is the latest online travel portal to hit the Indian market. The website has attracted a lot of attention in the last few days as a leading newspaper reported the portal was owned by India’s three major domestic airlines – Kingfisher Airlines, IndiGo Airlines and SpiceJet. And that the venture was floated by airlines to checkmate other independent OTAs who survive largely on commission payouts by airline companies.
Even though the ownership of the travel portal is still being speculated, VCCircle digs for more information on the people behind the OTA, which is reportedly trying to become an Orbitz in India, a US based travel portal owned by airline operators.
According to the Rang7 website, the company is managed by an entity called ShiVik Internet Pvt. Ltd.
VCCircle learns that Rang7 is founded by V. Ram Seethepalli, who was a former Managing Director and Group Vice President of Cendant Group, which 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. Seethepalli, who was looking after M&A at the company, had worked in their New York and Hong Kong offices.
Sources say that Seethepalli has been primarily backed by Rahul Bhatia, the founder of travel technology solutions provider InterGlobe Technologies and IndiGo Airlines. InterGlobe is the India distributor of travel distribution platform Galileo, which was owned by Seethepalli’s former employer Cendant Group.
VCCircle contacted Rang7 office to speak to Seethepalli, however, they refused to connect to him. When contacted, Kingfisher Airlines’ spokesperson denied that the report of its backing Rang7 as a “complete rumour”. SpiceJet’s interest in the company could also not be confirmed.
Sources say that Seethepalli and Bhatia could be in the process of cobbling up other investors. The Economic Times had reported a venture capital firm had invested $3 million in the company, however, this information could not be verified.
A VCCircle email to Rang7 to understand more about the company, the founders, and investors elicited a standard email reply from an unidentified spokesperson of the company.
It said: “Rang7.com is currently in Beta launch stage and as part of this exercise, we are currently fine tuning our technology platform & processes, and identifying how we can improve our services, before we undertake a public launch. This beta launch was initiated in December 2008, and is likely to go on for another couple of months.”
When asked about the reports of airlines backing Rang7, the company said: “We are not at the liberty to comment at this stage. The concept of an airline partnership has successfully been rolled out across the world (Orbitz.com in the US, Opodo.com in Europe). Such a partnership successfully delivers cost savings to airlines including GDS costs and commission costs.”
This means Rang7 is indeed following the Orbitz model. Orbitz was founded in 1999 with the partnership of major airlines such as Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines and American Airlines, who invested a combined $145 million in the company. The travel company was formed by the airlines in response to the threat of the growing online travel agents (OTAs). After a successful IPO in 2003, Orbitz was acquired by the New York-based Cendant Corporation in 2004.
It remains to be seen if an Orbitz model can work in India. A leading travel portal CEO said it’s easier said than done to build a consumer brand. The leading OTAs in India are MakeMyTrip.com, Yatra.com and Cleartrip.com, besides TravelGuru and others. They have been around for years now and have plonked large investments for building brand awareness and marketshare.
Moreover, airline operators have their own websites hawking tickets and there is likely to be a conflict. And lastly, the ownership structure could throw up problems of commitment as single owner is unlikely to own more than 10% in the company.
Aloke Bajpai, CEO and Founder, Ixigo, a meta-search engine, said: “The Orbitz model will face unique challenges in India as Orbitz innovated on the product and technology which has now been adopted by various OTAs in India. Also, at the time when Orbitz was launched, the Global Distribution System (GDS) fee was very high, which has now come down considerably, leaving a business model like the Orbitz with very low saving options.”
He also feels that in the times to come, the ‘zero commission’ pattern will prevail, making transaction fee the only source of income for the OTAs, hence making the Orbitz model unsustainable in India. In any case, consumers can rejoice as they can hope to get more sops and enticements.