‘In 2 years, over half of our revenues will come from hotel bookings, packages’

Online travel portal MakeMyTrip is tweaking its business strategy to tackle India’s nascent e-commerce space and stay profitable.

The company’s chief executive officer Deep Kalra spoke to Business Line about future plans and its shift in focus to the hotel and packages segment.

How has been the journey, from the inception of the company in 2000 to the present day?

After we started the company in April 2000, the first five years were tough, especially between 2001 and 2004.

That was the time when 9/11 happened, the dotcom bust happened and investors pulled out of sectors. But when I look back, I feel this was the time when we cemented, not just as a team but also the belief in the business.

This helped us in the long run. When India market opened up in 2004-05 with the launch of Air Deccan, more companies coming online and IRCTC, too, starting its online portal, it was a game-changer for us.

In 2005, when we launched in India, we had gross bookings of $20 million and about $2 million of revenues. Last year (as on March 31, 2012), we were close to $190 million in revenue and gross bookings were almost $1 billion.

What will be the company’s strategy going forward?

Two years ago we realised that we have to accelerate our growth in the hotels and packages segment.

Over-reliance on air travel bookings would not have been prudent.

The margins were coming down. The demise of Kingfisher Airlines further supported that.

In 2010, over 85 per cent of our revenues came from air ticket bookings, but in the December quarter it dropped to 68 per cent.

The remaining 32 per cent comes from hotel bookings and packages and few other minor lines of business like bus tickets and advertisements.

But the bulk is from hotels and packages. I believe in the next two years more than 50 per cent of our revenues will come from hotel bookings and packages.

Are you looking to raise funds? What about acquisition plans?

We have a cash surplus of Rs 400 crore. So we have to now put that to play and we don’t need outside funding. Our losses have been slender. We are looking for acquisitions in the hotel and package space in Asia, especially south-east Asia. We have been on the lookout for acquisitions in the pilgrimage space in India. It is an exciting segment.

A small segment of hotels in India have online presence. Do you think this will be a deterrent? How do you plan to address this issue?

The scenario is changing very fast. We do about 6,000 room nights a day, half of which are booked online, the other half are booked as part of a package.

It is growing very fast. Some of the newer hotel chains such as Sarovar, Lemon Tree are embracing this medium faster. The Taj group of hotels is also doing very well. We are their largest domestic supplier.

Hotels may take longer to move online. That’s because the confidence building measures are more. But, once the hotels see that this is an incremental channel to enhance revenues, they will enhance their online presence faster. We have total hotel coverage of 10,000 in India and 70,000 across the world.

The company’s net revenue declined by 5.5 per cent in December and it has been struggling with mounting losses. Do you see a turnaround in the near future?

The air market had completely collapsed in India in 2012. There had been no growth. That has put pressure on the revenues. Now, we are seeing some changes in the sector.

We expect to return to profitability in the next two quarters. It doesn’t happen overnight. The air market is slowly showing encouraging signs.

With the Jet-Etihad deal getting through, there will be more capacity and better management. This will help the market and also the growth in the hotel sector.

For instance, hotel and packages transactions in the last quarter grew by 68 per cent on a year-on-year basis. Just standalone hotel transactions grew by 120 per cent. The standalone hotel bookings segment is clearly the fastest growing segment and we see a lot of future growth in this segment. Hence, we are confident that this segment will help us get back to profitability.

What is not growing in a big way is the ultra-luxury segment. But our sweet spot is the three and four-star hotels. We expect the budget segment to do very well over a period of time.

How do you shortlist the hotels?

We have a team of 70 market managers in India and overseas. They do research on the hotels and they visit each and every hotel.

We have a detailed daily report on the hotels about how it is doing compared to competitors. It is an intensive process. The business is moving in two ways – online and the mobile segment.

What is your investment in the technology space?

The fastest growing segment is android, followed by iPhone. Our capital expenditure for the technology space was about Rs 12-15 crore last year.

We have a 200-member technology team who develop the software for us. So, both capital expenditure and operating cost in the technology space is about Rs 25 crore for us. Going forward, we will be focusing on the mobile space and introduce new products and features.

nivedita.ganguly@thehindu.co.in

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