Within days of online travel company Yatra Online Pvt Ltd acquiring Travelguru to strengthen its position in the hotels and holiday business, a top official from the Nasdaq-listed market leader MakeMyTrip Ltd said merger and acquisition (M&A) was high on its agenda.
“We are looking for such opportunities to expand our product portfolio and to add new technology,” Keyur Joshi, chief operating officer of MakeMyTrip.com, told Business Standard.
There is a need to go for acquisitions to have more bandwidth to service the growing demand, he said. “More people want to buy things online now than before.”
This is not an isolated story. Expedia India, the Indian arm of US-based online travel company Expedia Inc, said it was also keen on evaluating opportunities for acquisitions. “Start-ups will think about exiting the market and the big players will want to grow faster by acquiring companies,” said Vikram Malhi, country head, Expedia India.
M&As in the travel space have never seen more action than now. It all started a few months ago in India, with margins in air coming under pressure. Online travel companies are increasingly focusing on non-air revenue, and scouting for acquisitions in hotels and holiday business. Internationally, the trend had taken off about five to six years ago. Last week, Yatra Online bought Travelocity’s Travelguru to boost its hotel bookings portfolio in the backdrop of poor margins in the ticketing business. For Yatra, Travelguru was its fourth acquisition in the past 18 months. The company acquired Travel Services International in October 2010, Magic Rooms in July 2011, followed by BuzzinTown in December 2011.
“We can now give our customers the full bouquet of services, including access to 7,000 hotels for which Travelguru has specially negotiated rates,” said Dhruv Shringi, chief executive officer, Yatra.com.
MakeMyTrip has been on an acquisition spree ever since its initial public offering in 2010. In the past few years, the company acquired a 79 per cent stake in the Singapore-based Luxury Tours and Travel, 29 per cent in the Delhi-based My Guest House Accommodations, and 19.9 per cent in Ixigo, a leading travel meta-search engine in India.
Even a traditional travel and forex company like Thomas Cook India is eyeing a mix of offline and online market share in the coming years, and wants to expand its business via acquisitions.
Internationally, there have been a series of similar M&As in the online travel space. For instance, in November 2007, US-based online travel company Priceline.com Inc bought Agoda.com, thereby expanding its inventory by 27,000 hotels in Asia and more than 168,000 world-wide. Even Expedia Inc, in 2008, bought European online hotel reservations website Venere.com, again on the same lines.
In the US, over 50 per cent of hotel sales take place online (either through hotels’ own websites or through a portal). But in India, online sales constitute about 10-12 per cent of all room sales for hotels, the exception being international hotel chains which rely heavily on loyalty programmes. In case of loyalty programmes, 80-90 per cent of transactions happen online.
“Hotels in India are trying to increase online sales through their own sites, but will have to rely on portals as their reach is bigger and as these cater to diverse markets,'' said Rahul Pandit, president of Lemon Tree Hotels. Unlike airlines, hotels are not planning to reduce the commission they pay to agents as the demand is weak.