Bhanu Chopra, Chairman and Managing Director, Rategain Travel Technologies

5 May 2022 , 07:47 PM

In an interaction with Mamta Maity, indiainfoline.com, Mr. Bhanu Chopra, Chairman and Managing Director, Rategain Travel Technologies said "Today RateGain powers distribution for over 190,000 properties, which includes 180+ chains across the world. Our clientele includes 8 of the Fortune 500 Global companies, 23 of the Top 30 Hotel Chains, and 25 of the Top 30 OTAs, all leading car rentals, large cruise lines, and now some leading airlines."

What are the major industry characteristics and trends that control the fate of the players in this space of travel and hospitality?

Growth in Travel and Hospitality is driven by the following major trends:
 
Increased influence of the leisure traveler

1. Prior to the pandemic most city hotels depended on events, business travel, group bookings as well as tour operators — with solo and family leisure travel constituting a smaller portion of the overall pie.

   This constituted the bulk of their bookings — however post pandemic organizations have cut back on events, business travel and large group travel has still not made come back and therefore hotels and the travel industry is now relying on the leisure traveler to drive recovery which is also suggested by Phocuswire’s research which states that 82% of bookings in travel would be driven by leisure traveler. 

Expanding traveler base and higher travel frequency

1. High income Millennials in Asia:
   Availability and increase of disposable income in Asian economies which is home to almost a billion millennials, who take on an average 3-4 trips a year
2. Higher Life expectancy in Baby Boomers

Increasing lifespan and health of baby boombers and Gen-Xers who have high net-worth, financial security and are able to spend more on travel now as compared to earlier, and travel for much longer.
 
Increased role of Digital Content  and Online Bookings

1. With over 2 billion people on social, and Instagram becoming one of the biggest social networks, more people now compete online to put out better visuals of unique and far-away tourist destinations  - which further influences the generation to travel more
2. As per research from Google, 70-80% of all travel bookings now have a smartphone involved during the research process — again validating the increasing presence of digital/online channels in travel planning and booking process.

Eroding Brand Loyalty and Increase in Value-Buying

1. The leisure traveler poses a challenge to each hotel as they seldom repeat destinations or hotel brands, and always try to find the property that is best suited to their needs. Due to this, hotels are now focused on informing the guest

Shortage of Labour and Pressure on reducing cost

1. Close to 50 million people lost their jobs in the hospitality sector during the pandemic and 50% of them are not willing to join back the industry, creating a shortage of available talent pool willing to come into the industry
2. However, looking to improve their margins, hotels are attempting to reduce cost and therefore cannot afford to hire staff in large numbers, increasing their reliance on software that can replace human cost and provide more productivity

 Inflation

1. With increase in global food and fuel prices, disposable income would contract and therefore, more travelers would like to spend on accommodation, airlines and car rentals that provide better value as well as discounts — making travel and hospitality companies to rely more on pricing intelligence

Pandemic/Natural Events Response and Readiness

Last but not least, what impacts the travel industry is the occurrence of natural events, disasters such as pandemic, earthquake or war which can impact the industry for a brief period of time — however the impact of such activity is felt across industries and is not isolated for travel and hospitality.
 
Talking about the product suites offered by the company — could you throw some light on each of these segments and explain the rationale behind each of them?

When we look at the traveler’s journey there are five distinct phases and these are defined by a lot of companies
1- Dreaming: This is where the traveler is not actively looking to travel , but getting inspiration from social media and other channels
2- Planning: This is where the traveler is now looking at itineraries and actively planning for dates,location and activities
3- Hunting:   Once they zero down on a destination, this is where the traveler is now looking for the best offer/value they can get for their trip
4- Booking: This is when they make the booking on the site of their choice
5- Trip and Stay: In this stage the traveler takes the trip and checks in to the hotel to experience the stay as promised during the planning stage
6- Review and Retention: Based on their experience during stay and the deviation from the planning stage, travelers provide feedback and share their willingness to visit the property again

Based on the above six stages, the products of RateGain are aligned in three verticals that allow the commercial team of a hotel engage with the traveler at each step in the journey and impact them positively to generate more revenue. The company’s offerings can be broadly classified into three major segments — Martech, Distribution and DaaS(Data as a service). These three segments align with the six stages mentioned above of the traveler and aim to create the one platform for sales, marketing, distribution and revenue management. These three segments constitute a TAM of 5.91 Billion US dollars which will expand to around 12 billion dollars by CY2025.

Improving Return on Ad Spends with Martech

The Martech segment contributes to around 2.5 Billion US dollars in TAM and is poised to be the high growth vertical for RateGain focused on helping hotels drive more direct bookings through social media and metasearch websites.

Marketing technology has lagged behind in hospitality as traditionally a lion share of the bookings were driven offline through corporate events, corporate travel, group bookings and tours. The pandemic changed this as solo travel increased however with the pandemic boosting solo travel which is majorly booked online, hotels are now trying to leverage the opportunity to drive visitors to book directly on the hotel website to improve margins by lowering their cost of distribution and driving significant Return on Ad spends.

This is done by targeting and optimizing campaigns for experiential high-end travelers on social media for luxury hotels, and engaging value driven travelers to convert on metasearch such as Google, Tripadvisor who are looking to book quickly.

RateGain’s MarTech offerings also allow hotels to personalize the guest experience by understanding their needs through a 24x7 monitoring solution that allows the hotel to manage all queries, complaints and specific needs in real-time and also mitigate any negative experience

Delivering Better Margins with DaaS

As the traveler gets engaged with Martech offerings, the DaaS solutions are used by revenue managers, to ensure that the engaged traveler gets the right offer on the device of their choice and hotels are able to rank higher as well as get more bookings.

Using proprietary technology and API partnerships with all leading OTAs, RateGain is able to crawl and process forward looking pricing data to inform revenue managers how their competitor is planning to attract guests.

RateGain’s AI capabilities are able to process 7 billion price points in a year and provide the power to refresh data in sixty seconds using cloud capabilities build in collaboration with leading cloud services providers.

RateGain is able to procure this information from over 500+ sources in real-time and deliver accurate and high quality data in a simple to use UI that makes it easy for revenue managers to understand their market position and take decisions on their pricing strategy within five minutes saving them effort of collating information from across different channels, hotels, devices and processing it over hours to come to the right decision.

This product segment cuts across multiple levels of the vale chain, offering solutions to hotels, OTAs, Airlines, Cruise liners, Car Rentals, Vacation stays and more making RateGain one of the only software providers that has access to data from each segment in the industry.

RateGain provides multiple solutions in this business and most recently has launched an automated AI powered pricing recommendation platform as well as a demand forecasting solution which uses forward looking data to predict future demand at a city level — making it easier for hotels, car rentals, ferries to plan their demand and pricing strategy.

Reaching the right guest with Distribution

There is still a majority of travelers who prefer going to OTAs such as Booking.com, Makemytrip, Expedia and others, to get the best offer, enjoy offers and get other features such as full refunds and last day cancellation while planning their travel.

Hotels also rely on OTAs to get bookings from different source markets, which the hotel cannot reach on its own through marketing efforts.
Commercial teams in hotels cannot connect to each individual channel or demand partner, as the process is extremely time consuming, cost intensive and would require hotels have dedicated technology offices to enable this which would again impact cost.

RateGain solves this problem for the industry by connecting close to 191000 properties to around 400 channels that cover almost all major source markets in the world, providing chains an opportunity to expand in new source markets easily and allowing new OTAs to access large chains seamlessly.

RateGain distribution platform processes over 200 billion transactions annually, and with a dedicated data center sees zero down time providing a stable, scalable solution for the industry that is a natural growth story.

It helps in communicating the availability, rates, inventory and content from the accommodation providers to the OTAs and relays back the information transfer from the OTAs.
 
What is it, that sets Rategain apart from the rest in this TravelTech space? Why should any player across the value chain select Rategain over its peers, or develop such capabilities in-house?

There are multiple factors which when considered together, set RateGain apart from the rest of the players in the TravelTech space.

Coverage of the Entire Value Chain

To begin with, while there are competitors in each of the verticals, there are very few competitors who cover the entire value chain in the hospitality industry like RateGain. RateGain covers hotels, OTAs, Car rentals, Airlines, Tour Operators, Cruises and Ferries through its solution.

While it covers these segments, RateGain also is able to service the entire commercial department from Sales, Marketing, Distribution to revenue management which again is not common amongst our competitors

High Degree of Inter-operability

The end to end coverage provides RateGain the advantage of leveraging insights and data from each of these platforms and make our value addition, sharper to the hotelier.

A simple example of this is how our Martech products leverage Demand AI’s forecasting index to inform hoteliers when is the right time to start campaigns and when should they not spend on advertising. This helps in not only getting direct bookings but also improve their Return on Ad spends which directly impacts the bottom line.

This high degree of inter-operability makes it easy for RateGain to differentiate its products as well as solve for new usecases that have emerged in the post-pandemic more easily compared to our competitors- as they do not have these capabilities in house.

Extensive Partnership Ecosystem

RateGain’s partnership ecosystem consisting of all top OTAs and over 400+ other demand partners has been built over the last 15 years. Each partnership requires extensive technology effort to establish and manage, as well as sustained amount of business to continue. The existence of such a ecosystem allows hotels who want to expand connect to RateGain’s ecosystem easily, as well as new OTAs who want to list hotels connect easily as well.

This ecosystem creates a natural growth story where sales and marketing effort is minimal in establishing pairings between large hotel chains and regional OTAs.

As transactions and pairings grow, the investment at RateGain’s end would be in only technology as the infrastructure to sustain these bookings is already in place.

What are the key growth drivers that will propel the company to the next level and achieve pre-determined targets?

The company at its current position stands on a very strong footing, with a product suite that covers the entire value chain, well entrenched networks with both, the demand and supply partners, the largest data lake at its core, the best-in-class talent pool, a strong in-house research house headed by the founder himself and a strong pipeline building upon some impressive order wins recently.

The key growth drivers to take the company from here and propel it to the next level have been identified and the company is focused and committed to leverage the same.

Martech to drive Direct bookings

To begin with, our MarTech segment is a hyper growth driver, with an extremely large addressable market, and very little competitor intensity which further gets diminished when we combine our DaaS offerings with MarTech to make our products unique. With over 400+ hotels serviced in the NORAM region and a Master Sales agreement in place with large chains — the Martech segment is the fastest growing vertical for us and is stated to grow 50% YOY

Cross-Sell, Up-sell to Existing Customers

The company is looking to move towards a bundling strategy that would allow us to increase the penetration of our DaaS products in the distribution vertical, as well as distribution products in the DaaS vertical. Today only 30% of customers use either product, providing a large base to cross-sell other products

Creating New AI powered offerings for Post-Pandemic Usecases

Going back to the drawing board, the other growth driver is that of scaling our strong DaaS and Distribution offerings, thereby utilizing the incredible capability of DHISCO and putting our DaaS expertise and recently launched in-house forecasting products Demand AI and Rev AI to use. Not just these products launched over the past year, but further build upon them and use our unique data assets to create AI product offerings to plug in the gaps and thereby create a holistic and seamless platform.

Strategic Acquisitions

Looking beyond the confines of the company, the company has successfully carried out 3 acquisitions over the past 4 years and undertakes a very systematic, disciplined, and strategic approach for the same, with a dedicated department to carry out these inorganic expansions. Thus, this becomes an additional growth driver accelerating growth beyond organic potential.
 
Coming to the financials — could you provide a guidance covering the current nature of revenues and margins being achieved and the projections targeted moving forward?

Talking about our numbers, we operate at a very high gross margin nearing approximately 80%. While our pre-pandemic revenue clocked almost Rs4,000 million in 2020, it dipped in FY21 as a result of Covid-19. However, the green shoots that we are observing across the globe with the resumption of travel, opening up of borders, growing propensity of people wishing to head outdoors, we are confident of returning to pre-pandemic levels soon. We have been a profitable company from day one and have ensured on purpose that we remain fiscally responsible and do not let the growth momentum eat into our profitability.

We have always followed and comfortably beaten the SaaS metric of the ‘Rule of 40’, which is a summation of the EBIDTA Margins of the company and the growth percentage. Coming to our cash positions, despite the slowdown we have managed to have positive cash from operations. Regarding the nature of revenues currently, our revenue is highly predictable with the subscription mode accounting for around 75%, and 95% to 99% of the revenue recurring across segments. In addition to the recurrence, there is a high level of stickiness in our business, with the gross revenue retention in the range of 90% and net revenue retention at about 120%. The revenue mix based on geography accounts for 85% mainly from US & Europe, while on the basis of type of travel, almost 95% comes now from Leisure Travel in contrast to 5% from Business Travel.

Going forward, we expect our top line to grow organically at a rate of 25% to 30% owing to an extremely high growth expected in the MarTech segment of almost 50% YoY along with a 10% to 15% growth in DaaS and a 20% to 25% growth in Distribution. Currently clocked adjusted EBIDTA Margins of 10% can also be expected to cross 20% over the next few years, with the redesigned mode of operations — greater focus on R&D, reduced spends on marketing and better management of finance costs. We believe the time is ripe for this industry to bounce back and truly reach its potential and being at the forefront in this niche space, we are confident to achieve our pre-determined targets.
 
Is there a specific strategy behind the multiple acquisitions carried out over the past 3-4 years? How is this branch of inorganic growth shaping up going forward?

RateGain’s acquisition approach is quite astute powered by a department, which constantly tracks, analyzes and evaluates a plethora of targets to acquire. While most companies acquire companies based on their growth, valuations — RateGain always looks to acquire companies that are a natural fit in their overall vision, and therefore does not necessarily see this as an inorganic growth lever over a long term.

The department for M&A has clearly defined areas and synergies around which they assess any target company and carefully analyze how the company helps in plugging in the gaps towards its overarching aim of being the leading revenue maximization operating system for the industry.

Over the past 3-4 years, the company has successfully closed three major acquisitions — DHISCO in 2018, BCV in 2019 and the most recent, MyHotelShop in 2021.  Each of these acquisitions were to augment existing capabilities of RateGain and move towards the vision of becoming the single platform for the hotelier to maximize revenue.

With DHISCO, RateGain was able to augment RezGain and make a supply and demand network which is one of the biggest distribution networks in the world

With BCV and MHS, RateGain moved into the Martech space to help hotels drive more direct bookings through social media and metasearch websites — and becoming the one stop shop for distribution

As we move forward, the team continues to assess solutions and products that can augment well not only with products, but also with the culture of RateGain and provide us enough scale to leverage our sales team to sell it to our existing customers.
 
Can you throw some light on the nature of projects currently ongoing and in the pipeline. Which are some of the large marquee clients that the company is in business with?

With the company being in existence for over 17 years now and consciously targeting the luxury, premium chains for some of its products and the mid-market and smaller chains for the remaining products and services, it is connected with a large portfolio of players across the sub-sector lines, from hotels to airlines, from car rentals to cruise liners.

Today RateGain powers distribution for over 190,000 properties, which includes 180+ chains across the world. Our clientele includes 8 of the Fortune 500 Global companies, 23 of the Top 30 Hotel Chains, and 25 of the Top 30 OTAs, all leading car rentals, large cruise lines, and now some leading airlines.

Similarly, there are almost a 1000 hotels using Martech products between BCV and MyHotelShop for one or more services and offer tremendous cross-selling opportunities for us and a far more widespread presence and exposure for them, thereby being mutually beneficial and value-accretive.

RateGain’s new projects are focused on the vision of the company, to provide products that can help in maximizing revenue at each guest touch point and helping in acquiring, retaining and driving wallet share expansion.

As consume technology evolves, and their touch points increase through the usage of different apps and devices to plan travel, RateGain’s focus will be to help commercial teams engage with each of these new touch points and maximize revenue every day.