Online Booking Boom !
Arabian Travel News takes a close look at the online travel sector in the Middle East and reveals how web bookings are set for an explosion over the next few years.
The online travel sector might not have taken off just yet in the region, but ask anyone in the industry and it seems we could be about to leap into an internet travel booking boom.
While there appears to be no official data to confirm exactly how many people currently use the internet to book travel online in the Middle East, a few hard facts are clear.
The region has one of the fastest growing internet populations in the world, the highest number of smart phone users and a growing number of Online Travel Agencies (OTAs) are jumping into the market.
Sunil D’souza, country manager UAE & Oman, Kanoo Travel explains: “The Middle East has one of the fastest growing internet populations in the world. E-commerce could be worth in the region of US$30-90 billion, depending on your source of information, and the sector will grow very significantly in the future.
“At Kanoo, we represent several major airlines and we know from them that a growing proportion of transactions are happening online. This is a clear indication that the market is changing and consumers are seeking to book their travel online.”
According to Walter Lo Faro, director of market management, Middle East & Indian Ocean for Expedia, the number of travel bookings made online in the Middle East is set to “more than double” over the next five years.
Lo Faro estimates that around 20 – 25% of travel transactions in the region currently take place online, but he says the market is showing an “impressive speed of growth” as both travel suppliers and travel agents rush to cater to a growing demand from consumers to book travel online.
“The Middle East is slightly slower on this development but it’s getting there,” says Lo Faro. “Especially I would say in the past 24 months, the number of Middle Eastern users actually making bookings online has been growing exponentially.”
Expedia launched an Arabic version of its Hotels.com website two years. Lo Faro explains that while the site is “doing well” the “basic difference between an Arabic website and a European one is that you get a great deal of shoppers on the site, but the conversion is much lower, so there are many ‘lookers’ but not as many ‘bookers’.”
He admits that this indicates there is still some caution among the Middle East consumer about booking travel over the web, but says things are changing rapidly.
“Yes, people are still slightly reluctant to pay for things by credit card online. But people are getting more and more web savvy. They use internet sites a lot — Facebook etc. They are used to the tool itself but they are not particularly used to the transactional side of it, so between the viewers and the shoppers it’s not the same relation you would find in the UK for instance.”
He believes consumers will catch up quickly. “I think in the Middle East progress happens really fast. When I first came here, internet penetration was about 11% but now it’s nearly 60%. And that’s in just five years.”
OTAs ENTER THE ARENA
Some major online travel agencies are now entering the Middle East market to capitalise on this development. Makemytrip, India’s biggest online travel company recently launched a Middle East version of its site (makemytrip.ae). The company plans to invest a “few million dollars” in the Middle East over the next two years.
Amit Saberwal, senior vice president, International markets said the site was launched due to consumer demand.
“The highest number of visitors on makemytrip.com outside India and the US were from the Middle East. We have also seen transactions originating from the Middle East so we decided to launch makemytrip.ae offering flights, hotels and holidays customised for Middle East customers.”
Saberwal predicts major growth in the online travel sector: “As per credit card industry sources over 10% of transactions are made online of which travel ranks at the top. But over the next few years we will see an exponential increase in online travel.”
Another major Indian OTA, Cleartrip, has also launched a local version — Cleartrip.ae. Tarique Khatri, VP, business development says the company plans to invest close to US$10 million in the Middle East market in a bid to become the leading online travel company in the region.
Khatri estimates that while currently only 10% of tickets are sold online in the Middle East, the potential for online travel in the region is “phenomenal”.
“One of the most interesting things about the Middle East is that the internet population is growing incredibly fast — it’s one of the fastest growing in the world.
While there are no official numbers in terms of the e-commerce market in this region, there are different numbers floating around, ranging from $35 billion to $100 billion.
“More importantly, after meeting up with a lot of airlines in the region, they said close to 25% of their transactions were happening online. This was a clear indication to us that there was definitely big potential for an online travel agent in this market.”
Since launching, Cleartrip.ae has received more than 30,000 travel bookings, and in February had over 250,000 unique visitors. The company is targeting a three-fold growth in the region Middle East this year.
“We will do whatever is required for us to grow and be the leader in this market,” said Khatri. “By this time next year we should be three times as big as what we are today.”
OFF-LINE AGENTS MOVE ON-LINE
It’s not just OTAs who are looking to grab a share of the web bookings out there. Some of the region’s biggest travel companies are now investing in the latest technology and gearing up to launch their own web booking portals.
Kanoo Travel is currently in the process of “fine tuning” its first fully-fledged online bookings portal, complete with payment gateways offering air, car and hotel products.
The investment into online is “in keeping with the wishes and needs of our major corporate accounts and the changing face of the traveller’s needs,” explains D’souza.
“We recognise there is a growing number of consumers who are frequent internet users and who are comfortable making bookings online. This is the case for younger aspiring consumers. For these the future is to provide a full array of attractive, value-for-money services in a portal that is easy to use, friendly and safe.”
D’souza says Kanoo will roll out a number of new online products and services over the next few months including “B2B, B2C and B2B2C” solutions.
“One development we have pioneered in Dubai is an online booking platform. Once we add the payment gateway, then our clients will be able to make bookings and recieve all their services online.”
D’Souza estimates that once the web products are launched, Kanoo’s online business will grow to represent a “double digit” proportion of the company’s total travel business in the next three to five years.”
Another major player, Orient Travel is also making major investment into the online sector. Asim Arshad, CEO said the company has not yet “finalised its online strategies — but broadly speaking the website will have all airline content, special fares, hotel rates, package tours.”
Orient Travel has made an initial investment of around US$ 108,906 (AED 400,000).
“It’s time for us to have an online booking tool for our organisation, because that has become an essential requirement in today’s marketplace, especially for our retail, leisure as well as corporate clients, and furthermore to increase our market reach,” says Arshad.
“Initially I don’t expect a huge influx of bookings on the online portal, it should be gradual and steady. I do not foresee it taking over the offline division in the near future.”
Barriers to entry?
With internet users in the Middle East growing so fast, this begs the question — why is the Middle East lagging behind other markets when it comes to online travel?
There are some barriers. D’Souza says internet security and the fraudulent use of credit cards is still a major concern: “We are seeking top advice in how we build our payment gateways and provide internet security for ourselves and for our customers.
We will only introduce new online services once they have been thoroughly tested and benchmarked against international security standards.”
According to Khatri, while security has been a major issue in the past, banks are now finally getting on top of this.
“When it came to security, the ‘Verified by Visa’ and MasterCard was something that a lot of banks had not implemented. So people were always apprehensive and worried, wondering, will my transaction be safe? What if some fraudulent transaction takes place? Now if you look at the major banks in the region they are all gradually moving towards implementing that, which means customers will be assured of their transaction modes being safe.”
Another sticking point has been that many banks also don’t allow debit cards to be used for online purchases. “Credit cards and debit cards work on two different technology platforms,” explains Khatri.
“The Middle East has a huge debit card base and most banks have not enabled debit cards to be used for transactions online. Cleartrip has enabled debit cards for those banks which allow it and thankfully we have been fortunate in that almost 20-25% of transactions now happen on debit cards. I think banks are realising that they want people to start using these cards for transactions too.”
The other big obstacle is credit card charges which are among the highest in the world, says Albert Dias, co-founder of Musafir.com — a local online travel website.
Dias says Musafir.com has now “stepped away” from the leisure travel market due to “unfavourable commercial conditions”. He adds that airlines, who were the first to enter the online sphere in the region create difficulties for travel agents looking to move online.
“Suppliers have already established their share of the market. Most airlines are not very receptive to challenges or threats to their own existing revenue streams. Price is very important — and there has been an almost unspoken opposition to any threats or any challenges to a supplier’s price.
“There are even threats to matching that price, let alone going below it, and it’s not something we can do with the leisure market which is why we stepped away from it,” says Dias.
Despite these challenges, Dias says there is still a great deal of untapped potential in the online travel business. Musafir.com is now planning to launch a brand new website — currently in the development stage — which will specialise in holiday planning.
“We believe this is a niche in the online travel sector that has yet to be explored here,” says Dias.
“Our new product will allow customers to plan their entire holiday in a way that neither airlines nor travel agencies allow you to do right now.”
A BOOM TIME FOR ONLINE TRAVEL
Despite the challenges that do exist when it comes to setting up online booking portals in the region and encouraging people to feel comfortable enough to use them; all our experts agree that online travel bookings are set for an explosion in the Middle East over the next few years.
“A lot of traditional agencies are looking at investing in the online market — a lot of large companies are building online products, and for us it’s a good sign because I think we are all here to look at how we can develop the market size from what it is now to what it should be,” says Khatri.
“For example if you compare the market here to India — almost 60% of domestic tickets in India are sold online. So there is still a huge potential to develop the market out there, and with more players coming in, this will only add to that momentum.”
Lo Faro agrees that with all travel players making a move to online, the sector will see exponential growth in the coming years.
“The percentage of 25% [online bookings] is very likely to double in the next five years — very, very easily,” he says. “Especially as offline becomes online.”
“The online push is not just coming from OTAs after all. It’s coming from the hotel side, the supplier side. It’s coming from offline companies who are selling more and more online and it’s coming from travel agents who are increasingly going online.”
“It’s all about convenience,” he adds. “After all, if a customer finds it more convenient to go online to buy something, they are going to do that.
“And you better be there waiting, right?”
does the growth of online travel mean the Death of the traditional travel agent?
The internet might be booming, and it may be thanks to the web that people are travelling more — but travel experts agree that the “death of the traditional travel agent” has also been vastly overstated.
In fact, trips that involve complicated or special arrangements, or that are more expensive, are much more likely to involve a traditional travel agent.
Despite a predicted growth in Kanoo’s online business to a double digit figure, Sunil D’Souza believes off-line will be the choice for many years to come.
“The Kanoo view is that the traditional role of the travel agent will remain for many years to come. Not everyone is internet savvy, not everyone trusts the internet and many customers prefer the assurance of face-to-face customer service. That is something we do very well.
Likewise many of our corporate clients will still need a Travel Management Company to procure their services.
They rely on the TMC to work on their behalf making bookings timely and efficiently, making optimum use of their travel spend and being dependable in their times of need.
We are selling a service which requires consultation, research of content and people do trust the experienced advisers. And most importantly our team of qualified and expert travel counsellors and travel specialists are readily available at all times of the day for attending to an emergency/change or cancellation etc.”
Asim Arshad, CEO, Orient Travel agrees: “Online booking will grow but I don’t think it will be a dominating force in this region. Travel distribution in the Middle East will continue the way it is, with the definite addition of online booking tools, developed locally by TMCs as well as other international players entering the Gulf market.”
Amit Saberwal, senior vice president, International markets, Makemytrip.com
Makemytrip.com is India’s biggest online travel company, with a travel market share of more than 50% of all online sales. The company launched a dedicated Middle East website makemytrip.ae last year offering payment in dirhams and recently announced a tie-up with SNTTA Travel & Tours in Dubai.
Q: Why did you decide to launch makemytrip in the Middle East?
A: High internet penetration in the region and credit card usage are two factors that were considered.
Q: How much are you investing in the Middle East market?
A: In terms of development and marketing we are looking at spending a few million dollars over two years. It will be difficult to pin down a figure now. We have entered into a strategic alliance with SNTTA Travel & Tours and will be using their retail network to dispense our holiday and other products.
Q: What are your targets to grow the business?
A: We are among the first few OTAs to launch in the UAE and should be have a significant share of the market. The main competition arises from airline websites. We are anticipating a 200% increase in the year 2011-2012.
Q: Are OTAs stealing market share from the traditional travel agents in this market?
A: OTAs offer clients many more options as well as the convenience to book at anytime and any day; hence clients will be inclined to consider OTAs. The real threat to the traditional travel agent comes from airlines and hotels who are aggressively pursuing clients and offering them a host of benefits if they book directly on their website.
As a matter of fact we have developed a B2B module, which offers a single platform for travel agents, and they can book all airlines, hotels, rail tickets instantaneously. We have over 5,000 agents actively using our B2B platform and it has been a win-win situation for both us and travel agents.
Q: How is the business going so far?
A: We have seen a steady month-on-month increase, which is an indication that online travel will witness growth in years to come. With increased internet penetration and the launch of various online mobile applications we do anticipate online travel to grow.
We will investing in customising our products and technology for the market. We have a strategic alliance with SNTTA Travel & Tours and a business head in place for the region.
Q: How are you reaching out to the Middle East consumer?
A: We have a two tier strategy for the Middle East. We are increasing our presence on all online resources such as search, social and a host of news and information websites. Separately, we will be running offline campaigns in print, radio and TV to persuade the not-so online savvy consumers to start transacting online.
Tarique Khatri, VP, business development, Cleartrip
Q: What are you offering the Middle East traveller?
A: We have a lot of low-cost content which is relevant to the Middle East market, so what we have brought to the table is far more comprehensive than what was available out there.
We have also started adding more localised content — for example the low cost carriers such as Jazeera, Air Arabia — and we are currently in the process of integrating FlyDubai and Bahrain Air, which will make our site the most comprehensive when it comes to air content in this market.
Q: What’s been the biggest challenge when it came to launching Cleartrip in the Middle East?
A: The biggest challenge was that we were a new brand. And being a pretty nascent online market, we had to get a lot of people to know about us. The second thing is to build trust with the customer because as a new brand you always have this apprehension — will my ticket come through? Will they they take the money and run away?
What we tried to say is, here is a completely transparent company where you can see the best fares available. Plus we have a lot of links on our site which take customers to various forums where you can actually see real customer queries being handled. So that gave people the trust that yes, we are serious. Customers’ needs are a priority for us.
Q: How is business going so so far?
A: More and more people are using it. There is a lot of word of mouth that is spreading. Our traffic is gradually growing via indirect traffic that comes via the various websites that we advertise on, Google marketing and brand adverts that we do.
But now what we see is that direct traffic is coming through gradually too. Today almost 25% of traffic onto the site is direct which means that people are seeing the brand as reliable, as a place for them to come and search and buy their travel products.
Q: What plans do you have for Cleartrip the region?
A: Very soon we will be launching our mobile product in the Middle East which will allow customers to search and book from their mobile phones. We also have other products in India which we would like to introduce to this market very soon, including a ‘theatre for business’ for the corporates so they can manage their bookings online. We also have a travel agency product.
Q: Who is using the site to book?
A: The interesting thing we have found is there is a mix of people booking. Initially we had a lot of Indian people booking with us because they had brand association. But now we’ve seen a lot of locals booking, we have seen a lot of people from the Philippines. That is our aim. We do not want to position ourselves as an Indian brand in the Middle East, we want to be an independent brand, offering a great platform and efficient way of making travel bookings.
Walter Lo Faro, director of market management, Middle East & Indian EXPEDIA
Q: How’s business for Expedia in the Middle East?
A: We started in the region in 2006 and since then we have been growing like crazy. The past five years has been amazing. We grew about five or six times from the size we started, and it’s not just us — it’s the whole online business.
Hoteliers will tell you the same thing. Their online business is growing by 100 – 200% every year.
Q: How is hotels.com going?
A: It is taking off. If we see our results, the Arabic site is working pretty well. The level of conversion is lower than in Europe, but the English version of the site works extremely well, and the level of conversion is similar to in the UK.
Q: Are there plans to launch an Arabic version of Expedia.com?
A: There are no immediate plans for this. Expedia is slightly more complicated while hotels.com is basically a hotel bed bank, so that is disproportionally easier to launch. We always start with Hotels.com, in every country.
We make it work for a few years and see what happens and then according to the results we decide whether an Expedia site is to be launched or not.
You have to fine-tune quite a few things here especially when you launch an Arabic site, it’s quite complicated. But you never know, it pretty much depends on how we will grow in the future.
Q: What is your plan for Expedia in the Middle East?
A: In principle we want to exceed traveller expectations in terms of price competiveness and site content. The mission is to build the world’s largest and most intelligent travel marketplace.