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Russian travel market overview by Travelata.ru
 

Russian travel market overview by Travelata.ru

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Russian travel market is estimated over 50B USD while online share is still less than 10%. This report addresses the following topics: ...

Russian travel market is estimated over 50B USD while online share is still less than 10%. This report addresses the following topics:
- general trends
- travel patterns of inbound, outbound and domestic markets
- market sizing by segmens: flight tickets, hotel booking, package tours
- main players in each segment
- trend setting for near future by segments

This report is prepared by Travelata.ru team.
Travelata.ru is and online travel agency specializing on package tours.

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    Russian travel market overview by Travelata.ru Russian travel market overview by Travelata.ru Presentation Transcript

    • RUSSIA – A LAND OF OPPORTUNITIES IN ONLINE TRAVEL October, 2013
    • Russian travel market is estimated at USD 58B with online segment growing at 49% while there is still significant growth potential Volume of travel market1 in Russia USD billion 57.9 9% Share of travel booked online, 2012 Percent 62.5 59 USA 53.0 48.6 50 UK 44.5 42 Germany 50.0 Offline 47.5 25 India 45.6 43.8 41.4 20 Brazil 49% 3.1 4.8 2010 2011 7.4 2012 10.4 12.5 China 18 Online 2013 2014 Russia 14 1 Including outbound, inbound and domestic travel, according to Phocuswright SOURCE: PhoCusWright – report from 2012, Euromonitor 1
    • Positive trends outnumber potential risks Trends Risks • • Risk of global or local worsening of economical environment • Vague definitions of requirements in OTAtouroperator-customers legal relationship due to outdated legislation Over 90 countries do not require entry visa for Russian citizens. European Union countries still do but requirements are gradually getting looser and there is an ongoing negotiation with EU on visa-free entry. • Fast growth of e-commerce shopping habits • High penetration of debit and credit cards • Quickly growing number of banks providing acquiring services and thus decreasing fees • Growing spending potential in the regions • High number of investments into online travel field by local and international VC funds 2
    • Outbound travel in Russia is driven by handful of destinations both for vacation and business Outbound travel 2012 Number of visits, millions Top10 = 70% 47,80 2,50 Turkey 15,00 1,90 Egypt 1,90 0,90 China1 Thailand 0,80 Spain 0,70 0,69 Germany Greece 0,57 Italy 0,55 UAE 0,50 Finland 4,50 9,50 Ukraine2 32,80 4,60 Finland5 3,40 Kazakhstan 3,36 Abkhazia3 1,80 Estonia Total Tourists Business and other4 1,00 0,90 0,87 0,70 Poland Lithuania Germany Azerbaidjan Top10 = 81% 0,50 South Ossetia 6,17 Other 1. Mostly residents of Far East regions of Russia. Big part is driven by shopping tours for cheap Chinese products 2. Since Russians do not need passport to travel to Ukraine it is difficult to accurately determine the purpose of visits 3. Russians do not need passport to Abkhazia. Likely that most travel for tourism because of big number of cheap resorts 4. Only 1.2M out of 32.8M could be identified as business travelers with certainty, the rest is family related travel and consumer shopping arbitrage 5. Mostly residents of St.Petersburg who benefit from simplified visa requirements from Finland consulate and travel with a car for short trips and shopping SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture) 3
    • Domestic travel is less concentrated than outbound but still 35% is focused in just 3 areas Domestic travel 2012 Number of visits2 , millions 40.88 5.80 Top3 35% 3.80 3.50 1,43 Total Greater Moscow area 1,30 1,20 Krasnodar1 Greater Tatarstan Yekaterinburg Tyumen - Rostov St.Petersburg republic region region area area 0,90 Far-East region 0,85 Nizhny Novgorod region 0,80 Stavropol region 0,80 Samara region 20.50 Other 1. Sochy – a popular Russian resort city is located there 2. Reporting by number of occupancies in various types of temporary accommodation facilities (hotels, hostels, pensions, guest houses, etc.) SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture) 4
    • With only 2.6M tourists a year, the world does not see Russia as an attractive tourism destination yet. Most inbound traffic comes from former Soviet Union republics Inbound travel 2012 Number of visits, millions Citizens of Top10 countries make up to 63% of all tourist travelers: Germany, China, USA, UK, Finland, Italy, Turkey, France, Israel, Spain 28,00 2,60 25,40 6,50 3,60 Top10 81% 2,70 1,40 1,20 1,20 1,13 1,12 0,98 Total Tourism Business and other Ukraine Kazakh- Uzbekistan Finland stan Moldova Poland Tajikistan Azerbaidjan SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture) China 0,70 5,00 Armenia Other 5
    • We estimate Russian online travel market at USD 5B1 (9% share of the total) with flight segment taking up to 70% Flight tickets Hotel booking Package tours Market size 2013 (Estimated) USD B 22 18 15 Share of online % 16 7 2 50 CAGR 2010-2013 % Offline 25 20 Online Online • • 0-3 5-8 – 3rd party inventory 10-25 – Direct contracts with hotels Offline Flight tickets segment generates the most sales now but margins are getting thinner ▪ 8 ▪ Online hotel booking segment is dominated by a single incumbent while others are struggling to catch up ▪ Offline Commissions % 10 8 Online package tours segment is just in the initial formation phase Online 10-15 Average purchase USD 400 400 2,000 Click-to-Sale conversions % 3-8 0.5-2 0.1-0.5 Common user cases • • • Business Independent leisure travelers Relatives visits • • • Aeroflot recently reduced agency commission to 0% OTAs strong dependence on metasearches traffic • Important issues • Business Independent leisure travelers • • • • Booking.com is a dominant market leader with a strong brand Relatively small number of Russians travel independently abroad due to language barriers and lack of experience. Strong preference towards package tours. • • Only leisure travel Beach holidays, tours & sightseeing Family vacations Complex product to book online without human assistance. Over 85% of sales online happens via a call center No united GDS for packages. Each tour operator has its own booking system 1 Train tickets segment, home rentals, car rentals, travel insurance and other auxiliary services are not included SOURCE: Travelata team 6
    • In flight tickets there are handful of companies with strong financial backing competing for the market share and leadership positions Gross sales, 2013 USD m per month Company Description 10-20 20-100 >100 Not exhaustive Main sales and marketing channels Founded in 1993. Biggest and oldest consolidator of air and train tickets. Launched B2C, B2B and corporate projects. Offline travel agencies, OTAs, Offline ticket offices, corporate Founded in 2005 by a former Vipservice employee. Big consolidator of air tickets. Only B2B. Backed by Ingosstrakh. Offline travel agencies, OTAs, Offline ticket offices, corporate Launched in 2011 by a former employee of Anywayanyday. Grew to become a leader in TTV – est. $400M in 2013. Funded by Atomico. Metasearches, white labels, brand traffic Launched in 2007 as the 1st full Russian OTA – est. $350M in 2013. Funded by Tiger fund. PPC, Affiliate programs, brand traffic, some metasearch Launched as a standalone project in 2008 by the largest Russian e-commerce group – Ozon.ru. PPC, brand traffic, metasearches B2C project of Vipservice. Also offer charter flights that do not appear in GDS. Metasearches, white labels, also train tickets One of the youngest projects (2011) and least funded that managed to make it to Top 10 selling OTAs. Metasearches, some brand traffic Owned by e-travel S.A. – company operating in several European countries. Russia is their biggest market. Metasearches, PPC, Offline advertizing Biggest Russian metasearch. Launched in 2009 without any external funding and managed to outgrow Skyscanner in Russia Brand, SEO, Affiliate programs, PPC 1 European metasearch. Was one of the first to enter Russia and managed to capture a significant market share. Brand, SEO, Affiliate programs, PPC 1 The world leader in metasearch but the latest to enter the Russian market. Runs aggressive TV campaigns to catch up. PPC, TV ads Consolidators OTAs Metasearches 1 Sales from the Russian market only 7
    • Hotel booking market is dominated by Booking.com while two well-funded Not exhaustive VC-backed startup are trying to catch up Gross sales, 2013 USD m per month Company Description 1-5 5-100 >100 Main sales and marketing channels 1 Owned by Priceline. 1st mover advantage. Clear market leader. The brand became associated with hotel booking for Russians. PPC, SEO, white labels, brand traffic, affiliate programs 1 The only Expedia brand that is promoted in Russia. “ Most Russians have never heard of “Expedia” brand. PPC, white labels 1 Germany based B2B hotel aggregator. Offline agencies, corporate 1 Owned by Priceline. Stronghold in Asia. Metasearch, PPC Launched in early 2011. Raised ~$40M from mostly international VC investors. Sign direct contracts with hotels. PPC, SEO, Affiliate program Launched in 2010. Raised ~$30M from mostly local VCs. Rely heavily on B2B and corporate. Also signing direct contracts with local hotels PPC, White labels, offline agencies, partnership with Russian Railroad Company Launched in 2011. Also sign direct contracts. Claim to be profitable. Affiliate program, PPC As one of the leaders in flight OTAs is trying to cross-sell hotels using its massive user base. Officially, no figures on sales have been reported yet PPC, cross-sell from flights The oldest Russian hotel aggregator with direct contracts to local hotels. Mostly in B2B business. Offline agencies, OTAs, touroperators Project launched by UTS – touroperator. Aggregator of aggregators. Mostly B2B. Offline agencies, touroperators International OTAs Local OTAs Local aggregators 1 Metasearches The world leader in metasearch but the latest to enter the Russian market. Already signed up most of local and international hotel OTAs No data PPC, TV ads Launched a website in Russian in 2011 with all the reviews translated automatically. Relatively low number of original Russian reviews. SEO, PPC A Russian clone of Tripadvisor with 100% original Russian reviews and high relevance to Russian audience. 1 SEO, PPC A standalone project by flight metasearch – Aviasales.ru. No data SEO 1 Sales from the Russian market only 8
    • Package tours market is extremely fragmented with hundreds of players Not exhaustive with no clear leaders while online segment just emerging Gross sales, 2013 USD m per month One of the biggest discounters with developed retails agency and franchise network Franchise and independent agencies, brand ads, PPC <1% Franchise and independent agencies, brand ads, PPC Independent travel agencies Independent travel agencies Franchise and independent agencies, brand ads, PPC Franchise and independent agencies, brand ads, PPC Launched in 1998. Holding company for the oldest franchise network with over 100 offices across Russia. The brand associated with last minute cheap deals. SEO, Offline foothold Franchise network (since 2002 ) with over 600 agencies in 245 cities in Russia, Ukraine and other CIS countries. SEO, Offline foothold Launched in 2002. Over 100 offices – mix of own and franchises. Known for efficient sales operations. Top 5 in organic results in Yandex by many keywords. SEO < 1% Launched in 2001. Operate under 3 online brands. More savvy in online marketing than most offline agencies. 10 own offices in 5 cities. SEO, PPC <5% Started in 2004 as a blog in Russian social network - livejournal. Claim to find the cheapest deals with an army of freelancers and full time experts. Very popular among young trendy crowd. 7 offices in Moscow and St.Petersburg Online agencies <1% Big touroperator. Good brand. Own and franchise agency network. (~30,000 agencies across Russia) Independent travel agencies European hegemon. Entered Russia by acquiring 2 midsize touroperatos. Heavily investing in branding as a premium touroperator. Offline agencies The biggest Russian touroperator (>1.5B USD TTV). Offers low prices that very hard to beat. Has one of the most advanced IT systems among Russian touroperators. Sub-agent reseller of Tez tour inventory at 2-3% discount. Price discrimination strategy of Tez. (~200 big ones, over 2000 registered) Online sales Big discounter. Sells mainly Turkey and Egypt. Tour operators Main sales and marketing channels One of the biggest and oldest in Russia with a brand of reliable touroperator. Big retail chain of agencies. Company SMM, word of mouth Travelata launched in Dec 2011. Offering wide assortment of tour packages from over 120 touroperators online. Low price guarantee and fin guarantees against TO bankruptcies. Raised $5.5M from MCI management and Invia.cz PPC, White labels, Affiliate program, email marketing Launched in 2010. Wide assortment. Raised $2M from InVenture Partners. PPC, email marketing Launched in 2010. Focused on Voyage Prive model of a closed shopping club by subscription. Raised ~$7M from European and local angel investors. PPC, email marketing Description 1-5 5-100 >100 < 1% 9
    • So what’s next? Main market trends Flight OTAs Hotel booking OTAs Package tours OTAs Main challenges • Leading OTAs will continue increasing the gap with the rest of the players while fighting with each other for market share by marketing budgets and product/service innovation • Top OTAs will continue in their effort to decrease dependency on metasearches by developing stronger loyalty programs and investing in brand awareness • Top players will start entering hotel booking segment more aggressively in order to increase margins but most likely to do so via partnerships or acquisitions • Cross-sell from flight tickets to hotel booking is not working yet: top players need to figure out what is the most efficient way to cross-sell hotel booking. Just offering to book a hotel after buying a flight ticket does not convert well • Will focus on growth • Will continue localization of their product and service to differentiate from Booking.com • Will use wider scope of marketing instruments to reach to the new customers before Booking.com • Corporate and B2B segments also could be opportunities for further growth • Sources of growth need to be identified. The audience of hotel booking consumers can be divided into two major groups: A) Those who used to travel independently and book hotels online – these consumers are likely to use Booking.com and making them to switch could be too difficult. B) Beginners who used to go to offline agencies and making first attempts as independent travelers. This group might be too small to generate growth that startups are aiming for • Will focus on growth • Will continue improving product and service to make the online shopping experience of package tours significantly better than offline • Will expand to the regions more aggressively • More funding will be raised by existing players and possibly by newcomers • Offline agencies will start offering online payment options more to their clients but won’t be able to match the level of required call center operations and IT sophistication • Inertia in consumer habits and fear of fraud: ‒ Most people are used to buying their vacation package in the travel agency office, so in order to start buying online they need to know that it’s possible to buy online ‒ They also need to believe that buying online a package is as simple and safe as buying a flight ticket 10
    • ABOUT TRAVELATA 11
    • Travelata.ru is a leading Russian online travel agency focusing on sales of package tours online What we do? • • • • • • Revenue model Current status • • • • Products ‒ Package tours ‒ “Last minute” offers Convenient payment options: credit cards, cash, bank transfers Bookable online Full customer assistance – professional call center agents No markups – only touroperator prices Agency commission (10-15%) Favorable cash cycle (we collect the money from the customer and transfer to the touroperatos later) • Contracts with over 150 Russian touroperators Financially backed by Invia.cz (leader in online package tours in Eastern Europe) & MCI management (Eastern European VC/PE fund) Own call center – 30 agents in Moscow 12
    • Founding team Managers Alex Zaretsky – CEO, co-founder • McKinsey&Company • Intel • CByond (start-up – sold to Olympus) • MBA, Stern – New York University • B.Sc.& M.Sc. in Electrical Engineering from Technion – Israel Institute of Technology Stanislav Satsuk – COO, co-founder • McKinsey&Company • Commercial Director at CityVision Group (start-up sold to RAINCO) • MBA, Kellogg – Northwestern University • B.Sc in Economics from Kuban State Technological University Advisor Bas Godska – Marketing advisor, angel investor • Marketing consultant to KupiVIP, Oktogo, Enter and more • CMO at Lamoda.ru (Rocket Internet GmbH) • CMO at Ozon.ru • Marketing Director Europe at Orbitz.com • Marketing and E-commerce director at Lastminute.com 13
    • Contacts Alex Zaretsky CEO, Travelata alex.zaretsky@travelata.ru Skype: zaretsky 14