Online travel company MakeMyTrip has set a target of doubling its market share in the online hotel booking space to 50 per cent over the next two years. The Nasdaq-listed company, which raised an investment of $180 million from Chinese travel major Ctrip recently, plans to deploy significant funds to expand the high-margin hotel booking business.
“We already had reserves of $100 million before this investment on our balance sheet. For the next level of growth, we wanted to raise more money to strengthen the balance sheet and drive the next phase of growth in the hotel business,” Rajesh Magow, co-founder and CEO, India, at MakeMyTrip, told Business Standard.
Magow said the company enjoys a 25 per cent share in the Indian online hotel booking business, according to a recent report by Millward Brown. “We are focused to growing it as fast as possible. There is significant headroom to grow, as only about one-fifth of all hotel bookings is estimated to be taking place online at present.”
The firm, which lists nearly 27,500 domestic and 2,500 international hotels, will continue to aggregate more hotels across categories to drive growth. “The greater focus will be outside the top 10 Indian cities. Travel demand from the next level of cities will drive the need to expand the city base and aggregate the demand,” he added.
“A large part of our growth is going to come from people who are booking through offline channels, such as travel agents or after reaching the destination. Today, it is a lot more convenient to book over the phone. We are confident that online penetration in hotel bookings will improve from 20 per cent to 40-50 per cent in next three or four years,” said Magow.
In order to double the share, MakeMyTrip has to grow at a much higher rate than the market, which is projected to grow at 10 to 15 per cent every year. “We have to grow at double digit or even triple digit to reach 50 per cent of the market,” he said. The company’s online hotel booking grew 168 per cent in the last quarter. The company will invest in strengthening the mobile booking platforms.
The focus on growing hotel revenue is understandable. Hotel bookings offer a margin of 12.5 per cent, against 5.7 per cent offered by air ticketing. The firm gets 45 per cent of its revenue from hotel and hotel packages, while 55 per cent comes from air ticketing. Magow said the contribution from hotels and packages will go up to 75 per cent in the next two to three years. The firm recorded a revenue of $299 million last year.
“We already had reserves of $100 million before this investment on our balance sheet. For the next level of growth, we wanted to raise more money to strengthen the balance sheet and drive the next phase of growth in the hotel business,” Rajesh Magow, co-founder and CEO, India, at MakeMyTrip, told Business Standard.
Magow said the company enjoys a 25 per cent share in the Indian online hotel booking business, according to a recent report by Millward Brown. “We are focused to growing it as fast as possible. There is significant headroom to grow, as only about one-fifth of all hotel bookings is estimated to be taking place online at present.”
The firm, which lists nearly 27,500 domestic and 2,500 international hotels, will continue to aggregate more hotels across categories to drive growth. “The greater focus will be outside the top 10 Indian cities. Travel demand from the next level of cities will drive the need to expand the city base and aggregate the demand,” he added.
“A large part of our growth is going to come from people who are booking through offline channels, such as travel agents or after reaching the destination. Today, it is a lot more convenient to book over the phone. We are confident that online penetration in hotel bookings will improve from 20 per cent to 40-50 per cent in next three or four years,” said Magow.
In order to double the share, MakeMyTrip has to grow at a much higher rate than the market, which is projected to grow at 10 to 15 per cent every year. “We have to grow at double digit or even triple digit to reach 50 per cent of the market,” he said. The company’s online hotel booking grew 168 per cent in the last quarter. The company will invest in strengthening the mobile booking platforms.
The focus on growing hotel revenue is understandable. Hotel bookings offer a margin of 12.5 per cent, against 5.7 per cent offered by air ticketing. The firm gets 45 per cent of its revenue from hotel and hotel packages, while 55 per cent comes from air ticketing. Magow said the contribution from hotels and packages will go up to 75 per cent in the next two to three years. The firm recorded a revenue of $299 million last year.