Hello, everyone. I'm Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our Fiscal Year 2023 First Quarter Earnings Webinar. Today's event will be hosted by Deep Kalra, our company's Group Chairman and Chief Mentor. Joining him is Rajesh Magow, our Co-founder and Group Chief Executive Officer, and Mohit Kabra, our Group Chief Financial Officer. As a reminder, this live event is being recorded by the company and will be made available for replay on our IR website shortly after conclusion of today's event. At the end of these prepared remarks, we will also be hosting a Q&A session. Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995.
These statements are not a guarantee of future performance, are subject to inherent uncertainties and actual results may differ materially. Any forward-looking information relayed during this event speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements are contained in the Risk Factors and Forward-Looking Statements section of the company's annual report on Form 20-F filed with the SEC on 12th July, 2022. Copies of these filings are available from the SEC or from the company's Investor Relations Department. I would like to now turn over the call to Rajesh. Over to you, Rajesh.
Thank you, Vipul. Welcome everyone to our first quarter earnings call of fiscal 2023. We are glad to report a robust quarter-over-quarter growth of 63.3% in gross bookings on constant currency basis, signaling strong recovery in travel sentiment and demand post the third wave of COVID-19 infections in India. As shared earlier, we have built significant operating leverage in our business over the last two years, which has helped us deliver our highest quarterly adjusted operating profit of over $16.5 million, compared to about $12 million in the last reported quarter.
It is heartening that after two years of being under the impact of COVID-19 pandemic, this new fiscal year has started on a strong note with public behavior and sentiment back to pre-pandemic normal, given the comfort of strong vaccination coverage in India and the latest variants of COVID-19 reporting milder infection with minimal hospitalization and fatality rate. Accordingly, we have seen strong recovery in leisure travel in domestic destinations, as well as improving demand in short-haul international destinations in Southeast Asia, UAE and Nepal, et cetera. Globally and in India, governments and central banks have increased their efforts recently to tame inflationary pressures that had built up over the last few quarters.
As the effect of these measures become more visible in the coming quarters, there is likelihood that airfares, which have been higher than normal during Q1 due to higher oil prices, will become more attractive, leading to improved domestic and international travel demand, further considering the consumer sentiment for travel is still very positive. With work patterns gradually getting back to pre-pandemic normal, while we have seen increased demand for office commute during the quarter, we also expect corporate travel demand momentum to further pick up in the coming quarters, aiding overall demand recovery for the travel industry. Overall, our current estimate is that travel, both domestic and international, should recover fully to pre-pandemic levels by the end of this year.
Apart from the short-term positive outlook on demand recovery, we believe there are significant tailwinds supporting robust growth in travel industry over the medium term of next three to five years. Firstly, due to the pandemic, the travel industry saw a significant temporary decline, and hence the pent-up demand is likely to drive accelerated growth with return of normalcy. Secondly, post the pandemic, there is a permanent shift in how people perceive travel, with propensity to travel being much higher and experiences becoming even more important. Thirdly, there's also a secular uptick in the online buying behavior, which bodes very well for us, as most segments of the Indian travel industries have traditionally had low online penetration. Lastly, and most importantly, India is still an under-penetrated travel market with a huge scope of growth.
Some of the factors favoring these growth trends are expansion of infrastructure, increasing per capita income, increasing disposable incomes, and higher willingness to travel and book online among the young working population. As per the Ministry of Civil Aviation estimates, Indian aviation will become world's third-largest aviation market by 2024. Development of new airports, highways and addition of hotels will help grow domestic tourism manifold in coming years. Almost all the airlines have placed orders for new planes over the years. On the other hand, few hospitality chains have also announced their expansion plans, which should add to capacity and fuel domestic travel growth. As a comprehensive travel service provider, we hope to leverage these macro growth trends.
Let me now talk about the performance in the key travel segments, and I would then share the prospects on some of the future growth areas, both on the supply side and demand side. Coming to business segments. In our air business, we continue to maintain our leadership position and market share. We are recovering faster than the market. During the quarter, we witnessed over 90% recovery as compared to pre-pandemic levels. This is majorly on account of travel demand opening and more people traveling during the summer holiday season. I talked about high airfares earlier. This has affected recovery momentum to some extent. Leisure destinations like Srinagar, Dehradun, Leh have shown more than 100% recovery, while business and metro destinations like Delhi, Mumbai, Bangalore, et cetera, have lagged a bit due to high fares and corporate demand still short of full recovery.
On international travel, short-haul destinations like Southeast Asia, Maldives, UAE and Nepal witnessed strong recovery. In the next few months, as the visa backlog gets cleared and new visa issuances for European and American destinations is streamlined, we expect to see stronger demand recovery in these long-haul destinations as well. Coming to our hotels, packages and alternative accommodation business. We witnessed a strong recovery driven by leisure travel. Supply side services have now stabilized. In the top-selling hotels, 90% of the rooms are open, and almost all chain hotels are now fully functioning. In many of the leisure destinations, we are now seeing growth over pre-pandemic levels, which has helped taking the overall volumes recovery in this segment to around 87% of the pre-pandemic volumes.
With accommodations, our focus on building homestay supply has helped us improve supply in leisure cities such as Rishikesh, Srinagar, Shimla, Manali, Mussoorie, McLeod Ganj and Leh, which has helped us get past pre-pandemic volumes in this category. We also launched Homestay Awards, which are one of a kind in the country and will help popularize this category further. The awards attracted nominations from 2,500+ homestays across the country. Consumer voting is going on, and more than 460,000 votes have already been cast by the users. We continue to add more properties on our platform and increase our supply more. It is encouraging to see that more and more properties in smaller towns are keen to come on our platform and sell online.
In Q1, we sold rooms in over 43,000 properties spread over 1,900+ cities, which reflects the extensive support being provided to small accommodation service providers, particularly in the remote towns, and building deeper engagement with suppliers and customers in larger Bharat. Coming to our bus ticketing business. We maintained our recovery momentum in the seasonally strong quarter. Demand and supply recovery has been lagging in southern states of Tamil Nadu, Karnataka and Kerala. In the coming quarters, reopening of offices and gradual move away from remote working in the corporate sector, especially in the IT sector, should help drive full restoration of demand. On the product side, we launched a project aimed at increasing the last-minute booking share of redBus through targeted interventions on select routes by ensuring price competitiveness and pricing advantage with offline channels.
Interventions such as keeping the booking window open at a boarding point till the actual time of departure based on real-time bus delays, as well as showing the earliest available bus at the nearest boarding points have helped improve conversion rates for us. We launched new initiatives to differentiate our premium experience. Seven redBus lounges across top boarding points pan India, including four Café Coffee Day Lounges in Bengaluru, are now functional. Let me now share more details on the current areas of investment, which would be growth drivers in the next few years as a scale-up. These include both supply side initiatives and demand side initiatives, apart from small inroads in adjacent markets like GCC. On the supply side, our investments are primarily towards bringing more and more small service providers and accommodations onto our platform and ground transport services like rail and intercity cabs.
We now have accommodation service providers in about 1,900 cities, up from 1,600 cities earlier. We aim to have accommodation supply in over 2,000 cities before the end of this fiscal year. On airport transfer use case, we recently piloted to promote carbon efficient services, particularly in the metro cities, starting with a partnership with BluSmart, a ride sharing company with electric vehicles, offering our customers hassle-free, guaranteed and on-time pickup and drop experience at Delhi Airport. We are looking to expand the supply at other locations through similar partnerships. One of the key objectives around our ground transport services is to acquire customers, particularly in the hinterland, and eventually get them to buying other travel services on our platforms.
Our key initiatives on the demand segments, as shared earlier, are focused on catering to the corporate travel demand via myBiz and Quest2Travel Q2T platforms, as well as improved outreach to customers in the hinterland by tapping into the small travel agents across the country for last leg booking facilitation via our myPartner platform and through our franchise stores. Our target is to double the booking contribution coming from these demand segments from about 7% last year to about 15% over the next few quarters. According to our estimates, we are now the largest OTA powering the travel demand from Indian corporates via our myBiz platform, targeting with the SMEs and Q2T platform for large corporates, where we added notable clients like 3i Infotech, Grant Thornton, Gati Logistics, et cetera, during the reported quarter.
Coming to our foray into the GCC market, our first focus has been UAE market, and it continues to scale. Q1 has been a good quarter for us, with market showing strong recovery post Omicron wave and seasonal customer demand around Eid holidays. During Q1, our gross bookings grew 2.3x quarter-on-quarter, organically, albeit on a low base. We have made significant progress in building supply strength and automation. Our first target is to be the leading OTA in UAE by the end of this fiscal year. Before I wind up, I would like to reiterate that the outlook for travel industry has improved considerably, and we have started the fiscal on a strong note with robust top line recovery and growth in profits. With this, let me now hand over the call to Mohit for financial highlights of the quarter. Over to you, Mohit.
Thanks, Rajesh. Hello, everyone. I hope you're all staying safe and keeping healthy. During the last two years under the pandemic, we have been focused on tight cost control to get to operational profitability while being in the business recovery phase. This year, the objective will be to improve profitability along with strong bookings growth over the previous year. Before getting into the financial highlight, I'd like to call out two specific things. One, while our operating business is largely in Indian currency, our financial reporting is in U.S. dollars. Significant weakening of the INR versus USD during the quarter have a translation or restatement impact, and hence I'd focus on growth in constant currency to reflect the stronger underneath growth in the operating currency.
The year-on-year growth metrics during this reported quarter look very high because Q1 last year was significantly impacted by the second wave of the COVID-19 pandemic. I'll therefore focus on quarter-on-quarter growth to reflect the continued strong momentum in travel demand recovery. I'm glad to report that during the reported quarter, we posted very strong growth and profit numbers. We have achieved 63.3% quarter-on-quarter growth in bookings on a constant currency basis, apart from posting our highest quarterly adjusted operating profit or adjusted EBIT of $16.5 million. Adding for non-cash expenses, the adjusted cash operating profit or Adjusted EBITDA stood at about $20.1 million. During the quarter, our air ticketing adjusted margin stood at $60.6 million, registering a 38.7% growth over the previous quarter on constant currency basis.
We're glad to share that our domestic flight segments have nearly recovered to pre-pandemic levels of same quarter in fiscal year 2019-2020, although the recovery on international flights is still around the halfway mark, for mostly the reasons that have already been called out by Rajesh. The air ticketing margins for the quarter were on expected lines at about 6.1% in view of the high air fares. Therefore you can see that the average selling price in domestic flights was up almost 18.6% versus last quarter. Adjusted margin in our hotel and packages business stood at $66.9 million, witnessing a growth of 62.3% quarter-on-quarter in constant currency terms. We witnessed a surge in bookings this quarter, aided by the holidays or vacation seasonality.
The margins in the segment came in line with our expectations at about 17.2%. The average selling price for domestic hotels was up almost 11.5% over the previous quarter. In our bus ticketing business, the quarterly adjusted margin stood at about $20.8 million, registering very strong quarter-on-quarter growth of about 72.3% in constant currency terms. The margins were in line with our expectations at about 8.8%, and the average selling price increase in domestic bus tickets was about 15.6% over the previous quarter. Adjusted margin in our other businesses was $7.9 million, which is a 42% quarter-on-quarter growth in constant currency terms. Coming to our operating costs, we continue to be prudent with our variable spends, especially the customer acquisition costs.
Marketing and sales promotion expenses stood at about 5.1% of gross bookings, in line with the 5.1% reported during the last fiscal year. While it has been reported earlier, during the quarter, we took a majority stake in India's leading online forex provider, BookMyForex, to help build ancillary forex services as a part of our Trip Money Fintech platform to meet the growing needs of our travel customers. As international travel picks up, this will allow us the opportunity to service the forex requirements of our customers. We will continue to leverage our strong brands and cash position to drive investments in the areas of future growth already outlined by Rajesh. With that, I'd like to turn the call back to Vipul for Q&A.
Thank you, Mohit. Any of the attendees who want to ask the questions can please click on the raise hand button on their screen, and we will take the questions one by one. We'll just give a minute for question queue to assemble. First question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question now.
Thank you. Can you hear me?
Yes, we can hear you. Please go ahead.
Great. Thanks, Vipul. Congratulations on a great set of numbers. My first question is just the air ASPs, the average ticket size of the air transactions, how much of it is being driven by the price increases in domestic aviation, and how much of an impact from international improvement? If you can clarify, you know, if you can talk about overall, how much has international improved on a QOQ basis?
Sure, Vijit. I could take that. Hope I'm audible as well.
Yeah.
Yes.
Yeah. You know, and like I called out on the, on domestic side, you know, the domestic fares on an average have increased by about 18.6% over the previous quarter. That's the kind of, you know, increase in fares that we are seeing on the domestic side. International, you know, clearly the recovery has been kind of, you know, muted like I called out. International recovery is kind of, you know, more in the 50s right now. And therefore, kind of lagging. Couple of reasons over there, while we are kind of doing quite well on the short-haul destinations, you know, which is, you know, destinations like Southeast Asia, etc., we are doing well. However, recovery in the long-haul destinations, you know, particularly Europe, U.S., etc., is yet to pick up.
You know, multiple reasons over there, including high airfares and also the fact that, you know, issuances of new visas.
Mm-hmm.
Have been kind of, you know, severely impacted because of the large backlog that, you know, the, these embassies are kind of, you know, running.
Right.
I believe, you know, the improvement of recovery in the long-haul destinations would actually be something that we look forward to in the coming quarters.
Got it. Thanks, Mohit. Mohit, my second question is, within the domestic hotel business also, is budget segment still lagging, relative to the premium segment? Because there's a fairly decent jump in average ticket price there as well. Just a clarification question to what Rajesh said earlier. He mentioned new channels, you aim to have their contribution double from 7% to 15%. I just wanted to understand, what are you including in that 7% number?
Sure. I could take both. I mean, you know, when it comes to the domestic hotels also, there has been a bit of a kind of, you know, inflationary impact. Like I called out, the ASPs have increased by about 11.5%. You know, as far as recovery is concerned, you know, again, while the budget segment was lagging very significantly over the last fiscal year, or the last two years, it's actually kind of, you know, now improving. While pre-pandemic it used to be more in the, you know, the high 40s to kind of, you know, close to 50% mark, it's already gotten into the 30s. I would say, it's more the inflationary impact rather than the kind of, you know, mix impact, which is reflecting in the ASPs.
That's more on the hotel side. The second question, if you could just repeat that? Sorry.
Uh-
The 7%.
The 7%.
The 7% growing to 15%. Like Vijit called out, we're kind of tapping into a lot of new demand segments. Rajesh had called out in his narrative that, you know, we're largely looking at, you know, three channels of, you know, new demand segments to kind of, you know, tap into. One is, you know, the corporate segment, which is being catered to, you know, by myBiz platform for small corporates and Q2T by large corporates. The second one is the entire, you know, the franchisee network that we're kind of, you know, looking at kind of, you know, expanding. The third is the entire small travel agent kind of, you know, network being tapped into, along with kind of powering a lot of the affiliate channels.
Looking at all of these channels together, because traditionally we have been more focused on the retail customer, which kind of, you know, comes in directly and books on the app or the platforms.
Right.
These new demand segments that we are tapping through the non-retail kind of platform, these we believe should kind of keep increasing in the mix. These were accounting close to about 7% last year. We believe we can kind of possibly look at doubling the entire mix coming in from these new demand segments.
Got it. Thanks, Mohit. I'll just jump back in the queue.
Mm-hmm.
Thank you, Vijit. The next question is from the line of Amol Desai. Amol, you may please ask your question now. Amol, you'll have to unmute yourself and ask the question. While Amol comes back, we will take the next question, which is from Gaurav Rateria of Morgan Stanley. Gaurav, you may please ask your question now.
Am I audible?
Yes. Yes, Gaurav. Please go ahead.
Yeah, hi. Congratulations on great performance in this quarter. A couple of questions. Firstly, on ad, advertising and sales promotion, Mohit, you have always hinted it to go back to 6%-7%, while 1Q has kind of remained much lower than that, despite cross-booking improving quite a bit. How should one think about this number going forward? Has there been any material change in the competitive intensity which kind of changes your view? Second related question is, you had made remarks on the investment, so how do you think about balancing those investments and operating leverage benefit? You earlier had given an outlook of EBIT margins closer to 0.5% of gross bookings. Does that change after what you have done in 1Q?
Gaurav, I'll kind of, you know, take both of these. You know, on the first one, which is on, you know, customer acquisition costs, you know, like I called out during the quarter, these have largely trended at similar levels to the previous fiscal year, you know, at about 5.1%. We have been calling out that we do expect that this could kind of, you know, slightly go up. This will be linked to a couple of things. One, it will be linked to kind of, you know, the overall business mix getting restored to pre-pandemic levels, you know, where hotels used to contribute almost like, you know, 50% + of the mix. Right now, hotels is still in the forties.
Mm-hmm.
Because generally in the recovery pattern, we have seen, you know, air leads the kind of, you know, recovery and the other segments kind of, you know, tend to lag a little bit. As this mix gets restored over the next few quarters, I think we should possibly see this kind of, you know, number increasing because the amount of kind of, you know, customer acquisition costs that we incur on the hotel side are slightly higher, in line with the larger margins that we make in those businesses. The second point is, you know, we are also kind of, you know, not getting into any significant brand kind of, you know, expenses, you know, which are more longer term in nature.
Keeping in mind that we have still not kind of, you know, crossed the pre-pandemic, you know, kind of volumes. Once we kind of, you know, once we are getting beyond the pre-pandemic volumes, I think there will be a requirement to kind of, you know, restart on the brand expenses. Therefore, these two factors, keeping in mind, is where we have called out that we could see a little bit of increase coming in the marketing kind of, you know, costs. The good part is we should also see with the improvement in the mix, towards hotels, we should also see the blended margins going up marginally as well.
Some part of the, you know, the increase in the promotional expenses will be offset from the improved blended margins as well. Moving on to, you know, the second question on the investment. Like we have said, you know, I think with the business now firmly kind of, you know, having established its kind of, you know, profitability, and, you know, the cost levers kind of, you know, well in control. Also the fact that the larger investment in terms of opening up the larger segments like air ticketing or say for instance, hotels, et cetera, that investment is already behind us. What we are now curating is a variety of demand segments, which will kind of, you know, be very useful from the longer term growth point of view.
Secondly, getting into a lot of adjacent kind of, you know, travel services or travel related services. Again, where, you know, in both of these kind of, you know, demand and supply side kind of, you know, increases, we don't necessarily need to you know, kind of invest in a big way. The size and scale of investment is going to be much lower compared to, you know, the kind of investments we have been doing, say for instance, over the last four, five years in the hotels business. I think a large part of these investments practically will keep getting funded out of the, you know, operating cash profit generation that we'll see on a quarter to quarter basis.
Keeping that in mind is where we have kind of pretty much given a broader guidance, and we do believe we should be able to see, you know, overall EBITDA getting to kind of, you know, close to about, you know, the 1% levels of gross booking. It will be good if we can establish, you know, that kind of profitability, and then we'll gradually look at scaling it up further.
Maybe Mohit.
Yeah.
If I can just add, Gaurav, just one more point on the marketing spend.
Sure.
I think that's an important one. I thought it, you know, it'd be interesting to sort of call out that as well. See, we have also seen the organic traffic growth in the last quarter, which has been very robust. I mean, at these marketing spend levels, you know, and that, and that's how we are sort of evaluating if we have to up the ante on the marketing spend and all. Just keep looking at what the traffic trends are. Quarter-on-quarter, our traffic growth on these spends, you know, which is, you know, in large part of our traffic is organically as we had mentioned it earlier as well, was about 40%. Which was very robust quarter-on-quarter.
Just keeping that in mind, you know, and also the fact that, you know, just the overall, like I called out earlier as well, the macro headwind on high fares, you know, sort of look at that and look at the organic traffic growth that is already happening. You know, we end up sort of balancing our overall marketing spend, which is what we ended up doing in this reported quarter.
Great. Thanks for the detailed responses. Just a follow-up, Mohit, you said 1% of gross booking, is it for EBITDA or is it for adjusted EBIT number? Just wanted to clarify that.
Yeah. I mean directionally, you know, EBITDA. I mean, although the EBIT to EBITDA kind of, you know, gap will not be very large going forward, it's usually around the $3 million mark per quarter. So that may not be very material going forward, but yeah, more in terms of EBITDA.
Okay. Secondly, I just want
EBITDA.
Sure. Secondly, just wanted to get sense on the cash balance came down quarter-over-quarter. What's kind of going on there? Ideally it should have gone up with the strong positive adjusted EBIT number. Thirdly, a question for Rajesh on the market share. If you had shared, I kind of missed that on the airline domestic air segment. What is the market share this quarter compared to what you shared last quarter? Lastly, a data point, just a bookkeeping question. How should one, like, look at the UAE bookings, right? Is this a part of the overall booking number on the respective segment for us? And how big is that? Any quantification there if possible? Thank you.
Sure. You know, in terms of cash balance, you know, Gaurav, actually a large part of the increase that should have otherwise come through is kind of, you know, getting impacted because of the translation, kind of, you know, with the rupee weakening. The balances that we have in India, and the kind of, you know, the payables, intercompany payables that India has to some of the, you know, the other kind of, you know, overseas companies in the group.
That is what is kind of, you know, creating a translation issue and a drop in the cash balance. Otherwise, this is more a notional kind of a one, because guess what? None of these payments are due anytime soon. So therefore, this is more a temporary kind of a drop coming in because of the change in exchange rates. You know, the INR-dollar exchange rates varied significantly during the quarter. So that I'm hoping should kind of, you know, get course-corrected over the next few quarters. Moving on to the, you know, air market share. Again, it's kind of, you know, remained around the 30% mark.
You know, like we had called out, we kind of are more in terms of making sure that we are able to retain our strong market share in the air segment, and not necessarily looking at very, you know, significant gains in the market share on a year-on-year basis on the air ticketing side. You know, it will be a very different approach in some of the under-penetrated segments like hotels, accommodation or say, bus ticketing, et cetera, where we are clearly looking at significant market share gains, and the growth is kind of far outpacing the growth, not just in the market, but also in the online market.
Lastly, on your question on UAE, again, you know, like I said, this is again more a, you know, foray into the adjacent market where we believe we have a reasonable kind of a brand resonance, and therefore the approach is to kind of, you know, do a, you know, a kind of a gradual slow investment kind of a buildup rather than a big bang kind of a, you know, market entry. Therefore, we're kind of looking at this being, you know, part of our respective segment reporting. You'll see those numbers kind of coming in as part of the respective segments. Therefore the flight ticketing segments also kind of, you know, are kind of combined in the overall operating metrics being shared for air ticketing segments.
Thank you. I'll get back in the queue for further questions. Thank you.
No worries.
Thank you, Gaurav. The next question is from the line of Ruchi Seth. Ruchi, you may please ask your question now.
Hi. My question was on the hotel segment. I just wanted to understand, as part of the overall market, what is the current market share that we have in the hotel segment? Specifically if we divide the hotel segment into budget, so what is the market share there and how are we looking to gain share over there, especially given you know, some of the material competitors in the budget segment may be scaling back their marketing efforts?
Maybe I can take that, Ruchi. Ruchi, I think it'll suffice to say, I guess in line with our previous quarter's comments as well, that we do have a leading market share in the online market across the hotel segments. But quantifying that is very hard given the fragmented nature of the market, especially now, as we called out our focus also increasingly to build the supply on the alternative accommodation side as well. Now, whether it is Homestays or the apartments or the villas or the hostels. Now, if you start looking at all this even more fragmented nature of the supply, it becomes very hard to be able to sort of overall quantify.
We do know, you know, sort of, you know, the data that we sort of estimate and collect from the supply side with our partners on a basis, various discussions and conversations, et cetera, that our wallet share across the segments has only been improving.
Okay, thank you.
Thank you, Ruchi. The next question is from the line of Mithun Soni of GeeCee Ventures. Mithun, you may please ask your question now.
Hello.
Yes, Mithun. You may please go ahead.
Yeah. Congratulations on the good numbers. I have a couple of questions, starting with hotels and packages business. Want to understand, like if you can give a picture as to like how has the mix changed compared to last year in terms of the top hotels, like three-star, four-star. What would be the mix of alternative accommodations for us, and same way with the budgets, and how do we see this changing over the next one or two years. Add to it one question is that we are also seeing that a lot of these chains, you know, like Accor, IHG, they are also pushing a lot for direct booking or through their own websites. How do you see that impacting our business?
Same way with Google also trying to you know give you a whole the pricing packages price comparisons on their platforms. How does it change the business dynamic for us?
Yeah. Mithun, your line was really, really poor, but I think I got your question, so let me just make an attempt to respond to that.
Yeah.
You know, the various segments, how has our mix changed in this quarter between the premium segments and the mid segments or the budget segments? As I was just sort of mentioning in response to the earlier question, you know, what we have witnessed, you know, during the COVID as the recovery was happening in between after wave one and wave two, and after that for the last couple of quarters now when the, you know, the COVID restrictions are lifted and business is coming back to normal, what we have seen is that, our actually wallet share, which is sort of defined more as what percentage of sort of bookings that we end up doing as part of the different sort of segment of hotels, at a defined occupancy level has only improved across the segments.
Now it is not necessarily only on premium segment and not necessarily on a mid-segment or independent hotels, as well as the budget segment. As Mohit mentioned earlier, and we've reported that out, earlier as well, that budget segment growth was or the recovery rather was lagging behind. That also is, as we have seen in the April-May-June quarter, that's also come back nicely and hopefully the momentum will continue going forward as well. I guess net-net, I would say, mix hasn't really changed significantly. Now coming to the direct hotel supply bookings on the, Marriott and the others who try to push direct bookings on their platform. This has been the phenomenon for, forever. Actually global phenomenon to some extent even in India.
You know, from the way we have seen our numbers sort of growing as an intermediary, you know, like literally quarter on quarter over the years, I think both the platforms have their own sort of independent role to play. There is a set of value that we bring it for the customers, clearly, in the form of selection, choice, and convenience, and hopefully the best pricing. You know, just from a you know brand loyalty standpoint, you know, every hotel chain, global chain will have their own loyalty sort of program as well to attract their customers directly on their platform.
We haven't really over the years seen the skew moving towards, given the fact that the customers end up sort of doing selection where they want to see, especially in the market like India, compare it with many other hotels before they you know sort of make their decision to book. We have seen our platform growing much faster than what our understanding is on the supply-side direct growth. During the difficult times, we've seen you know the chain of hotels, in fact, across the board working a lot more closely, a lot more deeply you know with us in terms of just you know sort of leveraging the traffic that we get on our platform, which is huge.
To get the benefit of them and doing all those promotions, et cetera, on our platform rather than, you know, sort of, doing their own platform. From a parity standpoint, we end up getting, you know, parity to their platform as well. I'm not necessarily concerned about that given largely on the back of the value proposition that we bring it to our partners. I guess these were your two questions, right, Mithun?
Yeah. On to this, you know, on the same point, you know, like, you know, in my recent experiences as I keep doing the research on MMT-
Mm-hmm.
MakeMyTrip product, what I've observed is that during this good period, you know, when there was a lot of demand, a lot of these hotels, you know, even the single or the good properties in each of the locations, they were not giving enough rooms, is what I understood. Or they would say, "Okay, not enough rooms on our platform." Maybe they were directly selling. Is there something like a or they were selling through the other channels. Is this something more worrisome in the medium to long term? Just
Yeah. No, you know, it could be a fair observation, and I don't really know more details. Maybe we can take it offline to just understand more of what period did you actually observe that. Because our model is the allocation model, and we get inventory allocation. We haven't really seen-
Mm.
Any such examples where we were short of supply from any particular hotel or the partners would have come back and said that we don't want to give. In fact, the way it works is that as we sell, we keep getting the rooms sort of replenished automatically. We don't really need to. You know, there's no manual process involved here.
Okay.
We didn't see any sold out. You know, what might have happened, having said all of this, so, you know, as a trend, we don't see any of that.
Mm.
What might have happened sometimes what happens is when a peak destination during the leisure or a heavy holiday season period and very short period and, you know, we don't have in our country too many, you know, sort of long periods like that, where in a particular hyper location that market would be genuinely sold out.
Okay.
That market would be genuinely sold out across channels. If I may just add one more point. We now not only have all three of our online platforms, we also have our B2B platform called myPartner.
Mm.
We've got the corporate platform. From partner standpoint, there are more than one platforms that they can actually offload their inventory and get different demand segments. I don't think, you know, and there may be some anecdote that you might have observed, but as a trend, I don't see any of that.
Basically, we keep doing this internally, you know, comparing with MakeMyTrip and Booking.com as a comparison to see how things are, how pricing is, how it is compared to Google. You know, that's it. Now, one-
Understand.
Yeah.
No, understand that. I mean, we do that as well, so, you know, understand.
Now my second question is, you know, as in Europe, alternative accommodation on bookings platform is quite a big business for them. How do we see that for us over the next three-five years? You have already said, but if you can give some more color as to what would be the proportion of that for us?
Yeah, Mithun. No, that is absolutely right. That is the reason why we started focusing on this segment now for the last several quarters. That's like 360-degree sort of focus. We've been building supply, we've been getting all the kind of alternative accommodations from pan-India, and premium, super premium, mid-segment, budget segment, and all of them, whether it is the classical homestays, the cottages or the apartments or the hostels and all. I could just tell you directionally, you know, from an opportunity standpoint, I think it's a big opportunity, and it just, you know, early days of evolution in India, but catching up really fast in terms of just the emerging trend in consumers' mind.
Part of that was also, in fact, ironically, thanks to pandemic as well, where people were looking for safe, secluded, sort of, you know, stays that they wanted to get in. I can tell you on our platform, you know, we've been adding sort of accommodations, you know, like hundreds every quarter, literally. Also in terms of bookings, you know, from our pre-pandemic last year level, we have already, in this segment, we have done sort of 125% growth on that. Of course, it's a smaller base. It's not comparable to the hotel base that we have. Directionally, it is very, very encouraging.
Last but not the least, I will make the point, or even on our platform, given that you're quite familiar with our product, you would notice that we actually have a dedicated funnel for this called Homestays, which will, you know, give the customer experience specific to these sort of property types with the differentiated experience. It's a journey. You know, there are a few things that we've already done, a few features that we've already included, and there are many, many more that are waiting to come on that funnel.
Fair. One last question, if I can. Now with discounts, and it has come back a little bit, both in the hotel segment, in primarily the hotel segment. Should we say that this is now the new base because now we are almost there, you know, like full-fledged, or there is still the scope for the discounts or the promotion expenses to go up in the hotel segment?
Mithun, I think I just kind of, you know, answered that in one of the previous questions, you know, possibly from Vijay.
Yeah, which you indicated.
Yeah, yeah. I think the answer remains the same on this one as well.
Okay. Perfect. Thank you very much.
Thank you.
Thanks so much.
Thanks.
Thank you, Mithun. The next question is from the line of Aditya Chandrasekar of UBS Securities. Aditya, you may please ask your question now.
Hi. Just a very quick question from my side. When we look at adjusted margin percentage, right? For air, it's down from around 7.1% last quarter to 6.1%. In hotels, it's down from 17.7% to 17.2%. I understand this is because obviously the transaction sizes have increased a bit this quarter. How do we look at this number going ahead? Because as long-haul international kind of grows, et cetera, transaction sizes are probably going to increase further. Is there some kind of way to think going ahead?
Sorry, Aditya, you kind of, you know, broke out a little in between, but I think I got the gist of the question. You broke up in the last few seconds. I think if it's about, you know, the trends on the adjusted margins, you know, yeah, you're absolutely right. This is kind of largely, you know, moving in tandem with the change in the average selling prices. If you look at, you know, on the international side also, our margins are largely in line with the domestic market. There also, unless there is a very significant change in the ASP, the overall kind of, you know, take rates would kind of, you know, largely remain on similar lines.
Don't expect too much of a change. Overall, if the fares come down, as is expected, hopefully with some relief on the crude oil side, and, you know, therefore kind of, you know, the impact passing through in terms of, you know, ATF costs, and therefore on the overall fares, then I believe we could possibly see an overall kind of, you know, increase on the EBITDA margins. Coming on the hotel side, again, you know, there has been a, you know, like I called out, you know, almost like 11.5%, quarter-over-quarter impact on pricing, which has come in. Hotels overall, we do believe will kind of, you know, remain in that broad range of about 17%-19%.
I think so long as we are in that range, this seems, you know, pretty much in line with expectations.
Okay. Got it. Just a quick follow-up maybe. On the hotel side, it used to be between, say, 20%-22% or pre-COVID, right? That has kind of come down to the 17%-18%. This is the sustainable number kind of going ahead, or how do we look at it?
Yes. You know, around 2018, it had peaked at about, you know, 23%, and we had called out back then that we would gradually want to bring it down to about, you know, into the high teens rather than being in the 20s.
Because you don't want, you know, high take rates being a, you know, an issue, you know, allowing entry for, you know, other platforms to kind of, you know, make inroads with the suppliers. Therefore, this was a conscious attempt to kind of, you know, get it into the 17%-19% range over the last few years. This is also happening in tandem with the significant, you know, shift in the promotional spends that we are doing in that category. As we kind of, you know, reduce the, you know, quantum of promotional spends that we are incurring, we kind of pass on some part of that, you know, back into the, you know, margin relief to the suppliers as well. Because guess what?
The suppliers are now kind of front-ending a lot of these, you know, consumer promotions. We've got to kind of keep located in that context. Yeah, pretty much happening on a, you know, in an organized manner.
Okay. Got it. Yeah, that's it from my side. All the best. Thanks.
Thank you.
Thank you, Aditya. The next question is from the line of Shantanu Sinha of Axis Capital. Shantanu, you may please ask your question now.
Thank you. My question is regarding the finance cost. Actually, it has gone up during this quarter. Can you tell me the reason for that? Also, on the influence side, what is the outlook of the company? Because it had optimized the employees' strength in FY 2021, so will it add back the employees? The third question is regarding cash spending. What exactly is the plan of the company regarding all the cash balance that the company has, whether it plans to give dividend or want to invest into the company? These are my three questions.
Yeah, sure. I'll take those. You know, on the finance cost, like I had called out, you know, one of the significant impacts, you know, this quarter has been the translation impact of our, you know, the INR balances into dollar, because, you know, the INR has weakened very significantly. So there's almost $11.5 million kind of a Forex restatement of liabilities, which is sitting in the finance cost, and that's the reason that you see the overall finance cost at a high of about $16 million. So it's more of one-off for the quarter because of the significant weakening of the rupee.
Again, you know, these are largely intercompany kind of, you know, payables, and therefore not a realized kind of a cost, more like a translation cost. That is one part of it. On the employee side, like we had called out, you know, the only place where we had kind of done a little bit of a pruning on the overall employee numbers was on our offline channel. You know, we used to have close to about, you know, 20 stores across the country, and we were already kind of in a program where we were trying to kind of, you know, convert many of them into franchise stores and also onboard new franchise stores.
As part of that effort was accelerated when we kind of, you know, when the COVID pandemic hit us, and therefore quite a few of these stores have actually now turned into franchise stores for us. They've not gone out of the system completely, but yes, you know, they are no longer kind of, you know, the folks over there are no longer on the payrolls of the employee, but are kind of working on a franchise model. That was predominantly the kind of, you know, change in the employee kind of, you know, structure that we had done through the pandemic. We are not looking at any kind of, you know, significant changes to the employee strength.
We would have possibly marginal kind of, you know, increase in headcount as the LG volume picks up, but nothing in large numbers. Lastly, on the cash balances, you know, we kind of have a good cash balance, and also we kind of, you know, are creating cash, you know, like I had called out in every quarter. We'll continue to kind of remain in the scouting mode for any investment opportunities. You know, we've already called out a few in the last few quarters. We'll keep kind of, you know, remain open to that. No real kind of, you know, plans or thoughts around any dividend payout strategy.
Thank you, sir. That was helpful.
Most welcome, Shantanu.
Thank you, Santhosh. The next question is from the line of Brian Wang of Maxim Asset Management. Brian, you may please ask your question now.
Hi. Morning, Vipul. Can you hear me?
Yes, we can hear you. Please go ahead.
Hi. Thank you very much for the presentation, and congrats on strong results. I have two questions, please. First one is on the air ticket economics. Again, could I please clarify how does this work? Is it a fixed fee per booking or is it a percentage of a transaction basis? And the second one is on domestic accommodation supply, especially as it relates to hotels. Could I please ask what are the plans to grow domestic hotel supply, and why have the number of domestic accommodations been flat since FY 2019? Thank you.
Yeah, sure. I can take the first one. You know, on the air economics side, like I had mentioned, you know, the changes are largely because our take rates are largely flat. Therefore, as the ASP kind of, you know, or the selling price kind of, you know, increases, optically the take rate percentage goes down or the margin percentage goes down. That's to address your point whether, you know, this is largely an effect of, you know, the increase in the selling price. Yes, it is largely coming in from there.
On the second point, you know, I think clearly through the pandemic there has been some amount of disruption and we kind of, you know, we're seeing most of the top selling kind of, you know, hotels have now kind of, you know, come back on the platform, and we continue to kind of increase, you know, more and more particularly on the budget side and also on the alternative accommodation side.
Yeah. If I may just add, Brian, just on top of what Mohit said on the hotel supply, there are absolutely no plans on slowing down on that. You know, I don't know which number you are looking at pre-pandemic, but you know, like I was just sharing it earlier, today our pan-India city level coverage has gone up from 1,600 cities to actually 1,900 cities. So we do have more additional coverage of, you know, properties coming in from all kinds of properties, including hotels coming in from 300 more cities. And like Mohit was pointing out, you know, during the pandemic, the hospitality sector obviously went through huge amount of disruption and it was slowly and gradually sort of coming back.
You know, some of the properties which were not functional last quarter, they became operational and functional. As it gets to the steady state, which is now increasingly getting to, our momentum will further pick up on the supply side. There's absolutely no slowdown on adding more and more supply on our platform.
Okay, great. That's good to hear. Thank you, Rajesh, Mohit, Vipul. Have a good evening.
Thank you.
Thank you.
Thank you. Thank you, Brian. We'll take the last question now from the line of Kalpit Narvekar of Allianz Global. Kalpit, you may please ask your question now.
Hello. Hi, congratulations on a good set of numbers, and thanks for taking my question. My first question, sorry, I might have missed this answer, but margins on the air ticketing have come off 100 basis points QoQ, right? This 6.1% kind of number, where do you see that settling given the pricing trends in the air market, so the 6% margins, where do you see it settling QoQ, if you could answer that?
Yeah, sure. Maybe I can kind of, you know, repeat that once more. Kalpit, like I had mentioned, this is largely happening because, you know, our margins on the air ticketing side are largely flat in nature. They are not necessarily a percentage of the overall selling price. Therefore, in a higher fare regime, you know, optically the margin percentage kind of, you know, looks lower. In a low fare regime, you know, optically the margins kind of, you know, look a lot more robust or a lot better. That's the reason for this change. Directionally, we've been calling out that we do believe that the margins kind of, you know, should stabilize in the 6%-7% kind of a range.
Just a follow-up. Is it possible to share any kind of, what is it, like for every booking you get, like, you know, $30-$40 or something like that? Is that how it works? How is it negotiated with the airline?
Actually, you know, the margin has kind of, you know, multiple revenue streams coming in. This will include what we get as commissions or incentives, you know, whether it is upfront incentives or rear-ended incentives from the airlines. It would include the service fee or convenience fee that we levy on the customers. It would also include, you know, the fee that we might receive from our GDS partners or the distribution partners. There are multiple kind of, you know, streams that kind of, you know, make up for these. What I was saying is mostly these are largely, you know, flat in terms of, you know, per ticket kind of, you know, amounts that we make, and therefore the percentage varies a bit in keeping with the overall fare regime.
Great. Thanks, Mohit. One more question from my side. On the margins, right? This quarter you were at about like 1% of adjusted EBIT margins on a-
Yeah.
on gross bookings basis, right? You're guiding going forward also, potentially 1% at the EBITDA level, right? Just to understand if you see marketing expenses going up 100 basis points or say 6%-7% from these levels, then another 150 basis points increase in marketing expenses. Which cost items or say on the mix side can you offset it by and is it possible to give some kind of a, you know, margin walk where you can offset this 100 basis points increase on marketing?
Yeah. See, that's the reason I was saying that while we are currently, you know, in this quarter also we've been actually able to kind of, you know, get to close to about 1 percentage points of gross bookings. It might kind of vary slightly, you know, going forward, depending upon how the recovery patterns kind of, you know, shape out. As we kind of, you know, build here on, we would also want to kind of restart some of the investments that we typically do on the brand side. You know, so the brand campaigns, those are more like, you know, slightly longer term impact expenses that you need to incur, which we have been avoiding for the last, I would say two years under the pandemic, right?
This is something that we'll kind of possibly start incurring as we get to kind of, you know, going back to pre-pandemic levels or recovering or even kind of, you know, growing from there. I don't think we're kind of looking at, you know, offsetting this from any of the other cost lines. Although, part of it would get offset from the fact that as we build growth here onwards, our mix should start improving on the hotel side and hotels has a, you know, better margin structure.
Mm-hmm.
which would mean that the blended margins could also slightly improve, and that will partially offset the increase coming in from the brand spend.
Thanks. Thanks, Mohit. That's really helpful. Thanks.
Most welcome.
Thank you, Kalpit. We are almost out of time. This brings us to the end of the call. Rajesh, any closing remarks and then we can close the call.
No, thank you, Vipul. I think they were good, all good set of questions. Thank you, everyone. Thank you for your patience. Thank you for your time.
Thanks, everyone. Bye.
Thank you, everyone. You may please disconnect. Thank you.