Travel Aggregators: Missed the Bus?
MakeMyTrip is the fee-taking demand-aggregator for flights + hotels + buses
- Flights is a $7 bn annual revenue (https://bit.ly/2ll3qA0 + 43% marketshare)
- Hotels is a $13 bn annual revenue market (http://bit.ly/2WZcCsI http://bit.ly/2X4vne8)
- Buses is a $100 bn annual revenue market (http://bit.ly/2X3FksC #1 SRTU = 7%, rev = Rs 500bn)
- For completeness and comparison, the Railways number is $27 billion http://bit.ly/30fVxwy
In traversing the Railways => Flights => Hotels => Buses spectrum, fragmentation increases hugely. The higher the fragmentation, the more the need for not just a booking platform, which Redbus and MMT are, but a more holistic … let’s call it an asset-participating overall aggregator (OA) to provide the tech value (TV) comprising of the following, which the operators are too small to pay the fixed cost of developing themselves
- Demand aggregation. It is easy to believe that this job is done and dusted with Mission Accomplished by RedBus. RedBus does dominate aggregation, but a large part of bus market remains untapped ($190million gross in Q3F18 => 99% remains to be reached http://bit.ly/2X6Sfd4)
- Dynamic pricing for max utilization and revenue
- Financing mechanisms (either direct-lending or first-loss origination or pure marketplace) for fleet expansion and new entrant entrepreneurs
- Participation in yield upside rather than fee-taking
When there are huge investors to back an OA and where there is space for an OA, an OA should be expected to arise.
- In flights, there is little fragmentation and the operators are all large enough to invest in TV themselves. All pieces of TV are with operators in-house. Investors already back airline leases. No need for a new OA.
- In 4-star plus hotels, there are quasi-OAs namely brands to provide the TV. Banks finance hotel owners and brands provide the other pieces — not necessarily with data + tech but with deep knowhow of the market.
- In 3-star hotels and below, there were no financiers or OA. An OA emerged to provide the value namely Oyo
- In buses, the market is large + fragmented, no OA exists and almost no bus operator can pay for TV on its own. Those that can have still not invested in it. Very little of financing is informal. An OA is needed and does not exist (The commuter intracity segment does not really qualify — intercity is where the bulk is). Large investors have entered India and are hungry for large markets. Transportation is huge globally and separately in India also.
- A non-travel large domain in which an OA has emerged is office space, or more fashionably, co-working spaces — WeWork. Oyo itself is also interested in co-working. Another large domain is co-living which again is of interest to Oyo, but also several other players.
Of the elements of TV, my firm, Euler, has built out 1 & 2 in other/related markets. Extending to buses is an easy extension for our technology, but the ops is not our strength. Would love to hear from teams with deep experience in bus ops but without tech capabilities that are looking to build an asset-participating (WeWork or Oyo style) OA for buses in India.
