(Un)Biased search results Hrush
Over at Pluggd.in, Ashish has a post about the launch of an airline-owned online travel agency. The first problem with that post is that it alleges that Cleartrip’s search results are biased:
Existing travel portals i.e. Cleartrip show[s] fares in the order of commissions they receive
First, I’d like to challenge this concept of “biased” search results. Cleartrip’s search results have always been sorted by price–cheapest to highest—and the prices are set by the airlines, not by Cleartrip. Any special arrangements we may have with an airline have exactly zero influence on our search results.
Over and above that, Cleartrip has made extensive sorting and filtering options available to customers from the time we launched. We’ve never believed that the order in which search results are presented is a sustainable way to influence demand—customers want what they want and no amount of “biasing” is going to impact their behaviour. Cleartrip’s product has always delivered the most advanced tools to let customers sort, filter and narrow the search results so that they can find what they want.
The other problem is not so much with the post itself, but is related to something that the post points out:
Teaming up will help [airlines] reduce agency cost (Indian carriers spend close to Rs. 200 Crore in distribution cost, given away to travel agents and travel portals such as… Cleartrip.com).
So, let’s get this straight–collectively, the domestic airlines lost Rs. 4,270 crores last year, but their biggest concern is the Rs. 200 crores they paid to the people that sold their product? It looks to us like airlines are absurdly hell-bent on fighting the wrong battle–Rs. 200 crores is less than five percent of airline losses.
Continually blaming “high distribution costs” is either a fad or a diversion for airlines to ignore their single largest business concern: unsustainable pricing due to over-capacity. And this is true for airlines the world over–they cannot tell shareholders that the glut in capacity is the reason for their oversupply of red ink, so they’ve created a red herring called distribution cost.
We’ve been meaning to do a series of posts on the economics of the airline industry for some time now, we expect to put up the first post in that series on Wednesday.
Rang7! What does that even mean ? Like a rainbow or something ?
would advice cleartrip to publish posts on the economics for an OTA rather than airline. OTAs around the world have lost money since the beginning of time and same story continues in India.
just one bit of news has you running helter skelter. and u have removed the bias in your search. if a non entity gives you the runs, you’re truly not in the big league. have u even seen mmt or yatra comment yet?
the troubled times separate the men from the boys
@krish-we will cover the economics of the airline ecosystem as a whole. And, to the best of my knowledge, there are several large and very profitable OTAs all around the world e.g. Expedia, Ctrip, Travelocity, Priceline and more.
@gopal-we’ve never had any bias in our search results. And we’re just stating an opinion that the real problems in airline industry economics do not lie in distribution costs as you should be able to see from the simple math in the post.
i did not ask you for the math. i asked you about how come you guys reacted like you sat on a seat of needles, unlike a MMT or a yatra.
you chose not to answer the question – which is the answer itself. MMT and Yatra know that they can handle competition. You can’t. Design is not a sustainable advantage, and even if it ever was, it hasn’t worked for you for sure – else you’d be the biggest or the (most) profitable OTA in town.
@gopal-Didn’t see that question in your comment.
Also, I’ve noticed that you’re the fellow who has been posting tasteless comments here under Stuart’s name or my name from this IP address:
124.124.34.170
We’ve had to delete two of your completely tasteless comments today. So, here’s some questions for you:
* Why are you pretending to be someone you’re not?
* Why are you posting tasteless comments here?
* Shouldn’t you consider a hobby that is less despicable than being a comment troll?
We’d like to take this opportunity to end a pointless debate with you and wish you the best for your life.
I hate comment trolls.
But I have to agree, your response to one stupid blog post sounds defensive to say the least. Anyone with half a brain knows that just because you put it at the top of the list doesn’t mean that the user will purchase that ticket option. LOL, unless your customers are bigger idiots that we give them credit for.
Cleartrip continues to enjoy the advantage by bringing us the most desirable user experience, and it appears that this is an area where MMT and Yatra and several others have pretty much given up on (or never got started on, whichever way you look at it). So you have found yourself the unique distinguishing factor and turned it into a key part of your compelling proposition – don’t let a couple of ignorant posts here and there rile you up.
The ignorance of this poster is further accredited with his loose talk on distribution costs in the travel agency. I don’t know if he’s ever looked at distribution costs for ‘Parle G’ – the world’s largest selling biscuit, or even a simple book purchased at a bookstore, or a music cd, or a movie, or insurance, or anything else in the real world.
5% commission on ticketed fare is reasonable to say the least, and the 2% that went around sometime back on domestic fares is nearly worthless to agents.
And if you think that by cutting off your distribution arm you can make MORE money – well lets just ask Lufthansa how that experience went. Sales is the single most important thing for any company involved in selling ANYTHING. I can concede that there may be inefficiencies within your distribution network, but if you are admitting that the entire damn model is flawed, and you certainly don’t have a better sales model to turn to, then you have no business being in business.
Shareholders should sack those CEOs who come back and present distribution costs as a key cutback area – especially when it comes at the cost of sales volume. Arguably what any airline needs today is to fill those seats they have. And selling less tickets is not the answer.
Here are possible more difficult answers that CEOs don’t want to present:
1. Reduce those seats (read: kill routes and flights)
2. Increase basic fares, not surcharges
3. Add value to the proposition (like Paramount)
4. Refuse non-profitable routes
5. Consider linking smaller cities at lesser frequency than big cities at a high frequency (they get to charge more for this)
A great example for point #3 (stolen from Virgin UK): Free Limo airport pick up and drop off for business class or upper economy passengers. It will cost maybe 2K but enable you to sell the same seat at 13K as opposed to 3.5K.
I have lots more to say on this but this is already getting too long.
Dhruv–great points. We’ll be doing a series on airline industry economics shortly, so you’ll have lots more to sound off on. Stay tuned.
where’s that post on airlines economics you promised?
Shruti-still working on writing that post, there’s a lot of ground to cover, so we need to break it up into a series of posts.
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