Online travel portal Cleartrip is looking to drive half of its new customer acquisition through its ‘Local’ unit over the next three years, as younger customers seeking weekend experiences get converted into travellers.
Cleartrip believes that Local could contribute up to 20 per cent of the company’s overall revenues in the same time, and will help lower the cost of acquiring high-paying travel customers. Over the past eight months, it has seen over 20 per cent customers of Local buy into some sort of travel offering, with over 80 per cent of them being new customers.
“If it (Local) can get to 20 per cent revenue contribution in three years, I’d be very happy. What it does for Cleartrip is, even though it’s just 20 per cent of the revenue, at a customer acquisition level it’ll be closer to 50 per cent,” said Subramanya Sharma, chief marketing officer at Cleartrip.
With the average traveller in India making just two trips a year, portals such as Cleartrip have had to spend huge money on advertising and marketing to retain users. Local however provides customers with a constant use case, helping lower marketing costs and in turn drive revenues for discovering local activities.
Sharma says the market for travel and local experiences - food and beverage, shows and activities, is roughly the same size. However, given the smaller ticket sizes of Local, the addressable market is ten times larger. Cleartrip is now looking to tap these set of young users to cross-sell travel and build loyalty so that they become its regular customers in the future.
While Local was intended to expand Cleartrip’s revenue base and increase the stickiness of its service at times when customers were not travelling, the company soon realised it was tapping a largely new base of customers too. The average age of a customer making a travel booking on the platform is 35, users of Local are far younger at just 25.
“The TG (Target Group) for local is 10 years younger than the general travel TG. So that’s an interesting outcome and it has some interesting long-term implications,” added Sharma. “With the kind of activities we’ve onboard though, we’ve seen that cross-sell is beginning to happen.”
India’s online travel space has seen a price war in the past 12-18 months with large players such as MakeMyTrip and ibibo began slugging it out to win market share, while also fending off an attack from new and well-funded competition such as Oyo Rooms. With consolidation of MakeMyTrip and ibibo, and returning sensibilities among younger players, there’s now hope of reduced discounting which will allow players in the space to make money.
In the year that ended March 2016, Cleartrip’s losses more than doubled to Rs 64.6 crore from Rs 29 crore in the previous year, while revenues grew by 32 per cent to Rs 254 crore in FY16. Sharma, however, refutes that the company’s losses grew more on account of international expansion than from discounting.
In the current financial year, Cleartrip’s revenue growth could be in the range of 40-45 per cent, with losses again being attributed to expansion of its business and investments in Local. However, returning sensibilities in India’s online travel market could just see Cleartrip becoming Ebita (Earnings before interest, taxes, and amortisation) positive, but Sharma declines to share a specific timeline on when this could happen.