1.

Industry analysis (Online travel agents-OTA)

The Indian travel market is projected to grow at 11-11.5% to the tune of $48 Bn by 2020 with the
biggest contributor, air travel expected to grow at 15% to $30 Bn. Hotels will grow at 13% to $13 Bn
by 2020 while railways will remain largely stagnant at $5 Bn.

Domestic demand (business and leisure) and foreign demand will drive this acceleration in growth. The
Government has also increased spending on tourism infrastructure and proposed 100% FDI in tourism

Source: World Travel & Tourism Council “Travel & Tourism Economic Impact 2016, India”; PhoCusWright “India Online Travel

Overview Ninth Edition”, July 2016; BCG Analysis based on Project Experience and Research 

Domestic leisure hotel spend is expected to substantially increase as household incomes increase.

As consumers shift towards higher-income segments, annual average leisure hotel spends per
household is expected to increase by 7% to $18 by 2020, compared to $13 in 2015. Business spending
on hotels will increase with economic growth and rise in the working population thus leading to a lot of
players tapping corporate hotel booking as an alternate source of revenue.

The number of foreign tourists visiting India is also expected to increase significantly over the next 5
years, at over 7% to reach 11.3 Mn by 2020. Relaxed policies on visa on arrival and increasing
connectivity are factors that are expected to drive this increase in foreign tourist inflow and also to be
noted is that India is fast becoming a global hub for outsourced services leading to increased traveling
among foreigners into India. Hence Hotel spends by foreign tourists is consequently expected to grow
by 13% reaching $3.4 Bn.

 Note: Income segments are based on the Household Income (HHI) per annum. Strugglers: < $2,000,
Next Billion: $2,000 - $8,000, Aspirers: $8,000 - $16,000, Affluent: $16,000 - $32,000, Elite: >$32,000
Source: BCG CCI “The New Indian: The Many Facets of a Changing Consumer”, March 2017; World Travel & Tourism Council
“Travel & Tourism Economic Impact 2016, India”; Ministry of Tourism’s India Tourism Statistics, 2015; Thomson Reuters
Canadean “The Future of Hotels in India to 2020: Market Profile”, March 2016; Euromonitor “Lodging in India”, August 2016;
BCG Analysis based on Project Experience and Research 

A very important metric to be taken care of while discussing the online travel portal /agents is the
digital penetration of its product vis a vis the digital adoption of the product.

Hence Digital footprint, a metric that quantifies Indian consumers with internet access, has more than
doubled in the last 3 years. This trend is expected to continue, as is evident from the growing base of
internet users projected to expand from 332 Mn users in 2016 to over 650 Mn users in 2020.

Digital influence refers to consumers who use the internet in their purchase process irrespective of
whether they buy online or not. By 2020, nearly half of all urban Indian buyers will be digitally
influenced, of which two- thirds will buy online.

Conversion from digital footprint to digital purchase will be pertinent to this growth, for which players
looking to capture market share will need to cover all touchpoints of the consumers' purchase pathway
across dreaming, planning, purchase, experiencing, and sharing.

(With the advent of Jio into the market these predictions seem to be accelerated by more than a year
and will continue to outperform the industry expectation with the consolidation of the telecom
Industry )
 Source: International Telecommunication Union database for internet penetration and projections of internet users, 2011-16; BCG CCI digital
influence study (N=18,000 every year between 2013-2016); BCG CCI Digital deep dive study (N=501); BCG CCI “The New Indian: The Many Facets
of a Changing Consumer”, March 2017; NASSCOM “The Future of Internet in India”, August 2016; BCG Analysis based on Project Experience and

2. Demystifying some Trends of the Leisure Traveler in India

2.1 62 % of the consumers book the hotel first, transport later in India

While conventional wisdom may suggest that consumers book flights

to their destination before booking hotels, the research from BCG reveals the opposite.
Amongst consumers who booked both hotels and transport, 62% booked accommodation first
while only 22% booked flights first and 16% booked other modes of travel first. Pricing
continues to be a key driver of the selection of hotels – 33% of consumers choose their
accommodation based on attractive pricing or deals and 17% based on good reviews.
  Source: Google-BCG deep dive study through GFK consumer research, Nov 2016 – Jan 2017
Sample: n = 52 (Bookers)
Question: What was the order of booking of your hotel, flights and other transport?
Question: Which of these factors was the most important for deciding which accommodation to choose? 

2.2 Long, complex hotel booking journeys

For many Indian consumers, a vacation is an event planned in advance as opposed to being an
impulsive purchase. Consumers typically spend 46 days on average planning their trip. They
spend 49 minutes online on their travel research and visit as many as 17 touch points during
their booking journey. This opens up the opportunity for players to engage with the consumers
across all touchpoints of their booking journeys.

Source: Google-BCG deep dive study through GFK consumer research, Nov 2016 – Jan 2017 Sample: Journey length n =
52 (Bookers); Touchpoints n = 256 (Total); Time spent n = 256 (Total) 
2.3 Customers not loyal; converge to specific brands later

This is a key insight and has to be kept in mind while studying various OTA platforms, that
Travel research typically begins with a generic search online, for example, "hotels in XX
destination", "flight offers", etc. Initially, consumers are open to exploring a variety of hotel
brands and booking channels, but tend to converge towards certain brands later in the booking
journey as long as it provides similar costing structure (hence Indian consumers tend to be price
elastic)

At the beginning of the journey , 84%

of the consumers are undecided about the travel agent or booking channel.Of these, 79% have
something in mind but are open to alternatives. Players can attract consumers during the early
stages of booking and actively influence buyers from this point onwards. [1] [2]

3. Customer Journey
Customer behavior online varies significantly as a result of their underlying needs. Businesses have an
opportunity to selectively and differentially target customers with customized messaging and the right
mix of spending across channels. There are five cohorts of travelers in India across business travel—
$37 billion spent in 2018—and leisure travel—$57 billion spent.

3.1 Frequent flyer ($17 billion): Nearly 70% book online.

Factors affecting their behavior

 Convenience (timing, location),

 Availability

 Preference for brands

 Past experience

3.2 Budget business traveler ($20 billion): 86% research online and 60% book
online.

Factors affecting their behavior

 Cost

 Availability

 Feedback
3.3 Experience-oriented traveler ($22 billion): About 70% book online.

Factors affecting their behavior

 Research extensively
 High loyalty to their preferred airline
 Experiences

3.4 Budget group traveler ($29 billion): 90% research online and 55% book online.

Factors affecting their behavior

 Cost
 Word-of-mouth

3.5 An occasional traveler visiting friends and relatives ($6 billion)

92% conduct research but around 60% book online. They maximize family convenience within a
budget and believe online terms and conditions are restrictive. Factors affecting their behavior

 Family convenience
 Cost
4. Five structural trends are creating fundamental shifts in the travel
and tourism market in India

Hence looking at the above details regarding the industry in order to succeed in this industry a few of
the below strategies could be adapted[3] :

 Improve the booking and payment experience to alleviate consumer concerns and increase trust
and adoption, trust is still a major concern when consumers are booking online even with the
advent of online payment systems

 Addressing customer perception issues by expanding customization beyond premium travelers

into the mass segment, this is a very important point as only by achieving the mass
customization can any company achieve the global scale and venture backing to fight the global
players who are increasingly entering the Indian ecosystem

 Use consumer tech to penetrate mass segments, build an offline presence and provide access to
new users, building an offline presence can still be an effective go to market strategy wrt to
channels in tier two and three cities

 Find innovative and economical ways to package the experience, to increase both adoption and
retention.

 Create a robust digital back end to respond to customer needs across the purchase journey.
Source - https://www.bain.com/insights/how-does-india-travel

5. Makemytrip

5.1 Vision

At MakeMyTrip, our vision is to make travel simple and fun for all, and our core values guide
us in making this possible. These core values can be seen in the projects that we undertake, and
the way in which we solve problems for our customers. They are a representation of OUR
BEING & OUR DOING. Each member of the MakeMyTrip family is guided by them each and
every day.[4]

5.2 Initial days

Deep Kalra and his wife were expecting their first child when they decided to go to Phuket
while she could still travel, having already booked his tickets he was struggling to find
affordable stay through his travel agent but the agent was making his life difficult, that's when
he took the matters in his hand and searched for the hotel online in those nascent days of the
internet, he landed on a website AsiaRooms.com and found the stay at $15 per night even
though this surprised him he took the chance. He was clearly surprised by how well it worked
out and that's when he realized that this could be a revolutionary idea.

Deep approached Neeraj Bhargava of e.Ventures and signed a deal with them where they would
invest $ 2Million for 70% stake and Deep would own 25% stake and the remaining 5% would
be Esop’s.

The initial team consisted of Deep, Keyur Joshi for international travel, and Ambarish Mahajan
for domestic travel and Himanshu Khanna was going to manage marketing and Rajesh Magow
was handling Finance (who later on goes to become the CEO).

In march 2000 the dot.com bubble burst worldwide and their backer e. Ventures decided to pull
out of India most of its investment and Deep decided to buy back the entire company from
e.ventures at a distress valuation by paying a sum of 46 lacks (his entire savings at that point)
for 70% of his company. Now Deep and his team had 100% of the company but a very
unforeseen future ahead.

At the same time, Net2Travel bought two offline travel companies Pearl travels and Hopp
Worldwide to have a combined turnover of over 150 crores was giving MMT a tough time as
MMT had asked the senior management to take major pay cuts.

In a statement, Deep says "It is easy to say these things now but what helped to keep us going is
the fact that we never got paranoid about competition. We were always more obsessed with
customer issues. That said we were always aware of our competition although we never tried to
become like them. In fact, I have always pushed my top managers to spend one day in the
market every month they go and talk to customers and small hotels to get feedback and insights.
We were too busy to get pushed over by the competition."[5]
 Another interesting statement made by Deep during this time
"2001 to 2003 was just darkness and nothing else. So I told Sachin, Rajesh, Keyur that I would
take a 100% cut in my salary and they should figure out the number of cuts that they can afford.
I will convert those cuts to equity. I guess the smartest thing that they did was agreeing to this
proposal ".[5]

This was the crucial moment when the founding team members actually became co-founders in
MMT.

When everything around seems to get destroyed and closed down each day when the money
seemed to dry up and the future seemed dark these founders rose to the occasion and fought
their way back.

Time is an illusion, timing is an art (Emunds Stefen, Goodreads https://Goodreads.com/quotes).

The CAC (customer acquisition cost) is a major factor making or breaking business in its early
days of functioning.MMT realized that their Indian customer always just looked up the pricing
of the hotels online and asked their offline travel agents to match the same, hence leading to a
very high CAC compared to the actual revenue pulled by these customers. Hence MMT made a
very important decision to only target NRI’S back then, this instantly stopped the cash leaks in
marketing expenses for the Indian customer. MMT became the go-to stop for all travel needs of
the NRI’s for the next 4 years.

In 2005 two major events took place in India one was IRCTC opening online payments for their
ticket booking which made many people in the country comfortable in online payments and
then Emergence of LCC(Low-cost carrier) such as Air Decan and Sahara. But the issue with
them was even though their fares very low their sites often crashed when bookings went live
and the offline travel agents refused to reduce their margins on the airfare. Both these events
made MMT realize that it was the right time to enter India and thus truly the MMT journey
began in India.

Once it began its Indian operations again it raised a fresh round of capital from SAIF partners
who invested $10 Million in the first round and $25 million in the company subsequently. From
2005 to 2010 their topline grew from $30 million to $600 million and along the way, Tiger
Global (famous for its investment in Flipkart) invested. But during the same time, a lot of other
companies in India were also launched mainly Yatra.com backed by Northwest Venture
partners and Reliance Technology Ventures, Cleartrip.com backed by Sherpalo ventures,
Travelguru.com backed by Sequoia Capital to name a few.

There was a time when yatra.com was beating MMT in Gross merchandising value but there
was a strong rumor around 2008 that due to economic crisis around the world the board of
Yatra.com pushed it not to spend $17 million cash reserves they had which kind of slowed their
growth while during the same time MMT went in full throttle and widened the gap between the
two companies.

The time had arrived now for the company to take the next step and up their game hence they
decided to finally do an IPO at NASDAQ, the reason to choose the American markets was that
the markets in the US were more mature and understood this business model well without being
 fixated on profitability. So on 12 August 2010, they debuted in the stock market and its
valuation nearly doubled to 902.8 Million dollars. The debut shares nearly shot up by 88%.

There never was a dull moment in the Indian OTA(online travel agents) segments MMT
initially fought off My Travel Genie, Net2travel, etc to five years later fighting with Yatra,
Cleartrip and Via, just when they seemed to gain an edge GoIbibo entered the Indian market
backed by the giant Naspers of South Africa. With deep discounting and aggressive marketing
tactics they soon became a big concern for MMT. They both began bleeding cash to entice the
new tech-savvy discount hungry customer and their bottom line suffered for years to come.

In 2016 after years of bleeding money in the market bought MMT and GoIbibo together.
MMT acquired 100% of Ibibo and redbus which gave Naspers 40% of MMT.

This merger leads to MMT controlling more than a fifth of the online ticketing segment besides
having a substantial increase of presence in the bus, train, and hotel booking segment. This
move made MMT capitalization increase from $1.2 billion before the merger to $3 billion after
it.

5.3 Current product offering

1. Flights
2. Flights + hotel deals
3. International flights
4. Hotels
5. International hotels
6. Holidays in India
7. International holidays
8. myBiz for SME travelers (myBiz provides an unparalleled booking and travel
experience for business, with 24/7 support and 100% GST compliance)
9. Cabs
10. Cheap tickets to India
11. Bus tickets
12. Train tickets
13. Route planner
14. Flight status
15. Mobile app
[4]

5.4 Founding team characters/current top management

**This information has been taken from their official website with very little changes ** [6]

 Deep Kalra
Founder and Group Executive Chairman
 Deep is the Founder and Group Executive Chairman of MakeMyTrip Limited, the holding
company of India’s leading travel brands MakeMyTrip, Goibibo, and redBus. Launched in
India in 2005, MakeMyTrip is today one of the largest e-commerce business in the country.
Deep steered MakeMyTrip as CEO since its inception in 2000. He took on the role of Group
Executive Chairman in February 2020, to pursue strategic initiatives, including product
innovation and expansion, geographic growth, business model innovation, and corporate
development. ( It would be interesting to see if the change in the CEO position and Kalra
moving to a strategic role would lead to lower losses in the next quarter when the company
announces its annual financials.[7]
He holds an MBA degree from IIM, Ahmedabad and a Bachelor's degree in Economics from St.
Stephen's College, Delhi. His interests include swimming, yoga, adventure sports, quizzing, and
traveling.

 Rajesh Magow
Co-Founder & Group Chief Executive Officer

Rajesh Magow is the Co-Founder & Group Chief Executive Officer of MakeMyTrip Limited,
the holding company of India’s leading travel brands MakeMyTrip, Goibibo, and redBus. A
part of the founding team that built MakeMyTrip ground up, Rajesh is a believer in India's
digital opportunity and a backer of many young Indian tech companies that are raring to make
their mark. As CEO, Rajesh leads the strategy and operations of MakeMyTrip, including the
management of all business units within the organization.
Rajesh played a key role in executing a successful merger between MakeMyTrip and Ibibio
group. He has also led the initial public officering process of MakeMyTrip, with a successful
listing on NASDAQ in the US in 2010. Within MakeMyTrip, Rajesh also acts as a mentor to
the senior management team and other high-potential team members. He is a recipient of many
awards, including the Bloomberg Award for the Best CFO in India.

He started his career with Voltas and has also worked with Aptech Limited and Quantum in
senior management positions. Rajesh also serves as an Independent Director on the board of
Flipkart.

 Saujanya Shrivastava 
Chief Business Officer - Flights & Growth

Saujanya Shrivastava is the Chief Business Officer, Flight & Growth. Responsible for steering
revenue growth of MakeMyTrip's flights vertical, he manages the domestic and international
flights businesses, P&L, and the product vertical for flights and growth platforms. Previously,
he served as the Group Chief Marketing Officer, wherein he spearheaded the marketing
function. During this stint, Saujanya introduced innovative marketing campaigns to drive
customer engagement, brand recall, and salience.

Saujanya has also been associated with FutureBazaar.com, PepsiCo India, Citibank, and
Cadbury India. At Pepsico India, as the custodian of the flagship brand 'Pepsi', he was the
driving force behind some of the widely popular and successful campaigns around the ICC
 World Cup, ICC Champions Trophy, and the brand's 'My Can' packaging innovation. Saujanya
has done his MBA from the Indian Institute of Management (IIM), Kolkata, and has a
Bachelor's degree in Economics from Jadavpur University, Kolkata.

 Sanjay Mohan 
Chief Technology Officer

Sanjay is the Group Chief Technology Officer MakeMyTrip Ltd. He leads overall technology for
MakeMyTrip, GoIbibo, and Redbus. Before the merger with the Ibibo Group, he was the CTO of
MakeMyTrip.
Sanjay has brought on-board an extensive product leadership and management experience in
marquee companies like Yahoo, IBM, Infosys, Oracle, and Netscape in the US and India.
Sanjay has a Masters in Computer Science from the University of Louisiana and completed his
bachelor's degree in Engineering from the Birla Institute of Technology Mesra – Ranchi.

 Raj Rishi
Chief Business Officer – Corporate Travel

Raj Rishi Singh is the Chief Business Officer – Corporate Travel. In his current role, he is
responsible for driving accelerated revenue growth for the company’s Corporate Travel segment
and steering the Gift card business.

He has over 17 years of experience in driving sales and marketing for leading global consumer
companies including PepsiCo India, Samsung, and GE Money. Before joining MakeMyTrip, he
spent a decade in PepsiCo India, where he successfully led and managed the company's flagship
beverage brand 'Pepsi'. He was also responsible for spearheading the beverage business in Sri
Lanka, Nepal & Bhutan. Rishi has done his MBA from MDI, Gurgaon, and B. Tech from NIT,
Jalandhar.

 Rupendra Yadav
Chief Business Officer – Holidays

Rupendra Yadav is the Chief Business Officer – Holidays, overseeing teams responsible for
building and creating great holiday experiences through MakeMyTrip’s products and services.

In a career spanning over two decades, Rupendra has worked with leading global FMCG companies
Hindustan Unilever Limited, PepsiCo India, Philips, and GSK India. Before joining MakeMyTrip,
Rupendra was a part of the leadership team of GSK Consumer healthcare. His other stints include
Preethi Kitchen Appliances, subsidiary of Philips India and PepsiCo India, where he played a
pivotal role in leading market development for the brand's Food and Beverages category.
A chemical engineer from the Indian Institute of Technology, Roorkee, Rupendra holds a Post
Graduate Diploma in Marketing from Indian Institute of Management, Lucknow.
  Ritwik Khare
Chief Business Officer - Hotels Business Development

Ritwik Khare is the Chief Business Officer – Customer Delivery, International Hotels & Key
Accounts. In addition, Ritwik also heads our DMC operations based out of Thailand, Singapore,
and Malaysia.

He has been working with MakeMyTrip for over 5 years as a lead for Business Development and
hotel supply teams and has also served as Business Head for Hotel Travel, a MMT Group company
based in Thailand. 
Prior to this, Ritwik has had stints with Citibank and Aegon Life Insurance. In Citi, he was part of
the Mortgage business working in the areas of Sales, Credit, and Operations in multiple stints. He
led the National Alliances for Aegon apart from setting up the operations for South India for them.
He has also had short stints with HSBC and Evalueserve. Ritwik has also served as President and
Convener for the Delhi branch of Nehru Bal Sangh - an internationally recognized Voluntary
Organization. A Gold Medalist and MBA from Faculty of Management Studies, Delhi, Ritwik
graduated from Sri Ram College Of Commerce, University of Delhi. In his free time, Ritwik likes
doing road trips and enjoys swimming and playing table tennis.

6. Some Key Metrics to analyze the industry

6.1 Gross Bookings represents the total amount paid by our customers for travel services and
products booked through us, including taxes, fees, and other charges, and are net of cancellations,
discounts, and refunds, but does not include other revenues that are generated from 3 rd party
advertisement on our website, commissions, and fees earned from the sale of rail tickets and fees
earned by facilitating travel insurance policies to customers.

6.2 Adjusted Revenue represents IFRS revenue after adding back promotion expenses in the
nature of customer discounts, customer inducement or acquisition costs and loyalty programs costs
which are reported as a reduction of revenue, and deducting the cost of acquisition of services primarily
relating to sales to customers where the company acts as the principal. We believe that Adjusted
Revenue reflects the value addition of the travel services that we provide to our customers.

6.3 Adjusted Revenue Margins is defined as Adjusted Revenue as a percentage of Gross

Bookings, and represents commissions, fees, incentive payments, and other amounts earned in our
business. We follow adjusted net revenue margin trends closely across our various lines of business to
gain insight into the profitability of our various businesses.

6.4 Flight Segment is defined as a flight between two cities, whether or not such flight is part of a
larger or longer itinerary. Room Nights also referred to as "hotel-room nights," is the total number of
hotel rooms occupied by a customer or group, multiplied by the number of nights that such customers
or group occupies those rooms.
 6.5 Constant Currency refers to our financial results assuming constant foreign exchange rates for
the current fiscal period based on the reporting for the historical average rate used in the prior year’s
comparable fiscal period.

6.6 Fiscal Year-End – March 31st

[8] Source - http://s22.q4cdn.com/244830719/files/doc_presentations/2020/MMYT-IR-Presentation-

March-2020.pdf

6.7. MMT’s numbers on the same metrics

Gross Booking -$5.4 Billion(+28.1% yoy)

Adjusted Revenue -$673 Million(+26.2% yoy)
Air ticketing flight segment- 39.5 million(+18.4% yoy)
Standalone online hotel-25.9 million(hotel-room nights )(+23.4% yoy)
Bus ticket sold-61.5 million (+55.3 % YoY)

6.7.1 The fiscal year 2020

($ in millions) Q1 FY20 Q2 FY20 Q3 FY20

Total Gross Bookings* +24% +20% +19%
Adjusted Revenue* +21% +13% +13%
Air Ticketing +24% +17% +15%
Hotels and Packages +12% +2% +10%
Bus Ticketing +37% +38% +36%
(*Growth rates in constant currency year over year basis)
Total Adjusted Revenue as % of Total Gross Bookings 11.7% 12.1% 12.2%
Marketing & Sales Promotion Expenses As % of Total Gross Bookings 9.5% 9.0% 8.9%
Adjusted Operating (Losses) ($29.2) ($19.3) ($11.0)
As % of Total Gross Bookings (1.7%) (1.3%) (0.6%)

6.7.2 The fiscal year 2019

($ in millions) Q1 FY19 Q2 FY19 Q3 FY19

Total Gross Bookings* +27% +27% +32%
+25% +25% +31%
Air Ticketing +24% +31% +32%
Hotels and Packages +20% +18% +26%
Bus Ticketing +49% +37% +43%
Other +91% +96% +87%
Total Adjusted Revenue as % of Total Gross Bookings 12% 13% 13%
(*Growth rates in constant currency year over year basis)
Marketing & Sales Promotion Expenses As % of Total Gross Bookings 10.5% 10.8% 10.4%
Adjusted Operating (Losses) ($32.8) ($25.4) ($22.2)
As % of Total Gross Bookings (2.3%) (2.0%) (1.6%)

6.7.3 Financial analysis

  Mar 31,2016 Mar 31,2017 Mar 31,2018 Mar 31,2019

Total Revenue 336.05 447.62 675.26 486.01
Gross Profit 169.02 273.7 499.38 312.6
Operating
Profit -67.79 -135.39 -219.44 -162.87
Net Income -88.52 -110.17 -218.41 -167.76

Chart Title
Total revenue gross profit operating profit net income
675.26

499.38

486.01
447.62
336.05

312.6
273.7
169.02

mar 3 1 ,2 0 1 6 m ar 3 1 , 2 0 1 7 mar 3 1 ,2 0 1 8 m ar 3 1 , 2 0 1 9
-67.79

-88.52

-110.17
-135.39

-162.87

-167.76
-218.41
-219.44

Valuation Ratios

Profitability
 Free Operating Cash Flow/Revenue -18.84

Gross Margin 62.09%

Operating margin -26.73%

Pretax margin -26.98%

Net Profit margin -26.97%

Per Share Data

Management Effectiveness

Return on Equity -15.24%

Return on Assets -12.33%

Return on Investment -14.47%

Growth

Total Debt 5Y CAGR 17.32%

Tangible Book Value 18.7%

Book Value / Share Growth 27.71%

Revenue / Share Growth -7.09%

5 Year Sales Growth 13.73%

5 Year Capital Spending Growth 11.75%

6.8 Analysis

 Their ROE, ROA, and ROI are negative, generally, this is a case for most startups since they are in
their massive expansion stage it can be accepted to be negative but looking at its free cash flow we
see that this also in negative indicating that the company is bleeding money year on year and is
seeing no trends to subside.
 In the chart, we see that from 2016 to 2018 the revenue increases but in 2019 it again decreases a
key reason being higher competition and entry for various e-commerce websites eating into its air
ticket business this is a bad sign as the gross profit also follows a similar trend.

 The biggest trend to be seen is net income becoming a bigger negative number each year after 2016
indicating that the company is losing money on its cost side year on year (contrary to their belief
that the merger with Ibibo would provide cost synergies)

 Even though we see an increase in the number of tickets sold both bus and air tickets included
along with hotel bookings, this isn't translating to the bottom-line key reason being that the reason
for these sales number, is the deep discounting and offers given at high cost to the company leading
to negative bottom-line

 A very important observation in these financials is that no data is provided about Annual churn rate
of the company or the repeat purchases of the existing customers of the company, as this is very
crucial information which will lead us to calculate its customer acquisition cost wrt to its customer
lifetime value across industry and determine actually how healthy the company is (acc to the studies
above mentioned it is very hard to have an Indian repeat customer as mostly they are enticed by
constant deep discounting and offers )

7. Problems with MakeMyTrip

7.1 Entering of the global giant BOOKING.COM in India

“Booking is not a company which we take lightly,” Kalra said during his company’s quarterly
earnings call earlier this month.[9]

 Cash problems

Deep pockets of the Amsterdam based company will pose a big challenge to make my trip
which doesn’t have a comparably huge capital base and hence is dependent on its investors for
the necessary ammunition

 Not technologically up to the mark

Kalra admits he also did not invest adequately in the back end. MakeMyTrip outsourced all tech
requirements until a few years ago. [10]

Compared to booking.com even today after adequate investment in tech it still lacks in
customized recommendations to its users
  Agency Model(Booking.com) VS Merchant Model (MMT)

In merchant model the contract is between the hotel and OTA(online travel agency) where the
latter sells the rooms at a lower price than standard, the aim being to get bulk bookings to
achieve economies of scale but here as the Recent fights between the hotels and OTA suggests
is not desirable anymore for rapid listings of private properties.[10]

Source - https://www.livemint.com/companies/news/cci-orders-detailed-probe-against-make-
my-trip-oyo-11582554672076.html

On the other hand agency business model bookings are made per room basis where the hotel
owner gets to decide the final price and share the commission with the OTA only after the
guests have checked out. This model is transparent and more desirable by property owners.

 Flight v/s hotels, price v/s loyalty

Booking.com drives a large part of the revenue from lodging while MakeMyTrip generates
most of it from reservations via airplane tickets.
Kalra himself conceded that MakeMyTrip needs to prioritize cross-selling
consumers who buy air tickets from it to also reserve hotel rooms in the same
purchase cycle.
But today booking.com is massively expanding into air ticket booking thus
forming one of the major players eating into the air ticket revenue of MMT
As indicated by the 2020 numbers.

($ in millions) Q1 FY20 Q2 FY20 Q3 FY20

Air Ticketing +24% +17% +15%

 The rapid expansion of booking.com business to about 50000 properties today makes
its business grow faster in India than in china making them push more money into Indian
expansion.[11]

7.2 PROBLEMS WITH OYO

7.2.1 Backstory

OYO the country's largest hotel network with an inventory of over 70,000 rooms through 8,500
hotels and expanding, is being seen as an emerging competitor to MakeMyTrip in the hotel
booking space. In 2015 OYO was delisted from MakeMyTrip and Kalra's statement goes like
this
“If you look at the long-term, [that would otherwise] perhaps not the best strategy right now for
us to be helping create young new brands [in direct booking].”[12]
This led to OYO making and pushing its platform to book rooms and also give special
concessions to booking.com and yatra.com.
 A few years later the properties were listed again due to a common understating and a special
partnership between the two and these are some of the statements below, an interesting thing
here is this was done a few months into Rajesh's tenure as the new CEO.
Ritesh Agarwal, Founder & CEO - OYO, said, "With OYO, we've created a brand that
resonates quality for both our customers and hotel partners. Being a full-stack hospitality tech
company, we have built capabilities to run quality-ensured accommodations across different
formats and placing them in the hands of travelers who are constantly on the lookout for unique
experiences. We are excited to extend our offerings of beautiful living spaces to them through
MakeMyTrip and GoIbibo.”
Rajesh Magow, Co-founder & CEO India, MakeMyTrip Ltd. said, “We are committed to
bring the best of travel experience to our customers, it’s why we offer them a variety of options
across price segments, particularly in the fragmented economy and mid-segment hotels, where
there is a greater need to build assurance around stay experience. With OYO’s evolution as a
full-scale hospitality company, we are excited to offer their award-winning chain of hotels in
the value economy and mid-market category through MakeMyTrip and Goibibo platforms."[13]

7.2.2 Problems

 Due to increased competition in the online travel portals and the booking ecosystem, the power
of large suppliers like Oyo increases exponentially hence they can bargain a higher percentage
of commissions and hit the bottom line of any OTA.

 OYO does have its own portal where you can book rooms and till date promotes its portal
hugely both in terms of digital ads and offline BTL campaigns through its managers at the
property this can be a significant threat to MMT as they can pull the plug anytime.

 Oyo is deeply funded by Softbank for eventual fights in the marketplace.

 A case opened recently against Oyo and MMT citing antitrust laws –
The Competition Commission of India (CCI) launched investigations after hospitality firms
and industry bodies complained that MakeMyTrip offered preferential treatment to no-frills
Indian hotel chain Oyo on its platform, stifling competition.

The commission will look into whether a 2018 "agreement between OYO
and MMT entails preferential treatment to OYO and consequent
exclusion of Treebo, Fab hotel and any other hotel chain", a CCI order
said. 
The CCI will also examine whether the firms violated norms by charging
high fees to hotels while offering customers deep discounts. [14]

7.3 Challenge in the air - ticketing space

A few years back there were very few players who were proving air tickets online booking in
India mainly goibibo, makemytrip,yatra.com and booking.com but recently there has been
newer players like Paytm amazon Flipkart entering into this already congested market leading
 to increase in price and discounting wars among these players mainly in Lower cost carrier
segment.

 PAYTM – A POSSIBLE THREAT

Market leader MakeMyTrip didn't anticipate the quick rise of Paytm mainly in flight and rail
bookings.
Paytm, whose name is a shorthand for “pay through mobile,” is mainly an Indian mobile-
payment company and online retailer. But it was quick to see the opportunity rail and flights
presented for cross-selling other products and services.
In October 2016 Paytm began offering rail bookings. That move mattered because Paytm had
millions of users. The company helps users pay bills, transfer money, and recharge phones. The
company provides more than 130 million digital wallets and growing — more than six times
the number of credit card account holders in India.

Paytm moved fast. “Today Paytm is the largest private seller of train tickets by booking
volume,” says Paytm spokesperson [15]
Paytm sold 38 million tickets across the categories of flights, rail, and [intercity] bus in its fiscal
year ending June 2018. In 2018, Paytm became the second-largest online travel agency in India
after MakeMyTrip Group

Hence a combination of all these players in the online air ticketing space has made many
skeptical about MMT’s growth trajectory in this space leading the CEO to make the below
statement
“Essentially, we have been saying that the company needs to reduce its dependency on the
airside and increase exposure to the non-air side of the business, which is hotels and packages,"
Rajesh Magow said. [16]

FINAL THOUGHTS

A possible solution out of all this was the merger of MMT with Ibibo leading to consolidation of the
market and the emergence of a single large player in the market which could dictate terms both to its
suppliers and its consumers but this is far from the truth.
 This merger was assumed to reduce costs especially marketing costs leading to very low CAC due
to cost synergies and thus improving the bottom-line which wasn't the case, their marketing, and
promotional spending is consistently going up in response to a lot of new threats in the marketplace
 These threats now mainly are the NASDAQ listed Yatra.com, Priceline-owned Booking.com, and
Expedia, along with newer entrants such as SoftBank-backed Oyo, Treebo and Fab Hotels  to name
a few

 This has made their discounting spend worse than before thus eliminating the benefits of one of the
major synergies of their merger

 There also exist certain integration related issues between the two companies as their cultures had
stark difference's [17]

THE future is challenging for MMT with existing players like Yatra.com along with the advent of
newer players like PayTM, Amazon and Flipkart among the few in the air travel booking space and the
newer power vested by large suppliers like OYO, Along with key integration issues with their merger
which is yet to give them benefits in terms of cost reduction all the while burning through their cash
reserves.
It does seem like an interesting space to look out for in the coming years.

References

[1] Google-BCG deep-dive study through GFK consumer research, Nov 2016 – Jan 2017

[2] https://media-publications.bcg.com/BCG-Google-Demystifying-the-Indian-online-traveler-Jun-
2017.pdf

[3] https://www.bain.com/insights/how-does-india-travel

[4] https://www.makemytrip.com/about-us/

[5] How I Almost Blew It By Sidharth Rao

[6] https://www.makemytrip.com/about-us/company_profile.php

[7] https://inc42.com/buzz/deep-kalra-to-step-down-as-makemytrip-ceo-rajesh-magow-takes-over/))
[8] http://s22.q4cdn.com/244830719/files/doc_presentations/2020/MMYT-IR-Presentation-March-
2020.pdf

[9] https://skift.com/2017/08/22/makemytrip-puts-a-brave-face-on-booking-com-encroachment/

[10] https://www.businessinsider.in/this-is-why-booking-coms-agency-model-has-an-edge-over-other-
otas/articleshow/59102504.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[11] https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/india-biggest-apac-market-
outpacing-china-in-growth-booking-com/articleshow/68008674.cms

[12] https://skift.com/2017/08/22/makemytrip-puts-a-brave-face-on-booking-com-encroachment/)

[13] http://investors.makemytrip.com/investors/press-releases/press-release-details/2018/MakeMyTrip-
Ltd-and-OYO-announce-partnership/default.aspx

[14] https://www.arabianbusiness.com/travel-hospitality/432031-india-to-probe-makemytrip-softbank-
funded-oyo

[15] https://skift.com/2019/01/09/what-india-reveals-about-the-future-of-online-travel-a-skift-deep-
dive/

[16] //www.livemint.com/Companies/gzDDrB5WwCFwbG4Snif4eN/MakeMyTrip-is-doing-
everything-to-get-its-hotels-and-package.html

[17] https://economictimes.indiatimes.com/small-biz/startups/features/makemytrip-ibibo-merger-how-
combined-entity-continues-to-struggle-with-problems-old-and-new/articleshow/62658501.cms?
from=mdr