MakeMyTrip to focus on budget hotels to improve margins

With the domestic travel segment expected to slow down in the coming few quarters, online travel aggregator MakeMyTrip is charting out a diversification strategy entailing investments in budget hotels.

To improve demand as well as margins, Deep Kalra, Founder and CEO of Nasdaq-listed MakeMyTrip, said the company expects growth to slow in the domestic travel segment, and, hence, will be focusing more on standalone hotels in the budget segment. The online travel aggregator (OTA), which started out as an online airline ticketing platform, recently launched its own brand of budget rooms.

“We are witnessing an increase in volume in budget properties across the country. Opportunity for incremental margins is expected from the segment," he said during an investor call.

The company expects the revenue share from the hotels business to go up by 70 per cent in the next three years from 45 per cent now.

MakeMyTrip’s decision to focus on budget hotels comes even as the segment is witnessing the emergence of a number of branded online aggregators such as OYO Rooms, Zo Rooms and Stayzilla, which are eating into MakeMyTrip's market share.

Kalra said that the company expects more tourism activities to take place between India and China in the coming months. Earlier this month, the Delhi-based company raised about $180 million from China's OTA Ctrip through convertible bonds.

The funds, Kalra said, would be used in expanding into the international market, stepping up towards acquisitions and mobile marketing. He expects mobile-based advertisement and business promotional expenses to rise.

The company’s losses for the quarter ended December 31, 2015 widened to $19.5 million against a loss of $3.7 million in the year-ago period. However, the revenues increased 8.3 per cent to $82 million during the third quarter compared to $75.7 million last year.

The number of transactions was up by 34.6 per cent year-on-year and can be attributed to increased online promotions the company offered during the quarter.