Recovery Through Rediscovery
In the second quarter of 2020, the revenue of MakeMyTrip (MMYT), country’s largest player in the online travel business, fell as much as 95 per cent. Two years later, for the quarter ended June 30, 2022, it reported an adjusted operating profit of USD 16.5 million, the highest till date, compared to an adjusted operating loss of USD 8.6 million in the same period a year ago.
The company attributed this phenomenal growth to 'strong recovery' and an 'increased demand for travel'. But that is only a part of the story though behind the dramatic turnaround of the Nasdaq-listed MMYT which owns and operates well-known online brands including goibibo.com and redbus.in.
What happened to MMYT after a countrywide lockdown came into force in late March 2020? What was going on back then when the travel sector virtually came to a standstill? This reporter caught up with Rajesh Magow, Co-founder and Group CEO, MMYT, in the spacious meeting room located on the 19th floor of Epitome, a prominent office address in Gurugram to get the fully story. Magow walked in at the appointed time with his trademark smile. After a quick exchange of pleasantries and the initial ‘what’s' going on in the economy' discussion, the conversation moved to the subject of the pandemic and how it had impacted MMYT.
"The impact was severe, and it happened at a time when our size was big. We had faced multiple headwinds in our early growth years, and one can bounce back fast when the size is manageable but when you're big in size, it is more challenging and takes more time to control the situation," Magow said. "Fortunately, it wasn't an existential crisis for us." With the benefit of hindsight Magow has two words that best describe the pandemic. "It was 'unpredictable' and unprecedented'. Nobody really had a clue of how the pandemic would pan out," he said.
The silver lining was that MMYT was sitting with $200 million on its balance sheet. "We had some comfort," said Magow. "We were very agile -- it didn't take us months, perhaps few weeks to control the situation. Need of the hour was cost rationalisation given the significant revenue drop in Q1," he added.
At a tactical level, MMYT immediately reached out to its partners and negotiated better deals. Given its credibility in the marketplace, and its strong relationships, the partners were very supportive. Citi Research, while commenting on its financials said, “MMYT is leveraged to travel recovery and consumer sentiment, management remains strong. New demand and supply-side initiatives should continue to support growth. More important, MMYT has demonstrated sustained profitability and given the competitive environment, we think adjusted EBIT margins can continue to expand.”
Cost Rationalisation
Aa a strategic response, MMYT used this opportunity to evaluate if it needed to fundamentally look at the cost structure of its business. Essentially, the task at hand was to identify opportunities where the company could tinker its cost structure—from 'fixed cost' to 'variable cost structure'.
The company identified a few key areas and doubled down on that, according to Magow. One was its overall customer services unit. Given its consistent increase in scale and size over the years, MMYT had outsourced multiple services to a bunch of service providers who were supervised by a small internal team. "We were always meaning to crack whip on this cost element, but the pandemic helped in accelerating the pace of automation," stated Magow. From the call centre services to higher level of automation for post-sales booking, the MyTrip section on the website and its mobile application have automated every single post-booking help use case. "Customer can today download e-ticket/voucher, do web-check-in, change dates of booking, cancel booking and check the refund status. Effectively, it means our dependency on call centres has reduced dramatically and we are offering better customer experience besides saving costs," said Magow.
With the travel market moving online in a bigger way, MMYT, which had set-up 21 stores for holiday packages in all main cities under a fixed-cost model got converted into franchisee stores. "We not only converted but also expanded the number of stores. So instead of 21 owned stores, we now have over 100 franchise stores," said Magow. MMYT also reviewed all other cost heads including marketing and sales promotion, technology infrastructure costs etc. and found opportunities to optimise them. The real estate costs were also rationalised, he added.
Pain and Remedy
What about the layoffs? How many people lost their jobs because of cost optimisation and cost rationalisation? "We unfortunately had to right size roughly about 10 per cent of our workforce (about 350-400 people)…most of them were part of our company owned stores. As mentioned earlier, they were all converted to franchisee stores," said Magow. Staffers on the international business also lost their jobs. "This was clearly the most painful part, but this was the right business decision given the Covid situation. We wanted to set the tone from the top. Deep (Kalra, Group Chairman & Chief Mentor) and I went on zero salary. The leadership team and other senior folks also took pay-cuts," recalled Magow who was earlier the chief financial officer and COO of MMYT.
MMYT tried to soften the blow as much as it could, according to Magow. It took care of impacted employees for a year so that they could use this time to find another suitable opportunity. Besides this, the company also kept its options open—when the business comes back, it would be able to evaluate its ex-employees for suitable vacancies. "The good part is that we restored all the salaries soon as business recovered. It is important to note that we not only restored, but also released an ex-gratia payment to make up for their pay cuts during the crisis time. This payback was very well received and helped us maintain the credibility of our already strong employee friendly brand," said Magow.
Getting Future Ready
The most important fallout for MMYT was to become future ready. It would be fair to say that the two years of pandemic were perhaps the most productive years in terms of delivery of key tech projects including building new platforms. The company built a B2B platform called myPartner that was conceptualised, developed, and made market-ready during the pandemic. myPartner empowers travel agents across the country with wide selection of online travel inventory with a promise of helping them to enhance their service standards for their customers. “So far, more than 28,000 travel agents have registered on the platform,” Magow informed.
In the past two years, MMYT also launched its ad tech platform to help its partners and brands within the travel industry and beyond, target the right and a wider set of customers. This further helped them maximise their ROI on MMYT’s platform through relevant audience targeting tools, Magow said.
It also built a horizontal fintech platform called TripMoney where it offers insurance products, consumer lending products such as BNPL (Book Now Pay Later) and forex services. Recently, MMYT acquired Book My Forex, India’s largest non-bank online foreign/currency exchange marketplace. Through this the company is now offering a full-suite of forex and other ancillary services will be seamlessly integrated with the innovative travel-related finance offerings of Trip Money.
On the corporate travel front, it continues to enhance its offerings through myBiz and Quest2Travel. And on the B2B2C front, it launched its affiliate platform. “We are live on Amazon Pay with our flights and bus inventory, and will soon be going live with hotels. Apart from this, we have joined hands with PhonePe, and now travellers can find travel options seeded through MakeMyTrip easily on Google search. We have also integrated our inventory with HDFC SmartBuy,” said Magow.
The company has extended its ground transport strategy via redBus so that the bus commuter could also commute through rail or take a cab. MMYT has launched independent redRail app to penetrate deeper into India. For example, it is tested to operate smoothly and book IRCTC train tickets even in low internet bandwidth areas and on phones with low memory configuration.
MMYT also launched its intercity cab service under the brand name rYde by Redbus. “Our rail and intercity cabs offerings continue to help new set of travellers across the country…The pandemic made us think of new initiatives beyond what we had originally envisaged,” Magow added.
Truly, the dramatic turnaround from a period of life-sapping losses due to the pandemic-induced lockdown and travel restrictions to posting record quarterly profits and raising large amounts of capital, the story of MMYT is one of resilience, grit and determination in finding opportunities when the going gets tough.
