Goibibo and MakeMyTrip Merger Impact on Travel Tech, Sealing the Deal

The Indian online travel industry has seen significant growth in recent years, with more and more consumers turning to the internet to book their flights, hotels, and bus tickets. Two companies that have been at the forefront of this growth are Goibibo and MakeMyTrip. In 2016, these two giants announced a merger that would create India’s largest online travel company. In this article, we will take a closer look at the merger and what it means for the travel tech industry in India and beyond.

Background Of Both MakeMyTrip & Goibibo

Before we dive into the merger, it’s important to understand a little bit about each company’s history and its position in the Indian online travel market.

MakeMyTrip was founded in 2000 by Deep Kalra and is an Indian company with headquarters in Gurgaon, Haryana. The company operates through an online booking portal, MakeMyTrip, and has a 35% stake in the Indian online travel market.

Goibibo, on the other hand, is a subsidiary of the Ibibo Group, which was founded by Ashish Kashyap in 2007. The Ibibo Group is a South African company with a 91% stake and China’s Tencent holds a 9% stake. The company operates through various brands, including Goibibo, redBus, and Ryde.

The Goibibo Group and Makemytrip were both preparing for a showdown in the Indian online travel market, each fuelled by investor money. However, in October 2016, the two companies announced a deal to form India’s biggest online travel company.

The Merger of Goibibo and MakeMyTrip

The merger between Goibibo and Makemytrip was structured as an acquisition of Goibibo by Makemytrip. The deal was valued at around $1.8 billion, making it one of the largest mergers in the Indian e-commerce industry.

Under the terms of the agreement, Makemytrip would acquire 100% of Goibibo for a combination of cash and shares. Goibibo’s shareholders would receive $720 million in cash and $200 million in MakeMyTrip shares, with the remaining $880 million being paid in the form of a note.

The merger would create a travel tech giant with a combined market share of around 40%. The new entity would control around 20% of the lucrative airline booking market and have significant shares in the bus and hotel bookings and ride-sharing spaces.

Value Creation

The merger between Goibibo and Makemytrip was not just about creating a larger company and controlling a larger market share. The two companies realized that a battle for supremacy would come at a high cost, with too much cash burn and bitter discounts and promotion wars.

Instead, the companies decided to focus on value creation. By joining forces, they could create a more scalable business and offer customers a wider product offering – including air ticketing, hotel bookings, bus ticketing via the redBus brand, holiday packages, and the ability to drive cost efficiencies.

The merger would also allow the two companies to accelerate the pace of travel bookings growth from offline to online, as online travel penetration remains fairly low in India.

Impact on the Travel Tech Industry

The merger between Goibibo and Makemytrip, which formed the MakeMyTrip Group, was expected to help the companies stem promotional offers and become profitable due to their combined market heft. However, new and existing competitors have continued to offer promotions and discounts, leading to a fierce battle for market share in India’s $2 billion online travel market.

• The MakeMyTrip Group remains the market leader in terms of transactions for international outbound airfare and domestic air tickets. It also has about half of online travel agency sales of hotels. However, competitors like Booking.com, Expedia, Yatra, Cleartrip, Paytm, and Oyo are jockeying for position and gaining market share.

• One factor that has contributed to the competitive landscape is the growth of mobile internet access in India. The launch of Reliance’s Jio network in 2016 led to a surge in mobile internet adoption, particularly in smaller cities and towns. This has led to a new wave of customers who are open to trying online travel booking services.

• Another factor is the changing supply-demand dynamics in the hotel industry. Some hoteliers have begun to push back against the commissions charged by online travel agencies like MakeMyTrip, leading to a rebalancing of the relationship between suppliers and aggregators.

Overall, the Indian online travel market is characterized by fierce competition, rapid growth, and changing dynamics. 

While the MakeMyTrip Group remains the market leader, it faces significant challenges from both established players and new entrants. The impact of the merger between Goibibo and MakeMyTrip has been limited, as the industry continues to be shaped by broader trends in mobile internet adoption, supply-demand dynamics, and consumer behavior.

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Wrapping Up

The merger between Goibibo and Makemytrip is a prime example of how companies can create value by focusing on value creation rather than competition. The merger has created a travel tech giant that is well-positioned to take advantage of the growing demand for online travel-related services in India.

The merger has also highlighted the importance of creating a scalable business that can offer customers a wide range of products and services. By doing so, the new entity can drive cost efficiencies and accelerate the pace of travel bookings growth from offline to online.

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