 "ibibo sets off on new journey with MakeMyTrip")
Adversity brings the best out of people — it can also bring rivals together. An apt example of this was the increasing association between two leading online travel companies, MakeMyTrip and ibibo, which in October culminated in a merger to create a travel entity that towers above the rest.
The estimated value of the merged entity is $1.8-2 billion and the deal is expected to close soon. The merged entity will be owned 60% by MakeMyTrip shareholders and 40% by ibibo shareholders. It will bring under one umbrella popular online properties MakeMyTrip, Goibibo, redBus, Ryde and Rightstay.
The service tax case (tax authorities alleged online travel companies like MakeMyTrip and ibibo evade crores in service tax payment) in January 2016 got MakeMyTrip and ibibo in the same room. “That broke the ice. We met many times during the case. We fought the case together and won it,” says Ashish Kashyap, founder and group CEO of ibibo, which entered the travel business in 2009-10.
Not long after the court case was decided, Deep Kalra, founder and group CEO of MakeMyTrip, happened to meet Kashyap at a common friend’s farmhouse. “It was a very cold night of February. Besides discussing the industry, Kalra talked what it could mean if we can partner. His clear insight was that we are competing in a small market. If we try to develop it alone, it is going to be harder and expensive,” says Kashyap.
This was a clear indication that Kalra saw value in what ibibo was doing. Getting its proposition rightIbibo, the youngest in the peer group that includes MakeMyTrip, Yatra and Cleartrip, was not taken seriously by rivals in its initial years, Kashyap admits. There was a question mark on what it will bring to the online travel market beyond the listings.
Kashyap knew there were gaps in the product. The domestic flight ticket business had seen a movement towards online booking but hotels were nowhere in the online space. Kashyap, whose company is backed by the South African internet and media conglomerate, Naspers, identified the inefficiencies that existed in the way a hotel owner sold rooms.
Hotels would mostly sell less number of rooms online due to rigidity on prices but offer attractive rates to walk in customers. Kashyap saw that hotels had a significant scope to improve revenues by increasing occupancy at lower tariffs. “We did some heavy weightlifting,” says Kashyap, a reference to the discounts his portal offered.
This resulted in an uptake in the traffic. And by selling more and increasing occupancy, hotels improved their profitability and were in a position to offer low prices to customers.
“The hotel owner did not understand lean management earlier. When he started seeing returns, he started investing in discounts,” says Kashyap who had been the country head for Google in India and had helped it set up the India operations. “Every hotel in our network has seen occupancy rates move up significantly and a lot of discounting now is shared by the hotel owner.”
ibibo made its own payment gateway to increase successful transactions. It was the first company to give a desktop app to hotel owners that told them how they were performing vis-à-vis their neighbours. “We created a feeling of competition. We launched our own ratings and reviews instead of relying on Tripadvisor. We launched guaranteed refund time. These were the innovations,” says Kashyap.
These initiatives helped. ibibo emerged as the largest player in the online hotel booking space (according to the latest data available). Though a significant role in this journey was played by its steep discounting, Kashyap claims that was the right way to acquire new customers. “Seventy to eighty % of our users come back to us for repeat transactions,” he claims.
Last year, ibibo did 3.6 million hotel booking transactions and was a market leader, even ahead of MakeMyTrip’s three million bookings. “About 40% of hotel bookings should move online in the next few years from the current 15%,” believes Kashyap who has about 53,000 hotels listed on his platform. Setting new goals.
The recent action by the government against Rs 500 and Rs 1,000 notes is expected to support online transactions in several sectors, including travel and tourism. A large number of international hotel and flight bookings still happens offline, through travel agents. This is an area that Kashyap wants to work on, along with MakeMyTrip. (While Kalra will be the executive chairman of the merged company, Kashyap will be its president).
Knowing that the next wave of growth will come from semi-urban and small towns, Kashyap aims to simplify the process. “My belief is that the work flow of the way you purchase travel needs to get simpler. We are collecting large data of users and suppliers. All of these will get enveloped by artificial intelligence to help make choices easier. Even a neo literate person should be able to make online booking,” he says.
Other than hotel (domestic and international) and flights (more thrust on international), ibibo is betting big on bus travel where it operates through redBus (the company it acquired in 2013) and shared transportation through Ryde. “Look at this country. If you have to travel between two villages there is no option. Tomorrow, all these guys are going to come online. We have to think next,” says Kashyap.
redBus happens to be the biggest volume contributor for the group, accounting for about 17 million transactions last year.
With this merger, ibibo aims to develop the outbound market and bring holiday packages online. “We’ll be able to innovate and execute and put the resources in the right direction with this combination. There are complementary strengths. MakeMyTrip’s expertise is in holidays and packages; we do buses and have alternate transportation,” says Kashyap.
Industry experts see the merger as a challenge for players like Yatra and Cleartrip. “The merger will put the combined entity in a stronger position to negotiate prices and commissions in the travel space, especially with hotels, given that the entity is estimated to command more than 50 % of the overall online ticketing and hotel booking market, which might put pressure on the likes of the smaller OTAs such as Yatra and Cleartrip,” says Aloke Bajpai, CEO and co-founder at travel meta-search company ixigo.
The estimated value of the merged entity is $1.8-2 billion and the deal is expected to close soon. The merged entity will be owned 60% by MakeMyTrip shareholders and 40% by ibibo shareholders. It will bring under one umbrella popular online properties MakeMyTrip, Goibibo, redBus, Ryde and Rightstay.
The service tax case (tax authorities alleged online travel companies like MakeMyTrip and ibibo evade crores in service tax payment) in January 2016 got MakeMyTrip and ibibo in the same room. “That broke the ice. We met many times during the case. We fought the case together and won it,” says Ashish Kashyap, founder and group CEO of ibibo, which entered the travel business in 2009-10.
Not long after the court case was decided, Deep Kalra, founder and group CEO of MakeMyTrip, happened to meet Kashyap at a common friend’s farmhouse. “It was a very cold night of February. Besides discussing the industry, Kalra talked what it could mean if we can partner. His clear insight was that we are competing in a small market. If we try to develop it alone, it is going to be harder and expensive,” says Kashyap.
This was a clear indication that Kalra saw value in what ibibo was doing. Getting its proposition rightIbibo, the youngest in the peer group that includes MakeMyTrip, Yatra and Cleartrip, was not taken seriously by rivals in its initial years, Kashyap admits. There was a question mark on what it will bring to the online travel market beyond the listings.
Kashyap knew there were gaps in the product. The domestic flight ticket business had seen a movement towards online booking but hotels were nowhere in the online space. Kashyap, whose company is backed by the South African internet and media conglomerate, Naspers, identified the inefficiencies that existed in the way a hotel owner sold rooms.
Hotels would mostly sell less number of rooms online due to rigidity on prices but offer attractive rates to walk in customers. Kashyap saw that hotels had a significant scope to improve revenues by increasing occupancy at lower tariffs. “We did some heavy weightlifting,” says Kashyap, a reference to the discounts his portal offered.
This resulted in an uptake in the traffic. And by selling more and increasing occupancy, hotels improved their profitability and were in a position to offer low prices to customers.
“The hotel owner did not understand lean management earlier. When he started seeing returns, he started investing in discounts,” says Kashyap who had been the country head for Google in India and had helped it set up the India operations. “Every hotel in our network has seen occupancy rates move up significantly and a lot of discounting now is shared by the hotel owner.”
ibibo made its own payment gateway to increase successful transactions. It was the first company to give a desktop app to hotel owners that told them how they were performing vis-à-vis their neighbours. “We created a feeling of competition. We launched our own ratings and reviews instead of relying on Tripadvisor. We launched guaranteed refund time. These were the innovations,” says Kashyap.
These initiatives helped. ibibo emerged as the largest player in the online hotel booking space (according to the latest data available). Though a significant role in this journey was played by its steep discounting, Kashyap claims that was the right way to acquire new customers. “Seventy to eighty % of our users come back to us for repeat transactions,” he claims.
Last year, ibibo did 3.6 million hotel booking transactions and was a market leader, even ahead of MakeMyTrip’s three million bookings. “About 40% of hotel bookings should move online in the next few years from the current 15%,” believes Kashyap who has about 53,000 hotels listed on his platform. Setting new goals.
The recent action by the government against Rs 500 and Rs 1,000 notes is expected to support online transactions in several sectors, including travel and tourism. A large number of international hotel and flight bookings still happens offline, through travel agents. This is an area that Kashyap wants to work on, along with MakeMyTrip. (While Kalra will be the executive chairman of the merged company, Kashyap will be its president).
Knowing that the next wave of growth will come from semi-urban and small towns, Kashyap aims to simplify the process. “My belief is that the work flow of the way you purchase travel needs to get simpler. We are collecting large data of users and suppliers. All of these will get enveloped by artificial intelligence to help make choices easier. Even a neo literate person should be able to make online booking,” he says.
Other than hotel (domestic and international) and flights (more thrust on international), ibibo is betting big on bus travel where it operates through redBus (the company it acquired in 2013) and shared transportation through Ryde. “Look at this country. If you have to travel between two villages there is no option. Tomorrow, all these guys are going to come online. We have to think next,” says Kashyap.
redBus happens to be the biggest volume contributor for the group, accounting for about 17 million transactions last year.
With this merger, ibibo aims to develop the outbound market and bring holiday packages online. “We’ll be able to innovate and execute and put the resources in the right direction with this combination. There are complementary strengths. MakeMyTrip’s expertise is in holidays and packages; we do buses and have alternate transportation,” says Kashyap.
Industry experts see the merger as a challenge for players like Yatra and Cleartrip. “The merger will put the combined entity in a stronger position to negotiate prices and commissions in the travel space, especially with hotels, given that the entity is estimated to command more than 50 % of the overall online ticketing and hotel booking market, which might put pressure on the likes of the smaller OTAs such as Yatra and Cleartrip,” says Aloke Bajpai, CEO and co-founder at travel meta-search company ixigo.
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Transactions made on ibibo in FY ‘16
23.7 million total transactions
3.6 million hotel bookings, a growth of 420% year-on-year
83% of hotel transactions were done on mobile phone
2.7 million air tickets, a growth of 90% year- on- year
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46% of flights were booked on mobile phone
17 million bus transactions
(60% year-on-year growth).
24 million app downloads