MakeMyTrip expects hotel booking to contribute to 75% revenues by 2020

MakeMyTrip, India’s first online travel portal, is looking at the hotel booking segment to drive revenue growth as the company expects hotels to contribute as much as 75 per cent of its overall business by 2020.

The contribution of hotel bookings is currently close to 57 per cent of the total revenue ($192 mn) while packages contribute to about 12 per cent. Air tickets amount to 31 per cent of the total revenues.

The company that traditionally focused on the air ticket booking segment is now stressing more on the hotel business as the margin in air booking has thinned in the past few years and the hotel segment is offering much better profits.

Hotels are today the most profitable and sustainable businesses for MMT. Air ticket bookings offer a margin of about 5-6 per cent while hotel bookings offer about 10-15 per cent.

To expand its footprint in the hotel booking segment and to fight the growing challenge posed by Oyo rooms, the company last year acquired Ibibo Group in 2016 and brought MakeMyTrip, Goibibo, redBus, Rightstay and Ryde all under one roof.

The company had struck a total of 34,20,200 transactions for air ticketing in the three months that ended June 30, 2017, which is up from 21,50,300 transactions in the corresponding quarter of 2016, marking a 59 per cent growth. This number stood at 35,74,800 for hotel and packages in the three months that ended June 30, 2017, growing from 15,49,400 transactions in the corresponding quarter of 2016, marking a 130.7 per cent growth.

The figures clearly show that the rise in the hotel bookings and packages is much more than that of the air ticket booking.

MakeMyTrip is associated with 45,000 hotels, 13,500 alternative accommodation properties in India and more than 500,000 hotels and properties outside India.

The Online Travel Agency (OTA) market leader in the category, the company currently has a 41 per cent market share in all travel categories.

Among the other players in the market, Yatra contributes to 16 per cent market share, Cleartrip is at seven per cent and Expedia stands at five per cent market share (Deutsche Bank AG report).

Within the online hotel segment though, the company has grabbed a 58 per cent market share (as per Millward Brown Report of Q1 of fiscal 2018).

So, with the growing market and the scope for growth, is it a conscious effort to focus more on hotels?

Saujanya Shrivastava

The company is affirmative about this. Saujanya Shrivastava, Group CMO, MakeMyTrip, said, “The idea is to grow the segment by giving compelling reasons to consumers to experience the category online. Over the past 2-2.5 years, we have been trying to provide compelling value propositions, which are relevant and meaningful to consumers. That’s where our campaigns with Ranveer (Singh) and Alia (Bhatt) have seen a record-breaking success. Our online transaction on room night growth for standalone hotels increased by 192 per cent in Q1 of 2018. Our MMT India Standalone online hotels business accounted for over 94.8 per cent of all hotels and packages room nights in Q1 2018. This goes on to show that we continue to pursue to have hyper growth strategies and these are actually manifested in the way of campaigns. The MMT assured campaign with Alia and Ranveer, where Ranveer was dressed as Sardarji, got us a new user growth of 63 per cent compared to the same quarter last year.”

The company operates in three separate verticals of business – flights, hotel bookings and packages. While the numbers for hotel bookings look impressive with a growth of 192 per cent, what next? How much can it grow further?

Shrivastava portrays an immense potential for growth in the hotel booking sector. He added, “Overall travel is expected to be about $88 million by 2020. The addressable online opportunity is going to be about $33 billion by 2020. Online hotel booking has only 16 per cent penetration, which means, of 100 hotels that are sold, only 16 happen online. There is huge opportunity to grow the online hotel booking category. Another side of the coin is that there are about 100 million e-commerce shoppers. All the OTA put together claim to be having about 30 million users. You still have a sizable chunk of 70 million shoppers over there online but have not (for some reason) come to the OTAs. These are e-commerce ready. This market is poised for hyper growth and more so with the consolidated powers of category leaders MMT and Goibibo.”

Within hotel businesses too, the company is focusing on getting mid-level and smaller hotels – the 3stars and small cottages – to its online booking and the marketing platform as it sees a huge opportunity in this segment. These budget hotels are expected to supply two-thirds of rooms by 2020-21 fiscal, as per the Deutsche Bank AG report.

Most of the company's growth in the hotel segment has been driven through mobile booking. While the standalone hotels booked online grew by 164.7 per cent between fiscal 2016 and 2017, the standalone hotels booked on mobile grew by 217.5 per cent during this time.

Discounts and Offers are an important part of the communication extended by the OTA players and so are they for MakeMyTrip. However, Shrivastava feels that there is more to the communication that just offers-announcement. He explained, “Discounts and offers is just one part of the deal. When a person is able to strike a discounted deal there is a feeling of triumph. And it is true for every single category online. But, on a deeper note, we have been trying to tackle the fears of our consumers – fears of not feeling safe to share credit card details online, fears of making an advance payment and cancellation charged. We have tried to address each of these concerns through campaigns like zero cancellation campaign and pay at hotel or pay at checkout campaign. It got a good response both in terms of booking and brand recall.”

The total traffic on MMT currently stands at 7,32,06,083, as shared by the company, while the total of new app installs is at 53,28,428.

How difficult is for an OTA platform to grab newer users while retaining the existing ones, given that the competition is so intense and discount rates so high.

Shrivastava answers, “Our marketing campaigns do not alienate the existing users. No cancellation fees and pay at hotel will be equally relevant for a new consumer as that it would be for an existing one. Propositions and communications are relevant to both the set of audiences despite the fact that we are single-mindedly working towards expanding the category that sends the value proposition chiselled to make it very sharp.”

Info@BestMediaInfo.com