In MakeMyTrip's Q2 2014 earnings, the company reported an operating loss of $1.5 million for the quarter, but is continuing investment to enhance mobile services, hotel and holiday package business.
Top-line revenue for Q2 was 47.4 million, an increase of 3.8% year-on-year, whilst revenue less service costs was up from $20.2 million to $23.3 million in Q2 compared to the previous year.
Highlights from the call are mentioned below.
New website launch
- Deep Kalra - Founder, chairman of the board and group chief executive officer
- Rajesh Magow - Co-founder, chief executive officer- India and director
- Mohit Kabra - Chief financial officer
In Q2, MakeMyTrip rolled out its new website to all visitors (it was in AB testing mode in the previous quarter). With the new site, the company says it is seeing positive results on conversion across all the lines of business.
The new website enables the company to cross-sell and up-sell other high-value products. The speed of hotel shopping experience is improved by reducing data entry wherever possible.
The company is noticing an increase in traffic from Tier 2, Tier 3 cities, and it says it might be due to the internet penetration and the changing consumer behavior in those cities.
The website attracts 9.3 million monthly unique visitors, as measured by comScore. [Indian online travel brands traffic]
Spotlight on mobile
Mobile is one of the top strategy priorities for MakeMyTrip. The company has set a goal of being the leader in mobile bookings within its market. It has a dedicated mobile development team with a focus on bringing various orders onto a comprehensive mobile platform.
Recently, it launched flight and hotel bookings on the Windows phone app, international flight bookings on its mobile website and added InstaBook payment option on the mobile site during the quarter. Also, the route and transport finder app 'Route Planner' was added to Nokia's Asha smartphones.
MakeMyTrip's mobile apps have a combined download number of 1.7 million since launch. Its iPhone app has consistently ranked as one of the top two free travel apps in the Indian App Store and the Android app has ranked in the top ten free travel and local apps in India's Google market place.
The company also reports that about 13% of its domestic hotel transactions were booked via mobile during Q2. Among the total traffic to the site, about 20% of the traffic is from mobile site, and mobile applications. Lot of the new users are adopting to Internet for the first time through mobile platforms.
The company says Indian travel market has just begun to experience the growth of mobile as a channel for online bookings, and it will continue to invest in making the best possible user experience for its growing mobile users.
Hotels and packages booking
Hotels and packages (H&P) business continues to remain as the company's primary strategic focus. Number of transactions in H&P business increased by 58.5%, with revenue less service cost standing at $7.1 million. [MakeMyTrip's hotel product branding during IPL]
The company continued its growth in hotel business, aided by bookings of international hotels, through the acquisition of HotelTravel.
MakeMyTrip announced that it will continue to invest in the international hotel space (including HotelTravel.com), both in technology as well as marketing. [97% of Indians want to book hotels online]
On the holiday packages front, in addition to the regular demand destinations like the Andamans, Singapore and Thailand, the company is also seeing growth in destinations like Australia, New Zealand and Africa. The company also launched new luxury selections for many of its popular holiday packages.
An online holiday booking engine was also launched for some of its most popular fixed packages. Since then, an encouraging change is noticed among consumers to book these holidays online. The company's online holidays bookings grew by 150% this quarter and it is continuing the investment in online bookings platform to improve content and booking flow features.
Increasing domestic hotel properties
The Indian Hotels Company (Taj Group of Hotels) intends to launch 36 new properties over the next four years, which will expand it's hotel capacity by 30% and add 5,000 more rooms to the market.
Sarovar Hotels also has plans to set up new properties in Tirupati, Hrishikesh, and Bodh Gaya, which are among the country's popular pilgrimage destinations. [MakeMyTrip's take on pilgrimage travel]
Also, the hotel industry has been granted infrastructure status by the government. This will help hotels to obtain cheaper loans on easier terms.
The Tourism Ministry has announced plans to strengthen infrastructure and create more facilities at various religious and heritage places to accommodate the increasing number of tourists at these locations.
MakeMyTrip says that one of its competitor Goibibo gained in terms of traffic and transactions because it has been discounting steadily. The company says its not a durable strategy because Goibibo would tend to lose a lot of the volumes when it tends to bring back its prices (that it needs to at some point of time) [ibibo group that runs Goibibo acquired redBus]
MakeMyTrip claims to have a 47% market share within OTA segment. In terms of air, it has about 12% market share.
In August 2011, MakeMyTrip acquired a 19.9% stake in ixigo.com, India's metasearch service. MakeMyTrip says that in the last couple of quarters, there has been good progress on the product discovery side in ixigo, but from a contribution standpoint, there is no real material contribution to the P&L yet.
MakeMyTrip has the option (contractually) to increase its stake in ixigo, but it says that in the immediate term there is no plan of increasing it.
New airlines and its impact
The Foreign Investment Promotion Board has recently approved the application for a joint venture between the Tata Group and Singapore Airlines to set up a full new service carrier in India that is targeted for June 2014.
Jet Airways and Etihad Airways continue to move towards completing the approved joint venture, which had been announced some time back.
Also, AirAsia India recently received the no objection certificate from the Ministry of Civil Aviation and is applied for the air operating permit to begin flight operations in the first quarter of the next calendar year.
The Civil Aviation Ministry now estimates that domestic airlines are expected to add around 370 planes to their fleet by 2017 and the commercial fleet size could reach 1,000 by 2020, up from 400 currently.
In terms of air transactions in MakeMyTrip, there was a year-on-year increase of 24.7%. When it comes to international flight business, the company continues to see robust transaction growth that is largely driven by low penetration of international flights online.
The market is supply constraint, which in turn is causing airfares to remain fairly high. First two months of last quarter saw very attractive low fares. This is expected to continue right through the end of the calendar year. The enhanced air capacity is going to benefit the market in terms of price softening. A larger pool of people will be able to fly instead of a rail or a longer bus ride from point to point.
NB: image via Shutterstock.