Online Flight Booking Companies in India: Death by Google?

Google has launched its online flight search in India after partnering with Goibibo and Jet airways. It’s a potential game changer for end customers and Travel domain in India. This article is in context of India market.

Before you read further lets understand a couple of terminologies.

Who is an OTA

Online Travel Aggregator which can provide list of potential flights by searching through various airline. They primarily work as an aggregator of information for searching and have their own layer of booking and customer service E.g. Cleartrip, Expedia, MakeMyTrip, Yatra.

What is GDS

Global Distribution System is a network operated by a company that enables automated transactions between third parties and booking agents in order to provide travel-related services to the end consumers. E.g. Amadeus, Galileo.

How was it all fitting before arrival of Google in Flight booking

OTA utilizes GDS which provides airline tickets availability. Many Airlines do not have their own systems and thus their flights and seat availability information directly resides on GDS.

How is Google changing this picture

Google has partnered with both an OTA and a carrier to launch their own flight search (which is much more than just search as it allows you to navigate to a carrier / OTA and book also). This places Google in a unique position to offer search results directly and then book through an OTA only if required, else bypass OTA and provide access directly to carrier booking engine. This seriously affects OTA's as the traffic (you and me) can now directly go to Google, search and book a ticket directly from airline site. It not only cuts into OTA revenue but also means benefit of immediate revenue transfer to Carrier wherever bookings happen by bypassing an OTA.

This means that sooner or later, general public will go to OTA websites only for flight deals and combination of flight / hotel booking (in Effect holidays planning). This is something which Google cannot take away as of now as OTA's have their own tie ups with hotels.

Yes .. It really hurts an OTA

Most OTA's major revenue comes from flight bookings. Now people can search on Google and completely bypass OTA's (Unless an OTA joins Google bandwagon, it is losing potential revenue). So as Google Flight Search becomes popular, OTA's would need to necessarily join Google Flight Search. It means lesser people booking through an OTA, lesser people going to OTA website, and lesser potential for OTA's to do sales like Hotels booking. Google is hitting OTA's where it hurts the most, their revenue backbone.

Why does Google need OTA's at all

• Well, for one, the airlines customer support as of now simply cannot handle the amount of bookings if all current bookings happen only through them (if it is assumed that no booking happens on OTA).
• However, the real reason is that either Google becomes an OTA itself, or else it cannot offer a return booking option with different carriers in one go. So Google does need OTA's and has simply brute forced itself into Travel domain.

What it means for Carriers

• Carrier will get benefited by direct booking as revenue loss on transfers from OTA’s to carriers will get saved since money will be received directly by airlines.
• Carrier will need to have better customer service in place as number of transactions through their booking engines will increase.
• More investment on technology shall be required at Carriers end to handle this shift of traffic.
• Handling of sudden policy changes will be handled mostly at Carrier level only. E.g. during recent 2014 Kashmir floods, Govt. had asked carriers to fully refund the amount. Now dependency on OTA will be lesser. OTA’s generally are more responsive though as they invest heavily into technology. This means that Carriers will need to pull up their socks to have IT people ready to take care of such changes.

What it means for you and me

• Potential removal of OTA layer will benefit customer immensely as there will be less information loss during information exchange. Information loss becomes a big deal the moment an air booking gets cancelled / rescheduled. Generally this information does not get to OTA seamlessly via Carrier. For direct bookings, airlines usually will call directly and inform us and not OTA's.
• Potentially cheaper flights as once the Carrier systems evolve to handle the huge transactions, booking directly with Carriers will offer better benefits.
• One place to search flights. Go to Google and book flight. Simple.

Way forward for OTA's

• OTA’s need to focus more on deals and benefits they can pass to end consumer due to their direct relationship at micro level (with hotels etc.)
• Holidays and Hotels planning become hugely important. Flight booking can no longer be revenue backbone in its current Avatar.
• The only way to completely thwart Google’s move is if customer service and post-sales support is made super strong. If OTA’s want flights revenue, this becomes most important immediate improvement area for them.

For IT Service providers

• Carriers have suddenly become greener pastures for selling technology solutions.

It seems that as a giant, Google can simply blast into a market and become a major player. All aggregator providers need to be wary of such business changers. Watch out Policybazaar and likes.. be prepared for day when Google will delve into Insurance sector. That is another story for another day though.