James Shillinglaw | April 06, 2015 4:09 PM ET
Meet the Man Behind the Third Largest Online Travel Agency
A few weeks back I wrote a column where I talked about the opportunity for traditional travel agents in the increasingly consolidating online travel agency (OTA) market. Indeed, with Expedia’s pending purchase of Orbitz, there will now be just two huge players in the market—Expedia with its many brands and Priceline.
A few days later, though, another major player contacted me—one that is now poised to become the third major OTA after the Expedia-Orbitz merger is completed. I’m talking about Fareportal, which through its CheapOAir and OneTravel units now seems to be a lock for the number three spot.
Fareportal CEO Sam Jain, 42, who emigrated to the U.S. from India in 1992 and is now a naturalized U.S. citizen, began focusing on the travel agency and air consolidation business with FareBuzz in 1994. Nearly 10 years later, in 2003, he launched Fareportal, which then debuted CheapOAir in 2006 as its consumer-facing airline booking website.
At the same time, Jain is quick to point out that his company has a hybrid model—it sells travel online but also through large call centers with working travel agents in them. It’s this high-touch, high-tech strategy that differentiates Fareportal and its various units. I sat down with Jain to find out about his company and its business model.
James Shillinglaw: How do you position Fareportal and CheapOAir in the market today?
Sam Jain: For us, we actually focus on the traditional business a lot. Our business model is a hybrid business model. We do call centers and online, it's not purely an online operation.
JS: So you are in many ways acting as a large travel agency?
SJ: We are a large travel agency. Today you really cannot get traffic directly from newspapers or print media, so online is a way for us to get the traffic in. We have a great product online and we invest a lot in technology, but I think in order to really justify and have that level of service and support we need to have that hybrid model. That's how we differentiate ourselves.
JS: Do you think at this point you are probably the third largest online travel agency?
SJ: Well, we are if you include Expedia-Orbitz, if that merger goes through, and then Priceline. But we are still very small compared to those guys.
JS: Can you tell me the differences between the company units that you have?
JS: CheapOAir caters to the budget-conscious travelers, and the supplier relations and product teams are different from Fareportal. So we have a friendly competition going on between the two brands. The CheapOAir brand has special deals related to wholesale fares that we can market through our contact centers or through fare alerts or user profiles. So airlines will come to us and offer us tactical special deals through CheapOAir.
We also are able to innovate on the product side and invest heavily on the technology side. We have about 250 engineers. On the OneTravel side we are able to market vacation packages and hotels, more so than with CheapOAir. For example, the name CheapOAir restricts us a bit to the air business, but that was done purposefully.
JS: Unlike the other major online travel agencies you really have stuck to air. Why didn't you focus on hotels?
SJ: Well, we have a pretty sizable hotel component, but our focus has been like a laser on the air side. That's in our DNA. I started as a travel agent, so I'm the only CEO who comes from a traditional travel agency background.
JS: How do you make money on air unlike other OTAs?
SJ: It's tough to make money on the domestic airline side, but because of our business model we have a lot of special offers that we can provide to customers through contact centers and even online channels. We also really focus on the international business. We have a Spanish-language website that we just launched and we are launching our site in 11 different languages. We are going to the immigrant community with high-value tickets. For example, six people going to China is like a $15,000 to $20,000 ticket in the summer. We will actually get commissionable fares or net rates. That's how we get money on those.
JS: Are you also focusing on upgrading passengers and selling ancillary services?
SJ: We are the first company to integrate with over 15 airlines for the seats and ancillaries, even the bag fees. For example, with American Airlines we have pretty much all their products. We have a relationship with the carrier that we cannot comment on, but we are able to sell those products on our website.
JS: So effectively you are making money on air in part by selling ancillary services?
SJ: Absolutely. In addition, upgrades are a big part of our revenue. And this is great for travel agencies as well, because the more the airlines unbundle their product, the more that travel agencies, such as us, can differentiate themselves from the competition. We have the ability to integrate each and every product. We can make money on selling ancillaries, selling additional products, and getting a commission or markup on those products.
JS: But you also have access to consolidator fares?
SJ: I started with FareBuzz as an airfare aggregator many years ago and we automated the entire wholesale fulfillment process. In the early 1990s what used to happen is where every airline had a separate fare sheet with the rules and everything. It would take an agent maybe 10 minutes to quote a price by looking at all the different sheets.
We automated the entire process by creating a database that could dynamically check all the rules, and in less than 10 seconds the agent would have 10 different price options, including validating all the fare rules. FareBuzz is still around and they still do a lot of b-to-b business. We were able to use that knowledge and bring it here. We have relationships with over 450 airlines, including more than 70 low-cost airlines. Everything is so fragmented in the air space and the GDSs don't carry those low budget airlines’ inventory and pricing.
JS: Now you also make money by charging booking fees, right?
SJ: Yes, we do charge a booking fee, but I don't think that's unique in the industry today. All the OTAs have some kind of booking fee that is included in the total price. Our standard booking fees can change, but generally for online bookings it’s in the $28 range. Most OTAs are charging a similar fee though they don't advertise it much. The misconception is they don't charge fees.
JS: You also work through some very large call centers. How many call centers do you have?
SJ: We have one in Canada, two in U.S., two in U.K., one in India, one in Asia and another in Mexico. We will soon be launching our first Spanish language contact center in Mexico City. Worldwide we have north of 2,700 employees, The reason for that is our hybrid model where we focus so much on high-touch customer service and support.
JS: Do you see differences in the yields that you get between online versus vs. your call center bookings?
SJ: Definitely. There is a big difference because when you have a personalized one-on-one conversation with a customer the conversion rates are much better in the contact center. Certain airlines that don't want us to compete head-on with their own website give us special inventory with the call centers, which they don't perceive to be a threat to their own websites. Plus you can do much better with the additional upsells and cross sells through the call center.
JS: So what is the different between you and the other OTAs, like Expedia, Orbitz and Priceline?
SJ: We started with CheapOAir in 2006 and one of the things I was a little astonished about with the OTAs at that time is that it took me 10 clicks to find their phone number. CheapOAir largely came from that deficiency and the gap that was there between a traditional agency and an OTA. My thinking was there were two different business models—online and traditional travel agencies—so we wanted to bridge that gap. Today we are the only company that has a phone number on every web page that is prominently listed on the upper right side of the page. We now have over 1,600 agents speaking multiple languages around the world in our call centers. We also have a “follow the sun” strategy so we are never down. We think that connection with the customer making them feel that CheapOAir is a brand they can trust will give us an edge in the air fare business.
JS: Do you have affiliate program that travel agents can tap into?
SJ: We have a great affiliate program that has been launched in a limited way with a white-label solution. Basically a travel agency can create their own look and feel and list their own phone number and get connected to their own agent. It’s currently used by 10 to 15 different companies, but we have not really marketed it yet. We want to make sure it works right and we want to provide access to our hundred of millions of special inventory fares that the airlines provide to us so other travel agents can benefit from that model.
JS: What do you think about the traditional travel agents today? What is their relevancy and role and how do they fit in?
SJ: I think we have proven that travel agents have a very valuable place in the marketplace. We are one of the faster growing OTAs as a hybrid model. We are not really an OTA; we are a hybrid travel agency. We are the fastest growing company in the air business in America. The reason for that is truly because we have fashioned this personalized call center business.
That proves the point that travel agents are required. In today's economy, affluence is growing and you can see young kids becoming millionaires and billionaires. These kids want personalized service. They are willing to spend $100,000 on a vacation. They want special assistance and help from professional travel agencies.
In our contact centers we have a department for complex air fares, round the world fares and very complex type of bookings, or even group bookings. So we need expert travel advisors to be able to facilitate those types of bookings.
JS: Where do you think the OTA market is going if and when this Expedia-Orbitz deal is approved?
SJ: It's difficult to predict exactly what will happen, but I think Expedia has a great team and are very smart people who are executing all these deals with the companies they are acquiring. But we truly believe we will be successful if we stay focused on our own strategy, rather than worrying about competitors. The three main things that any company needs, which will define their success, would be taking care of their three main constituents: their customers, their supplier partners and their employees. If you take care of those three main constituents, success if almost guaranteed. That's what we try to follow.
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