MakeMyTrip planning to bear more losses in a bid to acquire customers

After multiple quarters of reported losses, it has been reported that MakeMyTrip is likely to bear losses for another two years to come. This of course is in bid to acquire more customers. They have decided to increase the revenues from the hotel and packages business and that would require attracting more customers by offering attractive discounts. The plan is to take the hotel business to 70% of the overall revenue over the next few years.

Sources report that MakeMyTrip can be profitable even at this point but it is a conscious choice to incur more losses keeping long term goals in sight. It is important to acquire more customers for hotels and packages because the margins from airlines are slim.

For the hotel business, the rate of internet penetration sits somewhere between 10-15% of the overall internet penetration. There is an increase in the number of users who are now booking online but still there is a significant chunk of users that are relying on offline options. The discounts and offers are primarily targeted at getting those people online. The number of transactions have been going up recently but that isn’t translating into revenue growth.

With the sudden growth in number of players in the hotel space, the OTAs are threatened. They are taking aggressive measures to stay competitive in the space. Budget hotel aggregators like OYO Rooms, Zo Rooms, Treebo Hotels and Wudstay are eating up the share of bookings that OTAs would have enjoyed otherwise. Unlike standalone hotels, these chains have got strong funds to heavily market themselves and offer lucrative discounts to give a tough fight to OTAs. They are especially focussing on the low end hotel business and are gaining good traction among young travellers. They are also partnering with various brands as accommodation providers to attract more business travellers.

According to Rajesh Magow, Co-Founder and CEO, MakeMyTrip, the real competition is from other OTAs like GoIbibo and Yatra as they are also aggressively trying to undercut others in a bid to gain a bigger market share. According to sources, Ashish Kashyap, CEO of Ibibo Group earlier claimed that his firm is 2.5 times bigger than MakeMyTrip in terms of booking volumes. They are also moving into other segments like GoIbibo recently introduced GoStays while Yatra.com introduced TG Rooms and TG Stays. This is a clear indication of the strong headwinds MakeMyTrip is preparing to face. The losses of MakeMyTrip were reported to be USD 6.93 million in first quarter of FY2016 against USD 3.96 million last year and they will go up further.

Update- MakeMyTrip has announced an app only festive season sale. They are giving heavy discounts on almost all type of travel and accommodation bookings through the MakeMyTrip mobile app and deals for specific credit and debit card holders. You can download the app here.