Issue #99 - Is Asia Rethinking the Scope of Travel SuperApps?
Travel app strategy insights in Asia from Traveloka, MakeMyTrip and Agoda.
In the air…
I’m writing en route from Phoenix to Kuala Lumpur, via Seattle and Taipei. It’s some trip.
The past week was spent attending The Phocuswright Conference. Around 1,200 travel industry delegates from over 40 countries swapped ideas, insights and pitches - plus tentative forecasts about what awaits in 2023.
Big hitters included the CEO/MD/Presidents of Expedia, Google, Tripadvisor, Hopper and Despegar, plus - from Asia - MakeMyTrip and Traveloka.
Hot topics included China, mobility, tours and activities, home rentals, Web3, payment tech, social commerce and - inevitably - climate impact.
“Cautious optimism” was often cited, but Europe was the conference room elephant. A financial analysts panel pointed out that the winter energy crunch will drag down travel demand. The residual economic effects could last longer.
Against this backdrop, some intriguing insights were offered about online travel distribution in Asia as regional OTAs reassess the SuperApp model.
So let’s roll with that theme today in a slightly abridged newsletter.
Thanks for being onboard.
Is Asia Rethinking the Scope of Travel SuperApps?
Formulated in China, the SuperApp concept quickly spread across South East Asia. It is now making waves in India. Smartphone-enabled travel distribution is a core feature of many SuperApps. But as consumers adjust to retrenching economic conditions and SuperApps face shareholder pressure to turn a profit, is modular change inevitable?
1) SuperApps Take Off in China
SuperApps emerged in China in the mid-2010s. Rampant growth of online shopping via smartphones saw consumers demand new spending experiences. China’s tech titans responded by building out their mobile apps into multi-purpose lifestyle service portals. Shopping was integrated with video streaming, gaming, social media, meals and groceries, travel booking and mobility and supported by digital payments.
Within a few years, 4 SuperApps dominated China’s on-demand economy. One of these, Trip.com (aka Ctrip), grew out of online travel. WeChat began as a chat app, Meituan (initially Meituan Dianping) in group shopping and restaurant reviews and Fliggy from Alibaba’s e-commerce empire.
Three of these now provide OTA portals within their SuperApp ecosystem. WeChat enables travel players to sell direct to consumers via its embedded Mini Programs.
2) South East Asia Adopts SuperApps
Leading into Covid-19, South East Asia’s dynamic digital economies drew influences from mobile shopping in China. Chinese internet giants invested in the region as consumers embraced the novelty and convenience of SuperApp e-commerce.
South East Asia’s own SuperApps gained traction. These include Grab, which began as a taxi-hailing app in Malaysia before relocating to Singapore, and GoTo, which is the merged entity of Gojek (ride hailing) and Tokopedia (e-commerce) in Indonesia.
In 2020, amid great fanfare, Malaysia-based AirAsia announced it would segue from being an LCC to an online lifestyle SuperApp. It later changed its name to Capital A.
As South East Asia’s largest nation by a considerable margin, Indonesia is a hub of mobile app services investment. Bukalapak is worth watching. Perhaps BliBli also.
Aside from AirAsia, none of the above is a serious travel distributor. At least, not yet. Even AirAsia deviates from the China model. Its own products form the core of its travel offering, rather than being a big-tent online travel marketplace.
3) Rethinking the Model for an Unfolding Era
The SuperApp operating landscape in South East Asia is shifting. More people now spend less time at home. This influences online consumption: ie, more ride hailing, more selective shopping. The return of travel offers appealing growth potential.
Meanwhile, SuperApps need scale, and trading across borders is highly competitive - especially in the pivotal fintech space. Consumer influences vary in each market, and loyalty is non-existent. Price and value drive sales, but margins are thin.
As everywhere, macro-economic gloom is dampening commercial and consumer sentiment across this region of 10 individual countries.
A year ago, smart money was on Indonesian OTA Traveloka assuming SuperApp status. During the pandemic, it successfully operated ride-hailing and food ordering services. Now its scope is sharpening. Having acquired USD300 million in funding, Traveloka will close its app-based meal delivery, grocery and delivery services. Instead, it will focus on its core business: online travel.
Grab is also rethinking. It will close a cloud kitchen business in Indonesia, and purchased a supermarket chain in Malaysia to support its food delivery service. Grab narrowed its losses in Q3. But, once 2023 arrives, it will no longer be able to make favourable year-on-year trading comparisons with 2021, which was a downbeat Covid-dominated 12 months across South East Asia.
Meanwhile, GoTo this week shed 12% of its workforce in order to “navigate the uncertain road that lies ahead” - and attempt to make a profit.
4) Three Perspectives for Asia’s Travel Recovery
As travel demand increases but Asia’s competitive pressures intensify, three leading OTAs outlined their app strategies at The Phocuswright Conference in Phoenix…
Comprehensive Travel Products - Traveloka
During the pandemic, Traveloka focused on “building strong engagement in our platform,” said Caesar Indra, President of Traveloka. "Now we are going back to focus on travel to keep our leadership in the sector and not spend on unnecessary products.” Founded in Indonesia, Traveloka also operates in Singapore, Philippines, Thailand, Malaysia and Vietnam. It aims to offer “seamless and comprehensive travel products,” and will invest in fintech to empower South East Asia’s large underbanked population.
Mastering Flights & Fintech - Agoda
Part of Booking Holdings and known for online hotel booking, Agoda launched flight sales in 2019. It invested technically in this segment during Covid-19, enabling it to “catch the early part of the recovery,” said Timothy Hughes, Agoda’s VP of Corporate Development. Building an airline booking engine “was expensive” but vital to compete in the regional airspace. Agoda is taking a market-by-market approach in Asia, and launched its first brand campaigns in India and Japan. Mastering digital payments is non-negotiable: “You need to be a fintech company to be in travel now.”
Vertical Super App - MakeMyTrip
“We want to be a Vertical Super App,” said Rajesh Magow, Co-Founder and CEO of MakeMyTrip. Founded in 2000, MakeMyTrip is India’s leading online travel group. In 2016, China’s Trip.com purchased a stake in the company. “We don’t want to go outside of travel, but we will cater for every single vertical [in travel].” It will likely take MakeMyTrip “a couple of quarters” to reestablish its pre-Covid 50-50 percentage split of hotels-transport revenue. Meanwhile, rapid growth in India’s domestic homestay market presents a sizeable opportunity.
As travel SuperApps confront shifting consumer expectations in volatile times, new distribution innovations and greater diversification seem inevitable.
Did I hear you say “Social commerce”?
Watch this space.
And, that’s a wrap for Issue 99.
The 100th edition of Asia Travel Re:Set (which is published every 2 weeks) will reach inboxes on 4 December.
Until then, find me on Twitter, LinkedIn, the Asia Travel Re:Set website and The South East Asia Travel Show.