Prioritising growth right strategy for MakeMyTrip

By: |
February 2, 2016 12:34 AM

Makemytrip reported over 300% growth in domestic hotel transactions in 3Q, vs our expectation and management guidance of 175-200% growth.

Makemytrip reported over 300% growth in domestic hotel transactions in 3Q, vs our expectation and management guidance of 175-200% growth. We note, though, that the higher growth appears to have been driven by substantially higher discounting and promotional spend as EBITDA loss widened to $15 million. We believe prioritising growth and market share over near-term margins is the right strategy for Makemytrip, but this could take time to play out.

Standalone hotel transactions for MMYT grew 326% y-o-y in 3Q against our expectation and management guidance of 175-200% growth. While this includes the impact of the “Great Indian Getaway” sale (seven days from October 27 to November 2) when domestic hotel bookings were up 8x y-o-y, we note that even excluding this period, India standalone hotel transactions appear to be up nearly 300% y-o-y.

This is particularly creditable given MMYT had discontinued sales of branded budget hotel aggregators like Oyo and Zo from the last quarter. Post the result, management has also upped its India standalone hotel transaction growth guidance for 4QFY16 to 325-375% from 175-200% earlier.

However, we note that the higher growth appears to have been driven by substantially higher discounting and promotional spend by the company. We think prioritising growth and market share over near-term margins is the right long-term strategy for Makemytrip, given the nascent stage of the online hotel booking market in India.

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