"Airlines will have to partner us in any solution that works best for all the parties"
Published: 01 Dec 2008
By EFT Correspondent in Mumbai
Earlier this year, Makemytrip.com had indicated about its target of achieving break-even by the end of this year.
Speaking with EyeforTravel.com, its CEO Deep Kalra says the non-air business is picking up significantly.
"We are on track towards (achieving) our targets," said Kalra (he was among the few who turned up for the second day of EyeforTravel's Travel Distribution Summit India 2008, which eventually had to be cancelled owing to attacks by terrorists in Mumbai).
"The share of the hotels and packages revenue mix is much healthier. We are closer to generating almost 30 percent of our revenues from the non-air business and we hope to grow it faster next year. Since technology is our backbone, the operating costs for OTAs lend themselves to fewer wastages or components that can drive savings. So the success of OTAs would be largely dependent on increasing margins from existing products and non-air revenues going up," said Kalra, who shared that last quarter the product mix for the company has been 66 percent air and 34 percent non-air.
On consolidation, he said, "I expect to see some serious moves in the next 2-3 quarters."
In an interview with EyeforTravel.com's Ritesh Gupta, he spoke about what does MMT stands for in the Indian market, zero commission environment and other critical issues. Excerpts:
EFT: What does Makemytrip.com stand for in your opinion in India? Do you think its synonymous with OTA business and how do you think you are in a position to reap rewards of your perseverance?
Deep Kalra: MakeMyTrip was conceptualised to provide travellers with greater choice and flexibility. It was launched in response to the vast gaps that existed in the delivery standards of service levels for the average consumer. A few websites offered air-tickets at the time but none that could comprehensively claim to cater across categories (LCCs and full-service) and offer a winning proposition like ours - Best Deal and Lowest Airfare Guarantee.
Attaining leadership position post launch MakeMyTrip has grown to offer a range of travel solutions to customers along with the core proposition of best deals at their convenience. While the initial growth driver for MakeMyTrip was air tickets category, we could foresee that we would need to focus on high-margin categories like holidays. Therefore, we also made efforts to grow the non-air business by offering holidays and online hotel bookings since real growth and revenue would be achieved by making inroads in these high-margin categories.
We are riding high on the back of this kind of focus. Already, while being almost synonymous with Online Travel in India we are among the three largest travel companies in the country. Domestic Travel bookings on MakeMyTrip have seen a growth of 127 percent in FY08 – during the current year we expect the strong growth to continue at over 100 percent. The big growth however will occur in the Outbound travel segment – more Indians now prefer to travel overseas and with domestic airfares increasing, we expect domestic travellers to convert into international holidayers.
EFT: How do you think the changing business environment (commission issue with airlines) is going to impact the OTA business in near future, considering that air contributes majority of revenues to entire OTA business in India? Do you foresee other means such as service fees - facilitation fees/ processing service fee - coming in a big way in near future?
Deep Kalra: A zero commission environment has existed in the US and UK for some time now and travel agents have moved to a fee-based model in these markets. It was only a matter of time before the zero commission was exercised in other markets as well. Travel agents have the option of levying a flat service-fee component to the ticket-price in order to rationalise their losses. However, the airline industry will have to partner us in any solution that works best to the advantages of all parties – the consumer, the agents and the airlines. The industry will need to work in tandem to chart the way forward – whether to apply a service fee strategy, or a transaction-based fee according to the services offered.
The good news is that this will not impact the business for OTAs as owing to a lesser number of intermediaries (and processing costs), our costs on the ticket will still be more competitive.
EFT: How have you managed to control your operational costs (has your marketing expenditure gone down significantly) and at the same time managed to optimise your customer acquisition and conversion? Is repeat business a major contributor considering that you have already dealt with so many customers over the last few years?
Deep Kalra: The marketing expenditure has been optimised to ensure higher ROI. Our existing customers are definitely coming back to buy more. We are also constantly acquiring new customers as newer sections of people are connected to the Internet through different access-points (desktops, laptops, hand-held devices, mobile phones) and others can access our best-deal proposition through innovations with our distribution channels.
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