Monday, August 31, 2009

Zuji boss Roshan Mendis on Travelocity buying Travelguru

Ease of adjustment in logo colours is never a factor in an acquisition but it has not taken long or much design work to add a few Travelocity stars to the logo of the newly acquired Indian online hotel player Travelguru. Thankfully they avoided the branding redundancy of adding the Zuji tag line of "your online travel guru".

A week or so after the purchase by Travelocity/Zuji of Travelguru I had a chance to sit down (virtually) with Zuji boss and Travelocity regional head Roshan Mendis to talk about the deal, the Indian market and regional plans generally. Roshan took over from former Zuji boss Scott Blume in June and now has a portfolio of brands to manage including Zuji in Australia, Hong Kong and Singapore , Nextour in Korea, Travelocity in India and New Zealand, and now Travelguru in India. [note that the Travelocity owned brand of does operate in Australia and New Zealand but is not owned by Travelocity. Instead the business operates under a franchise structure wholly owned by the Wotif group].

Roshan is very bullish about the acquisition, as he should be for something he has likely just paid tens of millions if not a hundred or so for. He feels the Indian market is at the right time for acquisition and expansion. But he is also upfront that the deal is not without risk. He admits that integration will be a challenge especially on the people front.

Here is some more detail from our interview

BOOT: This acquisition was your first big move as the new regional lead for Travelocity. Why India and why this company?

Roshan : Couple of reasons. We see India as a top three market in region. Looking ahead to 2012 – research indicates will be right next to China, Japan and Australia as top online travel market. In addition the OTA, general market and accommodation market growth rates in India are attractive. But it is still an emerging market. So this is not a deal without risk.

BOOT: you have plenty of competition to contend with. Expedia is in India and the local big three - Cleartrip, Makemytrip and Yatra are very aggressive.

Roshan: Absolutely – big three make up 80% of market. Competition is stiff and irrational at times. Certainly attractive bits in online space but domestic flights are unattractive and that is where competition is most fierce. Looking to compete differently through Travelguru.

BOOT: Will you bring the supply facing teams together?

Roshan: Putting integration plans together now. The Intent is for a unified partner marketing [Travelocity name for supply team] to represent Travelocity India for all brands.

BOOT: I read there were a lot of challenges in integrating Travelocity and Lastminute supply operations in Europe, are you concerned about the integration task here?

Roshan: I won't comment on the Travelocity and Lastminute integration but generally acquiring and integrating a company particularly on the people side is not a small job. [We are going into the integration effort] with a common purpose and goal between and Travelguru. [Including] clear expectations in leadership between the two. Under no allusions that going to be a cake walk putting people, processes and culture together.

BOOT: In the press release Travelguru founder and CEO Ashwin Damera, said "he was excited with the deal and would want to replicate the story in other Asian". Tell me more about this idea?

Roshan: Purpose of the deal and intent is to focus on India and make success in India – over and above that – the model might work in other market but don’t think that is where short term effort will be.

BOOT: Ram Badrinathan of PhoCusWright asked this question in his blog post "Travelocity Acquires TravelGuru—Will it Change Anything in India?" [Will Travelocity] back TravelGuru and Travelocity with at least a $2.5 million annual marketing budget (to build the brand and business)?

Roshan: [regarding the marketing plans of Travelocity and Travelguru in India] past behaviour is the best indication of future behaviour. If you look at, it is has grown in last few years. [On marketing we are] very analytical and invest in those channels that allow for growth and maximise profit. [BOOT I took this to mean a focus on online channels rather than offline spend]

BOOT: At last year's TRAVELtech your predecessor Scott Blume said that Zuji was firing in Asia on "most" cylinders. "when one country is firing, other aren't" he said. You have a large portfolio now in Asia. What are your plans for firing on all cylinders?

Roshan: In our portfolio in AP have a number of assets and they have certain kinds of potential determined by size of market, size of online pie, balance between and intermediates etc. Different expectations for the different markets and invest in those markets according to our expectations on what it should and can deliver. [delicately keeping with the analogy] We have a set of cylinders that are not the same size and horse power. Need to recognise and pump with the appropriate level of fuel to achieve the maximum potential. We take a portfolio view – have a place and role for each asset in the portfolio and will support to meet full potential.

BOOT: Finally - what worries you? What things do you want to make sure you get right?

Roshan: The acquisition. Lots of things to determine success of acquisition. There are social and economic events to keep track of as well as the maturity of the space, consumers, online penetration etc.

What do you think? Bold move? Too soon? Wrong market? Right time?

PS - looks like we can finally kill off the rumours of Expedia's investment in Travelguru


Allen said...

Really, very interesting text & business analysis. You have a nice blog. Keep it up!

Ram Badrinathan said...

Superb interview Tim. the other way is for Roshan to base himself out of India and run APAC from Mumbai.

Tim Hughes said...

@Ram - thanks for the comment (and thanks for the question!)

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patricia said...
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Sunil said...

Good Interview!!!
There are some intersting times ahead, amidst consolidation of Indian OTA space.
What would be even more interesting is to see the integration of Desiya with travelicity.