The acquisition of rival firm Ibibo will give MakeMyTrip a dominant position in online air-ticketing and hotel business. Rajesh Magow, co-founder and India CEO of MakeMyTrip, explains the synergy benefits and strategy behind the transaction to Aneesh Phadnis. Excerpts:
What kind of cost benefits and synergies can we see after this? What about margin growth?
We’ll keep the MakeMyTrip and Ibibo brands intact and their distribution will remain separate. On the back end, there are opportunities for integration. We see synergies in contracting from hotels and other suppliers. We run separate customer service call centres and that could be integrated to bring more efficiencies. As a single entity, we’ll have better negotiating power and the transaction allows us to optimise our advertising and marketing expense. We feel that margin growth will happen with the change in our revenue mix. Currently, our blended margin are 8-9 per cent and we expect that to increase with the growth in our hotel booking business. Currently, 50 per cent of our revenue is from hotel bookings and we expect it to increase to 70-75 per cent in the next three to four years.
There is a view within the industry that both MakeMyTrip and Ibibo are consolidating to contain losses.
This is a strategic deal for us. We have taken a long-term view of the business and have not done the deal with the purpose of reducing the losses. We feel that Ibibo’s business complements ours. It is strong in the online bus booking segment and its hotels business, too, is growing fast. Both the companies have strong mobile platforms.
What are the growth areas for business?
The hotel business is one area for growth. Online hotel booking remains an under-penetrated segment. We have created booking engine for alternative accommodation (Rightstay) and online market place for holiday packages (Gofro). Ibibo has a ride-sharing and car-pooling service (Ryde). We will continue to invest in these areas.
With the merging of two companies, will there be reduction in the staff?
Absolutely not. We are in a high-growth sector and are investing in future projects. We met our staff in a town hall meeting today (Wednesday) to clarify all the issues.