MakeMyTrip Bets on “Hotels and Packages”. Is this the future of Indian OTAs?

As online ticket sales for airlines becomes a costly affair with little margins left in the business, market leader MakeMyTrip, is doubling down on hotel reservations and sales of holiday packages.

The online ticketing company, which at the time of going public three years ago had 85% of its revenues coming from air ticketing, now gets only 68% from selling flight tickets. Whereas revenues from hotels and packages have gone up.

MakeMyTrip : The Logo
MakeMyTrip : The Logo

In the coming 2 years, revenues from air ticketing and “hotels & packages” will have an equal share of 50:50, Deep Kalra, CEO & Founder of the ticketing company said in May this year.

As per the Q1 results of fiscal year 2014:

  • There was a YOY increase of 72.2% in transactions of hotels and packages in 1Q14 in comparison to just 15.5% increase in air ticket transactions in the same quarter.

  • Gross bookings grew by 51.5% for hotels and packages while air ticketing just rose to 19.9%, in Quarter 1 2014.

  • In terms of “Revenue Less Service Costs” air ticketing witnessed a YOY decline of 6.2% while for hotels and packages it increased by 55.3% YOY in 1Q14.]

To summarise, revenue from air ticketing took a blow by 11.4%, closing at $15.2 million at the end of 1st quarter of the fiscal year 2014 in comparison to $17.2 million in the same quarter last year. Meanwhile, revenue from hotels and packages reached to $61 million at the end of first quarter of FY 2013-2014, an increase of 33.4% compared to the same quarter last year where it closed at $45.8 million.

Clearly, business from air ticketing is dipping while hotels and packages are doing better.

The only Indian OTA which went for an IPO, has revamped its website and logo. The new logo now features a tagline “Hotels Unlimited” instead of “Memories Unlimited” which was the punchline of the older logo.

Identity Crisis?

Is MakeMyTrip is going through an identity crisis? The new logo of the website says “Hotels Unlimited” yet the homepage of the portal opens a flight booking window first and “About Us” page displays the old logo i.e. “Memories Unlimited”.

As Vijay Shekhar Sharma, Founder, One97 points it out through a tweet

Vijay Shekhar ?@vijayshekhar 26 Aug

MakeMyTrip now has new tagline: Hotels Unlimited. Though the new site still opens for booking a flight first.

What’s going on?

There was a time when air ticket sales was making good money. But things have changed now. On one end, commissions and margins have gone down. On the other, airlines have started connecting with consumers directly.

Earlier this year, online travel agents were in for a rude shock as the Supreme Court banned collection of transaction fee on airline tickets.

Offering travel packages, hotels and including bus and train tickets are some of the ways to overcome dipping revenues from air ticketing. Also there are better commissions for travel agents in hotels and packages business, somewhere from 15-20%.

This is also a good cross selling opportunity for OTAs. However, scaling up a pure play online service might be tough as a lot of holiday sales in India happens over the phone.

Recommended Read

What’s NextBigWhat for Indian OTAs?

Image Credit: Shutterstock

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