Increasing Hotel Booking Conversion

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Increasing Hotel Booking Conversion

  1. 1. Increasing hotel conversation by using the tactic“For the consumer, By the consumer, To the consumer” By: Ashwin Gopal and Sandhya Boyapathi | July 2010
  2. 2. Executive SummaryThe Indian online travel industry has grown at a very fast rate in the last 5 years. As internetand credit card penetration has increased, more and more customers have started to adopt thee-commerce model. Online travel roughly contributes to around 85% of the total e-commercebusiness in India. Domestic flight bookings control a very significant share of revenues for allthe OTAs.One of the key travel products that still haven’t been able to catch up with the Indiancustomers is Hotels. While in the West, booking hotels on internet is very common, the Indiancustomer till now has not shown any real interest in booking hotels online. This is in spite of thebest efforts and investments made from all the large OTAs in the country.Based on extensive research, some of the main reasons that customers do not buy hotels onlineare1. People prefer to call the hotel directly and bargain for the best deals rather than goingthrough an OTA2. Country wide perception that online travel agents are purely air ticketing agents and cannotguarantee a good experience with hotelsThis document presents short term and long term solution for increasing the conversion rate ofOnline Hotel Bookings. The solutions are synthesized after an extensive primary and secondaryresearchThe gold rush in E-Commerce space and the golden goose of OTAs (Online Travel Agents)India has been the cynosure of internet and mobile based consumer businesses. With 800million+ mobile subscribers, 100 million+ internet subscribers, 200 million credit/debit cards, 20Million+ Facebook users, India has been in the forefront of internet and mobile usage.With E-tail transactions crossing $400 million+ and poised to cross $12 billion by 2016,undoubtedly It’s indeed a golden era for ecommerce in India.OTAs are chasing everything to differentiate and woo consumer Very little opportunity on flightprices as they come from common GDS source. All in all 2009 wasn’t the best year for OTA’s asthey tried their best to get out of the global slump and ventured into newer non air businesses.In 2010 OTAs are moving beyond just ticketing sites and are looking at delivering holistic valuebe it planning travel or holidays for its users or even more. With growth drivers – increasinginternet penetration (300 Million+ users), increasing usage of plastic money, awareness aboutonline booking advantages, By 2020 Indian OTA’s are expected to be among the top 3 fastestgrowing OTAs in the world.
  3. 3. Competitive landscape in Hotel booking industryEven though Make My Trip has the leading OTA with 48% market share and 87% of thecustomers prefer Make My Trip as an OTA, TravelGuru is the market leader in hotel booking.This is primarily because TravelGuru is positioned to cater B2B market. Per day sales volume 2010Consumer Behavior Secondary research revealed that, the time spent by the online users is skewing towardscontent generation over other activities. Skew in the Time Spent on the Webs 4 key activities The number of online queries for hotel bookings has increased fourfold in the past yearalone, but the conversion rates have been extremely low. Through focus group interviews, in-depth interviews and surveys conducted across 146 consumers and 35 travel agents majorreasons that emerged for this low conversion are  Lack of trust: A human interaction made them more comfortable with high involvement bookings like hotel, holiday packages, etc. The travel agent would be there to tell them stories about the good and bad things about the place, which though not necessarily work effectively in convincing the consumer. Poor media content, out of date reviews, bad descriptions is a put off despite attractive prices.  Customers consider hotels as “experience” rather than a “commodity”. The OTAs have not put insufficient effort to give a slice of hotel experience online which influences the booking decision.
  4. 4.  Resistance to change – Relying on next door travel agent for hotelsThe key insights through primary research combined with the secondary research revealed that  77 % of online shoppers use reviews and ratings for purchase decision  86 % of respondents prefer a friends / user recommendation over a critics / experts review  44% of people are drawn towards trying something new if it adds significant convenience to themThese key insights impelled us to explore this opportunity spot for MakeMyTrip.Customer segmentation:From secondary research, we segmented the market as below.  Mostly Business class traveler  Mostly domestic travelers  Both holiday trips and  International and domestic  Advance booking of tickets business travels flier  Extensive web search  Mostly domestic flights  Advance and last minute  No preference for any airline  Last minute booking of booking  Less importance to travel tickets  Less extensive web search  duration and time  Minimal web search  Travel duration very important  Economic class travelers  No airline preference  Medium Price sensitivity  Travel duration very  High price sensitivity  Associated with corporate important houses  Economic class travelers  Zero price sensitivity  Internet hours : >10 hours  Internet hours : 2 to 10 hours  Internet hours : All ranges  Annual income >10 lacs  Annual income < 5 lacs  Annual income: All ranges  Married/with kids  Single/Married/with kids  Mostly single  Age groups more than 30  Age groups less than 30  Age groups less than 30M  Low cost airlines  All kinds of airlines
  5. 5. MakeMyTrip is able to get customers onto its website but unable to acquire these customers. This is evident from the 16% increase in online queries, with abysmal conversion rates. We propose a short term and a long term strategy for MakeMyTrip in order to leverage its leadership in airline travel and pave its way as the market leader in the online hotel and holiday booking industry. Short Term: MakeMyTrip should use the 3 pronged Tease-Inspire-Involve approach in conjunction with integrated brand communication. Tease-Awareness should be created about the advantages and convenience offered by online hotel bookings and holiday planning through educational articles in newspapers and even movies. Additionally the ease of planning a trip using such services should be highlighted. Inspire- To break the inertia, the psyche of the middle aged customer, who spends maximum on travel and family holidays, should be eased through campaigns such as: ‘ Why go to a travel agent? Now planning your holiday is so simple, that even your young one can do it for you!” could be used. Capture the aspirations of the consumers through convenience and offers that are better than anyone else. Involve- Use channels such as FM and magazines to get people to talk about their perfect MakeMyTrip holiday and give out gift hampers to the best stories. The idea here is to create buzz around MakeMyTrip and increase its bran recall. Long Term Solution: With the advent of broadband internet, mobile internet, smart phones and GPS, users will be incentivized to “check in” rich media content and recommendations of hotels in MakeMyTrip website. Bringing consumer into the business value chain, MakeMyTrip can use the power of community to push repeat sales. How does the “Check in” mechanism Work?Check In: Consumer activates Validate: MMT validates the Go Live: Validated data goes live.information regarding a hotel entered data and passes / blocks Consumer gets a next tripand “check in” to the the data entered discount/check in pointsMakeMytrip system redeemable against next booking
  6. 6. As the content and recommendations posted are by end users, MakeMyTrip ensurestransparency by eliminating the doubt about the quality and experience of the hotel. Wepropose that the power of social networks should be harnessed to create viral campaigns aboutrecommendations made by the users…Operation model User posts rich media content in MakeMyTrip. Visitors get a slice of “experience” of a hotel and thus building the trust. This will lead to a booking. As time passes, a social network will evolve within MakeMyTrip and user will start believing the recommendations
  7. 7. The advantages of this idea are1> As MakeMyTrip provides technology and platform for creating viral campaigns for hotels,MMT’s bargaining power increases. This can be enchased to ensure “lowest price” for hotelaccommodations.2> Users get first hand recommendations from friends (spread through social network). Thiswill not only lead to very high conversion rates but also bring in new customers because aftergetting influenced by friend’s recommendation, non MakeMyTrip users will start booking viaMakeMyTrip.The challengeIt will take a formidable effort and time to build traction with the users to write reviews andupload stuff. Hence we propose MakeMyTrip to have content partnership with likes ofTripAdvisor.in who already has plethora of reliable reviews by the users. Going aheadMakeMyTrip users will shape the review system.Embracing the middle age customers – A new point of serviceIndia has the largest Postal network in the world with 1,55,618 Post Offices. With theemergence of courier services, Indian Postal System is underutilized. We propose MMT to havea strategic tie-up with Indian Postal System such that the internet enabled Post Offices (close to26,000 of them and increasing at a rapid pace) will act as the point-of-service for disbursing thetickets. About 32% of the middle aged people in India own some form of savings scheme inPostal Office and they have the “trust” factor associated with the Postal Office. These non-internet savvy users will go to post-office and book a hotel ticket.The offline activationWe propose MakeMyTrip to increase the media spend to Television Ads and screen the sameduring soap operas. The rationale is to target economic segment especially, the people of 35-50age bracket.ConclusionMakeMyTrip needs to leverage on its lead in market share and the high brand recall that it hasby giving consumer an experience he/she hasn’t had before as well as not provided by otherOTAs. Our solution with a philosophy of “For the consumer, By the consumer, To the consumer”will indeed solve the challenge of low conversion rates in online hotel booking. Trust factor intaken care as the users are the one who will rate and review the hotels. The rich media contentuploaded by the users give a real slice of hotel’s experience. This “human” aspect is the corevalue proposition of our solution.
  8. 8. References[1] ComScore Online Travel Trends In India (2010)[2] Travel and Tourism – India - Euromonitor International (2010)[3] Online travel Report India – ResearchOnIndia[4] McKinsey Global Institute research Report on consumer spending in India[5] “Future of India Post – Rural Dimension” by Harinder Singh

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