The Indian online travel space could trigger more consolidation following the merger of leading players MakeMyTrip and Ibibo Group, with an aim to grab the maximum share in the $30-billion travel market, feel experts.
Flush with capital from investors, the combined entity is expected to acquire more smaller companies or travel-tech start-ups to capture the consumers’ travel needs.
Experts say similar mergers can take place among players such as Yatra, Cleartrip and ixigo, too.Mushrooming start-ups
According to a Tracxn report, about 56 travel start-ups have come up in the country since January this year.
Raja Lahiri, Partner, Grant Thornton said increased competition, decreasing margins and falling market shares always lead to consolidation.
Without specifically commenting on the MMT-Ibibo deal, Lahiri said: “The leaders of the pack will look for companies (to acquire) that are technologically advanced and are offering innovative solutions.”
“Consolidation is bound to happen,” said Sagar Parida, co-founder, Trip Exploria. “Last year, every sector had some kind of acquisition or merger, except for the travel space; and with the crazy number of travel start-ups entering the space, it was expected.”
Most of the start-ups that have come up in the last few years cater to the unbranded-hotel and alternative-stay sectors, which also recently prompted both MMT and Ibibo to start alternative-stay segments.
MMT co-founder Rajesh Magow and Ibibo founder Ashish Kashyap told BusinessLine over the phone that the alternative-stay and alternative-transportation segments are highly under-penetrated at 15 per cent and 18 per cent, respectively.
The deal was sealed in just four months, said Magow. Kashyap added that it happened some time in mid of this year when Magow, Kashyap and Deep Kalra (CEO, MMT) were discussing about the challenges in the travel segment, and how to bring offline to online and improve efficiencies in the segment.
Magow said both the companies will capitalise on each other’s strength while “trying to create a brand that each and every Indian will use in the next 4-5 years.”
While MMT’s strength remains in flight bookings, hotel business and holiday packages (both domestic and international), Ibibo has been able to tap the budget-hotel and bus-bookings (through RedBus acquisition) segments.
Founded in 2000, MMT’s revenues from the hotel business has grown to 54 per cent, from 15 per cent, in the past four years.
Founded in 2007, Ibibo has witnessed 3.6 million transactions with 4x growth in the past two years. RedBus has seen 60 per cent growth annually during the past few years. Ibibo also started its alternative stay (Rightstay) and transport (Ryde) segments last year.‘Unorganised’ competition
Kashyap said both the brands will complement each other rather than compete.
He, however, said the merger had nothing to do with competition from players such as Expedia or Airbnb, but from unorganised offline players.
MMT plans to run all the brands of the combined entity independently as all of them have strong consumer recall.
Magow said that with rising consumerism and increasing digital adoption, the company aims to become the largest player in the highly competitive travel market that is still dominated by offline players such as Cox & Kings and Thomas Cook. According to experts, the offline travel booking market is still high at 80 per cent.
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