The flight tickets market – for regular air lines - is estimated at minimum 300 million euro in 2011, the on-line sales will represent about 7-8%, almost double than the last y (...)
The flight tickets market – for regular air lines - is estimated at minimum 300 million euro in 2011, the on-line sales will represent about 7-8%, almost double than the last year. Paravion.ro, one of the main players in this segment wants to consolidate its position on the market – see the plans, the stake, the fears and the drawbacks in an exclusive interview with Remus Visan, deputy managing director at Paravion Tour SRL, the online agency of the Happy Tour Group, owned by GED.
Happy Tour share holders are GED as well as business men like Mircea Vladu and Remus Visan. The main competitors for Paravion.ro are platforms like Vola.ro, eSky.ro, Decoleaza.ro or BileteAvion.ro.
Wall-Street.ro: Is it just my opinion or are there more and more booking/selling sites for flight tickets?
Remus Visan: In this moment, the number of online travel agencies in Romania is quite big, but still small compared to the offline IATA accredited agencies. As far as I know there are aproximatively 200, IATA accredited. They used to be more numerous but many of them were closed because of the economical conditions in Romania and they were no longer been able to sustain this financial effort. An accredited IATA agency must provide a payment guaranty to cover the passengers. For example, if you sell 1 million euro worth tickets a month, IATA require that you have an insurance policy of 500,000 euro.
W-S.ro: What makes Paravion.ro different from its competitors? What is your strategy?
RS: We are the only 100% online agency to offer our passengers the possibility to book, pay, issue their ticket and board the plane the same day, in just a few of hours. This is what makes us different from our competitors and this also helped us retain those passengers for whom “time is money”. Our ticketing agent step in when only if a booking requires a more elaborate itinerary.
W-S.ro: The only 100% online agency? And your competitors, what are they?
RS: In their case they rely heavily on ticketing agents that need to confirm the transaction and contact the passenger, one way or another. This step is no longer necessary for Paravion.ro. After all, it’s all about comfort. With us, everything takes place on the internet; there is no need for you to wait for a travel agent to confirm you anything.
W-S.ro: What is the percent of exclusively online transactions that are processed by Paravion.ro – booking, payment, everything?
RS: About 45% of the transactions are exclusively processed on the internet. I know it’s a big percentage, even compared to other online transactions, like eMag.ro, the leader of the online retail. But this is our strategy, to make an online business not just a simple portal acting as sales channel.
W-S.ro: This means you need fewer people to do the job?
RS: Let’s say that if we are to compare with our main competitor, for 10 of his agents, we use only one. Presently, we have 7 travel agents for support, 4 of which are also ticketing agents. Of course, we have a call center, too, but this is an externalized service.
W-S.ro: What is the percentage of low-cost tickets?
RS: In our case, it’s very low - only 5%. The rest 95% represent tickets for air-liners companies. Our clients prefer air-liners companies for several motives: flexible flight tables, onboard services and rerouting possibilities is something out of the ordinary happens. It’s also true that we the customers that wish to travel with low-cost companies and these sales are 100% online, too.
W-S.ro: Vola.ro, one of your competitors, published its financial data for Q1, saying that they have sold 30,000 flight tickets. Where is Paravion.ro situated?
RS: (smiling) For all the players in the market, the IATA numbers are public. The low-cost sales are accounted for separately and IATA does not take them into consideration, so our competitor can declare everything. All I can say is that are still in the leading position and we intend to do so in the future.
W-S.ro: How big do you think is the flight tickets market in Romania?
RS: If we consider IATA affiliated companies, we talk about minim 300 million euro in 2011, excepting the tickets sold directly by companies (including low cost). This year, 8% of this market will be represented by the online segment, 4-5% more than 2010. We own 50-55% of this segment.
W-S.ro: 50-55% is very much, considering the numerous competitors. But if we consider the street agencies, which you do not think of as 100% online, what would be your market share?
RS: Here I can tell you that Happy Tour Group owns, by far, the biggest market share: 12-12%, both online and offline.
W-S.ro: What made this increase of online ticket sale possible?
RS: Well, a new generation grew up. It’s the generation that was raised by fairytales, but by computers. The marketing campaigns deployed by the big sellers for the online market finally paid off. The customers are getting more and more used to buying online goods and, after all, buying a flight ticket is not that different from buying a laptop. Visa or MasterCard campaigns also helped by offering up to 10% discounts for online payments, which is quite something. Despite all this, the online trading/payment in Romania is still far behind. In Poland, for example the online market represents 5% of 2011 GDP.
The main obstacle - comisionul suportat este inca mare
W-S.ro: Which are the main difficulties you’re facing off in the travel industry?
RS: Generally, most of the tickets booked online are for the economy class. For their prices to be attractive, our profit margin is very narrow. That is because the commission you have to support is still big (you have to pay banking fees, online payments processor fees etc. that is 3-4% from the total value of the transaction) Practically this money is lost unless you want to be assured that every transaction is safe and that sensitive data is secured. Of course, you can choose as well a 2% commission but if you want to “sleep tight” you’ll pay 3% for extra security.
W-S.ro: That means profit margins are very tight.
RS: Yes, arount 2%. You must have a sustained sale volume to cover for all expenses.
W-S.ro: What services and what further developments you have in mind on highly competitive market?
RS: Since June we’ve started to sell travel packages as a charter service, 100% online. Practically, we make our own packages: flight and accommodation, all 100% online. Many of the passengers who purchase travel packages with Paravion.ro are top managers or people from the Diaspora.
W-S.ro: I see… Is there something you haven’t launched, but you are about to?
RS: By the end of Q4 we’ll launch a dynamic package service, in partnership with Amadeus. Practically, we are goin to offer our customers the possibility to book a hotel while booking a flight ticket and to find convenient "all in one" travel destinations, exclusively online.
W-S.ro: If you had extra 200,000 nonrefundable euro, how would you invest it?
RS: Paravion.ro is financed by GED through Happy Tour. The algorithm is always the same, at least 70% is invested in technology. We have enough ideas to absorb this budget.
W-S.ro: Speaking of technology – how is your mobile platform doing?
RS: We haven’t launched our mobile platform yet, but we will. We haven’t been too hasty about it in Romania because there is hardly any demand for it. For exemple, in Greece, the mobile segment was already launched in 2010 and in the first 3 months 90% of the visits ware just for browsing and no booking was made. Only after intense campaigns a few results were visible.
W-S.ro: What do you fear the most?
RS: Adopting the euro currency. This will be the moment when powerful international players, with superior financial resources will enter the market.
W-S.ro: What your customers complain about, most often?
RS: Many passengers choose to fly with low-cost companies. Sometimes the flights are delayed or even cancelled. We cannot be held responsible for such things and we do encourage the passengers to carefully read the general conditions for transportation, the rights of the passengers, the liability of the low-cost company, the luggage policy of every low-cost company. And they should remember that cheaper is not always better. Even if they travel with an airline company, we advise our passengers to see if it is in their advantage to buy a ticket that can or cannot be modified. Sometimes passengers complain about not having received a visa or for not observing the regulations regarding travelling minors, claims for which we cannot be held responsible.
W-S.ro: Did you have a model to inspire you?
RS: In deed, we’ve had a model and it was the online platform Opodo.com. I like it because is a 100% online business, very well designed and managed. De-a lungul timpului au avut foarte multi actionari.
W-S.ro: What do you advise your customers willing to buy online flight tickets?
RS: The online system is a revolutionary one, so it has rather few drawbacks, yet I advise the passengers to carefully choose the online portal for their booking to avoid unpleasant surprises. I also recommend them not to spend too much time on a webpage with time sensitive sessions so that they don’t have to start all over again the booking process in case the session expired. Another advice is to carefully choose their airline/low-cost company and to understand that the flight ticket is a legal agreement between them and the company.