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‘Aspire To Be One-stop Shop For All Travel Needs’
Deep Kalra and Rajesh Magow, MMT’s big guns, speak to Suman K. Jha, on the company’s plans, competition in the travel industry and the new age Indian traveller
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MakeMyTrip (MMT) has changed the way people go about their travel plans. Now in version 2.0, MMT aims to capture travel related businesses such as adventure activities and accommodation, thus, bringing the peripheral travel-related areas to the forefront of MMT’s growth plans. Deep Kalra and Rajesh Magow, MMT’s big guns, speak to Suman K. Jha, on the company’s plans, competition in the travel industry and the new age Indian traveller.
Yours has been an eventful journey. How has the journey been post the merger?
Deep Kalra: It will be fair to say that there are multiple phases in any company’s journey. In our journey, the first phase was the 2000-2005 phase. Most of it – four years – was fairly bootstrapped. And it was a tough time. It was a defining time because most of the startups were folding up, travel was doing well and, then, 9/11 happened.
The phase 2005-2010 was dramatic growth largely driven by flights. And we grew from $20 million in GMV (gross merchandise volume) to about $500 million. About 25x in five years. Flight ticketing, as a product, moves much faster. So, if you look at it, bus ticketing, movie ticketing, air ticketing, rail ticketing move much faster that the complex hotel booking. More complex because there are so many dimensions to a hotel booking like price, location, etc. When we IPOed, 85-90 per cent of our revenues only came from air ticketing. So, IPO would be the second phase.
Then, 2010 is the post-IPO growth – public money. Our entire IPO was $80 million with ‘greenshoe’ $80.5 (million) because without that we are $70 million, as that was the plan. And at that time, that was a lot of money. The post-IPO growth has been organic and inorganic. A string of investments, the largest of which has culminated now, in 2017, with the mergers of Naspers’ Goibibo and redBus, which MakeMyTrip owns 100 per cent of both.
Now, 55 per cent of our business is coming from hoteling packages, a far cry from single digits in 2010 and moving onwards. So, in the next 3-4 years it is fair to say that we will get 75 per cent from accommodation. Transportation,ticketing will remain important for us as a means to acquire customers. It is a very good throughput because people come very quickly to it. It is our job to cross-sell a higher value-added product.
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. That means the bargaining power lies with the middleman and here we are the intermediary.
Are there any plans afoot for movie ticketing as a subsidiary industry?
Kalra: I will take an initial stab and maybe Rajesh (Magow) can add to it. We discuss it all the time. We are very clear that we want to offer all travel products – anything to deal with travel directly and even adjunct to travel. The great one would be activities. But you take up activities when you travel or even if you don’t travel. Sometimes it is a substitute to travel.
People could be planning to get out of town and but for some reason they may not be able to get away. And you would drive out for one hour somewhere and plan to do something. However, awareness about activities is low at the moment. So, our job is to bring those activities to the fore. So, for example, we have to tell people, ‘Hey, you could do hot air ballooning’.
Could you list some of the options that you would get into in the near future?
Rajesh Magow: Like Deep was saying, the way we are thinking about this is to add more high-frequency use cases. So, one part of our business in this strategy is very clear. We want to be a one-stop shop for solving all the travel needs of our customers, be it any mode of transport or type of accommodation, in internal and domestic markets. And then, we have ancillary products such as insurance, forex and so on, anything to do with travel or related needs, we will solve it.
The second part is engagement on our app. Travel, all said and done, is not necessarily as high a frequency item as other activities would be. Like, for instance, you would probably be going for a movie twice a month. Or for activities, or for entrainment or for food – anything to keep yourself engaged and, for that, you will visit the requisite app more frequently.
To improve the engagement on our app, we are focussing on high frequency activities such as road transport in the travel domain. Because you definitely use road transport more than accommodation or flight transport. We want to double down on that and build value-added services around that. And then, look for related areas complementing travel.
Would you be competing against UberEats, Swiggy or Foodpanda?
Magow: You know when you look at competition, look at it slightly differently. One is the core business, which is the travel vertical. So, you compete with travel vertical player and there will be horizontal players who would be offering travel. Would you be competing with them? The answer is: Yes.
As you go deeper, it becomes a bit more challenging because you have to invest as much as a vertical player like MMT. So, when we would be expanding, would we be offering those services for our customers? The answer is: Yes. So, would I be, hypothetically speaking, competing with Bookmyshow, the answer is: No.
Are there any synergies between MMT and Goibibo?
Kalra: Let us not forget the penetration level on travels. The job is still not done. The domestic ticketing is the only place you can say that more than 50 per cent has moved online. International ticketing, domestic hotel, international hotel is still a small percentage; 10 per cent maybe in domestic hotel or less than 15 per cent. If I include alternative accommodation, say, homestays, less than 10 per cent has moved online. So, the job is still to be done.
The potential is huge and, therefore, we have to first do that. I would like to see people look at MakeMyTrip, Goibibo, redBus – all the three brands when they are looking at travel needs. So, we have to do justice to that and then the ancillaries will come. I think the complementarity has played off very well.
When we looked at it even before going ahead, we did as much homework as we could. We, obviously, could not get the full customer database. We did some sampling. When we arrived at a number we thought that there will be an overlap of about close to 30 per cent. We were pleasantly surprised to see the overlap was less than 20 per cent, which was very good news for us.
Also, there was a clear skew of customer overlap between the two head on brands. Brand MMT has about 17 per cent marketshare of all flyers, Goibibo is another 7 per cent. So, we have got 24 per cent of all flyers. So, one in four in any flight is our customer. Which is great but that also means we have to focus much more . We have got the volumes on air. We have to focus on completely seamless experience .
What are the applications that you are working on for seamless execution?
Kalra: AI is definitely one of them. Prior to that, we did a lot of what is called personalisation. It can only happen when you are in a logged-in state. We know what you brought from us and can serve you relevant content.
Data science is really the bedrock of all this and we have built up quite a solid team who study these patterns and tell us that these cohorts are doing this and, therefore, we should offer this.
Magow: Also, chatbox going to Voice. Basically the whole idea is to now have a product where you can get the next 100 million on board. We are looking for people who don’t have high-end devices. We have launched an app called Goexpress, which not only has a chatbot but also voice input in Hindi and English. You can basically speak about your accommodation, etc. There is also vernacular element to it.
As we deeply penetrate into Tier 3/4 cities, we will pick up the use cases where people have smartphone penetration. Many people have high-end feature phones but not necessarily smartphones. This application is also of 1.5MB size and has a vernacular and voice element to it. We believe that if this is successful, we will add more languages to it. That is another example of product innovation. We have taken a lot of cue from WhatsApp for this.
Could you give us a sense of your marketshare both in flight tickets and hotels? And what are your long term targets?
Our marketshare in domestic flights is 24 per cent. Online and offline put together. In 2010, it 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 flight is concerned. The online penetration domestic hotels is just about 15 per cent. Of that we are more than 50 per cent. If you see value side, markeshare 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.
Similarly, for outbound flights, it is single digits. Because there is a low penetration and a lot of headroom. But the growth rate is really high. Last but not the least, of the bus market – of the online market, we are more than 70 per cent. Again, of the total market, we are at single digits. Only that much market has moved online. If you look at OTA (online travel agency) marketshare, that is again 60 per cent.
The markestshare is only a measurement. The moot point is that this has been our goal consistently that we will remain market leader by far. It might not be winner-takes-it-all market, but winner-takes-the-lion’s-share of the market.
You have a number of players as competitors. Some of them with deep pockets as foreign players. What has been the challenge specifically from the competitors and how do you plan to take them up and enlarge your marketshare to 50 per cent?
Kalra: Even in that, if you look at it, 60 per cent has moved online in air ticketing. However, out of that, about 15 per cent is with suppliers directly with a tax. So, of the balance 45 per cent, we have 24 per cent. That means 21 per cent is with all our competitors put together. So, we have more than 50 per cent of online business.
The rest, 40 per cent, is offline. So, of course, we are interested in that. Similarly, in hotels, 15 per cent has moved online and balance 85 per cent is still offline. We have a long way to go out there. In the premium space we see, Booking.com and Expedia and they are obviously significant competitors and are very good at what they do.
We should win this market and continue to keep winning it because we understand India better. Booking.com is a leader in Europe and in many parts of the world. Expedia is a market leader in the US. But beyond a great product and technology, you also need to know your target audience very well and that is where we have been scoring. We see the next Indian market, which people are saying ‘Second India’. I don’t think money is the limitation for us or for some other international guys. I think, the limitation is about how we can understand the customer better and how we can build that in a scaleable manner.
Could you also talk about your partnerships whether it is with Flipkart or Oyo. And whether more partnerships are in the offing?
Kalra: We are open to take into partnership model where it is very clear who brings what to the table. So, in Oyo’s case, they were not talking aggregators where they are saying, ‘We will take on full hotels but we will be just like any other hotel’. So, we joined hands at the end and that is doing quite well. We are already doing around 10-12 per cent of their business. Customers, more importantly, are finding all the choice on one platform. Not having them is like us leaving out a big hotel chain. Similarly, Flipkart has a very big audience. Some of them wanted to get into travel. So, the partnership is like, we will power up their travel services in time.
We are very open to a model like this where it is very clear who is doing what. We are the travel specialist. Either you give a new audience or you bring a new supply offering that we don’t have. There is a very little overlap between these two.
Do you see consolidation happening in the market? How many players could exist and co-exist in the market ?
Kalra: I think the market is big enough for three players where at least two can make money and the third can exist in the long term. Beyond that, it will be a bit of a struggle.
How big a challenge is the Paytm’s new offering of ticketing services for you?
Magow: They definitely, by virtue of the cashback, have broken into the ticketing market. But if you have noticed, they have shut down hotels totally. Because it is more complex, you need a travelling specialist. Now you give a handsome cashback, there will be barely some people are going to move. So, we look at customers stacked up in terms of right on top who value service. The bottom people who have lots of time and will do anything to save Rs 50-100. Leave out the bottom 25 per cent, the rest of the market is very big.