Building A Game-Changer In The Travel Segment
Way back in 2000, internet was indeed fairly new in India, it had already become quite a phenomena in the US, I think that there was conviction that over time, it will definitely become big in India and so I was getting in early into this phase. Also, my initial model was more focussed around non-resident Indians coming back to India. So, their home market was actually oversees, most of them in the US. So the internet penetration in India being low, did definitely make me push back my plans for Indians to travel abroad and Indians to travel within India. But it helped me into India plan and I think if I move forward a couple of years, by 2003, I think I saw Indian Railways IRCTC doing well in India, getting people comfortable to buy online, that definitely helped me validate my decision that India is now getting ready. By 2004, we started building an India offing and by 2005, we also launched in India.
I think prior experience overall helps. So, firstly I’ve worked 8 years in my corporate life professional life after my MBA, before starting Makemytrip. So from 92 to 2000, I did 3 different jobs. AMF bowling was entrepreneurial, but I was really working for the company and helping them launch in India. Prior to that I started my career as a banker with ABN Amro and after AMF bowling, I actually worked with GE Capital for a short time. I think all stints were very helpful, but I still think that the stint with AMF Bowling was most helpful. And the reason is it was the path not trodden at all, so it was something brand new, it was launch of a new concept in India, as similarly when I launched Makemytrip it was launch of a new concept in India. Building a team from scratch was definitely important, evangelizing a new concept was very important. And I think most importantly, is the fact that if you have actually not done well – AMF bowling at end of the day did not do as well as expected,. In those 4 years I had hoped to set up 2000 bowling lanes in the country. The fact is only 200 went up for multiple reasons cost of real estates, availability of land spaces etc. but I think that was a very good sobering experience for me, a great learning and I think this one failure actually egged me on to keep on persisting with Makemytrip, despite the early challenges. So we went through a really difficult time in 2001 – 2002 after 9/11, the dotcom burst size epidemic, really a terrible time in India, very difficult time to keep the business going. But the fact that one had lived through a really tough time SME crisis hardened me and made me kind of tougher and able to go through what was the most difficult phase for Makemytrip.
When we launched Makemytrip in India the idea was to be the defining place, the defining portal for people to travel to India, from India and within India. Like I mentioned a short time back, market in India was ready to browse, but not to buy. We called it lots of lookers but very few bookers. So we actually focussed by default only on the inbound market. And I think it was analytical side, I’m definitely very big on analytics and BII to take help on all big decisions and so did my other senior colleagues and when we saw the numbers and we saw the conversions matrix in the inbound market, US to India particularly, we were convinced that that’s the market we need to focus on and we need to keep the Indian market on the back burner. So, for the initial 3 to 4 years the only focus right up to 2005 was only US – India inbound market
I think importance can’t be overemphasized and actually, particularly for businesses like ours which are B2C businesses, online businesses, the amount of data you generate everyday and every hour when you become a large site with a lot of people is phenomenal and the amount that data can tell you if you are willing to listen is also phenomenal. So actually, you can not only make lot of great decisions, but equally importantly not make a lot of silly decisions if you are willing to listen to that data. Of course the data has to be massaged and you have to get meaning out of that data and that’s where analytics comes in. So, it’s a ton of raw data, what you are going to do with it when you get 10 million visits to your site regularly and you need to know what people are doing, what they are liking, what makes them buy, what makes them go away. This could be beyond price, this could be a differentiated offerings , it could be just different aspects and facets of your site that people like and with mobile, it has become even more interesting. And then you can cross tab and you can look at behaviour of people on mobile and behaviour of people on website and now you have app as well, which is very popular in India and is really a sign of things to come. So it’s really up to you. My philosophy is look at all the data, tell people what you want to see and spend a lot of time on that, but finally the big decision is going to be very often a leap of faith and that’s where your right side of the brain comes in and that’s going to be the gut. So I think you got to get the base data, you got to get I think almost like different models in your mind ready and then the one you go for is where the real conviction and belief is.
Makemytrip is one of the very few companies which is listed actually internet companies which is listed and for the Indian internet companies the only one which is listed in the US. It puts on you a lot of responsibilities, but it is also very exciting. We’ve now been listed for almost 5 years, in August we complete 5 years and we are listed on NASDAC. We have had some challenging times, overall I think we have had a pretty good run. But we had a very challenging time twice, and the biggest time was when a large airliner in India Kingfisher went out of business and our business our product mix was very heavily skewed towards air and therefore, we had a concomitant crash in our own kind of revenues and earnings and the market obviously reacted very sharply when they saw kingfisher go out of business they said – what’s going to happen to companies like Makemytrip which is a leading OTA in India which also meant fewer airlines left in the domestic market which also meant higher prices. I’m very happy to say that we navigated that fairly okay and we have come out I think much stronger. Today our product mix is now less than 50% dependence on air and that’s only been because of the fact that we were willing to listen to the market and the market was telling us over alliance on the air product or any market where you have few suppliers is risky and now we have a very robust hotels business and a very robust holiday business, So, I think we are far better distributed in terms of our different businesses and we have a much healthier product portfolio. So that was a very big learning. Also, I think dealing with investors, one has learnt a lot and I think what that taught us is there will be investors who will be very short term or you can call them hedge funds who are looking for quarter on quarter returns, that’s fine, but who you really want a lot of in your portfolio are long term and long term investors they see these opportunities when market – there is some structural issue with the market or the market changes which is beyond, they actually look at how you reacted to that. And they are willing to give good entrepreneurs the benefit of the doubt, good companies the benefits and actually wait out and you know and some of our investors actually double down the position in that down turn in 2011-12 and that worked out very well for them because then they were able to come in cheap and again make a lot of money with Makemytrip.com.
This is a very interesting story actually… So, in 2005 when we launched in India, initially it was all air. We did want to sell hotels and we did want to sell holidays and we tried to sell everything online. After about a year we went back to the numbers and when we looked at where our customers were coming from it was very interesting. For air, we had customers coming from all across India. The big cities were our big contributors as you would imagine Delhi, Bombay, Bangalore etc. and that made perfect sense. But when we looked at hotels and holidays, we noticed a very big skew towards Delhi where we are based, New Delhi or the NCR region and north India and the more we dug into that and spoke to customers to understant that what was going on, I think it became clear to us that we were being perceived in the minds of the consumer as a Delhi centric company as a North Indian company. And we also realized for purchasing a holiday, particularly a long holiday, was an expensive purchase and people wanted to deal with companies that they could I think touch and feel and not necessarily a company which was only on world wide web. Things have of course changed a lot. This was way back in 2006- 2007. So we proposed to our board that we are going to set up a couple of retail stores in a few places, and the board which was largely American was pretty aghast because they thought that we were going against the tide, but with some convincing I was able to tell them that let’s do 3 pilots. We put up 3 stores in 2 very traditional cities of India Ahmedabad and Calcutta and one fairly modern city of India which is Bangalore and we studied these for 6 months and a very interesting result came out. Not only were these stores doing well stand alone, there was definitely on a good track, but our online business from these cities actually grew more than it grew in other cities and the fact was that there was a bleed over effect that we were getting because of these branded stores in a big part of – in a major market of these cities. So we doubled down on that. We actually set up 20 such stores and we have almost all of them up and running even today. We haven’t grown that. We have a franchise network of about 70 stores in addition to that. So this helps us in our holidays business and actually the real benefit it gives to us is it convinces the consumer that we are right there, and even today I think people like the fact that they can walk into our travel store , discuss their holiday issues, handover their passports, collecting their foreign exchange etc. but going forward the market is definitely moving much more online and mobile than it is offline.
I think it’s changed So, the initial days- if I just look at the early days, I think what was very important was what’s your USP? Why would people come to your site? When we launched in India in 2005, we were talking to our advertising agency and they said what’s the brief. And I said the brief is very simple. Just get people to our site and the site will do the rest, because we had something which no one else had. Basically we could solve through technology what off line travel agents couldn’t do. And that was our USP. We could give you all the options including the low cost carriers offline agents didn’t want to sell. Traditional travel agents didn’t want to sell low cost carriers because they made no money out there. So that USP was there and even when we launched hotel we were the first game in town etc. Over time, any successful business model will get copied, particularly if it is B2C and it is out there on the web, people will copy it and we got copied. I think over time we realized that user experience the key thing is going to be actually usability, which is how easy it is to use your site. How convenient it is to use your mobile offering and how quick and fast it is to use your app. So that becomes very very important. Also, selection, so all the choices competitive pricing, I won’t say always the lowest price because I am not a believer of a discount shop because discounts can’t last forever. And if you think you are going to be the cheapest probably someone is going to be a little cheaper, especially with the kind of VC money flowing around. So that’s not a sustainable model and especially when you are public and people are looking and investors are looking for returns. So we were very careful that our competitive advantage is got to be something sustainable and most of it was around the user experience, the ease of use, the usability.
I do tend to actually see a lot of young entrepreneurs that have invested in a bunch of young companies. My learning over time is that the only thing that really matters is the quality of the team and their intersay chemistry, because models change. In fact, some of the most successful businesses in India have been pivots if you think about it. So if you look at flipkart they started out selling just books. Today they are selling everything and I think that it is a very successful company and largely because there were very smart entrepreneurs behind it who were able to read the tea leaves, change directions, do different things. If you look at Snapdeal, they pivoted a 180%, a 180 degrees sorry. They pivoted a 180 degrees. They were a deal site and they became a market player, e-commerce platform. If you look at Paytm, and I used to actually sit on that board when they were 197 a mobile VAS company, and now they are a mobile market player in the payments company on the mobile space. So, very successful businesses pivoted very fast and came down to just one thing – The quality of the entrepreneur and the quality of the team, and their chemistry and their ability to like I said read the signs, grab the opportunities and build great teams. So, I’m very very focussed on the quality of the team and their passion and their energy. That for me is the most important. People say that yes you should look at Tam and the size of the market. I think it is almost irrelevant because if the team is smart and the market for whatever reason, there is a structural shift, and they see that market declining they will change their models. So, I think that the markets are almost irrelevant.
I am not a man of too many regrets, but yes, there is a lot of learnings and I think that if I were to start all over again Makemytrip I had started alone, but I was very fortunate to meet some fantastic colleagues, 3 of whom I very happily made co-founders along the way and I have no hesitation in saying that they are equally responsible for where the company is today. Today only one of them is with me full time, one of them works as an advisor with us part time and one of them stepped down around the time of the IPO which is fine, but we are great friends. So for me, the biggest – if I was to get another take I’d start off with one other co-founder so a team of 2, I think 3 is too many and someone with complementary skills, so I am not a techie and it would be great to have someone who is deeply technical and I could hopefully compliment that person with other skills.
I think it is all relative. It’s obviously – India is obviously tougher than the US market, tougher than Singapore and tougher than most of Western Europe, but these are you know barriers to entry in a sense. Or there are things that you need to handle. I think a smart entrepreneur should not get too mired in stuff that can be delegated. I think you have to realize what you are really good at and if you are really good at the regulatory stuff and your business depends on regulations, then you should do that. And then there will be times which will be challenging times for the company when the regulatory stuff is most important, then you should do that. But otherwise, I think you should stay away from stuff that you can delegate. So just be very clear in your mind the most important resource for you as an entrepreneur is your time. Money is easy to get and if you are smart and you are on to a good business it will get so much money that you won’t know what to do with it and again you have to pay it out as your time. So it’s your time, your waking hours of the day, you got to spend that in the most useful way. So never get sucked into things which you can delegate and I think that by far, that’s my most important learning.
I think one trend that now is pretty clear is the move to mobile. The shift to mobile is very fast and furious and in mobile like I said the app world and understanding the app world is very different. People say it’s one more way, one more channel, not really. It’s fundamentally different the way you acquire your customers, you’re ability to retain them, you’re ability to reach out to them far more effectively, but then comes with that the responsibility to keep the app and the offing very relevant, very very current, very very important, there is something very useful it must be to the customer. Otherwise, he is going to knock it off his mobile screen pretty soon because apps take up memory and people don’t want to clutter up their screens unless it is very useful. So, I think you have to keep that in mind and going forward that’s going to become morn ad more important. I think big data and analytics is going to play an even bigger part of decision making. People are going to take speed, quick responses for granted. You have got to go beyond of the fact that hey I have got a great price or got something which is special today but gone tomorrow, sustainable competitive advantage and constant innovation is going to be the key. I don’t think in the going forward, we can afford to wait months for releases and the release cycle is going to be cut down much shorter. Traditionally we looked at one quarter and two quarters, but I think it is probably going to be a few weeks. Going forward you will have to build the platforms very smartly so that you are able to make new releases very fast.
It’s a great question and I think that Google has always been interested in travel and I think Google is a very smart company and they can organize data better than anyone else. I think the key thing is to be very clear on what your offing is and what value you are adding to the consumer. If Google is able to give the same value to the consumer it will be very hard for us to beat them. So, Google today can give you tons of choices but we are in the transaction business. And when we are in the transaction business, people want to buy from someone. And today, most customers in India find it comfortable to buy from us 15% of all domestic travellers buy their tickets from us. A decent percentage of people booking hotel rooms buy their hotel rooms from us because they feel the confidence in the brand that we will take care of them, we will give them all the choices and we will give them competitive pricing. And I think you have got to remind yourself of that every day. You’ve also got to keep understanding from the consumer doing usability labs, talking to the customer what pain points they really have and then solving those and being two steps ahead. So you might have Google on side and Tripadvisor which does a great job of research, but on the booking space we have to make sure that we are the easiest place and the best place for people to actually make their transaction.
Around 2007, we realized for the first time that we got to build a more holistic product portfolio beyond flights and the reasons were very simple. The margins in the air business are really small, because there were few suppliers in the business margins were small, it was also a commodity. You have go to understand that when you buy a flight ticket, it’s less important who you buy it from. It’s more important which carrier you are going on what time is your flight and what price is your ticket. You can’t do as an intermediary as an OTA, we can’t do too much about the price point of the ticket, it is really the airlines doing. So we started thinking about what else can we do and what else should we be selling on our platform. We have customer, we have travellers coming to Makemytrip. Today we are selling them only flight tickets, should we look at other stuff. So we looked at other transportation models and today we offer rail tickets but again in rail there is only one supplier that is the Indian railways, so you can’t make margins. You can hardly make anything. We start selling bus tickets, but bus tickets again being a commodity of small price point. That’s when we started looking at the accommodation market and the more we looked at the accommodation market, both in terms of hotels and holidays, we realize that they are very interesting market, for two different reasons. So, I will talk about hotels first. In the hotel market we were able to see that people want a place to stay when they are travelling on leisure or on business and it’s only the big brand sand the chains that people know by name. But the majority of distribution of the hotels in the country are independent hotels that a lot of people don’t know, but what they do know is that they want to travel to let’s say Nagpur for work or to Shirdi for pilgrimage or to Goa for a holiday and they do know that their budget is let’s say Rs. 3000 a day or Rs. 2000 a day and they are looking to find something in a particular area to stay. So we started becoming and building up a hotel repository and we started offering hotels on our site. So, hotel was a really good business which could move purely online. It is today with much higher margins because many suppliers make better bargaining power for the intermediaries and we obviously have better bargaining power with independent hotels than we have with chains. Chains by the virtue of the fact that they are large are able to build up their own web presence and even do marketing while you go to independents, independent hotels can’t start marketing nationally because it will not make sense. It could be a 20 rooms property somewhere but they can’t reach out to the whole country because it won’t justify the marketing ROI and they need a marketing channel like Makemytrip and that’s what we became for them. When we looked at the holiday market, it is even more interesting. Because in the holiday market we saw that was the one travel product that we could actually own the experience for the customer. So, it wasn’t an airline where you were buying an air ticket, it wasn’t a hotel where you were booking a room, it was actually the whole package and so we started curating together holidays in places where people wanted to go, but was very difficult. Some examples are Laddakh. We made Laddakh very popular by actually curating a holiday, putting together a right mix of hotels, transportation between difficult terrains in Laddakh getting to very interesting places with reliable vendors and air tickets at much better pricing because we were offering volumes and we put it all together. We did the same for Andamans, we did the same for Bhutan and we made these packages very accessible to consumers and people love to travel but they want it well organized for them. So both these diversification of our portfolios have really helped to take away our dependability form one segment which was definitely going towards lower margins.