India-based OTA MakeMyTrip has reported a revenue less service costs of $28.5 million for the third quarter of 2013, an increase of 42.1% year-on-year.
The NASDAQ-listed company said the quarter was better than anticipated (up from $23.3 million in Q2 2013), and it will continue to focus on the hotels and packages business.
The company’s website attracted 9.4 million monthly unique visitors for the quarter (as per a comScore report), this is more than double that of its closest online competitors.
Leapfrog opportunity in mobile channel
MakeMyTrip’s mobile app download across all platforms crossed 2.4 million. One in five visitors accessed the site via its mobile channel, but when it comes to domestic flights and hotel shoppers the number was even higher at 25%.
Also, about 10% of online domestic flights and nearly 20% of online domestic hotels were booked via the mobile channel.
MakeMyTrip sees mobile as a leapfrog opportunity and it is noticing rapid increase in new users in its mobile platform. Among the total mobile hotel bookings, about 25-30% are new customers who have never transacted online.
According to research firm IMRB, there are about 205 million people online or are on the internet in India, and about 100 million of them are mobile-only. MakeMyTrip believes this is a whole new market to tap as a lot of these users are not necessarily existing desktop users, perhaps they don’t have a desktop at home.
The growth in smartphone usage in India and the availability of 3G data services in the country is seen as a key driver for the mobile push.
Air business boom
Revenue less service costs from air ticketing business grew by 38.3% year-on-year.
The company also focused on driving international air ticketing business (a segment that is still primarily booked offline in India) to move online. As a result of this focus, as well as prevailing high air fares in the domestic air market, the average transaction value in the air ticketing business was higher by about 15% year-on-year.
Also, the website’s content was improved to fuel online adoption of international air bookings. For example, the site now provides information on baggage rules and visa requirements to help alleviate customer’s concerns of overseas travel.
In December 2013, MakeMyTrip’s domestic air ticketing business had a marketshare of 12.4%, despite high airfares during the peak travel season.
The company has been investing to strengthen its supply capabilities in South East Asian and Middle Eastern countries. For example, the air inventory was increased by adding several new airlines to its booking platform, including Air Costa, Malaysia’s Malindo Air, and Singapore’s low cost carrier (LCC) Tiger Airways.
Recent developments in Indian air industry
During the quarter, the equity partnership discussion between Jet Airways and Etihad Airways finally materialized.
Singapore Airlines and India’s Tata Sons will be launching a new airline in India that is expected to launch by May-June 2014. In this unnamed airline, Tata Sons will hold 51% stake while the rest will be held by Singapore Airlines. A total of $49 million will be invested initially into the airline.
South East Asia-based Air Asia along with Tata group and Telestra Tradeplace will be launching a new LCC in India under the name AirAsia India. This new LCC is expected to be operational this year. In the new airline, Air Asia holds 49% stake, Tata and Telestra hold 30% and 20% stake respectively.
Also, SpiceJet, a LCC in India, announced a partnership with Tiger Airways, to expand its reach into Southeast Asia.
Hotels and packages business
Revenues less service costs in the hotels and packages business grew to $11 million, an increase of 50.6% year-on-year growth. The margin in this business improved from about 11.1% to about 12.6% on a year-on-year basis.
When asked about the dip in number of transactions in the hotels and packages business, the company highlighted the depreciating rupee (against USD) and the negative impact it had on outbound travel market. But, the domestic hotel bookings and holiday package bookings continued to grow.
As of December 31 2013, over 36% of MakeMyTrip’s total net revenue came from the hotels and packages business on a nine-month year-to-date basis. In recent years, hotels and packages business unit has been the company’s focus segment.
Developments in the Indian hospitality sector are seen as an encouraging move by MakeMyTrip.
Recently, Marriott announced a plan to open 100 new properties by 2017. IHG has partnered with a local developer to bring more Holiday Inns into the country over the next four to seven years. Also, STR Global reports that there are about 360 new hotels in the pipeline for India.
MakeMyTrip says that its HotelTravel acquisition in Thailand is in line with its efforts to address this hotel inventory growth in India.
Currently, MakeMyTrip has 11,000+ Indian hotels in the system, and with HotelTravel it is now offering 144,000 bookable hotels in outbound leisure destinations, particularly in Southeast Asia.