Concept Arbitrage: Travelocity

Expedia, Travelocity, Orbitz, TripAdvisor, Priceline – each carved out a unique niche for itself in Online Travel, and established a hot new category at the very beginning of the Internet in the US. The overall travel market today is $518 billion between US and Europe, not even taking into account China or other parts of world. $121 Billion of that is going to be online.

China’s online travel services market reached $31.6 million in the fourth quarter of 2005 (Source: Analysys International). Miniscule number? Not if you look at the forecast. China’s online travel market will grow to $9.6 billion by 2009.

In India, the total online travel market size is projected to be $368 million in 2006, and $523 million in 2007. I don’t have the 2009 forecast number, but it is safe to assume that it is in the billions. The overall Indian Travel sector is growing tremendously, forecasted to be $32 Billion in 2008.

Not surprising that the category is receiving venture capital: Yatra from Norwest’s Promod Haque, and TravelGuru from Westbridge Capital’s K.P. Balraj are two examples tackling the mass market. MakeMyTrip.com was an early entrant that is already at a $40 M+ revenue.

Seed Incubator Erasmic has a more nichy one called India Resorts Survey (IReS), focused on leisure travel in India.

The US market, in its turn, is becoming mature, and more segmented, as vendors start differentiating by focusing on specific niches. One of my favorite examples is Groople, which focuses on Group Travel. According to their CEO, Michael Stacy, Because there hasn’t been any formal studies on the group market, they don’t have the market size, but from talking to several hundred suppliers, they claim that over 30% of their business is group business (defined as 5 or more reservations). “We think there’s a $40 billion market not online yet. When you look at the size of the market the opportunity is tremendous.”

Reminds me of my childhood in India. We often traveled in large groups of friends and family. Traveling in groups, I strongly believe, is very much in the DNA of Indians.

So here’s an idea for a further concept arbitrage : Add the Groople concept to IReS.

This segment is a part in the series : Concept Arbitrage