Having burnt billions of rupees in trying to expand customer base and create market, online travel companies like MakeMyTrip and Yatra are looking to optimise their promotional expenses. Both the Nasdaq-listed travel players have seen a reduction in losses during the April-June quarter of the current financial year.
MakeMyTrip, the country’s biggest online travel company, has managed to bring down its adjusted operating loss to $32.8 million in the quarter from $52.3 million in the corresponding period of previous year, a reduction of over 37 per cent. This decline came even though the total marketing and sales promotion expenses increased marginally to about $149 million versus $142.4 million in the same quarter last year.
"Due to all other costs largely remaining in line with last year, this has helped us drive the reduction of about $19.5 million in adjusted operating losses," Mohit Kabra, group chief financial officer at MakeMyTrip said in an analyst call after the results early this month.
He added that the company's first quarter performance was driven by increased effectiveness of customer retention programmes and continued optimisation of promotional expense, especially in the budget segment of hotel bookings.
Yatra, another leading player in the segment, has brought down its adjusted loss to $5.95 million in the April-June period from $8.9 million last year. The company’s marketing expense, as a per cent, was around fifty per cent of the adjusted revenue in April-June period against 70.5 per cent last year. The sales and marketing expense came down to $14.9 million, a reduction of 11.3 per cent over same period last year. “This reflects the increasing efficiency of our marketing and sales promotion expenses on increasing gross bookings,” Alok Vaish, chief financial officer at Yatra told analysts recently.
He said the management anticipates a growth of about 20 per cent in adjusted revenue during FY19 along with a meaningful improvement in our adjusted loss on the back of efficiency marketing spends and leverage and operating cost.
Online travel booking is a small fraction of total travel business, especially in the hotel space, and companies have been luring customers to online booking platforms through discounts and offers for last two-three years. However, players are now turning rational.
MakeMyTrip aims to continue the journey of bringing down the promotional costs. Kabra said that for the remaining period of FY19 the company plans to maintain and expand the market leadership while continuing to optimise marketing and promotional expense, particularly in the budget segment of hotels.