Online Travel Agent Yatra.com has launched operations in the US and UK, reports DNA. The company has adopted a B2B model in the UK, while the US model remains B2C, like in India. So, while the US site is live (here), there’s no separate site for the UK. The company is directly approaching agents in the UK, and asking them to use the site for their India bookings.
Note: Don’t go by the numbers given in the story, according to which Yatra currently has revenues of Rs. 1500 crores, and is targeting $220 million by the end of 2009-10. Rs. 1500 crores is around $340 million, so there’s obviously some mistake.
The Impact Of 0% Travel Commissions
The most significant development in the online travel business in India over the past few months has been the cut in the commissions on sale of air tickets. Commissions are expected to go down to 0% (zero percent) from October this year. Take a look at this report. India (Airlines), Jet Airways and Kingfisher have deferred this by a month to November. If implemented, this means that all travel agents will earn nothing from the airlines for ticketing. The impact:
– A further increase in ticket prices if the OTAs start charging a service fee. This may work out, since airline sites will list the same tickets without that fee, and meta search engines will also index them.
– A change in the business model – more packages will be pushed, and hotel booking will become an important source of revenue
– Decline on airline ticketing advertising – to some extent, that has already happened, and it’s had a trickle down effect on related services – agencies, ad networks and publishers. Travel and Finance were the two largest advertisers online.t
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3 Comments until now.
Nikhil,
Assuming that their current #’s as stated in the release is correct.
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Averaging revenues of Rs 100 crore a month and a volume of more than 6,500 air tickets and
300+ hotel room nights per day.
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This Translates to 19500 Airline ticket and 9000 Hotel Booking.
The main point to consider will be how the revenue is being recognized.
Gross vs Net.
Example: The Hotel booking value could be Rs20,000(Gross) but the pass thru commisson(net) could be Rs500.
I think Yatra is stating the Gross Revenue instead of Net Revenue.
Hi Ravi…so what would be the kind of gross revenue they would require for a net revenue of $220 million? Immense, if you go by current margins. No, I definitely think there’s been a mistake with the numbers.
The Numbers may be right. The lower projection for 2009-10 may be due to the new 0% Airline booking commission.
As per this article 88% of Yatra’s revenue comes from air bookings.
http://sify.com/finance/fullstory.php?id=14736567
The biggest problem I see in this industry is they report Gross Revenue. This could be misleading especially when some of them are planning on IPO.
I don’t know the Accounting Rules in India, but in US and UK the
Revenues should be reported as gross amounts only when the retailer has the primary responsibility for fulfilling the transaction and bears the accompanying risk.
Check this Article
http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2001_3/manly
Section 3.2 Gross or Net Revenues