It was only when the people had begun to overcome their fears about travelling in the pandemic, that seemed a beacon of hope for the troubled travel industry, we are back to square one with an unexpected rise of covid infections in the country. The travel and hospitality sector that remained sluggish last year is facing headwinds again due to the newly imposed lockdown restrictions by the state government across the country. Amidst such times of distress for the travel industry, e-commerce behemoth Flipkart has surprised us with its announcement of 100 percent acquisition of online travel tech company Cleartrip, especially at a time when the second wave of Covid-19 infections is rapidly rising affecting the travel sector. As per a recent study from IBEF (Indian Brand Equity Foundation) the Indian travel and hospitality industry by 2029 is expected to grow by 6.7 percent to become $35 trillion, contributing around 9.2 percent of the total economy.
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As per a recent study from IBEF (Indian Brand Equity Foundation) the Indian travel and hospitality industry by 2029 is expected to grow by 6.7 percent to become $35 trillion, contributing around 9.2 percent of the total economy.
Cleartrip’s Financial Woes and the acquisition
Cleartrip was founded in 2006 by Stuart Crighton, Hrush Bhatt, Matthew Spacie that emerged to be India’s most preferred online travel agents by offering customers a personalised travel experience through its innovative mobile and desktop solutions.
The online travel industry was already suffering from low margins in the air ticketing space due to a varying customer base, Cleartrip was facing losses where the pandemic has further aggravated its financial woes. In 2020, the company was forced to lay off 500 employees. This acquisition comes as a sign of relief as they needed robust financial support to sustain their business and employees.
The Flipkart-Cleartrip acquisition is pegged at $40 million which will be a mix of cash and equity. In this deal, Flipkart has decided to acquire Cleartrip’s operations where it will operate as a separate entity with all its employees being retained by Flipkart. This acquisition will help Cleartrip to work closely with Flipkart to leverage its technology solutions to simplify travel experiences for the users.
Flipkart’s interest in the online travel industry
Flipkart eyeing the travel industry is not new. Flipkart’s quest for expansion into the online travel industry began in 2018 when it went to a strategic partnership with Make My Trip by making available Make My Trip’s travel services on its platform, the platform operates by the name ‘Flipkart Travel’. In August 2019 by signing a deal with Gurugram based Ixigo, the search bar on the travel page of Flipkart’s website is powered by Ixigo that allows customers to book flight tickets and has integrations for bus and hotel bookings.
With the pandemic coming into the picture, the travel industry is reeling under low to zero sales. Such acquisitions and partnerships appear to give the travel companies a new lease of life. This investment is a win-win situation for Flipkart since it was already planning to foray into the travel vertical. It will help to explore new areas of growth and offer a wide range of local travel offerings such as food trails, workshops, and cycle rides around the cities for the customer.
What is in it for the start-ups?
It will be beneficial for the travel and hospitality sector to undergo strategic partnerships with e-commerce companies to leverage technologies to offer personalised and enhanced customer experiences. The travel industry will now be offering short staycations, local camping and hiking experiences, contactless travel offerings, mobile check-ins to tap into new revenue areas. From the government side, it plans to open doors for the South Asian country tourists for regional tourism, which will help increase ticket bookings.
