MakeMyTrip co-founder and India CEO Rajesh Magow believes that its recent merger with Ibibo Group will create a business capable of dominating all aspects of the Indian online travel market.
The deal structure left many in the market confused – MakeMyTrip owns 60% of the combined business (which gives Ctrip a 10% in the business). Ibibo Group’s was 91% owned by South Africa’s Naspers and 9% by China’s Tencent and has 40% of the combined business.
Magow, speaking on the sidelines of the Phocuswright Conference in Los Angeles, told Tnooz that “in every aspect, on a people and business level, this is a merger, not an acquisition.”
“The conversations were all forward-looking, all about where we can take the combined business, the new growth opportunities that we can tap into through the brands we now control,” he said.
MakeMyTrip is leading the group as India’s already dominant full-service online travel agency. But Magow noted a range of opportunities across the combined portfolio.
“We saw that Ibibo was growing its hotel volumes significantly, in the three/two star sector, whereas we are more four/five star hotels and packages. We liked the fact that it is an agile business, with no legacy code getting in the way,” he said.
He also noted that Ibibo’s RedBus business was “a distinct asset” and was excited around the potential of its interstate cab brand Ryde.
These three businesses will help MakeMyTrip attract new customers. “With Ibibo we can capture the shift in consumer behaviour which is being led by the smartphone. It’s not about moving existing online customers around the brands, it’s about moving offline customers to online," he said.
Magow re-iterated that every vertical the combined business operates in has massive headroom for online growth, with the possible exception of domestic air where 50% of the market is already online. Hotels for example are “underpenetrated” running at 13/14% online penetration.
And the market dynamics are in its favour. “In India today, there are 330 million internet users, 250 million of whom access it via a smartphone. By 2020 there will 730 million people online with 700 million smartphones.”
A few weeks before the Ibibo merger, MakeMyTrip launched RightStay, an alternative accommodation brand which operates very much in the Airbnb space.
“This is very much an investment for the future,” Magow insisted. “There’s enough immediate potential in the organised hotel space, but we do think that consumer behaviour will change and when that change happens we want to be ready in the market with the technology and the supply.”
He expects RightStay to take "two to three years" before it starts making a material contribution to the combined business.
Another element Ibibo brings to the party is its expertise in digital wallets. While only 25 million Indians have credit card, there are 250 million debit card holders which help feed into an incredibly dynamic digital wallet ecosystem, all of which then make transacting via mobile or apps simple and secure.
“The idea that online has a limit because of the lack of credit cards is wrong, because digital payments generally are well established and accepted,” Magow said.
Together, MakeMyTrip and Ibibo want to become the one-stop shop for Indian domestic and outbound travel “so we are more like Ctrip than booking.com.”
The idea of MakeMyTrip becoming an Indian Ctrip, in which Ctrip owns a stake, is an ambitious aim, helped out by Ctrip-esque merger of a big, heavily funded rival. “Naspers is a deep-pocketed investor, so it’s good that we now have them on our side."
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