Skift Take

One wonders whether some travel companies like MakeMyTrip Group must rethink parts of their business during the pandemic. They may continue to struggle to pay out millions in refunds to customers due to a staccato pace of travel restrictions.

MakeMyTrip Group warned Friday that it might not see profits for years. But the online travel reseller based in Gurugram, India, also argued that it’s the best-capitalized of the country’s homegrown travel companies to come out of the crisis stronger.

Executives predicted during a call with analysts that it will outperform smaller rivals, which will face a more intense struggle to cope with the pandemic and the related collapse in travel.

“What gives me further optimism is that we entered this crisis in a far stronger competitive and financial positioning than our peers and believe that gap will only widen as we begin our recovery,” said Deep Kalra, co-founder and executive chairman of the group.

The company expects the pandemic may weed out smaller and weaker players and reign in the price war and expensive marketing battle that has ruled India’s online travel scene for years. It may get creative with its commissions and incentives to make it easier for hotel owners to afford to distribute rates on its site and mobile apps.

MakeMyTrip Group reported adjusted revenue of $137.2 million in the quarter ended March 31, before the pandemic took its biggest toll. Adjusted revenue numbers reflect a more accurate picture than the unadjusted ones, according to Skift Research, because of recent accounting changes and currency factors affecting the company.

During the first three months of the year, the group had an operating loss of $10.3 million. This figure reflected the company’s continued trajectory of narrowing its adjusted operating loss in sequential quarters and year-over-year. Yet the pandemic has forced the company to postpone its plans to narrow its losses to the single-digit millions in a continuous way this year.

“There’s a reset of the business,” said Mohit Kabra, chief financial officer.

The pandemic reached India later than elsewhere, and the government put the country under lockdown on March 25. The company said it expected a more significant impact on its earnings in the upcoming quarter. India resumed domestic flights on May 25, and hotel accommodation in much of the country on June 8.

Managing Costs and Cash Flow

Kabra said Friday the company’s executives couldn’t estimate the impact of Covid-19 on the company’s future revenues, cash flows, or liquidity. But the executives said the well-capitalized Trip.com Group, which took a 49 percent shareholding last year, provides essential support that would let it handle up to two years of a worst-case scenario.

MakeMyTrip Group may have to avoid using cash deposits for future bookings to support its operations after the pandemic prompted mass refund claims. It has been refunding customers for canceled travel using vouchers and credit notes often to preserve cash during an environment of zero revenue.

The company’s technology team is working on post-sales automation to make future experiences with its packages products more automated. The company is in talks with banks and payments providers to offer the availability of instant refunds to customers without taking on any balance sheet risk.

Beginning in April, the company cut costs, with reductions in compensation for executives and managers. The company ramped down its outsourced teams at its call centers. In light of the company’s shift in focus away from offline sales channels and its effort to trim fixed costs, it’s closing its company-owned retail stores in India.

“We plan to continue driving synergies across our portfolio of multiple brands on the path of disciplined and sustainable growth while making appropriate investments to drive online penetration,” said Kalra.

Charitable Efforts

MakeMyTrip Group led a video campaign with about thirty other travel sector partners to market a safety pledge and standardization of hygienic practices to reassure travelers during the pandemic.

The MakeMyTrip Foundation led a charitable response to the pandemic. It supported the testing and treatment of the travel sector’s front-line workers, including hotel staff and intercity bus drivers. The company crowdsourced funds and employee contributions to support the handing out of 10,000 cooked meals each day during the height of the crisis to industry workers who had lost their jobs.

MakeMyTrip’s technology team also contributed to help the government develop and launch a Covid-19 tracing app called Arogya Setu. Indians have downloaded the app more than 130 million times.

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Tags: coronavirus, coronavirus recovery, earnings, india, makemytrip, online travel agencies, trip.com group

Photo credit: The Jal Mahal Palace near Jaipur, which is the capital of the state of Rajasthan, India. Sayan Nath / Unsplash

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