Daybreak - Why Cleartrip could learn a thing or two from old school travel agents

Episode Date: June 11, 2024

When e-commerce giant Flipkart acquired online travel aggregator (OTA) Cleartrip back in 2021, the hope was that it would be able to turn things around. Cleartrip had hit rock bottom. And in many ways the only way from there on was up. But things haven’t quite played out as Flipkart and Cleartrip had hoped. One big reason is that Cleartrip under Flipkart may have veered too far away from what makes an OTA an OTA — the OG tried-and-tested strategies that made us keep going back to old school travel agents back in the day.Tune In. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Do you remember the good old days when mom and pop travel agencies were a thing? I don't know about you, but I kind of missed them. They took care of absolutely everything, which really takes a lot of the pressure off when you're planning a vacation. They booked your ticket. took care of hotel reservations,

even helped hook you up with a visa if you were travelling abroad. There was something quite exhilarating and freeing about the whole experience, if you ask me. Now let's pause that nostalgia trip for a moment and talk about how you plan your vacations today. For starters, your travel agency has probably been replaced by an online travel aggregator.

That's just a fancy word to describe websites like Make My Trip, Go-I-Bebo or Clear Trip, where you're able to book tickets and hotels online. Thanks to these apps and websites, you can plan your next holiday in a matter of minutes. So we've come a long way. But here's the thing. While old school travel agents are a dying breed,

a lot of their tried and tested strategies are what make online travel aggregators or OTAs work today. The one core principle that a successful online travel aggregator and a solid travel agent have in common is a deep understanding of the travel industry. That probably sounds simple enough, right? Maybe even kind of obvious. Except it really isn't.

Case in point, clear trip. The company has been down in the dumps for a while now. Revenue has been at an all-time low, despite the rest of the OTA industry doing pretty well at the moment. It is an anomaly in more ways than one. So when e-commerce giant Flipkart came into the picture, and acquired the company back in 2021, the hope was that it would be able to turn things around.

Clear Trip had hit rock bottom and in many ways, the only way from thereon was up. Now, unfortunately, things haven't quite played out as Flipkart and Clear Trip had hoped. And one big reason for that is that Clear Trip under Flipkart may have veered too far away from those OG tried and tested strategies we just spoke about. You know, the ones that made us keep up. going back to our travel agents back in the day. Welcome to Daybreak, a business podcast from the Ken.

I'm your host Rahal Philipos and I'll be joining Snigda every day of the week to bring you one business story that is worth understanding and worth your time. Today is Tuesday, 11th of June. Before the Flipkart acquisition, ClearTrip was in a make-or-break kind of situation. Business was bad, salaries had stagnated and their workforce had shrunk by half. The final nail in the coffin was the pandemic. So when Flipkart came in and threw it a lifeline in 2021, it almost seemed like a miracle. And the deal made sense for Walmart-owned Flipkart for multiple reasons.

The biggest of which is that the company managed to snap up ClearTrip for a mere $40 million. Now, that's a far cry from its $300 million valuation back in 2016. So it really was a one-man's law. is another man's gain kind of situation, literally. At the time, Flipkart was looking to diversify. It wanted to expand its bouquet of offerings for its vast online user base. Basically, it recognized that its customers shopping on Mintra and Flipkart were also probably traveling.

So why shouldn't it be able to tap into that need? So it went ahead and bought an online travel aggregator to integrate into its core business. Classic conglomerate move. bottom line is that bringing in Clear Trip made complete sense at the time. But three years after the acquisition, things aren't really looking up for Clear Trip. Its losses have ballooned 40 times, and this, despite the fact that post-pandemic, the rest of the OTA sector is doing better than ever. So what went wrong?

Well, the Ken reporter Gorav Bargur spoke to five X Clear Trip executives and three from its rivals to figure that out. and the consensus was somewhat clear. According to them, it was a mix of short-term vision and a deficit in travel industry know-how that was to blame. More on that in the next segment. When Flipkart entered the picture, one thing was clear. The e-commerce behemoth had every intention to rebuild clear trip from the ground up. But in the process, it also ended up changing the very culture of the company.

You see, the few employees that had stayed, on out of loyalty to Clear Trip's top management and founders eventually decided to scoot. So Flipkart was left with a handful of OG Clear Trip staff. And if it was faced by this, it really didn't let it show because it very quickly shuffled the deck. It began by bringing in top talent from its own ranks. A former Clear Trip executive who joined Post-takeover described these fresh faces as the quote-unquote blue-eyed boys of Flipkart.

This included the likes of I. Raj Gopal, who had made Flipkart a giant in online smartphone sales and also led Mintra as its chief business officer. Basically, a whole lot of top executives who had made some serious money moves for the company in the past. Okay, here's a bit of a spoiler. Many of them, including Aya Pan, eventually ended up leaving Clear Trip. But we'll get to that in a bit. For now, let's focus on what happened right after the acquisition. The hope was that these blue-eyed boys would come in, shake things up and really turn things around for Clear Trip. Which is exactly what they try to do.

They decided to go the Flipkart way and immediately implemented a hyper-growth playbook. What this meant was a combination of lofty employee targets and snazzy advertising campaigns to target audiences. This was the new normal for Clear Trip. And don't forget, this was also happening right after the pandemic. I'm sure you remember how travel had come to an absolute staff. and still during COVID. The travel industry was in the thick of it all.

But failure was not an option for Clear Trip. It was the Flipkart way of doing things. One former Clear Trip executive said Flipkart wanted everything done faster. They had larger aspirations than Clear Trip ever had. You see, before Flipkart, Clear Trip's founders had belief in the magic of their product alone, assuming that customers would flock to it like moths to a flame. But while this approach cultivated a small but dedicated fan base, the broader ecosystem had stopped paying attention to it.

Now, in stark contrast under Flipkart's reign, Clear Trip adopted a ruthless strategy, even if it meant taking a financial hit. So it started offering features like flight insurance at one rupee. It gave customers the option to cancel bookings without penalty fees. And over and above all of that, there were all the discounts, deals, offers, and rewards. Sure, this seemed to have helped with sales a bit initially, but in the long run,

it just doesn't work. Because the catch is, when the discount stop, your users jump ship to another platform. Another unfortunate outcome was that Clear Trip became more and more reliant on airlines, which typically operate at really slim margins. Basically, there's not a lot of money to be made there. So, can Clear Trip turn things around? Well, more on that in the next segment. Not everyone blames Flipcard for the Clear Trip crisis. Like one Clear Trip executive pointed out, travel is just a really hard space to break into.

It's complicated and it's competitive. Now, Clear Trip is up against a formidable rival in Make My Trip, which has methodically invested and built its empire over more than two decades. And if there's one takeaway from the Make My Trip success story, it's that travel is a long-term game. It takes a lot more than a flash-in-the-pan effort. Just throwing discounts and rewards in the customer's direction does not work. So now, Clear Trip seems to be trying to turn things around.

And it's doing that by doubling down on the hotel business. Unlike the highly regulated airline sector, the unorganized hotel sector offers a scalable supply chain. The profit margins also just aren't as slim as with airlines. So there's a fair bit of money to be made here. But cracking the hotel business is proving to be somewhat of a Sisyphian task for Clear Trip. The company is still floundering, unable to offer the right inventory at the right price. And a numbers back it up. Let me explain. So the hotel industry uses a metric called room nights. This basically means a number of rooms multiplied by

the number of days booked. So in Clear Trip's case, it managed. manages around 1,500 room nights per day, whereas Make My Trip manages about 1,000. According to a former Clear Trip executive, this has to do with the fact that Clear Trip has never really had a strong association with hoteliers. Even before the Flipka takeover, it's had a bit of a bad reputation. So even its plans to venture in the hotel space haven't been going too well. Okay, let's take a look at where things stand. things around for ClearTrip, Flipkart is running it like just another e-commerce business, which doesn't really work in the travel business. Here you have to understand the industry,

the ebbs, the flows, build relationships. Basically all the things your travel agents once did, while also innovating and coming up with better tech solutions. Yes, it's a tall order, but clear trip under Flipkart has little choice but to figure it out. And to make matters worse, a lot of its top leadership, including the blue-eyed boys it had initially brought in to turn Clear Trip around, are now on their way out. Earlier this year, Clear Trip's CEO Ayyapan Raj Gopal announced that he was leaving the company.

So Clear Trip really has to get its act together, and Flipkart has a big role to play here. For starters, it's time for it to realize that reviving the OTA means playing the long game, hiring travel experts and building strong industry ties. and not just relying on e-commerce-style flashy ads and discounts. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's, Produced by me Snigda Sharma and edited by Rajiv Sien.