Evaluation of Indias Online Travel Industry

Evaluation of Indias Online Travel IndustryMANAGERIAL economic sciencePROJECT ONLINE TRAVEL INDUSTRYGROUP MEMBERSNikita Goenka (PGP30324)Padmaja Agnihotri (PGP30316)Sandeep Kumar (ABM11034)Ravali Malka (PGP30317)Vishwas Nandan (PGP 30353)Saurav Kumar (PGP30340)Rohan Kokane (PGP30336)BACKGROUNDIndia is a ground with vast demography and a wide spectrum of opportunities. Better job avenues hold up gifted the youth with greater discretionary power. Rising use of mesh plastic currency has made the theatre of e-commerce an exponentially growing field in recent times.Why E-Travel as a subject of query?E- run low in India has a lions lot in the Indian E-commerce contributing to a whopping 82% to the entire foodstuff sh be in the year 2013 ( chart 1). Also, E- croak exhibited a marvelous annual suppuration of 53% in 2013 over 2012. This is further complemented by the fact that the Indian tourism sedulousness is the 2nd fastest growing in the world. The present newspaper aims at u nravelling various facets of this booming industry and studying its position in the private sector, especially e-commerce industry.Other meritsOnline lead demands least capital floor pricesQuick delivery of services enhances consumer satisfactionEVOLUTION ground on the single idea of easing journeyling in India, online belong services started around a decade ago. Booming of IT sector in India was one of the major(ip) factors stimulating online travel. Online travelling segment constitutes around 70% 80% ($25 billion) of all e-commerce activities and has been a major driver of the industry. pigment schemes and policies implemented by e-commerce industry rump be considered as major factor for success of the segment. Exhaustive assistance, user friendly websites, customer scotch redress atomic number 18 the major attractions prevailing in the segment. Makemytrip, Yatra.com, Redbus are approximately websites which birth seen rocketed growth as presented in interpret 2 and graph 3. expenditure ELASTICITY OF DEMANDPrice Elasticity is defined as partage change in demand due to one percent change in impairment. Online travel industry faces more level of price sensitivity than traditional channels, majorly because of ease of access to-PRODUCT INFORMATIONPRICE INFORMATIONCHANNEL SELECTIONFORWARD LINKAGESNowadays Travel industry is not restricted to its conventional travel business only. It has extended to preliminary linkages like bus tickets, travel insurance firm hotels. Share of severally linkage has been presented in Graph 4Regulations Introduced by the government and its shamThe regulatory norms laid down by the government of India are aimed at promoting growth of the market which have effect on the online travel industry. With the customers belatedly moving from traditional ways of qualification to online, these norms have greatly influenced the growth of online travel industry.A few regulatory norms laid are as followsCOST bodily structure The price structure of online travel can be analysed in two waysTraditional costing analysis by dint of study of the PL statementABC (activity based costing ) by analyzing the cost driver for each specific segmentThe following sections explains both the above stated viewpointsTraditional costing analysisThe income statements of various big players of the online travel industry are addressable for study. One much(prenominal) player is Makemytrip.com, a leading firm in online travel.Graph 5 summarizes the various expenses of Makemytrip for 4 consecutive years in descending order.Activities of online travelThe various activities of online travel have been are categorized asCore ActivitiesandSupport ActivitiesThe activities are studied considering their respective drivers in terms of the resources allotted and other factors such as time and space devoted etc.PRODUCTION STRUCTUREOnline travel industry offers services to its customers as a product. There are various types of services which online travel industry offers-Core servicesAir, running and hotel advance meshings and ticketingDiscount fares programEvent management service nurse added servicesTracking of journey24 hours emergency serviceslate approval using email systemInsuranceGraph 6 Traffic generated from mobile devices.Graph 7 Reach of travel doorways (India and Global)Graph 8 Profit Margin by segmentsPRODUCTION component partA mathematical product modus operandi gives relationship between inputs (capital, labour and other factors) and outputs (goods and services). Online travel power have high initial and fixed cost which it makes as less labour intensive sector.U= U (P, Y)Y= F (K, L)Where U = utility function of cost (P) and trips (Y)F = Production function of capital (K) (travel agencies)In short run, if labour is step-upd, the performance and maintenance of the online portal will be improvised. So this in-turn might plus number of trips for some(prenominal) time period then falls as onl ine travel agency is more engineering based and improving labour doesnt increase much of output.In long run, an improvement in the state of applied science shifts the production function up, leading to an increase in output per role player for a given level of capital per doer. The higher the technology, higher Y for a given K and L. An improvement in the state of technology shifts the production function up, leading to an increase in output per worker for a given level of capital per workerCOST FUNCTIONCost function is effect of level of production on the cost which the firm is incurring. Since in online travel industry we dont have any such physical product, we can relate the level of production with the sales generated by social club.Cost analysis for doubting doubting Thomas Cook has been through with(p) in Table 1 and Graph 9.TABLE 1 Thomas Cook- Average and Marginal cost of the service deliveredYearSales(INR in mn)Total Cost(INR in mn)ACMC2010345530860.89322011401730940. 77030.012012438633000.75240.557201313031102690.78810.80Source www.securities.com/emis/ Industry- Online travelGraph 9 Cost analysis for Thomas Cook (All money figures are in INR million)InferencesThe data given in Table 1 shows the average and marginal cost of the service delivered. From graph 9 we can see that the average cost reaches a negligible value of 0.45 at a sales value of INR 8700mn approximately. As the scale of operations of Thomas Cook went up beyond this point the average cost too increased. Clearly it is evident that the company isnt operating at its minimum cost point. Due to sudden increase in scale of operations, the company might not have optimized its value chain.REGRESSION ANALYSISIRCTC E-ticket bookingIRCTC started its e-ticket booking mental quickness from 2005 August. By that time there was already i-ticket booking in IRCTC where tickets will be delivered through courier to the house subsequently booking through internet. Once IRCTC launched E-ticket book ing, the sales through I-ticketing started declining and this new facility increasing sales of IRCTC. Number of people using internet in 2012 is 11.4% of total population as compared to 4.5% of total population in 2005. This fast growth in internet users resulted in increment of number of tickets schedule through IRCTC.Graph 10 Regression Analysis for IRCTC E-ticket bookingInferencesIn 2005, internet Company Sify had announced its tie up with Indian railroad line Catering and Tourism Corporation (IRCTC) to make online railway ticketing service available at over 3,400 iWay cybercafs across 154 cities, on cash payments.In 2008, With 8 lacs tickets sold every day on its website, IRCTC had announced its magnification policy to give services and sell airline tickets.With overall increase in mark travel quality and increase in train travelling, e-tickets are in demand.PROFIT OR breathing out ANALYSIS unsex MY TRIPwww.moneycontrol.comYearRevenueTotal CostProfit2011$124,721.00$119,891 .00$4,830.002012$196,599.00$189,951.00$7,048.002013$228,822.00$256,411.00($27,589.00)2014$255,375.00$276,281.00($20,906.00)Graph 11InferencesBased on the above analysis MakeMyTrip has achieved its break-even point somewhere in between 2012 and 2013.After that point it has been experiencing losses.PROFIT OR LOSS ANALYSISTHOMAS COOKwww.moneycontrol.comYearRevenue(In Cr.)Total Cost(In Cr.)Profit(In Cr.)2009242.00184.0058.002010282.00193.0089.002011340.00232.00108.002012386.00270.00116.002013383.00267.00116.00Graph 12InferencesFrom above graph, Thomas cook has passed its break-even point and has been experiencing profits for last 5 years.APPENDIXGraph 1 E commerce Market roleGraph 2 Growth trend in the online travel market Graph 3 Percentage of online usersGraph 4 E commerce market share (including the forward linkages)Graph 5 Summary of expenses of Makemytrip for 4 consecutive years in descending orderSource http//www.nasdaq.com/ figure/mmyt/financials?query=income-statementGraph 6 T raffic generated from mobile devices Graph 7 Reach of travel portalsSegment% ageAir Travel7Train Travel5Bus Travel12 auto Rentals15Hotels tours and Packages20Graph 8 Profit Margin by segments 2013Source E Y