We will be more receptive to hotel owners, says MakeMyTrip CEO Deep Kalra

How can we stop a hotel from discounting? They are the owners, says MakeMyTrip CEO Deep Kalra

Over the last few days, a few hotel associations took on online travel giant MakeMyTrip (which also owns Goibibo) and decided to boycott the twin brands, alleging a predatory pricing, high discounts and market distortions. Deep Kalra, chairman and group CEO at MakeMyTrip tells Ajay Modi that talks are leading to a gradual resolution and bookings are turning normal.  

What caused this stand-off? Are hotels no longer appreciating the work done in creation of the online market by companies like yours?

I am sure we can take some credit for creating this marketing channel. It is not that the hotels are not appreciating. I think some of the hotels probably felt that both commission rates and discounting are too high. I can appreciate the argument on commission. But on discounts, we are only doing that to help the hotels fill up their rooms. If they choose to opt for lower discounts and that anyways happen in the high demand season. Hotels may do well in high season but we have to help them in the lean season. We are very happy to listen to them and do it. I do not know how it became such a big issue that we did not have a conversation. Clearly may be we did not get the writing. We will be more receptive.

Is it not that discounts are on a decline?

Discounts have been coming down gradually. If you look at the last five quarters, we have brought down losses gradually from $50 million a quarter to $20 million. We stick to the guidance of breakeven in FY20. It can move a quarter here and there due to market conditions.

A hotel association has claimed that MakeMyTrip charges margins of up to 40 per cent. Isn’t that high? Are you not letting hotels offer discount at their end?

The claim of a 40 per cent margin is exaggerated. Even 30 per cent would be applicable only to a few hotels and the bulk of them are charged a margin in the 20s. The average blended discount is in the teens. How can we stop a hotel from discounting? They are the owners.

Hotels also allege that the bed and breakfast stay options hosted on OTAs are illegal. Your thoughts?

A number of properties are technically not guesthouses or hotels. But we need to unlock these assets as new hotels are not coming up. They must comply with norms. However, every state cannot have their own set of norms. The centre has to drive it. There is work to be done.

What could be the value of total bookings by MakeMyTrip and Goibibo?

Last year we did $5.6 billion…we should get very close to $7 billion in FY19. Tourism is growing between 10 to 12 per cent. The online tourism is growing 15-16 per cent faster as more people are making online purchases. It is not hard to keep growing at teens or even 20 per cent.

Is there a need for a fund raising?

Hopefully not. We have about $300 million and that should be enough to take care of the organic needs. If we look at another big acquisition, we may need funds. We are open to acquisitions in the technology space.

 As an OTA what are things you will watch out for?

They key things we look at is the cost of acquisition and repeat rates. The USP of online businesses is typically under the hood. The front end gets copied very quickly. If I launch a good feature someone will copy it. But our ability to innovate to do more with data and to serve relevant content will be the key differentiator going forward. I am personally inspired by Amazon. I see the way they do lot of their work overseas. It is not the prettiest site but it works for millions of transactions every day.