MakeMyTrip Enters Car Rental Business with Savaari Acquisition

Online travel agency MakeMyTrip announced that it is acquiring a majority stake in Indian intercity car rental company Savaari.

“We are announcing the signing up of a majority investment in Savaari Car Rentals, provider of intercity car rental services in India,” said Mohit Kabra, group chief financial officer at MakeMyTrip during its earnings call for the period ending September 30, 2023 on Tuesday.

The online travel company expects to complete the transaction before the closing of its third quarter on December 31.

“Currently, intercity cabs is a highly unorganized and fragmented market and with road infrastructure improving in the country, it presents a good future growth opportunity. So we have decided to strengthen this line of our business,” said Rajesh Magow, co-founder, group CEO and director of MakeMyTrip.

Calling it a segment with low online penetration, fragmented supply and lack of standardization in experience, MakeMyTrip said it foresees an opportunity to transform this space with technology and offer a better value proposition, both for suppliers as well as the customers.

Savaari, as Magow said, would be a small ticket investment within the $10 million range.

Magow called it “logical investment,” and said Savaari has been an existing supplier on the platform and it will help MakeMyTrip to accelerate its plans on the intercity offering side.

Budget Hotel Recovery

On the back of increased supply and deeper penetration beyond metros, MakeMyTrip’s accommodation business has also witnessed strong year-on-year growth in the second quarter.

However, the budget hotel recovery is taking a bit more time compared to other price points. The segment currently stands at around 85%-90% of its pre-pandemic levels.

The online travel agency noted that budget hotels have faced unique challenges, primarily due to significant price adjustments, considering the price sensitivity the segment witnesses.

And room nights priced below INR 1,000, effectively $14, have been slower to recover.

“This is not due to a lack of demand. It is only because it was priced exceptionally low during pre-pandemic,” said Magow.

Extend Online Reach

To solidify its presence and reach in India, MakeMyTrip has announced significant expansion in both its property listings and distribution channels. The online travel company now lists over 77,000 properties on its platform, spanning across 2,075 cities within India.

MakeMyTrip’s expansion strategy also includes a push to extend its online reach. The company launched its hotel product on the Indian Railway Catering and Tourism Corporation (IRCTC) website during the quarter. The initial response, it said, has been promising, demonstrating the effectiveness of this move to attract new users from smaller cities, catering to both leisure and business travelers.

Flourishing Homestay Market

“The homestay market is flourishing in India as more individuals invest in secondary homes for use as homestay accommodations in popular leisure destinations across the country,” said Magow.

MakeMyTrip’s homestay business is keeping pace with this trend, expanding its coverage to more destinations. During the quarter, they increased their supply throughout the nation, even reaching World Cup venues. Approximately 8,000 properties were added to the homestay inventory, with a specific focus on including 1,500 properties within the World Cup venues.

“Because of the World Cup, wherever India was featuring as part of the games, in specific cities, we’ve seen bookings and actual transactions growing both for hotels and flights,” Magow noted.

The contribution of homestays to overall bookings is steadily rising for the company, positioning this category as a key driver for future growth in the travel industry.

MakeMyTrip’s holiday packages business is also diversifying its offerings. Looking to attract travelers looking for unique and immersive experiences, the company introduced holiday packages that include homestays as an accommodation option.

Second Quarter Figures

MakeMyTrip reported a profit of $2 million in the second quarter, compared to a loss of $6.8 million in the same period last year.

“While the second quarter of fiscal year tends to be a seasonally weaker period for leisure travel, we are pleased to report strong year-on-year revenue growth and expansion in adjusted operating profit,” said Magow.