Interivew with Sandeep Murthy at Cleartrip.com

Written by: gaurav

On Aug 24th, 2007

The online travel business is a fast growing market segment due to increased travel in India as well as growing number of travel service providers like airlines and hotels. This market segment is also competitive with multiple players including travel agencies like Yatra, MakeMytrip and travel search portals/aggregators like iXigo, Zoomtra. Apart from these startups, the airline and hotels themselves are also setting up a strong online presence.

Online travel agencies typically build close business relationships with the service providers, transact on their own site and have offline operations to complement the Web Site. In contrast, search portals are typically online only and scrape the web to aggregate data from any and all sources possible (including online travel agencies) and redirect users to the source’s Web site to buy the ticket. Online travel agencies have higher expenses since they invest more in building relationships and need to have transaction capabilities on their site.

We recently interviewed Aloke Bajpai of iXigo. The following interview is with Sandeep Murthy, CEO of Cleartrip.com. The interviews themselves reflect the difference in beliefs of how to address the market.

I also have done a thorough analysis of which business model is more likely to success in this growing market. You can view at my blog at http://techtrends.in/2007/08/24/the-online-travel-space-%e2%80%93-large-opportunity-with-different-business-models/

What is Cleartrip.com?
Cleartrip is an online travel agency; we intend to make travel simple and booking online a pleasant experience. We currently focus on the domestic (India) air tickets segment with hotels across the globe.
  
Who are the founders of Cleartrip.com?
Stuart Crighton, Matthew Stacey and Hrush Bhatt, all of whom have a background in the travel and/or online industry are the founders of Cleartrip.

When did you join the Cleartrip team ?
Sherpalo and KPCB Ventures made a first round in investment in Cleartrip in September 2005. I joined as CEO a couple of months later

Whose decision was it for the insider to be brought in as CEO and what was the reaction of the founders?
Since I had been involved in the business from its inception, that is before the funding,  I share a  good rapport with the founders it was a joint decision between the founders, the investors and myself to have me play a more active role in the management of the business. Due to a shared vision and direction everyone, including the founders, were very supportive of this decision.

How much investment has Cleartrip received?
The exact number is not disclosed but it is in the millions of US dollars.

What is the uptake on the site?
The site is performing really well. We process upwards of 5000 transactions a day. 30% of our registered users who search on the site end up buying. We are also seeing repeat usage around 25-30%

What, in your opinion, are the critical factors of success in this business?
Providing the best customer services and exclusive deals with airlines/hotels are the key. Good customer service is attained by having a fully integrated solution for people’s domestic traveling needs.

We don’t believe that lowest price is a sustainable advantage. It’s not feasible/relevant. Take for example the airline business. The airlines are selling online and hotels will soon follow the trend. Hence all aggregators will have to have same prices. (or very similar). Can’t have any higher since no-one will buy and can’t have any lower since then there is channel conflict with the airlines and no margin in the business.

A better approach is to have a tight business relationship with the airlines and provide joint promotions and find compelling ways to add value to customers, with features such as fare calendar (you can see the lowest fare across the whole month in one search and ticket printer.)

So what do you do to provide good customer service and promotions?
The simplicity of our Web site we believe is a differentiator. In addition we also provide a very efficient customer support for any users that get stuck while using the Web site. For airlines that require a paper stub of the ticket we will even mail the tickets to our customers.

We’ve had several promotions with our partners (airlines). E.g. we had a scheme for a 15% discount for Indian Airline flights and a gift voucher for Kingfisher flights. We’ve also announced multiple promotions with hotels including Oberoi, Trident group and more recently the Fortune group.

What about hotels?
Hotels are a fragmented market and it is important to provide users with an exhaustive list of options. We currently have over 3,200 domestic hotels and over 40,000 International hotels available on our website. Where we can check availability and book it from our site itself. Initial response has been very good.

How do you market the site? What is the cost of acquisition?
Marketing site is a combination of online marketing, TV and print advertisement, word-of-mouth and various creative promotions with our partners or otherwise.

Cost of acquisition is not cheap in this business. However the demographic is fairly niche so can have positive returns.

How do you make money?
We get a commission for every ticket processed on our site. This is between 4 – 6 % for airlines and 15 – 20% for hotels.

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3 Responses

  1. 1. Rajiv said on August 26th, 2007 at 8:35 pm

    Interesting .. I read both ixigo and cleartrip’s interview, and used both sites.

    Not only do they have different approaches, but I also find huge price difference on them most of the time (ixigo cheaper)

    what does sandeep mean when he says “Cost of acquisition is not cheap in this business. However the demographic is fairly niche so can have positive returns.”

    how does a fairly niche demographic ensure positive returns ?

  2. 2. Vivek Garg said on August 27th, 2007 at 1:41 am

    How does one define acquisition cost in such non-subscription models (clearly not SAC)? Is it cost per transaction? Or cost per user login being created? I think later is only meaningful if user data is used to generate value in terms of targeted offerings/ads.

  3. 3. Gaurav Kotak said on August 29th, 2007 at 8:35 am

    Rajiv,

    Let me take a stab at your question since I had spoke with the guys at Cleartrip. Basically what Sandeep was talking about is that it is expensive to acquire users in this space since you have to tap in traditional media and competition is driving up prices. But since these users are a demographic that spend reasonably money online (ticket purchases) it is feasible to have a positive ROI over there lifetime (or perhaps even a single transaction) via the transaction fees.

    Vivek,

    You’re right; typically in transactional sites the metric used is either cost per transaction or cost per user that has at least one transaction. Then further analysis is done to calculate life time value of users that transact at least once. As you can see Cleartrip monitors this closely by tracking the repeat usage. Login metrics are useful as well but more so if there is a correlation between signup and future transactions or if there is revenue generated by ads or co-registration etc.

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