KalaGato believes the battle is far from over. “In fact, the hotel segment, which has long been the cash cow for the OTAs, is under threat.” Hotels bring 22 per cent of MakeMyTrip's profits, while flight tickets account for just 7 percent. No surprise, then, OTAs are turning their attention on hotels. MakeMyTrip, which now also owns Goibibo, decided to change its stance on Oyo, welcoming it back on board two weeks ago. The Nasdaq-listed firm’s decision follows a similar move by Yatra in October last year. Explaining the rationale behind this decision, Dhruv Shringi, cofounder and CEO at Yatra, said the customer needs and preferences are constantly evolving. “They seek newer and more interesting ways to make their travel bookings seamless and cost effective”.
ARTICLE SOURCE- BUSINESS STANDARD.