Online Travel Agencies: Maybe We Have to Sell Hotels, Too

Back in 2001, Expedia figured out that the only way to make money as an online travel agency was to focus on selling hotel rooms, not airline tickets. That seems really obvious now, but the Indian OTAs have struggled mightily with this concept, because (for so many reasons, not least of which is the lack of mid-priced hotels and a undersupply of rooms), they have relied heavily on low-paying airline tickets.

According to this article, that's finally changing. Travelguru (after its tie-up with Desiya) now claims that 90% of its revenues from hotel and holiday packages (though if I had to guess, I'd say that this is more a reflection of how large Desiya's business is and how small Travelguru's business is). MakeMyTrip and Yatra also claim growing and significant sales of hotels and holidays. Cleartrip lags behind the pack, with about 95% of their revenues coming from air. Look for more of the agencies to revamp homepages (as Travelguru has done) to focus on higher margin products.

In the US, once the OTAs started to think more like merchandisers and less like sellers of airline tickets, their margins grew. Cleartrip, with its wonderfully clean design, just needs to figure out how to maintain their stand-apart design while doing a better job of incorporating higher-margin products. Good luck.