Indian online travel players hit accelerator....again!

The Indian online travel industry seems (in market designed to produce mixed metaphors) to burst in waves. Back in 2008- the four leading companies of India - Makemytrip, Cleartrip, Yatra and Travelguru seemed to have created a $2bb plus online travel market from a near standing start.

In their recent India report, PhoCusWright now puts the 2010 online travel market (leisure and un-managed business) at more than double 2008. $4.3bb is their size estimate, as much as 25% of the total travel market. They predict a rise to $7bb in 2012 (you can buy the report here). That would put the India of 2012 at the same size as the online market of Australia in 2010. An almost unrivaled acceleration in online travel. Like many markets online, the buying of low cost carrier tickets is a huge driver. But, unlike many markets, rail is a significant part of the grow story in India. Online rail in India is already more than a $1bb a year and is more than a quarter of the online travel industry's total turnover. In India (according to PhoCusWright), the percentage of rail online is twice the percentage of hotel online.

Corporate activity is accelerating alongside the market acceleration.

Number one player MakeMyTrip (MMYT) has been public for less than a year (IPO in August 2010). They went to the market at $14 and are still trading above $30 (Apr 21 at $32.23) with a valuation in excess of $1.1bb.

Cleartrip is chasing hard. They have just raised $40 mm from travel travel expense and management solution provider Concur (you remember them, they bought TripIt in Feb for up to $120mm).

Not to be left out, a day later Yatra announced they were raising $45mm from raised from Valiant Capital Management, Norwest Venture Partners, Intel Capital and others (WSJ story here). According to the WSJ this eclipes the $33.8mm they raised in the last round. The article quotes sources saying that a float in the next 12-18 months is very likely.

Expedia is also refusing to be left out. They have added India to their list of markets covered by their JV announced with Asian low cost carrier giant Air Asia.

Via is trying to argue there is room for more players. With $15mm raised so fare from NEA Indo-US Ventures, Sequoia Capital India and others, Via (also known as Flightraja) has mega bucks in their sites announcing last month they intend (emphasis on intend) to raise another $100mm.

Travelocity are trying to peek their head above the noise through a marketing relationship with Mastercard.

A very busy 30 days in a fast growing market. Did I miss anything? For the Tnooz latest list of top travel sites in India care of Hitwise click here.

Thanks to FriskoDude for the great photo via flickr

Fairfax buys Occupancy.com - owns online vacation rental market in Australia

News out this morning that vacation rental and short let group Occupancy.com has been bought by media company Fairfax. Occupancy will now be combined with Stayz.com to form the clear and unambiguous number one in the vacation rental/short let online market in Australia. According to the SMH the sale was for $29.1mm. The Australian says this is made up of $17.9mm in cash and $11.2mm in shares in the combined entity. The shareholders of Occupancy will retain 10% of the shares in the combined group. Does this mean the combined entity is valued at $112mm??? (will need to investigate).

Sites in the combined group will include Stayz, Rentahome and Takeabreak. Early news is that it will be combined with the NZ businesses for Fairfax holidayhomes.co.nz and Bookit.co.nz. Not sure what it means for Travelbug.

This is a big move.The Combined Stayz and Occupancy likely have 60-66% of the market for online vacation rental and short lets in Australia. With Yahoo7's TotalTravel second and Realholidays (subsidiary of Real Estate.com.au) a very distant third.

I will do more analysis later - hopefully including an interview with someone at Occupancy. For background:

• 1999 Rentahome launched by founder Justin Butterworth (now co-CEO of Occupancy - new role to be confirmed);
  
• 2001 Stayz launched by Chris Sharkey and others;
  
• 2003 Takeabreak founded by Paul Young and Craig Davis (now co-CEO of Occupancy - new role to be confirmed);
• Dec 2005 Fairfax bought Stayz for $12.7mm;
• 2006 Stayz attempts to expand the business by launching Hotelz. It did not succeed given the crowded market and Hotelz was dropped;
• Aug 2008 - Fairfax claim Stayz doing more than $100mm in year in transactions values . They value Stayz at $36mm;
• Jan 2010 Fairfax subsidiary Trademe buys online booking software provider Bookit. They have software that makes it easier for independent properties to get online;
  
• 2010 Rentahome and Takeabreak merge to become Occupancy.com;
• 2010 - the BOOT estimates the vacation rental/short let online market in Australia to $455mm per year; and
  
• March 2011 - Fairfax announces the merger of Occupancy and Stayz.com

Still to find out:

• Who will do what in the new company? Note Kirsty Shaw used to be the GM of Stayz. Now her Linkedin profile says Director Strategy and operations - Transactions Division at Fairfax Digital (though the linkedin dates say this change has been in place for more than a year);
• What will happen to each of the three brands?;
  
• Where does this fit with other travel assets like Travelbug in Nz; and
• Will the 10% ownership by founders of Occupany and the restructure at Fairfax itself mean anything in terms of the massive cross promotion that Stayz gets from Fairfax sites?
  

TripIt/Concur Sessions - talking the TripIt acquistion with Concur's Michael Eberhardt

On Jan 13 this year it was announced that travel and expense management company Concur (Nasdaq: CNQR) would pay up to $120 million for the indispensable travel tool Tripit (Kevin May Tnooz story here and press release here). I had a chance to speak last week with Michael Eberhard, Concur's EVP and GM Asia Pacific (pictured) about Concur, the deal and their combined plans for Asia. Three themes from the discussion

1. Asia is a big priority for Concur and TripIt. They are planning to spend a lot of time and money targeting customers in this region;

2. There will be stronger links to travel booking in TripIt. Concur are a large travel management company and are looking to bring that to TripIt; and

3. The social media parts of TripIt are here to stay. I expressed some doubts about the usage of the social media features but Concur remain convinced that these are important features that will be worked on and pushed.

Full interview notes below.

The BOOT Asks: What are your plans for TripIt post acquisition?

Eberhard: The main goals of the acquisition was to increase investment into all of the TripIt solutions (free, pro product and core business product). Helps [Concur further target] unmanaged biz travel especially those still craving data at deeper level than an itinerary.

The BOOT Asks: I use TripIt extensively for travel planning and co-ordination, but I have not found the social media parts (finding who is in what location) that useful or result in any connections while on a trip. Do you see value in the social media elements of TripIt?

Eberhard: We see the social media parts as important. Personally, prior to the acquisition I made a connections with friends, including one running a marathon in Asia. Combined with mobile and groups will give friends, family and travel managers information and visibility they have not had before.

The BOOT Asks: What are your non-English and Asian plans?

Eberhard: Concur had a lot a success across Asia with existing customers. We are now moving into AsiaPacific to acquire and service customers locally. We will increase staff in Hong Kong and Singapore and through our joint venture in Japan.

The BOOT Asks: Why did you launch a joint venture in Japan and what is the biggest thing about the Japanese market that surprised you?

Eberhard: some of our largest customers have travellers and employees using Concur inside Japan but we have not been acquiring new customers. To address this properly it made sense to do a JV with a local company (press release here).

The number one surprise about the Japanese travel market is that the market is more fragmented than we expected and processes are unique.

The BOOT Asks: Concur is (in part) in the expense management business. What is the weirdest expense you have seen an employee try to charge?

Eberhard: Most companies have some level of fraud. We have examples of lavish parties, including weddings being charged by employees.

My Take

I use TripIt religiously to help me cover 200,000 miles a year in travel. It is always a challenge to see how a start up will fare inside a multi-billion dollar company. Concur seems like a better home for TripIt than a media company or OTA due to the focus on travel and expense management rather than a retail or media model. As I tweeted when the deal was announced - this the first deal of 2011. Is also the first of my list of seven do-overs/reboots (Triporati, Tripit, NewTravelCo/Travelpost, Getaroom, Voyij, Wego and Hotelscombined) to get bought out.

Concur background

I have to admit upfront that I had not heard of Concur prior to this deal. If you are like me in this regard, let me share with you some of the background provided by Eberhard. At the core the company is a "provider of travel and expense management solutions". Market cap is around $2.7b (as of today). They claim 15 million users in 90 countries including big companies like Unisys, Ericsson, JCPenny and Cable & Wireless.

Dave Cunningham of OurExplorer on sale to Viator

Recently we read through Tnooz and TechCrunch that destination activity specialist Viator had bought human tour guide search and booking engine OurExplorer (press release here). Once the deal has closed, Viator will own the main assests of OurExplorer. An emerging start up brand and a rating system, search engine and booking functionality for 2,400 individual guides.

I had a chance last week to talk with OurExplorer founder and CEO Dave Cunningham about the sale process and what he learned as the boss of an online travel start-up. [for more background on the company see my 2008 interview with Dave]

BOOT: How was the sales process?

Cunningham: It took about fourteen weeks to complete. Six weeks of work in the background then eight weeks of due diligence to confirm the value and the legals.

BOOT: 14 weeks to do a deal – that’s quite quick?

Cunningham: It felt very long. For a small team due diligence is a lot of work. It is a massive risk as a start-up to engage in a sale process. The company we lost 10-15 weeks of growth in the process.

BOOT: What did you learn from the sale process that would benefit other start-ups?

Cunningham: Three steps to us building out OurExplorer

1. Build the platform an website
2. Establish the supplier base (guides); and
3. Build demand

Of these - do not underestimate how hard the work is to build out a supplier base. Need dedicated sales people – start-ups constantly underestimate how hard to get a quality supplier database. Only once you have a decent supplier base can you drive traffic – which is difficult enough.

I wish I’d had more paper evidence of supplier’s commitment. Both in terms of contracts and exclusivity. OurExplorer would have been worth a lot more with paperwork on supplier.

BOOT : Did you user a broker or advisor? If so, do you have any advice in using an advisor?

Dave: Yes. If getting biz broker to help – insist that they take less up front and more on the back end. This made it easier for us to see who had the contacts in the industry. We negotiated to double exit fees and reduce upfront. Any company that said yes to the deal provided us with confidence of the value of their network.

Too many start ups have the same number of companies on their power point deck as the exit. In Australia everyone has Fairfax [large AU media company] or News [News Ltd, the AU arm of News Corp] on their slides as a buyer. Need to have a profitability strategy in your plan. Cannot be reliant on a sale exit – especially in Australia where there are limited buyers.

BOOT: What are the integration plans with Viator?

Dave: Viator have confirmed that they will keep the brand. Viator had two options

1. integrate product – select the top 1000 or so guides (out of 2,400) and add them into the Viator product set; or
2. keep the OurExplorer brand and dedicate effort to grow the business and brand

Viator are doing both. Integrating and keeping brand alive. Viator have around 5,000 products. By adding 2,400 guides to the product list this is a big add.

BOOT: What’s next for you?

Cunningham: One job left. I am going to the World Tour Guide Association conference in January for a good quality hand over. Then done. Then looking to buy into another start up. To help them drive sales and marketing.

My Take

OurExplorer are the definition of the long tail in travel (I mean that in a good way). They are the first (that I know of) to provide searching, rating and booking of individual guides. I think it makes a good addition to Viator.

For my 2008 interview with Dave see this post

Thanks to Håkan Dahlström via Flickr for the photo

Tnooz: Consolidation and M&A activity in Asia

Post live a Tnooz titled "Keep an eye on Asia for next wave of major online travel consolidation". In it I discuss how the three powerhouses of Asia - Rakuten, Wotif and Ctrip - have spent the last three years acquiring companies in Asia, Europe and America as they try to develop growth outside their respective home markets of Japan, Australia and China. I end with a prediction that

"there is more [M&A activity] to come; that we should expect to see more deals by these companies in the next three years. I would also not be surprised to see one of these companies make a major play through a big ticket acquisition in either Europe or America."

Full post here

Google to buy ITA Software (report). If true Google's meta-search march is on!

Back in March care of a reliable source I broke the rumour/story that Google was about to launch a travel meta-search product. Then Tnooz broke the story that the rumour was true and Google was seen inserting pricing and supplier bidding information to google map search results.

The biggest worry that Google has in getting into the travel meta-search space is how to catch up in technology. It is important to realise that each developer that Google diverts away from the core algorithm and ad platform carries a large opportunity cost. Even in a world of twenty percent time, Google is very conscious of the cost of putting developers on the expensive and complicate work involved in specific sector search rather than general search. The biggest question hanging over a travel meta-search play therefore was how would Google find the time and resources to build the product.

Looks like we might have the answer - and it has nothing to do with "building".

Story coming out of BusinessWeek that Google is in talks to buy ITA Software, one of the worlds biggest independent travel booking software makers who count Orbitz (disclosure), Bing, India's cleartrip, Expedia's Hotwire and Kayak as customers. Would certainly provide Google with all the tech they would need to launch a top flight meta-product. And on the entertainment front, would make the relationship between Microsoft and Google even more interesting.

hat tip to Paul Fisher who alerted me to the story via Twitter