Deals

Travel metasearch engine Aviasales secures $10M from iTech Capital

Above: Travel agency's neon sign

Image Credit: PaulSwansen/Flickr

iTech Capital, a Russian private equity and venture capital fund, announced today an investment of $10 million in Aviasales.ru, a leading search engine for flights and hotel bookings.

The terms of the deal have not been disclosed, but the fund told East-West Digital News that it had obtained a stake of less than 30 percent.

The company, which is attracting venture money for the first time, will invest in developing its key products: the Aviasales Russian search engine and its international version, JetRadar, a Thai version that was launched recently, as well as the Hotellook hospitality project and the Travelpayouts affiliate network.

Aviasales’ core service helps users compare airfares and hotel options from more than 100 online travel agencies and more than 60 carriers. Users are then redirected to the selected seller’s website to complete and pay for a booking.

Aviasales claims more than 4 million unique visitors monthly and 500,000 search queries for tickets every day. About 27 percent of the queries are made from smartphones and tablets.

Competing with such companies as Kayak, Momondo, and Skyscanner, the Russian company claims to hold first place among metasearch services on the Russian market.

“AviaSales is currently the only metasearch company that controls the way the ticket price is shown to users; they demand that online agencies show the full price at first contact,” underlines iTech Capital’s PR and investor relations director Viktoria Gracheva.

International expansion is a priority for Aviasales, which already works on 13 foreign markets in the UK, Germany, and Australia in particular, under the JetRadar brand. More than one billion travelers use JetRadar each year, the startup claims.

With its headquarters located on the island of Phuket (Thailand), the Russian company employs about 80 staff members.

Fast growing segment, hot investment destination

The Russian travel market was worth $53 billion in 2012, according to global travel market research company PhoCusWright. Only 14 percent of this market is currently booked online, which is a lower rate than in the other BRIC countries — and substantially less than the 50 percent and higher rate found in the U.S. and UK.

Online ticket sales and hotel bookings accounted for more than $7.5 billion last year, with a 40 percent annual growth rate, according to Russian e-commerce consultancy Data Insight.

Growth has been favored by the easing of visa requirements for Russian citizens, the growing use of bank cards, and fast e-commerce penetration — especially in Russia’s regions, as analyzed in a recent report by East-West Digital News.

Venture funds have invested heavily in Russia’s online travel market over the past few years. Among the most well-funded startups is online hotel booking agency Travel.ru (formerly Oktogo.ru), which raised $30 million in less than four years from Western European funds Mangrove Capital and Ventech and Russia’s VTB Capital.

Travel.ru’s competitor Ostrovok secured more than $40 million in four rounds between 2010 and 2013 from leading U.S. business angels and venture funds, but it had to lay off a significant part of its staff last year.

Innovative air ticket booking site Onetwotrip.com raised $25 million in 2012 with plans to go public on Western stock markets.

This article originally appeared in East-West Digital News, our partner in Russia.