Outbound travel is on the rise in Bangladesh. An increasing number of Bangladeshis are now traveling abroad and spending generously. In 2014, some 1.5 million Bangladeshis visited abroad, according to data from the Bangladesh Bank, National Board of Revenue and Bangladesh Institute of Development Studies, showing a sign of the rise of a new middle and upper class in the country.
Outbound travel spending rose from $404.7 million in FY15 to $436.4 million in FY16, a 7.83 percent rise from the previous year. It does not represent the real number since data collected only shows the official endorsement of foreign currencies for traveling purpose. The actual figure remains unreported. However, it does send a pretty clear signal. At the same time, local tourism is also booming.
Travel is a US$7 trillion industry globally. As mentioned earlier, it has been seeing steady growth over the past couple of years in Bangladesh, an increasing number of Bangladeshis are now traveling overseas and the industry is just getting started, in every meaning of the word.
OTA is a relatively new business in Bangladesh. OTAs are basically aggregators who aggregate travel deals and services and build the business on commissions on sales. There are other small pockets of revenues such as ad but largely it is the commission.
The travel agency business has been around forever but digitization of travel business is a relatively recent phenomenon. Over the past years, we have seen a handful of OTAs to start operation in Dhaka. The total number of OTAs, of all sizes, are now somewhere north of 50 in the country. According to industry insiders, OTAs now control about 4-6% of the total travel market in Bangladesh.
Broadly speaking, there are a handful of conditions for an OTA business to succeed such as internet penetration, digital payment, and overall awareness regarding digital shopping. These trends are going in the right direction in Bangladesh. Put that together with OTA, the future of OTA business can only go one direction and that’s exponential growth.
Robi entering the OTA market is a significant event for the nascent industry for several reasons. With the power of Robi’s promotional muscle, it is likely to help the industry to build the necessary awareness and customer education in the market.
However, it seems Robi’s motivation is not building an OTA alone, which itself will be a pretty tough ambition for the operator if you consider the innovator's dilemma and disruption theory, Robi also wants to make money out of it on day one. The subscription service for Robi users is being built with that intention in mind. In many ways, Robi is not trying to build an OTA business only, it is also trying to build a travel VAS service for its subscribers and make money through it. There could not be any other explanation for the subscription offerings. If it is not a VAS and Robi is not going to use some tricks to sell the subscription service to its users, it is not going to work because who would pay for services that he/she could get for free elsewhere. You may suggest that a subscription service offers convenience to the users and Ghurbo promises to use AI to curate better deals and offers for the users and as well as send SMS to the users, but these offers are already available for free elsewhere. It is just a free email newsletter subscription away.
That being said, since Robi has this huge user base, the motivation to monetize that user base via different products and means is a positive thing. But if that is the main motivation for Robi to get into OTA business, it is likely to end up in failure sooner than later.
Cover photo credit: Ghurbo Facebook page