Skift Take

MakeMyTrip's management deserves credit for ending a period of decelerating growth and for reducing operating losses over several quarters. But many investors are impatient for an era of profits.

Online travel agency MakeMyTrip has begun offering a new product category of attractions and activities, such as tickets for theme parks and group walking tours. The new product, soft-launched on its Android app, adds to the flight, hotel, alternative lodging, and intercity-bus tickets that it sells.

MakeMyTrip executives said Thursday, during an earnings call with investors, that they hope to use the product to increase engagement with its customers. The company follows a global trend in online travel companies aggregating tours and activities content online.

MakeMyTrip is India’s largest online travel agency. Its brands process 63 percent of India’s gross air and hotel bookings online, while its number-two competitor Cleartrip, and number-three competitor, Yatra, collectively have only 26 percent share, according to estimates for 2017, included in a May 2018 Morgan Stanley analysts note. MakeMyTrip said its Redbus brand has about 70 percent share of Indian bus ticketing online.

Stable Growth

On Thursday, the Gurugram-based-based company reported its fiscal 2019 second-quarter results with gross bookings rising $173 million, or 16 percent, year-over-year, to $1.2 billion in absolute dollars. That’s notable because the second quarter is a low season for travel in India.

That represented a stabilization and modest reversal of a recent bookings deceleration that raised eyebrows on the Skift Research desk while preparing a September report on online travel agencies that focused on MakeMyTrip.

For instance, the pace of gross bookings decelerated in absolute dollar terms, meaning, not adjusted for shifts in currency exchange values, in recent quarters. First quarter 2019 gross bookings increased by $50 million year-on-year versus a $91 million year-on-year increase in the fourth-quarter of 2018 and $178 million in the first quarter of 2018.

Revenue also trended back upward in the latest financial period. In April, the company began reporting revenue by subtracting the cost of discounts and its loyalty promotions but did not restate past year performance. So the company directed analysts to adjusted revenue numbers.

During the quarter, the company generated $160 million in adjusted revenue, which was an increase of $20.9 million — 15 percent higher than the comparable adjusted figure from a year earlier. When expressed in constant currency, adjusted revenue grew by about 25 percent.

Management said that the revenue growth came along with a significant reduction in adjusted operating losses, as well as a quarter-on-quarter growth acceleration in stand-alone hotel room nights booked online.

Over several quarters, the unprofitable company has reported a sequential reduction in losses. In the second quarter of 2019, it reported a loss of $25.4 million, compared with a larger loss of $45.0 million in second-quarter 2018, an improvement of $19.6 million. Management credited the latest quarter’s reduction in losses to improved marketing efficiencies in how the company sells budget hotels and a rising growth of sales of premium hotels, which enable higher markups on net rates.

MakeMyTrip continued to market its loyalty programs for its flagship brand, introduced in the past two years, to encourage repeat business from its customers. It said it had gained early traction. MMT Black, which is free, now has 960,000 members. MMT Double Black, where members pay an annual fee and receive five free trip cancellations and other perks in return, now has 41,000 paying members — up from 33,00 reported in the last quarter.

MakeMyTrip’s share price of $22 barely moved on the earnings report today. But the price remains sharply off its 52-week high of $41.70, as investors sold shares apparently on concerns that the company is not growing revenue and turning to profit at a fast enough pace.

makemytrip india's largest online travel agency associated press

MakeMyTrip Group CEO Deep Kalra and members of his team.

MakeMyTrip said it believes India’s travel industry will continue expanding because of rising national income. Skift Research’s latest report, The State of India Outbound Travel 2018, noted that the number of outbound tourists from India in 2016, the most recent year available, was 21.9 million and that the country is the fastest-growing outbound market besides China.

To profit from India’s outbound travel growth, MakeMyTrip has been adding international hotel inventory. It now offers more than 500,000 properties. The company said it generated more than half of its international hotel business in the latest quarter from properties it has directly contracted with, while the rest had been from reselling through other distributors. Domestically, MakeMyTrip offers more than 55,000 accommodations in India, most of whom have direct distribution deals with the company.

MakeMyTrip’s soft launching of “experiences” products as an attempt to encourage customers to use MakeMyTrip throughout their trip and not merely to book a flight or a lodging stay, domestically or overseas.

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Tags: india, makemytrip, tours and activities

Photo credit: Shown here is Jai Mahal Lake Palace in Jaipur, India, one of the places travelers can book a trip to via online agency MakeMyTrip. Jai Mahal Lake Palace

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