Expedia's Game Plan for Cashing In on the Indian Travel Market
Expedia intends to position itself in the domestic and international travel market in India. This will involve coming in closer contact with the people and travel suppliers. Expedia's goal is to take on the local market leaders MakeMyTrip, Cleartrip, Yatra and Travel Guru and climb up to the fourth position in less than a year. Here's how Expedia plans to go about it.
Connecting with Indian Consumers
Expedia is now armed with a significant $6 million budget for its marketing initiatives in India.
- Building its brand: Expedia is making heavy investments in increasing its brand recognition in India. It has partnered with MSN and hindustantimes.com to form a customized Indian offering: Expedia.co.in. Its "Big Daddy" advertising campaign can be found on TV, billboard, taxis and trains all over the country.
- Expanding distribution channels: Given the high penetration of mobile phones in India, Expedia has partnered with Nokia to create an avenue for mobile browsing and booking to compensate for the country's still low (though rising) Internet penetration.
- Staying affordable: Expedia does not charge booking fees to its customers, but instead gets commissions from travel suppliers (airlines, hotels, etc.). This could be particularly attractive for the increasingly affluent but still very much value-conscious Indian consumer.
Partnering with local travel suppliers and agents
- Directly sourcing travel inventory: Expedia is now in talks with domestic carriers to get a share of their inventory directly.
- Partnering with travel agents: It is also partnering with small brick-and-mortar travel agents through the Travel Agents Federation of India by providing them access to its own travel inventory of air tickets and hotel stays. This will significantly expand Expedia's distribution in remote and rural geographies with low Internet penetration.
- Expanding hotel inventory to suburban and rural India: The Indian hotel and lodging market is essentially unorganized, and is dominated by family-run, independent properties. As it increases its presence in India, Expedia will greatly enhance its hotel stay inventory (currently including rooms in more than 130,000 hotels) to include small hotels in suburban and rural areas.
Stock Upsides from an Indian expansion
As Expedia increases its presence in India, we can expect an increase in overall bookings via Expedia.co.in. We currently estimate Expedia's share of hotel bookings to rise from 2.07% in 2010 to 2.37% in our forecast period. However, growth in India, with its over 1.2 billion people, can help Expedia gain a higher share of the overall hotel bookings.
Even a 0.2 percentage point increase in incremental market share due to expansion in India could lend a 5% upside to our current $30.60 Trefis price estimate of Expedia's stock.
You can see a detailed analysis of our $30.60 Trefis price estimate of Expedia's stock here.
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