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Executive summary


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Online travel agency to serve Russia & CIS

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Executive summary

  1. 1.      Russian  ё-travel.ruBringing  Russia’s  travel  industry  online                    By:  Andrei  Barashenko  and  Max  Tikhonov  +7  909  685  77  33      
  2. 2. Executive  Summary  At  the  moment,  in  Russia,  presence  of  travel  industry  online  is  at  its  infancy.  Only   1-­‐2%   of  packaged   holidays   are   sold   online.   The   market   is   wide   open   and   there   is   no   efficient  service  that  allows  the  consumer  to  find,  compare  and  buy  a  desired  holiday  online.    The  process  of  booking  a  packaged  holiday  is  fairly  painful  in  its  present  form.  To  begin  with   the   consumer   has   to   try   very   hard   to   find   correct   and   well-­‐presented   information  online   and   even   if   such   information   is   available   the   process   of   booking   is   not   entirely  automated.  One  will  have  still  have  to  visit  travel  agent’s  office  to  make  the  purchase.    The   usual   procedure   is   the   following.   Customer   browses   the   net   where   he/she   is  presented   with   approximate   prices,   travel   option   and   out-­‐dated   information.   Then   one  has   to   call   the   travel   agency   to   confirm   that   the   desired   holiday   package   is,   in   fact,  available.   Next,   the   customer   will   need   to   go   to   travel   agent’s   office   to   make   a   final  confirmation  and  payment  for  the  trip.  The  payment  is  done  in  cash  or  at  best  of  times  via  a  bankcard  (not  online  but  rather  at  the  office).  Moreover,   when   dealing   with   travel   agents   the   consumer   is   usually   presented   with  limited   information   since   most   of   the   time   agents   have   special   agreements   with   certain  suppliers  an  thus  tend  to  push  only  limited  products.  Therefore  the  choice  of  consumers  is  very  often  limited.  In   our   opinion   this   market   inefficiency   presents   a   huge   opportunity   for   a   company   that  can   provide   proper   online   tourist   agency   services   such   as   Expedia   or   Priceline.   Our  solution   to   the   problem   is   to   build   a   service   for   the   Russian   market   that   would   allow  consumers  to  choose  from  a  great  variety  of  travel  products  supplied  by  Russian  as  well  as   international   service   providers.   A   place   where   the   consumer   will   be   able   to   get   the  most  up-­‐to-­‐date  information  about  available  products,  compare  them,  if  needed  compile  their  own  trips  and  ultimately  book  and  pay  online.    The  business  model  is  simple  and  we  are  not  going  to  reinvent  the  wheel.  The  idea  is  to  charge  a  commission  on  the  travel  products  sold.  In case of packaged holidays supplied bylocal tour operators, in Russia this  commission  is  usually  paid  by  the  service  supplier  (tour  operator)  and  varies  from  8  –  15  %  (depending  on  volume  of  business  generated)  The   unique   selling   points   are   based   around   all   the   advantages   that   a   true   online   tour  agency  offers:  24/7  service,  good  value  for  money,  great  variety  of  customizable  options,  swift  and  efficient  access  to  all  the  information  required  to  make  a  decision.  Further,  the  main  proposition  to  the  customer  is  comfort  and  competitive  pricing  that  we  will  be  able  to  offer  due  to  efficiencies  and  scale  of  operating  online.  It  is  important  to  emphasise  the  “best   value   for   money”   proposition   since   recent   research   emphasis   increasing   price  consciousness  of  the  consumers  when  selecting  a  packaged  holidays.    E-­‐travel   will   make   life   much   easier   for   the   customer   by   splitting   and   presenting   travel  products  thematically.  For  example,  skiing  holidays,  weekend  getaways,  last-­‐minute  deals,  surfing/sun  holidays  etc.  Travel  products  will  be  sorted  by  a  fine-­‐tuned  filtering  engine.  We  are  also  planning  to  introduce  unique  products  to  the  Russian  in  such  segment  such  as  skiing   and   surfing,   which   are   gaining   in   popularity.   This   will   be   possible   due   to  cooperation  with  a  number  of  key  partners  in  EU.    Sales  and  marketing  will  be  done  via  combination  of  online  and  offline  methods.  Due  to  the  fact  that  any  inquiry  into  travel  opportunities  most  consumers  in  Russia  begin  with  an  online  search,  sufficient  efforts  will  be  put  into  online  marketing  tools.    
  3. 3. Competition   is   currently   week.   In   total   there   are   only   one   agency   and   two   tour  operators   that   are   offering   complete   online   services.   However,   in   case   of   the   tour  operators,   online   services   are   a   small   addition   to   their   brick   and   mortar   retail   outlets.  Their  interfaces  are  not  very  function  and  user  friendly  and  resemble  Craig’s  list  era.  Most  importantly  they  are  focused  only  on  selling  their  own  products,  thus  lacking  comparison  and  customisation  offered  by  online  tour  agency.  The  third  competitor,  is  more  direct  in  nature,  is  a  start-­‐up  that  was  launched  a  few  years  ago  (  It  provides  full  automated   online   sales   of   travel   products,   however   they   are   at   a   very   early   stage   of  development  and  have  not  gained  much  pace  and  market  share.  Additionally  big  part  of  their   efforts   goes   to   servicing   business-­‐to   business-­‐sector.   Travelmenu   position  themselves  as  more  of  an  online  booking  system  for  other  travel  agents.  We  regard  them  as   main   competitor,   but   since   they   have   begun   operating   not   so   long   ago   there   is   still  plenty  of  room  in  the  market  to  service  the  consumer  segment.  And  we  are  certain  that  the  consumer  is  ready  to  be  accustomed  to  the  new  way  of  purchasing  travel  products.  With   regards   to   the   market,   it   is   quite   sizable.   Russia   ranks   8th   biggest   spender   on  outbound  travel  globally.  It  is  important  to  notice  that  our  primary  target  is  the  outbound  packaged  holiday  segment,   which   has   been   growing   at   14-­‐20%  for  the  past  5  years  and  now   amounts   to   11   million   packaged   holidays   sold   every   year   and   accounts   for   60%   of  outbound   tourism   in   Russia.   Only   1-­‐2%   of   these   packaged   holidays   are   now   sold  online.  In  a  matter  of  3-­‐5  years  that  figure  will  be  much  higher.  Russian  Internet  audience  is  now  the  biggest  in  Europe  at  68  million  users.  Penetration  of  payment   methods   has   experience   phenomenal   growth   in   the   past   few   years;   the   same  could  be  said  about  ecommerce,  more  an  more  people  are  buying  products  and  services  online,   thanks   to   a   few   online   retailers   who   are   working   hard   to   drive   consumer  confidence   in   internet   purchasing.   Therefore   we   believe   that   the   demand   is   there   and   the  market  is  ready.  We   are   a   team   of   different   but   complementing   backgrounds.   Leader   behind   the   idea   is   an  experienced   business   development   manager   who   has   managed   an   internationally   diverse  team.   Our   technology   wiz   has   previously   worked   for   Intel   Corporation   in   the   United  Kingdom.   He   has   also   co-­‐founded   a   software   development   company   in   Russia   that   has  successfully  developed  state  of  the  art  IT  infrastructures  for  Addison  Lee  Taxi  services  in  London.   Our   marketing   guru   has   been   involved   in   online   and   offline   marketing   for   14  years;  he  led  the  launch  of  an  international  web  based  insurance  company,  on  the  Russian  market.  As   for   the   current   state   of   things;   at   present   we   have   formed   a   well-­‐balanced   founding  team  with  complementary  skills  and  experience  that  can  successfully  launch  and  grow  the  company.  Portion  of  the  funds  to  get  started  we  have  raised  from  personal  savings  and  we  are   currently   seeking   co-­‐investors.   We   have   also   formed   an   agreement   of   cooperation  with   key   technology   partners,   who   provide   access   to   real   time   database   of   all   travel  products   supplied   by   biggest   Russian   tour   operators.     And,   which   allows   direct   and  immediate   booking.   We   are   also   in   process   of   signing   agreements   with   key   product  suppliers.  To  sum  up,  we  are  convinced  that  now  there  is  huge  gap/opportunity  in  the  market.  And  it  is  all  up  for  grabs  with  the  right  model  and  the  right  team.  The  key  point  is  that  it  is  only  a  matter  of  time  that  holiday  purchasing  in  Russia  migrates  online.  Much  like  the  airline  ticket  booking  online,  which  is  now  growing  at  double-­‐digit  rates.  Now  is  the  time  to  enable  Russian  consumers  to  buy  their  holidays  online!