Russian travel market is estimated over 50B USD while online share is still less than 10%. This report addresses the following topics: - general trends - travel patterns of inbound, outbound and domestic markets - market sizing by segmens: flight tickets, hotel booking, package tours - main players in each segment - trend setting for near future by segments This report is prepared by Travelata.ru team. Travelata.ru is and online travel agency specializing on package tours.

1. RUSSIA – A LAND OF
OPPORTUNITIES IN ONLINE
TRAVEL
October, 2013

2. Russian travel market is estimated at USD 58B with online segment
growing at 49% while there is still significant growth potential
Volume of travel market1 in Russia
USD billion
57.9
9%
Share of travel booked online, 2012
Percent
62.5
59
USA
53.0
48.6
50
UK
44.5
42
Germany
50.0
Offline
47.5
25
India
45.6
43.8
41.4
20
Brazil
49%
3.1
4.8
2010
2011
7.4
2012
10.4
12.5
China
18
Online
2013
2014
Russia
14
1 Including outbound, inbound and domestic travel, according to Phocuswright
SOURCE: PhoCusWright – report from 2012, Euromonitor
1

3. Positive trends outnumber potential risks
Trends
Risks
•
•
Risk of global or local
worsening of economical
environment
•
Vague definitions of
requirements in OTAtouroperator-customers
legal relationship due to
outdated legislation
Over 90 countries do not require entry
visa for Russian citizens. European Union
countries still do but requirements are
gradually getting looser and there is an
ongoing negotiation with EU on visa-free
entry.
•
Fast growth of e-commerce
shopping habits
•
High penetration of debit and credit cards
•
Quickly growing number of banks
providing acquiring services and thus
decreasing fees
•
Growing spending potential in the regions
•
High number of investments into online
travel field by local and international VC
funds
2

4. Outbound travel in Russia is driven by handful of destinations both for
vacation and business
Outbound travel 2012
Number of visits, millions
Top10 = 70%
47,80
2,50
Turkey
15,00
1,90
Egypt
1,90
0,90
China1 Thailand
0,80
Spain
0,70
0,69
Germany Greece
0,57
Italy
0,55
UAE
0,50
Finland
4,50
9,50
Ukraine2
32,80
4,60
Finland5
3,40
Kazakhstan
3,36
Abkhazia3
1,80
Estonia
Total
Tourists Business
and
other4
1,00
0,90
0,87
0,70
Poland Lithuania
Germany Azerbaidjan
Top10 = 81%
0,50
South
Ossetia
6,17
Other
1. Mostly residents of Far East regions of Russia. Big part is driven by shopping tours for cheap Chinese products
2. Since Russians do not need passport to travel to Ukraine it is difficult to accurately determine the purpose of visits
3. Russians do not need passport to Abkhazia. Likely that most travel for tourism because of big number of cheap resorts
4. Only 1.2M out of 32.8M could be identified as business travelers with certainty, the rest is family related travel and consumer shopping arbitrage
5. Mostly residents of St.Petersburg who benefit from simplified visa requirements from Finland consulate and travel with a car for short trips and shopping
SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture)
3

5. Domestic travel is less concentrated than outbound but still 35% is
focused in just 3 areas
Domestic travel 2012
Number of visits2 , millions
40.88
5.80
Top3
35%
3.80
3.50
1,43
Total
Greater
Moscow
area
1,30
1,20
Krasnodar1 Greater
Tatarstan Yekaterinburg Tyumen
- Rostov St.Petersburg republic
region
region
area
area
0,90
Far-East
region
0,85
Nizhny
Novgorod
region
0,80
Stavropol
region
0,80
Samara
region
20.50
Other
1. Sochy – a popular Russian resort city is located there
2. Reporting by number of occupancies in various types of temporary accommodation facilities (hotels, hostels, pensions, guest houses, etc.)
SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture)
4

6. With only 2.6M tourists a year, the world does not see Russia as an
attractive tourism destination yet. Most inbound traffic comes from former
Soviet Union republics
Inbound travel 2012
Number of visits, millions
Citizens of Top10 countries make up to 63% of all tourist travelers:
Germany, China, USA, UK, Finland, Italy, Turkey, France, Israel, Spain
28,00
2,60
25,40
6,50
3,60
Top10
81%
2,70
1,40
1,20
1,20
1,13
1,12
0,98
Total
Tourism
Business
and other
Ukraine
Kazakh- Uzbekistan Finland
stan
Moldova
Poland
Tajikistan Azerbaidjan
SOURCE: Russiatourism.ru – official agency for tourism affairs (part of Ministry of Culture)
China
0,70
5,00
Armenia
Other
5

7. We estimate Russian online travel market at USD 5B1 (9% share of the
total) with flight segment taking up to 70%
Flight tickets
Hotel booking
Package tours
Market size 2013
(Estimated)
USD B
22
18
15
Share of online
%
16
7
2
50
CAGR 2010-2013
%
Offline
25
20
Online
Online
•
•
0-3
5-8 – 3rd party inventory
10-25 – Direct contracts
with hotels
Offline
Flight tickets
segment
generates the
most sales now
but margins are
getting thinner
▪
8
▪
Online hotel
booking segment
is dominated by a
single incumbent
while others are
struggling to
catch up
▪
Offline
Commissions
%
10
8
Online package
tours segment is
just in the initial
formation phase
Online
10-15
Average
purchase
USD
400
400
2,000
Click-to-Sale
conversions
%
3-8
0.5-2
0.1-0.5
Common user
cases
•
•
•
Business
Independent leisure travelers
Relatives visits
•
•
•
Aeroflot recently reduced
agency commission to 0%
OTAs strong dependence on
metasearches traffic
•
Important issues
•
Business
Independent leisure travelers
•
•
•
•
Booking.com is a dominant market
leader with a strong brand
Relatively small number of
Russians travel independently
abroad due to language barriers
and lack of experience. Strong
preference towards package tours.
•
•
Only leisure travel
Beach holidays, tours &
sightseeing
Family vacations
Complex product to book online
without human assistance. Over
85% of sales online happens via
a call center
No united GDS for packages.
Each tour operator has its own
booking system
1 Train tickets segment, home rentals, car rentals, travel insurance and other auxiliary services are not included
SOURCE: Travelata team
6

8. In flight tickets there are handful of companies with strong financial
backing competing for the market share and leadership positions
Gross sales, 2013
USD m per month
Company
Description
10-20
20-100
>100
Not exhaustive
Main sales and
marketing channels
Founded in 1993. Biggest and oldest consolidator of air and
train tickets. Launched B2C, B2B and corporate projects.
Offline travel agencies, OTAs,
Offline ticket offices, corporate
Founded in 2005 by a former Vipservice employee. Big
consolidator of air tickets. Only B2B. Backed by Ingosstrakh.
Offline travel agencies, OTAs,
Offline ticket offices, corporate
Launched in 2011 by a former employee of Anywayanyday.
Grew to become a leader in TTV – est. $400M in 2013.
Funded by Atomico.
Metasearches, white labels,
brand traffic
Launched in 2007 as the 1st full Russian OTA – est. $350M in
2013. Funded by Tiger fund.
PPC, Affiliate programs, brand
traffic, some metasearch
Launched as a standalone project in 2008 by the largest
Russian e-commerce group – Ozon.ru.
PPC, brand traffic,
metasearches
B2C project of Vipservice. Also offer charter flights that do not
appear in GDS.
Metasearches, white labels,
also train tickets
One of the youngest projects (2011) and least funded that
managed to make it to Top 10 selling OTAs.
Metasearches, some brand
traffic
Owned by e-travel S.A. – company operating in several
European countries. Russia is their biggest market.
Metasearches, PPC, Offline
advertizing
Biggest Russian metasearch. Launched in 2009 without any
external funding and managed to outgrow Skyscanner in
Russia
Brand, SEO, Affiliate
programs, PPC
1
European metasearch. Was one of the first to enter Russia
and managed to capture a significant market share.
Brand, SEO, Affiliate
programs, PPC
1
The world leader in metasearch but the latest to enter the
Russian market. Runs aggressive TV campaigns to catch up.
PPC, TV ads
Consolidators
OTAs
Metasearches
1 Sales from the Russian market only
7

9. Hotel booking market is dominated by Booking.com while two well-funded
Not exhaustive
VC-backed startup are trying to catch up
Gross sales, 2013
USD m per month
Company
Description
1-5
5-100
>100
Main sales and
marketing channels
1
Owned by Priceline. 1st mover advantage. Clear market leader.
The brand became associated with hotel booking for Russians.
PPC, SEO, white labels, brand
traffic, affiliate programs
1
The only Expedia brand that is promoted in Russia. “ Most
Russians have never heard of “Expedia” brand.
PPC, white labels
1
Germany based B2B hotel aggregator.
Offline agencies, corporate
1
Owned by Priceline. Stronghold in Asia.
Metasearch, PPC
Launched in early 2011. Raised ~$40M from mostly international
VC investors. Sign direct contracts with hotels.
PPC, SEO, Affiliate program
Launched in 2010. Raised ~$30M from mostly local VCs. Rely
heavily on B2B and corporate. Also signing direct contracts with
local hotels
PPC, White labels, offline
agencies, partnership with
Russian Railroad Company
Launched in 2011. Also sign direct contracts. Claim to be
profitable.
Affiliate program, PPC
As one of the leaders in flight OTAs is trying to cross-sell hotels
using its massive user base. Officially, no figures on sales have
been reported yet
PPC, cross-sell from flights
The oldest Russian hotel aggregator with direct contracts to
local hotels. Mostly in B2B business.
Offline agencies, OTAs,
touroperators
Project launched by UTS – touroperator. Aggregator of
aggregators. Mostly B2B.
Offline agencies,
touroperators
International
OTAs
Local OTAs
Local
aggregators
1
Metasearches
The world leader in metasearch but the latest to enter the
Russian market. Already signed up most of local and
international hotel OTAs
No data
PPC, TV ads
Launched a website in Russian in 2011 with all the reviews
translated automatically. Relatively low number of original
Russian reviews.
SEO, PPC
A Russian clone of Tripadvisor with 100% original Russian
reviews and high relevance to Russian audience.
1
SEO, PPC
A standalone project by flight metasearch – Aviasales.ru.
No data
SEO
1 Sales from the Russian market only
8

10. Package tours market is extremely fragmented with hundreds of players
Not exhaustive
with no clear leaders while online segment just emerging
Gross sales, 2013
USD m per month
One of the biggest discounters with developed retails agency and franchise
network
Franchise and independent
agencies, brand ads, PPC
<1%
Franchise and independent
agencies, brand ads, PPC
Independent travel agencies
Independent travel agencies
Franchise and independent
agencies, brand ads, PPC
Franchise and independent
agencies, brand ads, PPC
Launched in 1998. Holding company for the oldest franchise network with
over 100 offices across Russia. The brand associated with last minute cheap
deals.
SEO, Offline foothold
Franchise network (since 2002 ) with over 600 agencies in 245 cities in
Russia, Ukraine and other CIS countries.
SEO, Offline foothold
Launched in 2002. Over 100 offices – mix of own and franchises. Known for
efficient sales operations. Top 5 in organic results in Yandex by many
keywords.
SEO
< 1%
Launched in 2001. Operate under 3 online brands. More savvy in online
marketing than most offline agencies. 10 own offices in 5 cities.
SEO, PPC
<5%
Started in 2004 as a blog in Russian social network - livejournal. Claim to find
the cheapest deals with an army of freelancers and full time experts. Very
popular among young trendy crowd. 7 offices in Moscow and St.Petersburg
Online
agencies
<1%
Big touroperator. Good brand. Own and franchise agency network.
(~30,000 agencies
across Russia)
Independent travel agencies
European hegemon. Entered Russia by acquiring 2 midsize touroperatos.
Heavily investing in branding as a premium touroperator.
Offline
agencies
The biggest Russian touroperator (>1.5B USD TTV). Offers low prices that
very hard to beat. Has one of the most advanced IT systems among Russian
touroperators.
Sub-agent reseller of Tez tour inventory at 2-3% discount. Price discrimination
strategy of Tez.
(~200 big ones, over
2000 registered)
Online
sales
Big discounter. Sells mainly Turkey and Egypt.
Tour operators
Main sales and marketing
channels
One of the biggest and oldest in Russia with a brand of reliable touroperator.
Big retail chain of agencies.
Company
SMM, word of mouth
Travelata launched in Dec 2011. Offering wide assortment of tour packages
from over 120 touroperators online. Low price guarantee and fin guarantees
against TO bankruptcies. Raised $5.5M from MCI management and Invia.cz
PPC, White labels, Affiliate
program, email marketing
Launched in 2010. Wide assortment. Raised $2M from InVenture Partners.
PPC, email marketing
Launched in 2010. Focused on Voyage Prive model of a closed shopping club
by subscription. Raised ~$7M from European and local angel investors.
PPC, email marketing
Description
1-5
5-100
>100
< 1%
9

11. So what’s next?
Main market trends
Flight OTAs
Hotel booking OTAs
Package tours
OTAs
Main challenges
• Leading OTAs will continue increasing the gap with the rest
of the players while fighting with each other for market share
by marketing budgets and product/service innovation
• Top OTAs will continue in their effort to decrease
dependency on metasearches by developing stronger loyalty
programs and investing in brand awareness
• Top players will start entering hotel booking segment more
aggressively in order to increase margins but most likely to
do so via partnerships or acquisitions
• Cross-sell from flight tickets to hotel booking is not
working yet: top players need to figure out what is
the most efficient way to cross-sell hotel booking.
Just offering to book a hotel after buying a flight
ticket does not convert well
• Will focus on growth
• Will continue localization of their product and service to
differentiate from Booking.com
• Will use wider scope of marketing instruments to reach to
the new customers before Booking.com
• Corporate and B2B segments also could be opportunities for
further growth
• Sources of growth need to be identified. The
audience of hotel booking consumers can be
divided into two major groups:
A) Those who used to travel independently and
book hotels online – these consumers are likely
to use Booking.com and making them to switch
could be too difficult.
B) Beginners who used to go to offline agencies
and making first attempts as independent
travelers. This group might be too small to
generate growth that startups are aiming for
• Will focus on growth
• Will continue improving product and service to make the
online shopping experience of package tours significantly
better than offline
• Will expand to the regions more aggressively
• More funding will be raised by existing players and possibly
by newcomers
• Offline agencies will start offering online payment options
more to their clients but won’t be able to match the level of
required call center operations and IT sophistication
• Inertia in consumer habits and fear of fraud:
‒ Most people are used to buying their vacation
package in the travel agency office, so in order
to start buying online they need to know that it’s
possible to buy online
‒ They also need to believe that buying online a
package is as simple and safe as buying a flight
ticket
10

12. ABOUT TRAVELATA
11

13. Travelata.ru is a leading Russian online travel agency focusing on sales of
package tours online
What we do?
•
•
•
•
•
•
Revenue model
Current status
•
•
•
•
Products
‒ Package tours
‒ “Last minute” offers
Convenient payment options:
credit cards, cash, bank
transfers
Bookable online
Full customer assistance –
professional call center agents
No markups – only touroperator
prices
Agency commission (10-15%)
Favorable cash cycle (we collect the money
from the customer and transfer to the
touroperatos later)
•
Contracts with over 150 Russian touroperators
Financially backed by Invia.cz (leader in online
package tours in Eastern Europe) & MCI
management (Eastern European VC/PE fund)
Own call center – 30 agents in Moscow
12

14. Founding team
Managers
Alex Zaretsky – CEO, co-founder
• McKinsey&Company
• Intel
• CByond (start-up – sold to Olympus)
• MBA, Stern – New York University
• B.Sc.& M.Sc. in Electrical Engineering from Technion – Israel
Institute of Technology
Stanislav Satsuk – COO, co-founder
• McKinsey&Company
• Commercial Director at CityVision Group (start-up sold to
RAINCO)
• MBA, Kellogg – Northwestern University
• B.Sc in Economics from Kuban State Technological University
Advisor
Bas Godska – Marketing advisor, angel investor
• Marketing consultant to KupiVIP, Oktogo, Enter and more
• CMO at Lamoda.ru (Rocket Internet GmbH)
• CMO at Ozon.ru
• Marketing Director Europe at Orbitz.com
• Marketing and E-commerce director at Lastminute.com
13

15. Contacts
Alex Zaretsky
CEO, Travelata
alex.zaretsky@travelata.ru
Skype: zaretsky
14