EaseMyTrip (EMT) is navigating a challenging path as it struggles to maintain its market share in the highly competitive online travel agency (OTA) space. Despite efforts to diversify its business model, the company’s focus on acquisitions and expansion into non-core segments raises questions about its long-term strategy.
Declining Market Share and Competitive Pressures
EaseMyTrip’s market share has been under continuous pressure, as evidenced by its declining Gross Booking Revenue (GBR). Comparatively, market leader MakeMyTrip has shown robust growth, outpacing EMT significantly. While EMT’s GBR share in its revenue mix has improved due to higher commissions from hotel bookings, the overall decline in market share highlights the intense competition in the OTA space.
Shift Away from Air-Ticketing Revenue
A key part of EMT’s strategy is reducing its reliance on air-ticketing, which contributed 64% to its total revenue in the September quarter, down from 82% in the same period last year. While this indicates diversification, it also reflects shrinking margins due to fierce competition and high discounts.
Rising Costs and Margin Pressures
EaseMyTrip’s cost structure, once an advantage, is becoming a concern. The total cost as a percentage of GBR rose to 5.2% in the September quarter from 3.8% in Q2FY24. This increase is largely attributed to aggressive discounts and integration costs from multiple acquisitions. With competition driving down ticketing prices, maintaining profitability remains a challenge.
Diversification Strategy: Strengths and Concerns
The company’s diversification efforts include equity investments in hotels and ventures into unrelated businesses like electric bus manufacturing. While EMT’s Dubai operations show promise, contributing to the GBR, their overall impact on the business remains minimal, with single-digit contributions to revenue. Moreover, the lack of consistent disclosure around acquisitions complicates assessing their financial benefits.
Comparison with Market Leader MakeMyTrip
EaseMyTrip trades at a significant discount compared to MakeMyTrip in terms of valuation. This disparity may widen further given EMT’s declining market share and strategic challenges. MakeMyTrip’s strong brand presence and diversified revenue streams position it as a preferred choice for investors seeking exposure to the growing travel and tourism industry.
Travel and Tourism Industry Outlook
India’s travel and tourism sector is poised for growth, driven by increasing disposable incomes, better infrastructure, and growing demand for domestic and international travel. However, for EMT to capitalize on this opportunity, it must address its strategic and operational inefficiencies.
Investment Perspective: Should You Bet on EaseMyTrip?
While EaseMyTrip offers a low valuation entry point, its challenges—declining market share, rising costs, and an unfocused diversification strategy—raise concerns about its ability to compete effectively. Investors may find better opportunities in companies with proven track records and clearer strategies in the travel and tourism space.
