Indian OTA MakeMyTrip remains committed to building on its market-leading position as its Q1s reveal a double-digit lift in revenues and a triple-digit increase in sales and marketing costs.
In cash terms this equates to revenues of $121 million, up 29.4% on the same period last year; sales and marketing expenses were $52.7 million, up by 329.2%. Losses "as per IFRS" were also up - $14 million this time compared with $7 million.
Its financials for the April-June quarter said that that the increase in sales and marketing costs was "the result of significant customer inducement/acquisition programs...an increase in mobile application download and referral cost....[and] other brand advertisement expenses."
It acknowledged that "the customer inducement/acquisition expenses are primarily incentives given to customers for accelerating growth in our standalone hotel booking business".
And the approach appears to be working. The standout growth figures in the results are from hotels - overall online hotel bookings were up, in volume terms, by 478% compared with the same period last year; the volume of hotel bookings from mobile was up 871%.
Nearly three in four domestic hotels and 44% of domestic flights were booked on mobile in the quarter.
CEO Deep Kalra shared some more details on the earnings call with analysts. He noted that at the end of the quarter MakeMyTrip could claim 5.2m monthly active users of its app, compared with 4.2 million at the end of the previous quarter. So far the app has been downloaded more than 23 million times.
Air, generally, gets less attention than hotels in the OTA world because the margins and mark-up on beds are more compelling than seats.
MakeMyTrip however still has strong domestic and international air sales, lifting transaction volumes by 34% in the quarter. In Q1 MakeMyTrip's net revenue margin was 10.1% - up from 7.8% last time, based on flight margins of 6.5% (up from 5.5%) and hotel and packages margins of 16.9% (up from 13.3%).
Kalra noted that this part of the business is likely to continue growing as a result of the Indian government's recent decision to allow foreign businesses to invest up to 100% in its airlines and airports. The government will also encourage the use of underused airports in smaller town and cities.
The results of these changes is that the government expects 300 million domestic air trips to be taken in 2022 compared with 81 million in 2015.
MakeMyTrip is well positioned to take advantage of this on two counts. On the call Kalra kept referring to Millward Brown stats around its market share which confirmed not only its market leading position but also the scale of its lead over its competitors.
So for domestic hotel bookings MakeMyTrip has 28% of the OTA market, 7% ahead of its nearest rival; its 51% share of the domestic market is a "significant lead" over the number two OTA; for international outbound air it has a share of nearly 50%, a 27% lead.
Karla also mentioned that its recently opened development centre in Bangalore has been working on ways to optimise the MakeMyTrip platform for users in areas of the country with low bandwidth or users with low capability devices.
Analysts on the call were persistent in asking about India's competitive landscape in light of Yatra's recent announcement that it had received around $100m funding as part of a reverse merger that would result in its being listed on NASDAQ alongside MakeMyTrip.
Kalra said:
"We believe that typically it’s the weaker players who will get hurt much more...We have a strong position in air and hotels but we definitely expect Yatra to up the marketing and the promo trajectory that they've been on, but I think it will be more other players who will be hit."
Click here for MakeMyTrip's investor relations page to access its 2017 Q1 earnings release and a replay of the earning call.
Related reading from Tnooz:
Yatra valued at $218 million, will list on NASDAQ (July 2016)
MakeMyTrip takes Ctrip’s advice (May 2016)
Ibibo Group lands massive $250 million round to extend travel bookings online (Feb 2016)