Online travel portal MakeMyTrip, which made a blockbuster IPO debut on the Nasdaq in August, is following an active acquisition strategy that will help it get closer to its customer. MakeMyTrip, which acquired online bus ticketing company Ticketvala.com from Mumbai-based Travis Internet in March 2010, is casting its net wide for potential acquisition targets across travel sub-segments such as hotels, exhibition and technology-enablers.
MakeMyTrip founder Deep Kalra said, at the company’s second quarter earnings call, “We are looking at a couple of them, the focus for us is companies that are going to help us get closer to the customer, expand margins and growth. This is a wide canvas as travel in India itself is fairly widespread. In the hotels and packages sector, there are various places that we can add value. We are very keen to look at technology companies that can help as well.” The company is also identifying candidates that will add value in its exhibition business.
Tech Spend and Guidance
MakeMyTrip is planning to spend $2-$3 million on technology upgrade in the next 18 months. It has already spent close to Rs 700,000 on technology, including hardware, software and website development. Recent technology enhancements to the platform have enabled customization of flight plus hotel and bus plus hotel packages and instant ticketing. This, Kalra feels, has improved the customer experience.
In its guidance, the company expects overall revenues to be in the range of $58 to $61 million for the full fiscal year. It expects the margin for air business to hold in a similar range as Q2, while hotel and packages business might see a marginal improvement. The company is hoping that increased vendor bargaining power will drive revenue margin improvement in hotel and packages business going forth.
Quoting data from the Directorate General of Air Traffic (DGCA), Kalra said, MakeMyTrip grew to more than 8% of market share of total domestic air passenger traffic as of June 2010. Its ex-India business contributes 25% while business from India, inclusive of both international and domestic ticketing, is 75%, up from 40% in the September quarter last year. It is planning to increase focus on international air business, which holds a “significant opportunity to increase bookings since they are largely transacted offline at present.” Currently only 50% of MakeMyTrip’s international business is on the online platform.
Pointing out to some trends in the online ticketing space, Kalra said, though users are comfortable researching for flights, hotels and packages online, they choose to deal offline for questions related to passports and visas. “Very often passengers want to go offline either for payments. Because it’s often a very large ticket item and people don’t want to block out the entire limit on their credit card. With packages too, many have specific requirements on food and restrictions in different parts of the country. We think over time, with increasing broadband coverage, rich media as well as the habit of just transacting online for another product category, people will be encouraged to choose online,” he added.
MakeMyTrip, which claims to have a 48% share in India’s $1-billion OTA market, witnesses competition from airline carrier sites, online ticketing sites and traditional offline travel agencies. The other prominent players in the space are Cleartrip, Yatra and B2B site Via.
MakeMyTrip sees no major competition from carrier sites. Dismissing them as competition, Kalra said that only 25-30% of low fare air bookings are done on the airlines’ own websites. For full-service carriers, this number is in single digit percentage and for airlines like Kingfisher that number lies even lower. For Air India, it is around 5%. “Most of the full-service carriers still rely on agency distribution and OTA distribution,” he said.