Markets

Hotels, And India’s Middle Class, Show Path For Online Travel

India Market Shows Path For Online Travel

It’s a fool’s errand to predict what will interest historians decades or centuries from now, but the scribes here at PYMNTS don’t pull back from such challenges. When it comes to retail, general commerce and online payments, the increasingly powerful middle class in India will probably get major credit in future textbooks for shaping the global digital economy.

Look no further than an India-based hotel operation called Oyo for further evidence of that. As a new report stated in The Wall Street Journal, “founded just six years ago by a 19-year-old entrepreneur from one of India’s poorest states, Oyo Hotels and Homes has grown so fast that it already ranks among the largest hotel chains in the world.”

The founder, according to that report, “created a lodging empire by persuading thousands of unbranded, usually badly run Indian hotels to put themselves in his hands as franchisees or lessors. Oyo asks owners to upgrade them to meet some basic standards – clean linen and bathrooms, air conditioning, Wi-Fi, breakfast and properly groomed staff – and rents their rooms out at bargain-basement prices, using homegrown technology meant to optimize occupancy rates.”

Winning Formula

Now, according to the newspaper, “the formula has been a hit with India’s burgeoning middle class,” with some $1.5 billion worth of capital coming from the likes of SoftBank, Sequoia Capital, Lightspeed Venture Partners and Airbnb Inc. “Most of the company’s revenue comes from fee-paying franchisees and bookings. Oyo is also part listings platform, like Airbnb, and part reservations site, like Booking.com. For India, where all three approaches are in short supply, that has turned out to be a recipe for rapid expansion.”

The rise of Oyo comes amid other innovations and disruptions in the world of online travel. Indeed, as PYMNTS has covered, a group of startups is setting its sights on the travel activities industry, which is the fastest growing segment in the tourism market.

The startups are targeting millennials around the world, offering services such as amusement park tickets, cooking classes, walking tours and more, focusing mainly on the growing Asian travel market. In fact, travel industry research company Phocuswright has predicted that turnover in the tours and activities market would reach $120 billion this year, with more than a third spent with Asian suppliers.

“Asian inter-regional demand itself is as sizeable as the U.S. or Europe, then you add on the growth,” said Eric Gnock Fah, co-founder of Klook, according to the Financial Times. “In five years’ time, I think Asia as a whole will be bigger than the U.S. and Europe. That’s why I think investors in general are optimistic about this sector.”

Founded in 2014, Klook received a $225 million cash investment from SoftBank earlier this month, bringing its total raise to $520 million and its valuation to over $1 billion. The company currently offers more than 100,000 activities in more than 270 cities.

Retail Influences

Not only that, but eCommerce innovators are taking new approaches to hotel reservations.

Splitty Travel, for instance, allows consumers to combine two rate plans to create one itinerary for their stays. While the technology could allow consumers to save money on their trips, the platform isn’t all about the cost savings. The company allows for splitting and matching between cancellation policies, as well as meal plans. Co-founder and CEO Eran Shust told PYMNTS in an interview that the aim is to bring more options to the table and enable travelers to “choose something not out of the specific package[s] that most of the OTAs [online travel agencies] are offering.”

The platform lets a traveler have breakfast as an option on the first day of his trip (presumably if the hotel charges for breakfast), and he can choose to enjoy the local cuisine in the city for the other two days of his stay. In another case, a traveler might know she can stay for one night, but is unsure whether she can make the last two days of her stay. With that scenario, the traveler could book the first night at a non-refundable rate and the others at a rate that allows free cancellation up until the day before check-in. The company can also split reservations across different days to take advantage of deals and specials. In terms of selections, Splitty Travel focuses on hotels that are two stars and higher as well as boutique properties.

These recent developments, notably from India, give more clarity on the future progress of online travel.

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