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Wake up call for OTAs – IRCTC is making 50 Lakh a day by selling Air Tickets

In India Online by Ashish Sinha14 Comments

IRCTC launched air travel booking just a month ago and India’s largest ecommerce site, i.e. IRCTC now claims an average sales of Rs. 50 Lakh per day (~1,500 tickets) – just from air tickets sales.IRCTC- logo

IRCTC is offering 10% cashback on the tickets and maybe, that’s one of the reason driving crowd to buy the tickets from the site.

Given that travel tickets are an undifferentiated product and compete mainly on the basis of price, it will be interesting to see how other OTAs that play on user experience and several niche factors compete with the ‘catering service of Indian railways’.

IRCTC Traffic

  • On an average, the site gets over 55 lakh hits per day (over 2 lakh individual visitors)
  • More than 100000 tickets are booked every day (including I-tickets)
  • Every day, around 8000 I-Tickets are sent to around 200 of India’s biggest cities daily in specially crafted envelopes.

[For more details, read our earlier analysis on IRCTC transaction growth rate]

IRCTC – The Business of Travel Business

One of the toughest question for any company to answer is “What Business Am I In?”. Indian railways has a monopoly, but they compete with low cost airlines, they compete with bus services.

While Indian railways still has a long way to compete on its service quality, the catering arm, i.e. IRCTC knows that it is not just in the business of booking train tickets.

IRCTC is in the business of travel booking and that means a gamut of things – right from bus booking to train, to air travel to packaged service.

Given the traffic the site receives, these numbers (i.e. INR 50L/day) seems quite reasonable and serves as a serious threat to OTAs. Now, would you still say Internet not happening in India?

Also see: IRCTC Solves a Customer Pain – Will Operate 23 Hours a day

Comments

  1. Piyush

    IMO that figure is just sales. Not revenue. 1500 tickets means at best 3-5Lakh revenue(200-300/ticket).

      1. Nilesh

        I don’t think the headline is sensational. I think OTAs need to be very concerned about a government enterprise entering in an industry which is already crowded and running on low margins.

        1. Piyush

          Not really. OTAs do roaring business. The Domestic Indian airline industry is about 30K crore in size. Of this OTAs have captured more than 30%. This comes to
          around 10K crore.

          IRCTC 0.5 crore/day is about 100 crore(considering sundays and lean patches give or take 20 crores). Chicken feed!

    1. Ashish

      Figure is definitely about sales (thats a no-brainer). How many OTAs currently are even close to that number..even on a montly basis?

      1. Piyush

        Monthly ? Talk about daily or event 6 hourly. Top 3 OTAs (MMT, Yatra and Cleartrip) do that kind of business in about 3 hours, each! One of those did about 1300 crore rupees of booking last year. That is on an average about 4 crore per day.

  2. Indus Khaitan

    Hmm… we are lauding the goodness of IRCTC, the monopoly, the anti-thesis of what entrepreneurship is all about, the site which still lives in 1996?

    The govt does not have a business model, it is my & other tax payer’s money which provides a below average web service and now threatens the OTAs, some of who have become an epitome of better quality UX & CX in this nation.

    Indus

    1. Nilesh

      Well said. There are some sectors where public-sector enterprises are needed (like infrastructure) but selling tickets for a commission is not one of them.

    2. Ashish

      @Indus Am greatly inspired by the intrapreneurial culture in IRCTC. Its easy to question what they are doing..but hold on – they drive 1/3rd of ecommerce. They make a lot of first timers get used to transacting on the web. They make a lot of people to go to cafes and book tickets (from authorized agents). They have done phenomenal job in promoting all of this and entry into flight/event ticketing (CWG) is, I believe an ambition worth respecting.

      They don’t have a business model? They have bad UX, still they do so much of transaction.. – aren’t these the *perceived* gaps startup/OTAs were supposed to fill in?

  3. Internetwala

    Ashish,
    You sound like IRCTC is making Rs 50 lakh per month in net profit.
    Hoping that you actually meant they are recording that much in revenues, and considering that IRCTC is giving back 10% to its customers, what’s the actual amount that they are taking to the bank.
    Even, considering the fact that they are giving 10% of the base fare, still what’s their net profit.
    Aside all this, is selling air ticket part of the mandate that IRCTC was originally set up?
    If making profit is the only motive, why don’t they also start selling books, music, mobile phone, laptops… after all you do need most of these while you are travelling, don’t you?

    1. Arvind

      Frankly, if you look at Indian Railways from a distance, they do sell everything. Including hospitality, band width, fuel, entertainment, electricity, water, public communication, education and you just spell it.

      The objective for Government here is to reach out to the citizens, and this is one infrastructure that lets them have it. To sell air ticket is not a bad business idea; other than probably misuse of mono-poly infrastructure and re-enforced trust on the Government.

      Indeed this is a wake up call for those in travel space, because Railways is going to erode their market and secondly technology would take a back seat. That is the point of this article, and of discussions.

      Cheers,
      Arvind

    2. Ashish

      The number of tickets sold is mentioned in the bracket – pretty much implies that its the sales number.

      Given that this is a launch offer, do not worry about the profit/margin right away. Volume matters.
      “Aside all this, is selling air ticket part of the mandate that IRCTC was originally set up?” – They are into ticketing and travel business. A great move by any company (that too from govt) to move up the value chain. That’s their next level of growth

      As far as the last point is concerned, feel free to share that with IRCTC..you might get free tickets for that.

      1. Nilesh

        Ashish,

        I think the title – “making” 50 lakh a day – is what is confusing some readers. Although the article itself is very clear, the title does seem to imply otherwise.

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