Booking Platforms Disrupt Tourism Value Chains in India
New Study on who benefits and who misses out
India is one of the most digitised travel markets in the world. Instead of top international players like Booking, HRS and Airbnb, it is primarily national platforms that dominate the market. Not everyone benefits from this, however. In a study for Tourism Watch, the organization IT for Change has examined the impact of platforms on the Indian tourism sector. Deepti Bharthur, Senior Research Associate and author of the study, reports on the main outcomes in an interview with Lea Thin.
Lea Thin (LT): Deepti, platforms are dominating the tourism market in India. Who is the big winner of this development and who is missing out?
Deepti Bharthur (DB): The biggest winners are the platforms themselves. They have capitalised on a great market and they have been able to create a competitive advantage that is going to be quite hard to beat. Especially big platforms have venture capital funding available to offset discounts, so they are able to offer very attractive rates to customers. Mid-range budget hotels and small businesses, however, have taken a hit on account of platform practices. Caught in a deep discount system, their revenue margins have come down. Small local tour companies, especially those offering adventure tourism, have also really lost. These businesses tend to operate in remote locations like in the mountains with limited digital infrastructure. The lower online visibility and slower responsiveness of these companies in comparison to larger platforms, combined with their discounting strategies means that customers tend to favour the latter.
LT: Can you still be successful as a tourism provider in India today without a platform?
DB: It depends. When we look at the domestic travel market, Indian travellers tend to be quite price-conscious. Therefore, the competitive discounts platforms offer are definitely hard to compete with. Still, there is room for an alternative business model. Tourism in India is such a huge market, so different kinds of players can have a piece of the cake. We have noticed this especially for older businesses, which have been part of the game for many years. They have been able to build a loyal consumer base long before the platforms appeared. New players offering niche services, who engage with social media and build a brand identity, are also seeing success. Most actors though, want the best online presence they can get which usually still includes platform integration.
LT: We have talked about the negative impact of platforms, especially for small businesses. Can platforms also strengthen Micro, Small & Medium Enterprises (MSME) in value chains and thus contribute to sustainable development?
DB: In our study, we are proposing some measures like featuring locally owned businesses prominently on platforms and giving them online presence, showcasing local impact and also sharing data with local tourism agencies. Especially in the Global South, private platforms have enormous amounts of data of all kinds starting from tourist traffic patterns to ecological footprints. This data needs to be proactively shared with local public agencies and small businesses, so they can include this knowledge into their decision-making as well. Data trusts operated and managed at local level can help strengthen MSMEs and enhance their ability to compete in the age of digitally mediated tourism.
Platforms should also be working towards helping tourists to make better decisions that complement rather than deplete the local economy. For instance, accommodations should not only be sorted by location and how clean the rooms are, but also be categorised by the quality of working conditions for their staff. Do they get fair pay, fair contracts? Do operators follow green business practices? Are men and women treated equally? By displaying these sets of data platforms have a big role to play in helping consumers to make good decisions.
LT: Which governance instruments can be applied in order to make sure that the business models of platforms are not built on lopsided dependences of MSMEs that in the long run enhance power imbalances?
DB: Platform regulation is a cross-sectoral issue. Problems like monopolies, tax avoidance, drilling down social security of workers or unfair pricing mechanisms are replicated across multiple sectors whether it is e-commerce, mobility and transportation or tourism. What is really needed is comprehensive policy reforms. Two major points of platform governance are crucial: First, to look at competition and anti-trust legislation frameworks as they exist and see how and where the new issue of platform dominance can be accounted for. Competition frameworks are predominantly concerned with consumer welfare so they often fail to catch issues of market distortion. This needs to change. Data governance is the second important area. Without policies that can ensure some data advantage for all players and safeguards for personal data, data mined through transactions in tourism or other sectors stands to become an entirely privately captured resource that enormously benefit a few players while leaving others struggling with an ever-widening information asymmetry.
LT: Besides economic impacts, digital booking platforms often intensify tourism growth with ecological degradation as a consequence. What can destinations like India do with regards to regulation?
The effects of ‘overtourism’ itself have to be regulated by destinations and government agencies. They need to carry out impact studies and look at resource management with regard to water, land use and degradation. So platforms may not necessarily be able to solve the problem of overtourism. But platforms have the power to create new destinations. They put up some great pictures and a nice listicle and it goes viral. In that sense, they can take the load off a highly visited destination by throwing light on smaller places. Thus, they can redistribute tourists from over-crowded areas and enrich new economies. But this is something that has to be done very consciously and in close cooperation with local actors.
Lea Thin is a Berlin-based geographer and journalist. In her work she focuses on issues around sustainability, gender, climate and development policy.
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