Categories Analysis, Leisure & Entertainment

It’s going to be a tough journey for MakeMyTrip (MMYT)

The ongoing global COVID-19 pandemic has severely disrupted the way we live and carry out our everyday lives. Starting from China in January, the travel restrictions were imposed across the world to combat COVID-19. Travel, tourism, and hotel are some of the worst affected industries because of the global pandemic.

COVID-19 impact in India

The Government of India implemented the lockdown from March 25, 2020. The travel bans and quarantine requirements have had a significant negative impact on the travel industry. The impact of COVID-19 has drastically curtailed travel demand in terms of consumer sentiment and their ability to travel. This resulted in airlines and hotels in India and around the world operating at significantly reduced capacity.

MakeMyTrip (MMTY) - Q4 2020 earnings - revenue

Q4 results

Last Friday, India-based online travel company MakeMyTrip (NASDAQ: MMYT) reported its fourth quarter 2020 results. Revenue reduced 12.7% annually in the fourth fiscal quarter. On an adjusted basis, revenue declined 16% year-over-year. Loss per share stood at $3.20, while gross bookings reduced 12% to $1.2 billion. MakeMyTrip’s Q4 financial results reflected the decreased revenues in air ticketing, hotels and packages segments and a slowdown in bus ticketing revenue growth.

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As news flow of COVID-19 outbreaks in Southeast Asia and Europe increased in the last week of February, cancellations of tickets started and bookings declined across the company’s outbound travel products. Starting in March, reports of increased COVID-19 infections in India began to dent the demand across all domestic lines of business.

Cutting costs

In March, MakeMyTrip announced that it will sharply reduce variable costs like advertising, sales promotions and payment gateway costs, along with optimizing IT infrastructure and expenses relating to the functioning of its offices and other establishments. The company also canceled all discretionary spending like events and training and suspended brand-building expenses. On the people front, both Chairman Deep Kalra and CEO Rajesh Magow took zero salaries effective April 2020. The rest of the leadership team has also offered to take a 50% cut in their compensation.

MakeMyTrip - COVID-19 cases

Long climb ahead

According to Worldometersinfo, 10.6 million people have got COVID-19 as of writing this article. The graph here shows the Top 4 countries that are affected by the pandemic. India stands at the fourth place currently in total cases and it’s also third in active cases. Considering the rapidly increasing confirmed cases, India is expected to surpass Russia and reach third place in a few days. This scenario makes the situation worse for MakeMyTrip.

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However, MakeMyTrip expects that leisure and discretionary travel to gradually bounce back in India and other parts of the world once the virus is adequately controlled or when a vaccine is developed. Also, MakeMyTrip expects online booking for travel and hotels to increase gradually once the pandemic gets over. The company expects essential business, family and medical travel to be one of the first drivers of the pent-up travel demand. In hotels business, the company had introduced free cancellations and enhanced pay later options to ease the customer’s future bookings. But it will take many quarters for MakeMyTrip to come out from these challenging times.

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