MakeMyTrip Puts a Brave Face on Booking.com Encroachment

This year MakeMyTrip has shown double-digit growth in revenue for airline tickets, hotels and vacation packages.

But the India-based company, operating at a net loss so far this year, is also beginning to see the effect of global giant Booking.com ramping up its hotel inventory in the country.

MakeMyTrip founder and chief executive Deep Kalra said that in India’s premium segments — such as four-star, five-star, and major chain properties — Priceline Group-owned agency Booking.com is adding hotels at a rapid pace.

“Booking is not a company which we take lightly,” Kalra said during his company’s quarterly earnings call earlier this month.

While MakeMyTrip has an advantage in domestic bookings made by Indians and in outbound travel, Booking.com has an edge in its big inbound business to India. It also has far more marketing and engineering firepower.

Flights Versus Hotels, Price Versus Loyalty

There’s another difference: Booking.com drives the vast majority of its bookings from lodging while MakeMyTrip generates most of its reservations via airplane tickets. Kalra said this dynamic works in his company’s favor, as Indians — as do travelers in many countries — tend to shop for air tickets before other components of a trip.

He conceded that MakeMyTrip needs to prioritize cross-selling consumers who buy air tickets from it to also reserve hotel rooms in the same purchase cycle.

That work can’t come soon enough. In June, Booking.com placed a flights tab for the first time in memory on its homepage. The flights tab links off to a Booking.com-branded flight-metasearch site powered by sister company Kayak.

Kalra added that MakeMyTrip has strong brand recognition with Indian consumers and his company plans to invest more in that. He said market research shows that, while many consumers comparison-shop on multiple sites, they will ultimately book with their preferred online brands.

On the other hand, many travel executives in other parts of the world, at least, concede that consumers are driven by price.

“We will just have to go much deeper with our consumers to be able to understand their needs better,” said Kalra.

“We’ve got this inherent strength with the combined market share of our brands [MakeMyTrip, Goibibo, and Redbus] now getting pretty close to a quarter of the entire market [inbound and outbound].”

Booking.com and MakeMyTrip are competing for bookings at many of the same properties. Out of the 100,000 hotels in the country, the two companies have largely ignored the one- and two-star hotels. Both are focusing on branded hotels and they tend to be in the boutique, four-star and five-star categories.

Multi-pronged strategy

Kalra said MakeMyTrip can leverage its deep knowledge of the Indian market and consumer.

“We have to be able to offer our selection in a multi-dimension way, so not just a particular room in a particular hotel etc.” Kalra said, claiming that MakeMyTrip’s Indian team has a better understanding of the way its fellow nationals prefer to travel.

“We have seen where people travel in large parties, very typical of Indians,” he said. “They want different rooms and different arrangements. And we’ve now got a solution for that where we can offer different rooms in the same hotel in the same kind of shopping cart.”

Company officials separately referenced a multi-pronged strategy for outmaneuvering foreign companies. Plans include targeting parts of the Indian travel experience that global players ignore but that are disproportionately important to the typical Indian traveler.

Examples include helping consumers with visa processing, selling affordable SIM cards that enable Indians to use their cell phones abroad, and helping with finding tours and activities that will appeal to Indians’ language needs and cultural preferences.

MakeMyTrip has also invested in Indian startups for reasons that may be relevant to its jockeying with online giants. For instance, it has taken a 25 percent stake in Simplotel, a startup that provides digital marketing services for hotels. That move suggests that MakeMyTrip may try to copy — in a minor way — Booking.com’s move with its BookingSuite services for hotels and Expedia’s move with its PartnerCentral tools for hotels to try to offer somewhat similar (though more rudimentary) business-management services to properties.

Complicated Partnerships

Confusing matters, Expedia Inc. said earlier this summer that it wants to double its share in the Asian* region through new tech and marketing investments and takeovers of regional players. Expedia is currently running behind MakeMyTrip and Booking.com in India by some measures. *(Correction: An earlier version of this articles said “Indian” instead of Asian. Sorry.)

Talk of Expedia solving its India gap by possibly acquiring MakeMyTrip cooled last year when Chinese giant Ctrip took a 10 percent stake in the Indian market leader with a $180 million investment. Ctrip, along with Naspers, a media company in South Africa, and Tencent, a Chinese telecom, collectively own half of MakeMyTrip — with founders, small investors, and public shareholders owning the rest.

That situation itself is complicated because the Priceline Group has a $2 billion investment in Ctrip.

It gets even messier when you consider that MakeMyTrip uses Booking.com’s affiliate inventory and Ctrip’s inventory internationally in some markets as an alternative to contracting with overseas hotels for supply.

In June, Ctrip chief executive Jane Jie Sun said that the India market is very similar to China.

For example, she said both markets require businesspeople to have an understanding of how to deal with the government and bureaucracy. That special knowledge is learned and earned by local entrepreneurs. In the case of MakeMyTrip, that means being skilled enough to jump through the necessary hurdles, Sun said.

Executives also believe MakeMyTrip has an edge in local knowledge when it comes to signing up India’s long-tail of independent properties. It has 40,000 hotels directly contracted, while global players like Booking.com often rely on inventory coming in from aggregators or channel managers.

Ctrip has hinted that it sees its investment in MakeMyTrip in part as a strategic move to outmaneuver Expedia and Priceline in this region.

What’s certain is that Ctrip’s investment, strategic partnership, and mentorship have pushed MakeMyTrip to spend heavily despite sustaining net losses.

Late last year, MakeMyTrip merged with Goibibo, a significant competitor.

In May, MakeMyTrip announced it would raise $330 million in additional funding from Ctrip.com, Naspers, and others.

The merger and other investment-led activities have boosted growth — and losses. Revenue in the quarter ended June 30, 2017, increased 58 percent, year-over-year, to $192 million. But during the same timeframe, the company’s net loss widened to a reported $68.5 million.

MakeMyTrip also faces a few local competitors nipping at its heels.

MakeMyTrip commands a online domestic market share of 41 percent, according to analysts at Deutsche Bank. Yatra has a 16 percent market share. ClearTrip has a 7 percent share, and Booking and Expedia are at about 5 percent each.

Yatra, like MakeMyTrip, is operating in the red. It reported revenue of $46.8 million for the three months ending June 30, 2017, and posted a loss of $46.8 million.

Direct Versus Indirect

Less directly, MakeMyTrip faces competition from the branded-budget hotel chains Fab, Oyo Rooms, and Treebo — all of whom want shoppers to book directly with them instead of via an agency and are attempting to lure shoppers via discounting.

Last year, MakeMyTrip took Oyo’s properties off of its platform. Treebo’s properties are gone, as well.

Kalra joked: “If you look at the long-term, [that would otherwise] perhaps not the best strategy right now for us to be helping create young new brands [in direct booking].”

MakeMyTrip has its own three brands of branded budget chains — most prominently GoStays, but it also has MyValuePlus and MakeMyTrip Assured. It intends to promote those as alternatives.

Kalra said, “At that [low-end] price point, consumers are less brand-focused, but they are definitely amenities- and quality-focused. So, I think they are more interested in, ‘Can I get this offering in the right location at the right price point and with a service quality offering guarantee?’ And I think that service quality guarantee is what we are providing.”

“Over time, hoteliers are also understanding the economics of partnering with some of the New Age chains versus staying independent and being able to control their own destiny. And we think that’s a very important part of markets like ours, which are highly fragmented, 80 percent, 90 percent independent hotels.”

“Over time, good hoteliers, we believe, will choose to stay independent and work with platforms maintaining their identity, but managing price far more intelligently and getting a lot more demand intelligence from platforms like ours. So, that’s where we will be playing.”

Rising Tide for All?

Kalra said there is a big enough pie that is growing and room enough for multiple players to benefit in India. He also said it’s a validation of the opportunity in the Indian market, which MakeMyTrip is well-positioned to benefit from.

“I think that [Booking.com’s ramp-up] is actually a testimony to the fact that the Indian hotel market is opening up online,” said Kalra. “We’re now at 10 percent penetration [for hotels being online]. There is 90 percent to go.” Relatedly, only a third of Indians are online. But that is projected to grow to one about half online by 2020.

As for the behemoth of Amsterdam, Kalra said, “It’s very clear that Booking.com is going to be growing in this market and we will be seeing more of them.”