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Going Beyond Travel And Stay
MakeMyTrip disrupted the travel booking industry with online bookings way back in 2000. Now the company is back with game changing plans, literally
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Twenty years ago, a traveller had to go through a rigmarole of planning multiple things such as getting tickets, booking hotels, consulting travel agents, hiring tour guides and transportation services and even planning his or her itinerary. But with the influx of online travel players such as MakeMyTrip (MMT), Yatra, Cleartrip, Goibibio (now owned by MMT), etc., during the turn of the millennium, life got really simpler for travellers as air tickets and later hotel bookings could be done with a few clicks. The one who gets the maximum credit for disrupting the travel industry is Deep Kalra, an alumnus of IIM Ahmedabad, who founded MMT nearly two decades ago.
Founded in 2000 by Kalra and Rajesh Magow, MMT came to life to empower the Indian travellers with instant bookings and comprehensive choices. The homegrown travel portal has stayed ahead of the curve by continually evolving its technology to meet the ever-changing demands of the global travel market and steadily establishing itself as the leading player in its home market. However, the ‘home’ market was not yet ready to grab on to the conveniences offered by an online travel facilitator.
Talking to BW Businessworld exclusively at his office in Gurugram, Kalra, founder, Chairman and Group CEO of MakeMyTrip, says, “Although we started our business in 2000, one of the wise decisions we took was to stop marketing in India because people here were not buying online. We focussed on NRIs in the US. That, in a way, kept our fires burning.”
Half a decade later, when e-commerce caught on in India, MMT too benefitted from it. “With the nimbleness of a startup and the resources of a unicorn, MakeMyTrip has always had strong business fundamentals, which helped it evolve to the changing needs of its stakeholders – hoteliers as well as travellers,” says Aditi Balbir, founder & CEO, V Resorts. “It has shown how existing scale can be leveraged to keep introducing new features and products that the ever-evolving customer is looking for,” adds Balbir.
MMT, with 2,800 employees, has its name etched even in the hospitality industry. “MMT has made hospitality industry convenient for all its users. We also consider MMT as a benchmark for ourselves, as it entered the market when no private player could think of,” says Karan Mago, co-founder, Luvstay.
Kalra affirms that MMT witnessed dramatic growth during 2005-2010 largely driven by flights. Around that period, it grew about 25x in five years from $20 million in GMV (gross merchandise volume) to about $25 million. Its journey was smooth sailing until the moment when Kingfisher Airlines collapsed in 2012 dragging down the company’s bottomlines. Back then, 85 per cent of MMT’s business was derived from air bookings.
“Along the way, we had a lot of solid growth, profitability, and, then again, went back into the red because of Kingfisher and other airlines (which were not also doing well). We realised that we can’t run a business that is solely dependent on the airlines,” recounts, Kalra on MMT’s journey. “I would say a defining part would be (when we got into) hotel or an accommodation product. Now, 55 per cent of our business is coming from hoteling packages, a far cry from single digits in 2010.”
According to a 2018 Google-BCG study, the Indian travel market is expected to increase to $48 billion by 2020 – from $27 billion in 2015; $33-35 billion in 2017; $38-40 billion in 2018. Of the projected figure of $48 billion, $5 billion will be rail, $13 billion will be hotels and $30 billion will be air by 2020. This is the domestic market only (domestic and foreign passengers). The market is largely dominated by the OTAs (online travel agencies). MMT plus Goibibo stand at 45-50 per cent of the marketshare, while IRCTC is at 20-25 per cent. The rest is with players such as Cleartrip.com at 5-10 per cent and Yatra.com at 5-10 per cent share.
With the growth in Internet penetration in India, more consumers are getting connected. There were 332 million Internet users in 2016 and this is expected to increase to 650 million in 2020, states the Google-BCG report. With greater digital influence in the purchase process and consumers using Internet during the purchase process, online travel is expected to go up from 30 per cent in 2016 to 50-55 per cent by 2020.
“MakeMyTrip has the first-mover advantage, locked in supply and inventory early in the online travel game. It has a balanced portfolio across air and hotels packages. Also, more than 50 per cent of the revenues are at higher margin; it also offers customers all packages on one platform,” says Rohit Ramesh, Partner and Director, BCG. The Next Big Bet: Hotel And Accommodation
Since the market penetration for online hotel bookings in India is just at 15 per cent, MakeMyTrip has its work cut out. “Within the online segment, we are more than 50 per cent. If you see value side and our marketshare based on that, we would be more than 60 per cent. We have high value transactions. That is as far as domestic hotels are concerned. In the next 3-4 years, it is fair to say that we will get 75 per cent (of our total business) from the accommodation segment. Why is hotel a much better place to be? Because it is a fragmented space. There are probably 1 lakh properties in the country, plus homestays. Out of the 1 lakh properties, we have contracted 60,000 already,” says Kalra.
To bolster its business in the accommodation segment, MMT has signed a global partnership agreement with Best Western Hotels & Resorts, which will help MMT add 8,000 international hotels to its portfolio. The online travel firm has also announced that it has tied up with ICICI Bank to introduce co-branded cards to make travel a more rewarding experience for Indians on the move. MMT has also outlined plans to introduce ‘Short Stays’, an innovative concept that enables travellers to stay in hotels for short durations of four, eight and 12 hours. The online travel facilitator is also looking at offering another innovative solutions for the budget segment with Go Stays, where the room tariff is between Rs 1,000 and Rs 1,200 for one night. Another area Kalra is excited about, which has also become a buzzword globally, is offering ‘experience’. The initiative is all about facilitating in-destination leisure activities, events, and hand-picked experiences at affordable prices to travellers on its app.
Airline Ticketing Soldiers On...
Talking about its presence in the air ticketing vertical Kalra says, “Our marketshare in domestic flights is 24 per cent, which is online and offline put together. That, in 2010, used to be about 8 per cent. So, that is how we have grown. Our organic growth is also 2x over the last 4-5 years. That is as far as domestic flights are concerned. Similarly, for outbound flights, it is in single digits.”
So, will it be a cakewalk for MMT especially when there is a large scale disruption and market dynamics are changing? Venkatesh Madurai Subramanian, a travel industry veteran, says, “Attracting new customers and retaining them is a question of continuous engagement. The challenge for companies like MakeMyTrip is to stay abreast and watch out for the next disruption such as Airbnb or Uber in the travel space. Virtual reality, chatbots are much spoken about in the travel industry. Though VR can never actually replace the physical experience, it is something to definitely evaluate and experiment with. For instance, can it generate sufficient interest? Tech giants such as Google, Facebook, Amazon are yet to make a significant dent in this industry as the barriers to entry are not very simple. With all the advantages of hosting applications on the Cloud with relatively lesser investment, the next disruptive Uber or Airbnb for the travel industry could just be around the corner.”
Replying to BW’s queries Amanpreet Bajaj, Country Manager, Airbnb, says, “We do not comment on competition because we believe that Airbnb is the only platform where travelers and hosts can have a unique and dynamic experience across over 191 countries in a comprehensive manner.” He further adds: “Our strategy is simply to ensure that Airbnb continues to be a people-powered platform, connecting guests with hosts and communities and offering unprecedented access to local passions and interests guided by the people who make communities unique. Finally, as a 21st century travel company, our intent is to create magical travel experiences for our guests by moving beyond conventional travel and by inviting them to truly ‘live’ in any destination rather than just ‘see’ it. This is what distinguishes us and sets us apart.”However, Kalra is unperturbed. “In hotels (segment), 15 per cent has moved online and balance 85 per cent is still offline. We have a long way to go out there,” says Kalra. “We see the next Indian market, which people are saying ‘Second India’. And for non-English speaking India, we see that as a massive opportunity because that is not something we work with now. I think you need more than vernacular in your understanding. And we want to be not only the preferred port of call but the very trustworthy handholding travel assistant wherever you go.”
Kalra is confident of MMT’s growth plans and is unshaken by competition with deep pockets. “I don’t think we are in dearth of money. We have about $400 million on the balance sheet with the ability to raise more. When we were listed on Nasdaq in 2010, we were a $450 million company. Today the market cap is close to $4 billion. We delivered an 8-9x returns to our investors. So, it is not very difficult to raise more if you need to. I don’t think money is the limitation for us or for some other international guys. The limitation is about how we can understand the customer better and how we can build that in a scaleable manner.”
MMT’s growth story proves that capturing the market at the right time is vital to any organisation. Like BCG’s Ramesh says, “Its inorganic growth through a string of M&As and investments has brought the best tech-enabled capabilities in the travel space together under one roof. Also, its focus on driving customers loyalty and engagement, to expand the proposition beyond price discounting has helped the company grow.”