Why MakeMyTrip's CEO sees India's soaring aviation sector hitting a road bump

While domestic flights have experienced double-digit growth so far this year due to high demand and limited supply, Magow said that short-term challenges like limited flight availability and the rising preference for road travel due to improved infrastructure might slightly moderate the aviation sector's growth.

"In terms of airlines, the supply is constrained and it is trickling in. The prices in airlines will get fixed when the additional supply comes in by next year. Aviation may have also lost out a little bit in favour of ground transport, as road infrastructure in the country is getting better," he told Mint. 

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Despite these factors, Magow believes that the travel sector will still see robust growth. “The overall travel and tourism growth for the next two, three years is going to be in the double digit between 10-15%," he added.

When it comes to room tariffs, there may be little to no relief for travellers during peak events like concerts, events and during holiday seasons, but hotel rates, in general would remain moderate. "This year we have noticed that hotel rates have increased only 3-4% over the same period last year across the board. Barring large events and concerts and increases during peak seasons, when rates tend to be high, I don't see hotel rates as an issue because there is also a growing availability of alternative accommodations which travellers are picking from," he added.

Performance and evolving trends

In the latest quarterly update last week, Nasdaq-listed MakeMyTrip reported a 24.8% year-on-year revenue increase, reaching $267.4 million, driven by heightened demand across various travel services, particularly air ticketing (up 18.6%), hotels and packages (up 17.2%), and bus ticketing (up 31.7%). The company also saw impressive growth in ancillary services like car rentals, rail, and insurance, which surged by 110.7%. Net profit for the quarter rose to $27.1 million, up from $24.2 million a year ago, while adjusted net profit increased to $44.9 million, compared to $38.9 million in 2023.

Magow highlighted the growing significance of religious tourism for the company, with a 20% increase in room nights sold at spiritual destinations in the final quarter of 2024. 

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“In UP, spiritual destinations grew at 40%, led by Ayodhya, Varanasi and Prayagraj," he said. He added that the evolving nature of religious travel is attracting a broader range of travellers, not just budget tourists. “It is the experience of it that’s attracting a lot of travellers," he said. This sector’s growth is contributing to the broader expansion of the travel industry.

On outbound travel, Magow expressed optimism despite the depreciating rupee. “Indians always find a way. When traditional international travel destinations become more expensive, they will find an alternative," he said. He pointed to countries like Japan, Azerbaijan, and Turkey as examples of more affordable options for Indian travellers. “A similar thing happened with Azerbaijan, Turkey, Greece, Spain, Georgia and others."

MakeMyTrip’s hotels and packages business also saw a strong performance, growing by 17.2% to $147.1 million, with both domestic and international bookings contributing to the rise. Additionally, the rise in alternative accommodations, such as homestays and villas, has been a key factor in growth. “We’re growing on that side and we are either at par or more than the largest alternative accommodations business here in terms of our inventory," Magow said. Alternative accommodations now represent 45% of the company’s business, while flights and hotels make up 34%.

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He said that despite the growing demand for alternative accommodations, the hotel business remains strong due to its higher margins. "The margins in hotels will keep growing...," he said, reaffirming the company’s optimistic outlook for future growth across all travel segments.