Mergers and acquisitions beyond a certain threshold require approval from the Competition Commission of India (CCI). In March this year, fair trade regulator CCI approved the proposed merger of online travel firm Makemytrip’s Indian travel business with the rival Ibibo Group, owned by South African media conglomerate Naspers. As part of this arrangement to create a combined $2.2 billion-valued entity under the common brand name of Makemytrip, Naspers and China's Tencent Holdings would sell Ibibo Group to MakemyTrip in exchange for an issuance of new shares by the latter. It will bring together a bouquet of consumer travel brands, including MakeMyTrip, Goibibo, RedBus, Ryde and Rightstay, which together processed 34.1 mm transactions in 2016.
The CCI’s approval for the deal comes at a time, when Makemytrip has successfully managed to not only overcome the impact of demonetization on its operations, but also grow its market share to attain a leadership position with 45% of the Online Travel Agency (OTA) segment in India. Indian travelers booked 52% more trips in July-December 2016, compared to the same period in 2015, according to a report compiled by Makemytrip. There was a surge in last-minute bookings too. About 81% of domestic bookings took place within a month, and 36% of international bookings were done within a week of travel. Domestic hotel transactions saw a 145% rise with the highest growth seen in the budget category hotels while the 3-star hotel category accounted for the highest transactions in terms of volumes. International hotel transactions witnessed a rise of 59% with half of the bookings being done in the 4 or 5-star category; whereas the 3-star category saw the highest growth, the report said.
Continuing to witness this upward trajectory, Makemytrip has seen Indian travelers book 39% more trips to travel in April-July this year, compared to these summer months in 2016. To achieve these growth numbers, the company initiated a slew of measures that included focus on quality of products, innovation via new platforms, effective Human Resource policies, customer friendly offers to draw sales and partnerships for cashless transactions.
Enabling Cashless transactions
Makemytrip has 34,000 hotels across India and 240,000 hotels internationally and has been using the automated invoicing feature of PayPal for bookings. This facility allows the automatic transfer of invoices to customers by email, along with a link that can be followed to complete payment through PayPal. Due to the success of this facility, PayPal has extended its merchant partnership with Makemytrip to facilitate hotel and holiday bookings. As a company that has been focused on driving customers to shift from offline to online for their travel bookings, Makemytrip launched a cashless travel sale from December 6 to 8, focusing on the high travel season during the demonetisation drive. The Cashless Travel Carnival offered attractive discounts for flights, hotels and holiday packages across its digital platforms.
Budget hotels
While Makemytrip already operates alternate homestay focused RightStay, Ibibo operates budget accommodation platform GoStay. As a result of the merger, Makemytrip has implemented plans to take on smaller rivals Treebo and FabHotels in the budget hotels space, and is forecasting up to 75% of its earnings to come from hotels and packages segment over the next three to four years. This aggressive intention to expand in the budget hotel segment will bring in a greater portion of its overall revenue from broader, and more lucrative, hotels and packages segment. On a standalone basis, for the third quarter ending December 31, Makemytrip's revenue from its hotels and packages business increased by 18.1% to $82.2 million, contributing almost 67% to its overall revenue for the three month period.
Back to the future human resource program
Back to future is a program specifically designed for women professionals rejoining work after a break of two years. The bi-annual program has been running in two batches, one in Gurgaon and another in Bengaluru, with 20-25 women participating in each batch. Makemytrip plans to provide skill advancement, mentoring, industry exposure and work experience in the form of a 24-week paid internship, after which it will take back some employees in roles of frontend developer, backend developer and test engineer. In doing so, it has joined a list of companies that have been attempting to improve gender diversity numbers in their human resources. Goldman Sachs, Genpact, Target and Intuit have launched similar programmes to help women transition back to work.
Quality stamp on listed hotels
Makemytrip has launched a concept called Assured Hotels where it plans to categorize and certify hotels to address customer concerns while booking hotels online. The hotels rated greater than 4 out of 5 would make the cut based on ratings and online reviews, clearly tagged locations, recent pictures to reinforce authenticity, and neighborhood guides. The hotels that get a quality assurance from the company would largely be across 3, 4 and 5-star categories. "Assured Hotels is a MakeMyTrip promise of an amazing stay experience, which is a guarantee. It is about awesome rooms, great service and a 24/7 hotline. We are saying should you ever have a problem after you've checked in at any of these hotels, you could reach us on a 24/7 hotline and we will endeavor to resolve your problem in 60 minutes. Else, your stay will be free," said Saujanya Shrivastava, group chief marketing officer at MakeMyTrip.
Creating quarterly reports that enable it to anticipate change in the travel habits of Indians, Makemytrip has managed to overtake competition from domestic players such as Yatra and ClearTrip.com. And after entering into a partnership with China’s largest travel site Ctrip, it has managed to keep Airbnb, Kayak and Booking.com at bay. With this merger, it has achieved economies of scale necessary to consolidate its leadership position in a market where smartphone penetration is driving a shift towards online bookings in the Indian travel industry.
