Many offer cashbacks and discounts…but customers seeking consistency and reliability will keep coming to us, says MakeMyTrip’s Deep Kalra

9th Apr 2018
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Very few Indian entrepreneurs can boast of not just surviving, but also thriving through internet and startup ecosystem booms and busts. Deep Kalra, Founder and Group CEO of online travel major MakeMyTrip, definitely can.

MakeMyTrip is a survivor of the first generation of internet companies that were established in India in the late 90s and early-2000s. Very few companies set up in that period remain relevant today, making MakeMyTrip the exception.

A market leader for several years, a year-and-a-half ago Deep and his band of merry men at MakeMyTrip pulled off a coup that shook up the internet ecosystem in India when they merged with their biggest competitor Ibibo Group. In the process, they got two valuable brands—Goibibo and redBus.

Now Deep, 48, is busy consolidating MakeMyTrip’s leadership in the travel segment. The recently announced partnership with Flipkart is among the steps he is taking to ensure aggressive growth. Through the partnership, MakeMyTrip will power Flipkart’s travel category.

Deep Kalra - feature image
Deep Kalra, Founder and Group CEO of MakeMyTrip

The company, listed on Nasdaq in 2010, saw an almost 40 percent rise in revenue in October-December to $172.4 million, but posted a loss of $45.3 million. In the third quarter earnings call, the company said the group reported gross bookings of $3.4 billion and nearly $432 million in net revenue in the first nine months of the fiscal. In the same call, Deep said MakeMyTrip logged over 94 million monthly shopping visits, and over 70 million monthly active users in the third quarter of the fiscal.

In this phase of growth—Deep calls it the most exciting phase—MakeMyTrip is focusing on technology and data to make the customer experience more personalised and focused.

Hotels and packages, a higher margin category compared with airline ticketing, is the biggest revenue contributor and account for 56 percent of net revenue. The company is the market leader in domestic flight ticketing with a 24 percent market share.

This is not to say that it faces no competition or troubles. There have been rumours of merger struggles. Ibibo Group’s Founder and CEO Ashish Kashyap left the company less than a year after the merger. Competition is also intense. SoftBank-backed Paytm has launched travel ticketing, and a price war is expected there.

Deep brushes off such concerns. In a detailed conversation with YourStory, he outlined how the merger has impacted MakeMyTrip, his plans for the company, the Flipkart partnership, and how tech will power MakeMyTrip’s next phase of growth. Edited excerpts:

Q: The last year or so has seen many changes at MakeMyTrip; how has the Goibibo acquisition impacted the overall business?

Deep: You are quite right. I think a lot of things have happened in MakeMyTrip in the last year or so. We call it a merger firstly, and not an acquisition. We have learnt a lot from this year. There are some things which both these companies do really well. And I think it has helped us emerge as a company which is more mature, but also has brought back some of the startup kind of alacrity that you need, which gets diluted a bit when you end up becoming a larger company and a market leader for long. So, I think this helps us look at how the same problem is looked at by two different companies in different ways. We have had the luxury now to use the best of technology, picking the best of approaches and architecture. In a lot of cases, we have actually synergised the backend. For hotels segment, we use the backend system that Goibibo used for both entities now. It is very well architected, very powerful. In fact, for me that was a turning point in looking at Goibibo not only as a price competitor but also a company that has really good tech chops.

When we meet our hotel partners it is the same market management team. But they will negotiate for both MakeMyTrip and Goibibo. So that is something that has been a big change.

We could have rationalised the team by letting go of some market managers. But we are using the extra market managers now to go deeper and increase our span of hotels. When the merger was done there were 40,000 hotels now we getting close to 60,000 hotels. We have now got into homestays in a big way.

The second thing we have managed to do is on the air side. We have kind of unified the code. So in air MakeMyTrip had a longer legacy and have built some pretty good systems. I can't say the entire code is common but chunks and parts of it. We have managed to do two things on air—one is pick up about almost 0.5 or 1 percent higher commission not from airlines but from GDS (Global Distribution System – companies that enable transactions between airlines and travel agencies) because the volumes are very large. Between the two brands we now make up about 25 percent of domestic flyers.

All support functions have been completely unified.

In the frontend, the brands are different and there is healthy competition. But we have been very conscious in cross pollinating. Not long back, the chief product manager of MakeMyTrip moved to the Goibibo side. He is now chief product officer of Goibibo. At various levels we have done a lot of cross pollination because that takes care of sharing best practises. So one year down the line, we are in a good position, in a good place. I think we are well settled.

Q: Any challenges along the way? Could you call out a few?

Deep: Plenty, would be the frank answer. A merger is all about people. When people say that 75 to 80 percent of all M&As fail, they are not kidding. They fail because I think people tend to do the excel, the presentations; the board members and the shareholders saying ‘hey this is how we will gain value, we will cut here and we’ll chop here and we will gain here’. But I think one has to approach a merger in a very different way.

While the big picture technically comes out of strategy, you need to work ground up. Companies like ours are all about the people. Of course, we have big brands but these brands will come to nought if we don't keep innovating and creating.

For us to appreciate that fact, and therefore take disproportionate care of our assets—that is people—is very important. And so, we have been spending a lot of time fixing that and trying to approach that from an individual's point of view.

I think we have been spending a disproportionate time on it this last year. And it is not just the HR’s job, it is a leader’s job. Rajesh (Rajesh Magow, MakeMyTrip’s India CEO), myself, and each of the leadership teams of the three brands have actually been spending a lot of time making sure things are fine.

I think we haven't lost any of the key resources we would have liked to have kept. We had some natural iteration, like CFO and legal head.

Q: You have said that the brands - MakeMyTrip and Goibibo - will focus on different segments of customers. Can you elaborate on that?

Deep: I think we are very clear that we want the brand overlaps to come down even further. Firstly, even when we merged, we were pleasantly surprised the brand overlapping was in the low 20s. But we wanted to keep the brand positioning further apart and we did a bit of studying on that.

It was clear that MakeMyTrip was more appealing to more premium and older customers. They had a lot of brand affinity there. Goibibo was more appealing to the younger bargain hunters. These customers were willing to do things like sharing their contact list so that if anybody from that list books he will earn a certain amount of ‘Go Cash’.

You will see this reflecting in our advertising campaigns. You will see an interesting campaign breakout with the IPL. Goibibo is partnering with Mumbai Indians. Deepika Padukone, with a few of the Mumbai Indians stars, will promote the team success and we are also linking it to what we are doing with the app. I don’t want steal their thunder, but I think it's something pretty radical that people would like to see.

Q: Why is it useful to have multiple brands in the travel space?

Deep: We are trying to straddle the entire market – from premium to budget. We believe that it's good to have multiple brands in the online market.

There is one hidden benefit in terms of the extent you can understand about your customers about when they leave your brand and come back. That is a good way of leveraging data science. It helps you change the listing, change the pricing, and change our product positioning accordingly. I think between the three, we are doing a lot of cross promotion. We have started the intercity cab, which is another way to get from one place to another.

Q: Your partnership with Flipkart has come at a time when top internet commerce players, like Paytm, have started looking at online travel, especially ticketing, in a focused way. Are price wars a concern?

Deep: The travel part is not something that Flipkart wants to build themselves. Flipkart is one of the most exciting companies of our times and we are delighted to partner with them to catalyze the massive online travel opportunity in India. We see a lot of synergy in this partnership for both players. For us, this partnership is in line with our strategy to focus on growth as it will give us access to an even bigger online customer base and will further deepen the moats around our business.

Ticketing has a lower barrier to entry. Of course people can come in and compete for prices. But even today the majority of the Indians are bothered that this mobile ticket should be good enough to put me on a plane without any hiccup. There is an inherent barrier to entry even on the ticketing side. It's the consistency and reliability for which they keep coming back to us. And we want to go further, I think we are still at one sigma or two sigma. We want to go to a six sigma on seamless booking.

The Paytms of the world will come, and they will give you cashbacks and discounts and quite frankly the lower end of the customers will move and they will keep moving till they get burnt.

Apparently, there is a study by McKinsey that says all markets have a bottom quartile of customers, about 20 percent, who are bargain hunters. But that customer for us frankly is not our target customer. We are very clear internally that our priority is the one who is going for value service and not competing on price. We don't want 100 percent in the market, and we are not going to get it.

Q: Mobile is clearly an area of focus. What is happening on the mobile side?

Deep: Mobile is not something we were accelerating but we were responding to the market. I am happy that we adapted to it quite quickly, and we were in a place to capitalise on that. App has been very useful. For air ticketing, we can say that we are the defacto meta search of the country. But that’s not the case with the hotels segments.

But once we are able to get someone to download the app, we are able to tether the customers in a very interesting way which is not possible with email marketing etc. We get to segment customers in the backend not just by location but also by price, intent, income, corporate or leisure and many more such segments and then push personalised options and suggestions for them.

We have invested a lot on creating this backend and are now able to capture all kind of intent signals. It is work in progress and I would like to say that we are halfway there but there is a lot more to do. Doing it at scale--don't forget we have 30 million users till date—is the challenge.

We can now do interesting things. Like airlines keep opening new routes. We can send notifications to customers on this. But now we can go beyond. If someone is searching for a bus on redBus for a specific route that is now served by an airline, it is silly for us not to promote that or use that.

Or something like the heli taxi service that has been launched in Bengaluru. That needs to be only promoted among those flying in and out of Bengaluru and we probably know 50-60 percent of them.  We told Thumby Aviation (the organisation operating the heli taxi service) that you don't need to promote elsewhere.

Q: And overall in the hotel segment what is the strategy now and especially now with a lot of competition, how is it doing?

Deep: The real value is in fragmented markets, not in oligopolistic large markets where there are few big players, because the pricing power is not in the hands of the supplier. To give you an idea, today almost two-thirds of all domestic air tickets in the country are bought online but only 15 percent of hotels are bought online.

With MakeMyTrip, it's more about our customer blockers like why don't more people book online? Our research has produced some interesting observations. One of the reasons is customers are worried about cancellations and charges. We have been trying to talk about zero cancellation, with ‘befikar book kar’ campaign, which is working now.

We have, for the first time ever, used celebrities - actors Ranveer Singh and Alia Bhatt - to connect with the next 100 million, who are in the Tier II and Tier III cities. We’ve done a lot there like best price guarantee. And you are going to be seeing more brand promises.

Q: How concerned are you about Booking.com?

Deep: Booking is something we take very seriously. I think it is growing steadily, but in the premium end of the market. Its strong point is inbound hotel relationships. Customers from Europe and US come on the site. In domestic, I think it has obviously created its mark but where we have our real opportunity is understanding the Indian customers and all their nuances.

For Booking, it is one size fits all. And this is not only when Indians are travelling in India but also overseas. It's not unusual for even well-heeled, well-travelled Indians to have at least one vegetarian member in the family and food becomes a big deal.

I think it's our job to find out and tell people about food friendly hotels in such destinations.

Not only that, but the way Indians travel. There is fear of public transport overseas. Even in places like US and London, where it’s all in English. So, most Indians like to stay in areas where they can walk a few miles to eat and to shop because firstly they are saving money, and second they enjoy the walk.

We have to understand that the kind of hotels we are promoting are not exactly the kind of hotels that Booking.com will promote to its non-Indian customers. There is a very clear play that we want to be the site for Indians, the brand that Indians trust when they want to travel overseas and in India.

Q: They are not a price competitor, though?

Deep: I don't think Booking.com is really a price competitor; it’s not their way of competing. So, it's good for now but I think as time goes, it might become one as India is the next frontier.

Q: The packages segment is also an important one for MakeMyTrip. How big is that segment?

Deep: Usually for most Indian families, their first, second or third trips are packages and then they gain the confidence of making their own plan. Not just for price, but for security. Also, for the reasons like language, food, tell me what to do, where can I go.

Our holiday business is a very different. We are seeing a very interesting phenomenon, where a lot of the packages are moving online (booked online completely). Even international packages are moving online, especially for destinations where visas are not needed. We offer a slight price advantage and that price advantage is nothing but factoring in the cost that it would take to service this customer offline.

We have a very good history with our Ladakh, Kashmir and Andamans packages.

We saw places that were made for good holidays but were difficult to reach and navigate and we made a product around it. This is one thing that a Paytm or a Flipkart will not be able to replicate easily. About 20 percent of the revenue of the hotels and packages segment come from packages.

Q: Will we see MakeMyTrip use new tech like AI much more?

Deep: We have a pretty large team of data scientists. We are using chatbots extensively—Gia for Goibibo and Myra for MakeMyTrip. This covers quite a bit of post sales queries and will also start dabbling in sales.

We are experimenting on how we can take this to the next hundreds of thousands of Indians with vernacular. We think tech will be a differentiator here.

Q: How are your subscription services doing?

Deep: MakeMyTrip black is a simple loyalty programme where every time you buy something from us you get a certain number of points that would count as MakeMyTrip money. Now we have close to 250,000 subscribers and growing. I think it would grow to a million and we plan to grow it.

The interesting thing is the double black (which has about 20,000 enrollees) which was definitely inspired by Amazon Prime. In double black, we say the first five flight bookings and first five travel bookings, the cancellation is on us. People don’t book to cancel. So, we say that let’s build some brand love and take that hit. And people have really liked it and we are trying to experiment with a few other things.

Q: Will we see more acquisitions?

Deep: We are always looking. It's hard to say specifics being a listed company, but we are always looking at opportunities, travel related by-and-large, directly or indirectly. But tech is where our head is. We have a small M&A team that keeps looking at opportunities.

Q: You have been doing this for almost two decades. What excites you about the travel space?

Deep: It might seem strange but the fact is despite having done this for 18 years, I really believe that the best is yet to come. The first five years were the dark ages. We launched in India in 2005 and in 2010 we listed. But the market has really opened up in a massive way thanks to the mobile revolution, data plans etc. There are 400 million Indians online and some 200 million who can afford to buy online. I am excited about the new user—the 10 million youth that have just got their new jobs and have no concept of saving.

I think we are in a really good space where travel is really booming and most of it is moving online. What's exciting is how do we capture the mind set of this Indian who has moved online recently and who is keen to travel, and we want to be the brand that they trust instinctively and take care of them. And the vision I’ve always had is to get all our customers to become our brand ambassadors. And we keep moving in that direction and it's more important to have people come back to you unaided. And that is what we are excited about.
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