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“We Are In Talks To Build An OTA Backed By Airlines”

18 May, 2012

Rang7.com is an online travel agency, which is still on the stealth mode. The online travel agency is trying to build a business in India on the lines of the successful Orbitz model. Like Orbitz was floated by a group of airlines, Rang7.com is also in the process of cobbling up a group of airline backers to launch its service in India. The company is founded by Ram Seethepalli, who was formerly an MD with Travelport, which had been a major investor with Orbitz. Seethepalli exclusively spoke to VCCircle on his plans , and also clarifying media reports including VCCircle’s on Rang7.

Excerpts: 

Why another online travel agency Rang7.com? Could you tell us about your business model?

The existing OTAs in the country – Makemytrip, Yatra and Cleartrip – are doing a decent job for the Indian consumers. Our thesis is that India does not need another online travel agent if it is exactly on the same lines. It has got to be something different. If it is not something different, then it is just wasting time for the investors, employees, suppliers, and consumers. So I think the references to Opodo and Orbitz have been made (in relation to us) – and that’s the model what we are working on.

(Orbitz was an online travel agency floated in 1999 by airline such as Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines and American Airlines, in response to the threat of the independent online travel agents such as Expedia and Travelocity who were beginning to hold high distribution power.)

The belief is that GDS (Global Distribution System) fees is already low in India and that most of the airlines have their own portals for selling tickets – so how do you think the Orbitz model would work in India?

GDS fees is only one of the important parts of our model, and it is a misplaced belief that GDS fees are optimal in India. If our partner airlines are the ones saying that the GDS fees are low and that there are no savings to be had, We will shut shop tomorrow.

(Orbitz came about because of the continued increase in Global Distribution System fees, which refers to a fee on booking done thorugh the worldwide computerised reservation network, a single point of access for reserving airline seats, hotel rooms, rental cars, and so on.)

How did you conceive the entire idea of bringing the Orbitz model to India?

It is my past experience. It is something I have done and I understand. If you look into my past life, you can draw some conclusions on how the idea came about.

(Prior to starting Rang7.com. Seethepalli worked with Cendant Corp/ Travelport in New York and Hong Kong as the company’s managing director and group vice president. He worked there for about 5 years from 2001 to 2006. Cendant had bought Orbitz for $1.2 billion in 2004 and later ebookers for $190 million. Cendant exited the entire travel distribution services business, called Travelport, in 2006 by selling it off to Blackstone Group-led PE consortium for $4.3 billion.)

When do you plan to launch the site officially?
The work’s in progress. I can’t really answer that but we have to get our strategy executed before we “officially launch”.

Have you been selling tickets online?

Yes, we have been selling tickets for quite some time. It has largely been through word of mouth, via friends and family. No one knows about us, only friends and family come to our site. We have not gone out there to draw attention to ourselves.

And why is it that you haven’t come out in the public and the media?

Because, unless we are different, there is no point competing with MakeMyTrip, Cleartrip and Yatra. They are doing a good decent job by themselves. Unless we have something different for the entire industry, we shouldn’t be in business. As far as the world is concerned, we don’t really yet exist. So it is not a conscious decision to announce or preannounce. We are not ready for the world and we will be only ready for the world when we are different.
 
What are your expectations from the business?
We want to be good to our share holders, investors, team and of course the Indian suppliers and consumers. The Indian consumer needs something with a twist. We want to grow well, be a market leader and be profitable. We want to add value across the value chain – supplier, intermediary, technology as well as consumer.

You are launching during the slowdown. Is that affecting your business plans?

We have only launched the beta version yet and that is only to make sure that everything works. I am the only one buying tickets or my mom is the only one buying tickets. No one knows about us except close friends and family. The slowdown is not impacting us at allbecause we are operating off a very small base.

The key point is that we don’t yet “officially”exist and if the model is right, and everybody is benefitting, then it shouldn’t matter if there is a slowdown or not. It is unfortunate that the information leaked out because we have been asking everyone to keep things close to their chest.

According to media reports, you are in talks with Kingfisher Airlines and SpiceJet. How true is that?

We are in talks with the airlines. That is the Orbitz Model. I would be breaching confidentiality with the airlines if I disclose who all we are in talks with.
 
Is Rahul Bhatia an investor in your company?
No

Are your talks with the airlines in advanced stages?

They are reasonably advanced. We have been working at this for a little over a year.

What kind of responses have you been getting form the airlines?

We are in discussions with the airlines. If you study the history of Orbitz, there was value to the airlines. In fact, a media report alluded to certain potential savings -, those savings are real. I mean if we execute, those savings are real.

So in this day and age where the airlines are looking all over the place for even a small benefit, the economy has nothing to do with whether the model is right for India. This is an opportunity for them to help themselves. So there is value there, which is why we are in discussions. 

Would the airlines invest in Rang7.com or would they just tie up with Rang7, what is the arrangement like? Who are the current investors?

I can’t answer that one now.

 


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2 Comments
Ashwin Godbole . 6 years ago

I personally find the travel information on the rang7 site (http://www.rang7.com/myindia/travel-guide/) more appealing and useful. The fares they display and the booking engine experience is not more special than MMT or Yatra.

Andy . 6 years ago

One of the major USPs of Orbitz was their direct connect model with the airlines for a fee lower than the GDS fee and agency commissions. Orbitz got exclusive fares from the airlines that were not available either through the GDSs or the OTAs. This allowed Orbitz to really scale up in a very short period of time. However that model was not sustainable because the GDSs and all agencies (offline and online) protested and wanted parity and got that in due course. So while this model may work for a period of time it will lose it’s sizzle in due course. A lot will depend on which airlines participate.

“We Are In Talks To Build An OTA Backed By Airlines”

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