FOCUS: MTS joins race for soaring Russian online booking market

By Yekaterina Yezhova

MOSCOW, Jul 25 (PRIME) -- Top Russian mobile operator MTS has used the retreat of foreign hotel booking majors to ride the wave of the bourgeoning market and acquired service Bronevik, estimated by analysts at no more than 1 billion rubles.

“In our view, the business of recreation and travel will fit MTS’ ecosystem well and will take a place next to the ticketing service. We do not expect it to bring any noticeable cash to the operator, it will simply widen the list of services. It means it will be a business aimed at involving and retaining the user inside the group’s service system,” investment company Veles Capital Artyom Mikhailin told PRIME.

“The synergy is clear because the service will be promoted in a very wide base of MTS’ subscribers and will profit from other services, like the bank. We do not see any significant positive or negative effect on MTS’ financial results from the service’s consolidation because it is quite small. In our view, the service hardly costs more than 1 billion rubles.”

MTS said earlier in July that it fully acquired Bronevik Online and Bronevik Company, parts of Bronevik Group, one of the market leaders in online hotel booking.

Bronevik was third largest after Ostrovok.ru and Yandex Travel on the list of most popular online travel agencies and meta search engines in the week ending on July 22, according to TravelLine, a unified platform for hotel business.

The deal will boost the operator’s new business MTS Travel, which will offer a service for booking hotels, other accommodation and tickets, provide tourist and excursion services, arrange rent and leasing of vehicles, rent of recreation equipment, and organize sports activities.

MTS President and CEO Vyacheslav Nikolayev said that tourism, business travel, and hospitality are developing dynamically in the country and the company expects this industry to soar in the coming years.

Vasily Karpunin, head of news and research content at BCS World of Investment, said MTS will have no problems with incorporating the business in its ecosystem. “The synergy effect may be achieved chiefly thanks to MTS Bank,” he told PRIME.

Mikhailin at Veles Capital said that after Booking.com and Airbnb pulled out from Russia, competition between the local players has become much keener. “The operator evidently also wants to join the race and has the resources to invest to obtain the advantage over its peers,” the analyst said.

The hotel booking sector will unavoidably end up in an oligopoly where the one to three players hold 98% of the market, Karpunin at BCS said.

“It cannot be otherwise because the people are not comfortable with the current motley crew of applications, when after withdrawal of Booking.com and Airbnb, there is a vacuum, and the market has a great deal of services,” he said.

The market should have one or two dominant players – this is what the customers need and, as a consequence, the need of those who offer their hotels and apartments. “Earlier, all the hosts were on Booking.com, now every hotel and the like chose an aggregator or a handful of them, there is no single venue. Nobody knows which application is the champion, and it is inconvenient for the hotels to keep dozens of them,” Karpunin said.

“As a result, this business is highly competitive. I think that MTS should understand that it won’t go far by simply adjusting it to the ecosystem. Active promotion is required. Significant investment is needed to join the top applications that will get the lion’s share of the market in two to three years. Besides, one should be prepared to acquire rivals with high expansion rates to stay in the race.”

(57.3917 rubles – U.S. $1)

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