MakeMyTrip.com: The Story of Online Travel Booking Startup

23Nov2009 Filed under: Entrepreneure Stories Author: Bikash

MakeMyTrip founder Deep Kalra has some interesting history. In 1995, Deep Kalra saw that India had burgeoning consumer promise. So quit his safe-but-boring banking job and joined AMF Bowling. AMF was an American company which aimed to bring bowling alleys and billiard halls to India for the first time.

However, it was not entrepreneurship in the real sense because it was not his own thing and he had a remote boss in America. The hobby was ahead of its time for Indians. He opened about 200 lanes, most of which were in small centers.

After four years, he went back to banking again. Again in 2000, after saving some more money, he decided to start things his way. He was impressed by the Internet and frustrated by the fact that it was hard to travel in India. So, he opened MakeMyTrip.com . The site was like other online travel brokers started during the dot com bubble; the only difference was that it was in India.

There were several problems

1. The venture was ahead of the time
2. There were market crash
3. Kalra’s foreign investors reneged on $1 million in funding commitments
4. Occurrence of SARS, which made everyone want to travel in Asia less.
5. Kalra was 31-years-old with a wife and a baby at a time
6. Starting a dot com at that point was insane and downright suicidal.

So what did Kalra do?

Kalra and two senior managers bought back their equity in the business. They also agreed to go without salaries for 18 months. Kalra called for a meeting of his staff and asked them to take 40% pay cuts. Among the employees, 25stayed and 17 quit.

Kalra started to focus more on selling travel to returning Indian expats rather than locals. But he knew that they needed to keep an eye on the domestic market.

MakeMyTrip broke even after 1 year. In 2003 Kalra had decided to get some more money from VCs. In 2004, Kalra started focusing on his original vision of building the Expedia of India. This was the right time because Internet adoption in India started to grow, the Indians who had the money to travel had credit cards, bank cards or access to money transfers.

”There’s a fine line between resilient and stubborn,” Kalra says, “It worked out, so we can say we were resilient. But at the time I worried I was just being stubborn. But I figured you regret the things you don’t do in life, not the things you do.”

Kalra benefited from a global Internet truism: Online travel is the ecommerce gateway because it makes up about 70% of global ecommerce. Online travel was one of the first categories to take off in the United States. It is also one of the few markets big enough to sustain a host of publicly traded Internet competitors.

Different companies were successful in online travel. Ctrip was one of the first big Internet hits in China. Developing countries like India and China offer a great chance to entrepreneurs in the online space for creating winning solutions.

Some facts about Makemytrip.com

1. Makemytrip.com is now making $5 million in US dollars of profit this year.
2. The gross booking reached about $500 million.
3. Revenues are up 88% during the recession.
4. One-out-of-every-twelve domestic flights in India is booked via MakeMyTrip.com.
5. It sells 2,500 of railways tickets (the second largest category in travel) every day.

MakeMyTrip.com provides an insider look to the online travel business for entrepreneurs who want to start their own business.

Why did online travel booking succeeded? In case of online travel booking, you can deliver the product over email. In emerging markets this can be a great reason. Emerging markets general do not have shipping to far-flung areas and so makes it difficult to do business for physical goods. But online travel booking needs you to send nothing except the ticket through the buyer’s email. Again, it does not ask for too many changes on the buyer’s part the way he/she buys travel. Instead of the travel agent through whom a buyer used to buy tickets, he now buys it himself saving the extra charges (the charge of the travel agent) in the process.

Another important point for entrepreneurs- a ticket or hotel room is a perishable asset and so if you can move those assets, you can easily get a nice cut.

MakeMyTrip has also opened 20 physical stores. Why? In India, online travel business have not yet been able to solve the hotel problem. Even the US sites are not able to do it yet. People do not like to book hotel online because they do not know the brand and there are lesser number of branded hotels. People also don’t like booking big vacation packages online. These physical stores were set up to help people decide on the hotel and vacation packages.

Kalra as a perfect businessman studies every competitor out there. He’s taken idea from lesser-known companies like FareCast.com. He tracks other companies and competitors. He also tracks Expedia and its customer conversion rates. Expedia has a rate of 6%, and MakeMyTrip has a conversion rate of 7%.

Kalra took risks and he is happy that he took it.