Top Position: Uncovering the Ins and Outs of Traveloka's Business (Part 1 of 2)

Ten years ago, Ferry Unardi was a student at Harvard Business School. Coming from Padang, a city in West Sumatra, Ferry often finds it difficult to fly from his hometown to the United States.

The process is very complicated. To go home, Ferry booked a flight to take him from Boston to Jakarta. When he arrived in the Indonesian capital, he could only buy an additional ticket to return to Padang, he told Prestige magazine in 2018. Complicated, time-consuming, and difficult to plan.

Frustrated with the problems he had to deal with as a frequent flyer between the United States and Indonesia for about eight years, Ferry racked his entrepreneurial brains and started looking for solutions, believing that this could be a business. He teams up with a former colleague named Derianto Kusuma, as well as an old friend from school named Albert (only Albert). Ferry left Harvard. A year later, the three of them officially established Traveloka in Jakarta.

The company name is a combination of words from its main business and locale, a Sanskrit word meaning "world" or "universe". A company spokesperson said Traveloka was meant to be taken literally as "the world of travel".

Until 2021. Traveloka has become the largest online travel agency in Indonesia. The app has been downloaded more than 60 million times, and the platform has around 40 million monthly active users. The company also said it has more than 150 partner airlines with a total of 200.000 international and domestic flight routes. In addition, more than 800.000 hotels, villas and guesthouses in 100 countries are registered.

Traveloka's valuation is now estimated to reach USD 3 billion. This year, Ferry plans to bring Traveloka to the US stock market, possibly through the SPAC merger to avoid the conventional IPO process. Before that happens, here are the ins and outs you need to know about the company.

Traveloka Achievements

Let's make an analogy with Traveloka as Expedia in Southeast Asia. The list covers almost every element of travel - flights, hotels, attractions and activities. Users can customize and pay for the entire itinerary within the platform. Its services cover Indonesia, Malaysia, Philippines, Thailand, Singapore, Vietnam and Australia.

Traveloka started as a flight ticket search and comparison site, functionally automating some of the travel agency tasks that Ferry booked while at Harvard. With cash flow from East Ventures in 2012 - a few years before the startup "boom" in Indonesia - the three founders built the site. It wasn't long before they realized that customers wanted more than just search results. There's a key component missing: if people could book plane tickets and pay for their tickets with just a few clicks, Traveloka could truly become an online travel agency. The key is convenience that has not been available before.

The transformation took place in 2013, but the team didn't stop there. The following year, Traveloka added a hotel booking vertical and launched applications for Android and iOS. This is in line with the shift in habits in Indonesia - cellphones are becoming commonplace, and people are starting to go online. Traveloka is ready to serve young customers who are more comfortable buying through personal devices.

But Traveloka has grown far beyond the first two syllables of its name. The company has entered the fintech industry, ensuring that its customers have a path to pay for what Traveloka sells. Then, it becomes important to facilitate large transactions on a mass scale from day to day.

The company reportedly acquired local digital payments company Dimo ​​Pay in 2018, but it has yet to acknowledge its role in the deal. However, Traveloka released the PayLater feature shortly thereafter, which was co-developed with peer-to-peer lender Danamas. At that time, Traveloka was the first company (not fintech) in Indonesia to enter the “buy now, pay later” service. This step ensures that Traveloka is able to attract new users who are not customers of formal and conventional financial institutions.

“We started fintech to facilitate travel bookings by consumers in Indonesia who may not have a credit card or cash to pay in full for travel bookings. Since many of our customers use the app for various transactions, we believe that the user opinions we get will allow us to properly manage our loan offerings,” Traveloka Head of Corporate Communications, Reza Juniarshah told KrASIA. The company has facilitated more than 6 million loans through the service, he said. And it doesn't stop there: Traveloka entered into a partnership with Bank BRI in 2019, and both released credit cards designed for registered users. Last year, Traveloka established a similar partnership with Bank Mandiri.

Behind the high valuation of the company

Traveloka received unicorn status in July 2017, when it pocketed an investment of USD350 million from Expedia, the company that inspired Ferry. The list of supporters also includes Global Founders Capital, Singapore sovereign wealth fund GIC, and Qatar Investment Authority.

Currently, a company's value is determined by its diversification, but Traveloka has many competitors when it comes to entering the new fintech arena. “Traveloka is not unique in trying to capture the value of fintech opportunities in Southeast Asia. Every tech giant and traditional financial services company is getting serious about their fintech strategy because the market potential is huge, and we are starting this sector in the region,” said Herston Powers, managing partner of 1982 Ventures, which invests in fintech and travel technology startups.

Thus, this move could start a new phase of consolidation in Southeast Asia. As more companies enter the fintech world, there will be new opportunities for fintech startups to forge relationships with established players and seek solutions through mergers and acquisitions, Powers said.

New innovations have expanded Traveloka's reach. In 2019, the Traveloka Protect company insurance line was launched. This initiated a sharia health insurance program called Free Reliable for Muslim customers with the Hong Kong-based FWD Group.

Fintech may prove to be a disaster-resistant space where Traveloka can grow even more. In the future, the company intends to focus on this sector. In an interview with KrASIA last year, co-founder Albert said Traveloka would expand its fintech offering "vertically and geographically". The company is also reportedly preparing local financial services for Thailand and Vietnam. They recently formed a joint venture with one of Thailand's largest banks for the development of a new fintech, although details have not been revealed.

Outperform fintech

As an early investor, Managing Partner of East Ventures, Willson Cuaca optimistic about Traveloka's status as a multi-vertical company that is growing as a multinational company. “Traveloka introduced 'buy now, pay later' products, credit cards and digital payments to its customers two years ago. The platform is mature and advanced, therefore this is the right time to expand financial services to Vietnam and Thailand,” said Willson.

Apart from fintech, Traveloka is also expanding into lifestyle and entertainment services. Also launched a page for a restaurant directory, Kuliner Traveloka, in 2018. A sub-brand called Xperience was launched in 2019. There are around 15.000 activities in over 60 countries, including events, films, as well as special classes and workshops.

Like other big platforms that have made it easy to order food with just a few touches on the application, Traveloka Eats now offers delivery services to several locations, even though it doesn't yet dominate the market share. Grab Food and GoFood Gojek, both of which are growing in popularity in Southeast Asia. However, Traveloka is striving to become an app that covers all travel and lifestyle services in the region, and the pivot that has been undertaken has accelerated the company in breaking through international travel hurdles in 2020.

- This article was first released by KRASIA. Re-released in Indonesian as part of the collaboration with DailySocial