MakeMyTrip, Ibibo will save millions from their merger
HAND IN GLOVE Will use the money to expand existing biz, build new tech, products around mobile and shared services
In the largest deal in India’s online travel business, MakeMyTrip merged with its largest competitor Ibibo on Tuesday in a deal that will help both companies save cash they were burning fighting each other.
Loss-making MMT alone burnt $80 million last year, said Deep Kalra, its group CEO. Another $100 million was spent on marketing. “These guys (Ibibo) were doing the same… that’s not pragmatic,” Kalra told HT.
The company has been struggling with the low-margin airline ticketing business and stiff competition from startups such as OYO and Paytm, as well as incumbents such as Yatra and Cleartrip. Ibibo was also a competitor in the hotels business – which will contribute 75% to MMT’s revenue.
“With Paytm getting into hotel and flights ticketing and heading into a discounting way, this merger us a strong play to fight competition,” said Kalra.
It will also promote RightStay, MMT’s rival for Airbnb and OYO.
It also gives the combined entity more brands to leverage. For example, in buses, RedBus, owned by Ibibo, is the single largest aggregator in the country. MMT, which too has a bus booking business, will now get access to this inventory.
Buses, says Kalra, is the future of the online travel business as more people get on to the internet and make bookings online.
MMT will also invest in futuristic technologies of ride sharing, accommodation, mobile and booking solution, data science and technology to improve consumer experience, with Kalra expecting companies such as Google and Facebook to enter the travel business sooner than later.
MMT wants to build a business based on customer experience, much on the lines of digital marketplace Amazon in the US. People stick with Amazon for shopping even if other e-commerce companies give better deals.
“There will be some bargain hunters, but we don’t need them. We will be happy with 20% to 30% of the market, which is the cream,” Kalra said.
He wants to build MMT’s defence around better customer experience, which he expects to come from the technology and new products that are being developed at the company’s research and development centre in Bengaluru.
Data science will help MMT to stand out in the commoditised ticketing business, said Kalra. It will build algorithms that will help the company understand user “expectations, needs and preferences”. It will also help MMT reduce its marketing spend.
It will tell what is the kind of money the company should spend in acquiring customers, how much one should bid to buy or get rights for key words.
Kalra is also looking at shared rides. Ibibo has something called Ryde, an intercity cab service. MMT will identify customers with common flights and destinations, and offer them shared cab rides from the airport at up to one-third of the regular fare.