India’s largest online travel agency may beat analysts’ expectations and break even sooner rather than later. Ctrip, which now owns nearly half of the company, could be a factor. Another is boosting hotel content, which offers higher margins than air.
India’s MakeMyTrip Group expects to narrow losses to the single-digit millions by next year, a rather ambitious goal as it will have to pare back an operating loss of nearly $43 million in a matter of three to four quarters.
In the three months ending June 30, the company continued recording multi-quarter drops in losses, reducing the amount by $2.6 million to $42.9 million, compared with a loss of $45.5 million over the same period last year.
“You can expect to see us bring down the EBIT [earnings before interest and taxes] loss to a single digit in three to four quarters. Then we’re close to break-even and we can focus entirely on growth,” founder and group CEO Deep Kalra told Skift in an interview in Singapore on Tuesday.
Ctrip, which now owns nearly half the company and has five of its 10 board seats, may have something to do with it, directly or indirectly. The 49 percent shareholding by the Shanghai-based company has already resulted in MakeMyTrip integrating “some of the best content they [Ctrip] have in flights and hotels,” both in terms of range and rates.
“We have direct access to that, versus us having to take that from a third party like Booking or Expedia,” said Kalra.
“Also we can now combine two of the largest countries in the world and negotiate with hotels much better,” he added. “There are 200 million Chinese traveling out next year and 30 to 40 million Indians traveling internationally. And we both have a lot of markets in common since we’re both in Asia.”
Such an integration did not occur in the first round when Ctrip invested $180 million in MakeMyTrip in 2016, according to Kalra. “With a 49 percent shareholding, now they are totally committed,” he said. There are teams on both sides focusing on smooth integration for both air and hotels.
Apart from leveraging Ctrip’s content, Kalra also told Skift that a large investor like the Chinese online travel company gives MakeMyTrip “strategic help” on dealing with a hyper-competitive market, which India continues to be.
“So many people have thrown billions into the market, discounting all the time. First it was Yatra, then Goibibo and we acquired them [Goibibo],” he said.
Ctrip’s experience with competition in the China market is relevant for MakeMyTrip, said Kalra. Though the countries are different, they are similar in that both are large markets, both are mobile-first, and both are emerging countries.
“Ctrip has gone through fierce competition — chapter one eLong, chapter two Qunar, chapter three Meituan. That’s something you could learn a lot from,” he said.
Ctrip synergies aside, hotels and homestays, where margins are higher than air, “is where we are investing,” said Kalra. Analysts will be happy; as reported, some were disappointed that MakeMyTrip boosted sales on hotels and packages by only 7 percent to $68.5 million during the three months ending June.
But attempting to topple Booking.com’s grip on this will be a feat. Still, Kalra points out the group has actually made a huge progress on hotels. “At the time of [MakeMyTrip’s] IPO in 2010, air was 85 percent of our revenues, it’s 35 percent today. Hotels and packages were small, 10 percent; today 55 percent. It has really changed and will continue to increase,” he said.
There’s still so much room for growth in India, where the market is fragmented. Online travel agencies can therefore add value by becoming effectively the marketing engine for independent hotels, he said.
MakeMyTrip has some 60,000 direct contracts with hotels in India, he said. Internationally, it has singled out the 20 most popular cities for Indians and done direct contracts with properties in these cities.
Homestays are a “massive” opportunity. MakeMyTrip has “a few thousands” of them and is seeing a trend of millennials booking high-end villas in resorts such as Goa and Phuket when holidaying, and apartments in expensive cities such as Singapore as a way to save costs.
Apart from continuing to boost inventory, it is investing on ways to improve the buying experience, such as using video to promote hotels, generating more user-generated reviews, and listing features that are essential for Indian guests, such as whether a hotel has a “true” vegetarian restaurant within it or in the vicinity.
Meanwhile, Cox & Kings’ struggles are another “opportunity” for MakeMyTrip as it has freed up a lot of room capacity which is needed in the winter season this month to March 2020.
Photo credit: Goa: Lots of rooms available as a result of Cox and Kings' struggles, “an opportunity” for MakeMyTrip. Gniliep, Flickr