Competition in the saturated Russian online travel sector is fierce, and one of the main players last week took the dramatic step of a complete rebranding as it seeks to differentiate itself from its rivals.
Skolkovo resident Oktogo, which was supposed to be read OK-to-go (a fact lost on many), has adopted the name Travel.ru, and launched a new site which combines booking services with travel information.
The move was made possible by the $2 million acquisition in September of Travel.ru, which provides tourist information for Russian travellers (think Lonely Planet / Rough Guides). The new Travel.ru combines this content (which is both in house and user generated) with options to book hotels (Oktogo’s main service), airfares and tours.
The rebranding is also accompanied by an injection of $5 million in a round led by VEB Innovations, a fund established by the state-owned Vneshekonombank specifically to fund Skolkovo projects. An unnamed ‘inside source’ said that VEB provided around half the round, with previous investors contributing the rest.
This takes the total investment raised by the project over $30 million since it was launched in 2010, with stakeholders including Mangrove, Ventech and VTB Capital. In the last round, in March 2013, the startup raised $11 million.
The old Oktogo had a ‘base’ of 8,000 hotels in Russia and the former CIS, and a further 350,000 around the world, and was used by a monthly audience of over $1m, while its clients spent an average of $400 on the site. The team behind the project hope that the new site, with its broader business model, will attract both a larger audience and increase the project’s potential to earn from advertising. This should significantly boost the company’s revenue, which was $10 million in 2011, $30 million in 2012 and forecast to be “three times higher” in 2013.
A $5 billion market
According to the global travel market research company PhoCusWright, the Russian travel market was worth $53 billion in 2012. Only 14% of travel in Russia is currently booked online, which is a lower rate than in the other BRIC countries and substantially less than the over 50% rate found in the US and UK.
A recent research report by Travelata.ru, a Russian online travel agency focusing on package tours, estimated that the overall Russian online travel market to be worth $5 billion. This segment is now growing around 50% yearly with numerous positive trends supporting this growth.
Among these trends are the easing of visa requirements for Russian citizens, fast growing e-commerce shopping habits, higher penetration of bank cards (since many online travel purchases have to be paid by card), growing spending potential in the regions and investments by VC funds in the online travel field.
Within the market, airline tickets make up 70% of purchases, but airline margins are getting thinner. This segment is the most mature with such players as Onetwotrip, Anywayanyday, Ozon Travel and Trip.ru, as well as consolidators VIPService and AviaCenter, occupying leading positions.
The online hotel-booking segment is dominated by Booking.com, while others are struggling to catch up, especially two well-funded Russian VC-backed startups, Ostrovok.ru and Oktogo.ru/Travel.ru
- RUSSIAN E-COMMERCE REPORT – The total volume of Russian online retail is expected to reach $16 billion this year, up from $13 billion in 2012, not including cross border sales. In partnership leading universities and consultancies, EWDN has published an in-depth research on this industry. To receive free insights or to order the full version (2013 edition), please contact us at [email protected].
