MakeMyTrip Ltd (MMYT) 2017 Q1 法說會逐字稿

Welcome to MakeMyTrip's Fiscal 2017 First Quarter Earnings Call. The Company wishes to remind you that certain statements made on this call are considered forward-looking statements within the meaning of the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance, and by their nature, are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call 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 is 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 June 14, 2016. Copies of this filing are available from the SEC or from the Company's Investor Relations department.

And with that I would now like to turn the call over to your host, Deep Kalra, Chairman, Group CEO and Founder of MakeMyTrip. Sir, please go ahead.

Thank you. Thank you, and welcome everyone to our fiscal 2017 first quarter earnings call. As we report on our first quarter's results, I want to share our enthusiasm for the long-term business opportunities within the OTA industry in India and for MakeMyTrip in particular. As the clear market leader, and with a brand that's synonymous with online travel in India, we believe MakeMyTrip is very well positioned to benefit from the country's massive 350 million and burgeoning mobile Internet user base. In addition, India's high annual GDP growth forecast of 7.7% according to Fitch Ratings is expected to provide a strong tailwind for the already healthy domestic consumption behavior and demand for discretionary leisure travel.

As a travel intermediary, we also welcome the recent policy reforms announced for our domestic civil aviation industry. The latest reforms announced last month will allow up to 100% foreign direct investment in both domestic airport operations and airlines, and seek to boost regional connectivity by leveraging underutilized airports in smaller cities and towns. These reforms, according to the government, are intended to take flying to the masses by making it affordable and convenient and aim to have 300 million annual domestic passenger trips by 2022 and 500 million by 2027, up from 81 million last year.

At the MakeMyTrip, we will undoubtedly benefit from these long-term macro tailwinds that will drive higher travel demand and faster online bookings adoption. We are also firm believers that our focus on delivering customers the best experience, especially on mobile, will differentiate us from competitors, widen our leadership position within the market and ultimately drive long-term sustainable and profitable growth.

To make all of this happen, we've taken great care and effort to drive a winning company culture that's focused on transparency, innovation, creativity and operational excellence, which has allowed us to attract and retain the best employees in the competitive e-commerce talent market in India. I'm pleased to say that our team's efforts and focus on culture has certainly been validated, as we were recently ranked Number 1 for 2016 by the Great Places to Work Institute within the e-commerce category in India.

Now let me share some of the key highlights of the quarter. We continue to clock very high transaction growth within our strategically important Hotel & Packages or H&P segment, driven primarily by standalone online hotel bookings, which now represent over 91% of all H&P transactions in the quarter. The strong growth in H&P also help us improve our non-air net revenue mix to nearly 60% for the quarter, in line with our long-term goal of shifting this mix to over 70%.

The outstanding standalone hotel transactions growth that we've witnessed in the last few quarters has clearly resulted in continued market share gains. According to the latest Millward Brown survey, in March, our share of domestic online hotel transaction reached 28%, which represents a solid 7 percentage points lead over that closest competitor. Further, we believe our lead is significantly higher in revenue terms in view of the stronger position we have in the mid to premium segment of hotels.

In the air ticketing business, the year-on-year growth in our domestic air transactions is over 37%. As per the DGCEI data, the year-on-year market growth during the same period was 21%, illustrating the strength of discretionary consumption by the large Indian middle class, driven by affordable domestic airfares from lower crude oil prices. The high growth in our domestic air transactions has resulted in us achieving a 16.2% domestic air market share in the reported quarter, which also means MakeMyTrip has nearly 51% share of the OTA air market and a substantial lead over the next closest competitor.

In Q1, our marketing team focused on driving further brand awareness in India to accelerate the shift from offline to online bookings. We launched a nationwide TV campaign, which we announced on our last earnings call, featuring well known Bollywood celebrities, Ranveer Singh and Alia Bhatt as our brand ambassadors. The messaging of these commercials were framed around removing any perceived blockers that were preventing consumers from booking hotels online. This TVC, along with various other brand building campaigns, including our free cancellation policy on hotel bookings, has yielded a 63% year-on-year growth of new users acquired and a 59% increase in total users and the highest ever number of hotel transactions in any given quarter.

In addition, our marketing team has partnered with banks in each region and leverage their large base of banking consumers to reach much of India that's still offline and also offered localized and targeted travel offers to new and fast growing cities via local media and vernacular messaging. The various brand campaigns had helped peak our online brand salience score according to Google. Furthermore, we've also increased MakeMyTrip's top of mind brand awareness to 45% according to Millward Brown's brand track record report.

Coming to CRM. As we continue to drive more traffic and consumers to our [flight] and apps, we have the ability to leverage our ever expanding CRM data in order to further personalize our consumers' experience. In fact, today we already have 10s of millions of data attributes which we use to deliver the right content to the right users at the right time.

As we go along via our blogs and other online content, we aim to be the primary go-to destination for Indian travelers to be inspired, conduct a research and ultimately make their travel bookings with MakeMyTrip.

Lastly, one of our core strengths is technology where we are investing to make our platform even more scalable and flexible in order to react to fast growing and changing online market conditions. We're also aiming to drive automation across as many facets of our operations as feasible. As an example, our mobile Extranet for hoteliers is empowering them to very quickly offer pricing changes, discounts and room availability on our hotel's platform, which maximizes returns for all parties. Today, a significant portion of the platform engagement with hotel partners now comes via the mobile Extranet app and we are currently leveraging vernacular demo videos to help hoteliers understand and ultimately drive adoption and engagement of the platform across smaller hotels in smaller towns of India.

The good news is that the new version of the Extranet has already logged a 3 times to 7 times quarter-on-quarter increase in supplier engagement and usage of the newly launched promos, content and payment sections. In order to support this ongoing technology investment, we had previously announced additional hiring of technology staff in our new Bangalore technology center. I'm pleased to say that the hiring process is going well and we are almost halfway through our hiring targets. More importantly, we've been successful in attracting high quality talent from top-ranked consumer Internet companies and Tier 1 colleges. This new tech center has already started contributing to products related to enhancing customer experience for users in low network areas and using lower quality devices.

During the 2016 Google I/O conference, our mobile apps were showcased by Google as an example of how one should build mobile apps for the masses with a focus on how effectively our app handles low bandwidth and low capability mobile devices.

Now I'd like to hand the call over to Rajesh to share more details of all the exciting things we're working on (inaudible) our new and existing base of desktop and increasingly mobile base of customers.

Thanks Deep, and hi, everyone. As you just heard from Deep, we've had a very busy start to the new fiscal year, working across multiple fronts to provide customers the best possible experience with MakeMyTrip. I would like to start by summarizing the progress we've made on mobile, which has been a key enabler to growth across our businesses, as illustrated by the 73% share in transactions of domestic hotels and 44% of domestic flights transactions booked via mobile in quarter one fiscal year 2017.

I'm also pleased to share that our total cumulative apps downloaded to-date has exceeded 23 million at the end of Q1 fiscal year 2017. And we now have over 5 million monthly active mobile users. Q1 was also the first quarter where more than half of MakeMyTrip's total online visitors came to us via their mobile devices.

In the quarter we made continuous improvements to enhance the experience across our mobile apps, for example our team worked very hard to reduce the latency of our mobile experiences down to less than five seconds of initial app launch, and less than three seconds on subsequent launches, which is impressive and important given the speed of Internet connectivity in India. Also, with each new version of our mobile apps, our team keeps lowering the total app size in order to accommodate lower end smartphones with smaller onboard storage.

Lastly, our team is continuing to test and squash out bugs within the apps to ensure a nearly 100% crash-free performance. In addition to building great mobile apps to attract users, we are also personalizing the mobile experience in order to re-engage and retain our mobile users. For example, our new app-based fare alerts service notifies users when flight prices fall for a fare they were searching for, which has resulted in some of the highest click-through and re-engagement rates of any app feature we've ever launched.

We are also reaching out to customers with unused mobile wallet credits in order to re-engage users with dormant app downloads. We have also experimented with instant refunds to solve a key pain point for many e-commerce users in India, today in view of the time, it takes across payment gateways to process refunds. Our instant refund allows customers to immediately get a refund and re-book another flight or hotel in the event of a failed process within the booking funnels.

During the quarter, we've also rolled out new features on mobile that will help keep our apps on users' mobile devices long after they have completed a booking, like Jeeves, our mobile virtual assistant. Jeeves was designed as a way to enhance the on-trip experience and drive have app retention after a trip is booked. For flight customers, Jeeves allows users to web check in when available and allows hotel customers to quickly find their hotel, while on their way to it. In the near future, you can expect Jeeves to have added capabilities to help our travelers during their trips.

We have also added a feature that once our travelers reach a hotel, the app will ask them to rate their hotel experience. If they rated negatively, our operations team will try to assist them in real time by talking to the hotelier and fixing whatever issues were reported. These recent enhancements and added features has allowed us to increase our mobile retention rates, which help us optimize our customer acquisition costs going forward.

Now let me highlight a few other enhancements made within our hotel business that's making it a better experience. Users will now see a personalized and relevant list of hotel results that are sorted based what our internal algorithm believes would make the most sense for that user. At the same time, users can also now search for hotels near one of millions of popular points of interest available like hospitals, schools and conference venues.

Lastly, you would recollect we had invested in HolidayIQ last year with the specific intent of building and leveraging their user generated content. We achieved this goal and we have now completely switched our domestic hotels reviews to exclusively use content available from HolidayIQ.com, which we believe has more relevant content and reviews for our base of domestic customers.

In terms of our hotel coverage, during Q1 our team worked to further broaden offerings to over 33,000 domestic hotels. They've also completed a necessary API integration with our strategic partner Ctrip to now offer customers access to an additional 40,000 hotels direct from their networks. These combined efforts provide customers access to more than 310,000 completely bookable hotels outside of India via our desktop and mobile platforms.

Now let me share some detail of our holiday's business during the quarter. In our holidays business, we are pleased to see modest transaction growth returning during the quarter despite softer demand for travel to our popular destinations due to terrorist activities in Paris and Brussels and continued unrest in Kashmir. Our teams quickly responded by curating destinations that they saw as highly desirable travel destinations for customers.

Given the high growth and high mix of online standalone hotels within the Hotel & Packages segment, we are now a refocusing our packages business towards achieving more profitable revenue growth.

Lastly, our air ticketing business has seen growth boosted by the fastest growing domestic civil aviation market in the world with seat capacity increasing over 21% year-on-year. Our marketing team utilize highly targeted and highly personalized campaigns, including leveraging banking alliances and our CRM database to reach customers in cities and towns where our share of the market has been under-represented. In Q1, our team also went live with a mobile fare calendar, a popular desktop feature that helped user find the best deals. Integrated our systems with Air Pegasus, a regional carrier based in South India and upgraded API interfaces with other airlines like AirAsia, Air India and IndiGo, which will improve the booking flow and drive further automation of our back-end processes. As for our international outbound air ticketing business, we continue to gain share amongst the OTA peer group with market share of nearly 50% and an over 27 percentage point gap over the next closest OTA.

Now let me hand it over to Mohit, who will provide a financial overview from the quarter.

Thanks Rajesh, and hello, everyone. I'd like to start by highlighting the record revenue less service cost of $58.9 million achieved in the first quarter of fiscal 2017, which was ahead of expectations. This represents a constant currency year-on-year growth of 62.6%. I'm pleased to report that this is amongst the highest year-on-year net revenue growth rate we've reported in a quarter in the last few years.

This quarter we have also reported the highest quarterly mix of non-air net revenues at 59.4%. Our air ticketing business achieved year-on-year transaction growth of 34% and net revenue growth of over 38%. As market leaders, we continue to grow ahead of the industry, which recorded a year-on-year growth of about 21%. We will continue to focus on volume growth in this business segment in the remaining quarters of the fiscal year 2017.

I'm pleased to report that our year-on-year constant currency net revenue growth in the Hotels & Packages business stood at about 90%. This was the result of a strong transaction growth at 260%. This transaction growth was driven by 478% growth in India standalone hotels booked online, expectedly driven by over 870% growth in mobile transactions. This was made possible with our increasing app download base, which now helps us get online standalone hotel orders from over 1,000 cities in India. It is also heartening to note that our online standalone hotel transactions grew 21% over the previous quarter, which has also seen about 507% year-on-year growth.

During the reported quarter, our adjusted operating losses were to the tune of $24.3 million, which is up $5 million quarter-on-quarter improvement over the last quarter's reported loss of $29.3 million. As we have called out in the last few quarters, the operating losses have primarily been the result of our two-pronged strategy of, firstly, driving significant market share gains through customer acquisition and inducement programs for standalone online hotel bookings.

And secondly, investing behind brand and category building media campaigns to drive online booking behavior by addressing perceived blockers based on customer insights, particularly in the deeper parts of India that can fast move online with increasing smartphone penetration. On one hand, this has helped us drive almost 2.5 times increase in overall visits to the domestic hotels segment of MakeMyTrip app or website. On the other hand, our quarterly repeat rate from customers in standalone hotels booked online in India has almost doubled over quarter one of last year.

Quarterly repeat rate (inaudible) repeat bookings in the quarter from customers who had booked their hotel during the last year. We are focused on building operating efficiency even as we continue on the high growth strategy, and this is evident from the reduced operating losses over the previous quarter despite a 21% quarter-on-quarter transaction growth in the standalone hotels booked online in India. This was largely achieved with more efficient marketing and promotional expenses. We achieved about 170 basis points improvement in our marketing and promotional expense, which as a percentage of gross bookings, has come down from about 11.1% in the previous quarter to about 9.3% in the reported quarter. The endeavor will be to continue with this disciplined approach of optimizing our marketing spend and actively managing our transactions for better unit economics across our entire product portfolio.

With reducing cash burn, we believe we are well poised to continue investing behind high growth, particularly in the online hotels transactions, leveraging our strong balance sheet with cash and cash equivalents of about $196 million as at the end of the reported quarter.

Lastly, it's also worth highlighting that in the last two reported quarters, we have been able to achieve our long sought pursuit of blended net revenue margin above the 10% level. This has been made possible with the increased non-air mix of about 60%, largely driven by growth in online hotels. Going forward as we scale the business, the focus would be on driving higher efficiencies in operating costs, including marketing and promotional costs in particular, which I've already talked about in greater details.

Now I'd like to provide our revenue outlook for the remainder of fiscal year 2017. We remain optimistic of the long-term business growth opportunities that are presented by India's low penetration in the online hotels market, as well as the growing domestic aviation market. Based on the strong first fiscal quarters, high revenue, less service cost achievement and the continuation of our high growth strategy to increase our India standalone online hotels market share. We are improving our outlook for the year with a year-on-year net revenue growth in constant currency to a range of 35% to 40% which will be a 10 percentage points increase over the previously rolled out growth guidance range of 25% to 30%.

With that I'd like to pass the call back to the operator for Q&A.

Thank you. (Operator Instructions)

Sachin Salgaonkar, Bank of America.

I have three questions. First question is, when we look at your take rate at hotels and packages, it has declined on a Q-o-Q basis, any particular reason what is driving that?

Sachin, last quarter was also the end of the fiscal, wherein you typically kind of see some amount of performance linked bonuses coming in and it was also a low season quarter, Q1 tends to be a high season quarter where the focus is more on ensuring that there is optimal inventory availability.

Hello Mohit, can't hear you.

Hey, Sachin, it's Jonathan. I believe -- trying to get him back on the line, so stay with us for a second.

Yes, Jon, this is Deep -- Deep is back on. Yes, we got disconnected, sorry about that.

Sorry. Sachin, are you still on the line?

Yes, I am.

Yes. Rajesh and Mohit are here too. Sorry about that Sachin, Rajesh was just saying we should take this.

Sachin, sorry, I just wanted to add to what to Mohit said, we should just take the same explanation even for air. You would have noticed quarter-on-quarter a small drop there as well. So it tends to happen towards the end of the year for sure. But also, if you go back in history, you would probably also notice that and I've always said that in the past, that quarter-on-quarter or between the quarters, sometime low season, high season, you would see some fluctuations because sometimes it's a function of specific deal with a particular supplier that you would be getting in a particular quarter and all. So I think we should just bear that in mind, and overall annualized margin on a year-on-year basis.

My second question is generally on your cash burn now. Is it fair to say that your cash burn has sort of peaked in 4Q and going forward, we could see a decline in that?

Sachin, at least for the reported quarter, we've seen a decline and that part I called out, of close to about $5 million compared to the last quarter. Now this is also kind of based on our growth aspirations and competitive dynamics. So while we expect that we'll continue to be on this path, we have to take it as we kind of get into the subsequent quarters and then take a call on it. But directionally, yes, we do believe we'll rank continue -- reducing the cash burn on a quarter-on-quarter basis.

Yes, if I could just add one more time, so fundamentally what we're trying to do, Sachin, is to obviously constantly keep working on finding out avenues where we can, with the less burn, deliver more revenue, which is what we try to deliver this quarter and that would be our endeavor. And specifically, I think it will be in that ballpark range, but we should see it close to -- see it rather linked to the growth numbers that we are delivering. So I would think that it will kind of go hand-in-hand with the kind of growth numbers. I mean, largely, you would see last quarter and this quarter 400%, 500% kind of growth being delivered, but similar kind of growth numbers delivered at the lower cash burn, so that's how you should think about it.

And my last question is generally on competitive intensity with Yatra getting new investment, the company clearly wants to focus on budget hotel space in a much more aggressive manner than what it used to focus historically. So does that increase the competitive intensity of that, what are your thoughts generally on the competitive landscape out here?

Yes. Hi, Sachin this Deep, I'll take that. So yes, Sachin I think clearly with this reverse merger or backdoor entry on the NASDAQ, I guess Yatra will have now funds anywhere between this range of, I guess it's $100 million plus, minus $20 million depending on how the deal pans out. And obviously this is an attempt to come back into the space they have [enquired]. We do believe that typically it's the weaker players who tend to get hurt much more, I think we've cemented our position very strongly both in air and hotels. So we don't expect that we're going to get that impact but we do of course expect Yatra to definitely up the marketing and the promo kind of trajectory that they've been on, we do expect to see some increase out there, but I think it'll be more other players who would be probably hurt by that.

Gaurav M, Citi.

Just had few questions. One is that you did not give details of ETB transaction number this quarter. So can you just share that number with us?

Yes, sure happy to do that. Increasingly -- the reason why we were not increasingly -- ETB was being -- as we had also shared in the past, if you would recall being consolidated with the hotel travel and therefore we probably would have excluded that, but we're happy to share that number.

And we'd specifically called it out last year, Gaurav because we were kind of directionally suggesting that we're kind of ramping down that particular business. But what we have clocked in this quarter is close to about 29,000 transactions in ETB.

The growth without the -- excluding 300 something, right? Excluding ETB.

And the growth in Hotels & Packages excluding ETB is about 322%.

Now the next question is, while you've mentioned on packages, there was some modest growth in the transaction segment and you're focusing more on the profitable part of the business. So does that mean that it's going to be more outbound versus domestic? And how should we look at packages now?

Precisely. I mean, definitely more focus on outbound and certain key destinations, domestic where the packages product is still very important. For example, Andaman and Ladakh are still very prominent destinations, Kashmir definitely when there is no disturbance happening, it's also a package destination and maybe one or two other key destinations in domestic. But a lot more focus on outbound packages because there the demand for packages is much higher. And this strategy is obviously linked -- this strategy linked to the scenario that we are witnessing is standalone a la carte online hotel booking growth, right? I mean, this goes hand-in-hand with that because there's so much of transaction growth that we are delivering on one side, obviously -- and especially in the domestic market. So obviously trying to encourage behavior of booking more and more a la carte and that's what is happening, which is in any case from just an operating business model standpoint is much better from a long-term standpoint. And therefore, more and more going forward, you would see within packages, our focus of moving towards outbound, and only certain key destinations of domestic.

Just last couple of questions. I think so Mohit 5 million active monthly users during the last quarter, what was this number, say for the fourth quarter? Just to get a sense of how (multiple speakers).

No, it was about -- in fact, the overall average for the last quarter was about 4.2 million and this quarter it moved up to 5.2 million.

Just last question, while you mentioned about the competitive intensity in Yatra, but between you all and Ibibo, you are the two players with any amount of funding and were sort of competing on the ground. The other players, I would have assumed would have become too marginalized over a period of time given lack of funding. So with Yatra coming into the picture, wouldn't the market share have to be necessarily taken from the top two players because the smaller place really don't matter as much or they don't have that much market share to take from?

No, I think the way to look that is slightly differently. So if you look at the air market, yes, we have a very large share in the OTA, which is about 51% as I called out and then the next competitor out there would be probably about 20 percentage points or so lower and then there is a long tail, we still have six or seven players. The positive impact of this is of course that market tends to grow as we've seen new players come in, focus on new segments, et cetera, it grows the market for sure, which we've seen in the past.

On hotel actually, it's further fragmented. So if you come to hotel and you see the market share and you're seeing, as we reported 28%, 21% and then you'll have a few players in the teens and then also some single digit. So I think it -- of course we will see how it plays out but we are obviously, I guess we've already shared given some kind of guidance on, not only on growth but even on burn, we are going to continue with a strong growth focus and we don't believe that we are going to lose any of that any of the share.

Can you give us any update on how you think OYO, Stayzilla, those kind of players in the market now? Are they (multiple speakers) competition has reduced?

Yes. And even before that, I would like to actually just call out the strength of consumer base and a well engaged consumer base. So while we are talking about 23 million downloads, just your previous question on MAUs or the monthly active downloads is very important once you build in a personalization kind of platform. So now we are able to reach users, engage them beyond their purchase cycle and also reach them with relevant offers. As we had mentioned with Jeeves, we're able to give them fare alerts, which keeps them engaged and they're seeing enhanced features like what they can do now with this to check in, to web check in, to share their check in experience at hotels et cetera. So a lot of the personalization actually helps, especially when you have a large base and that's going to be the focus, so it is two-pronged, one is to acquire new users, grow the base through marketing campaigns and also other promos and incentives. And the second is then to work very closely with the base we have as we know what segments -- what are the particular preferences, not only the geo locations, but the preferences where they like to travel, how they like to travel, and then we prime them with the right kind of offers at the right times. So I think that itself is a very big advantage that we now enjoy. So we intend to hold on to that.

Coming to your question on other competitors, OYO, I think what we have noticed is a change in strategy, and I think they've also spoken about it, we're seeing more and more that pre-booking has come down and this is now more about taking a full place, a guest house et cetera on lease and then trying to run that. So I think there's definitely been a slowdown out there and I think it would be a function of just the kind of high burn that they've done and then obviously the recent raises was not in the same amount as was expected, I think there was some reported numbers and then eventually, I think it was smaller.

So they have definitely come down in intensity. Stayzilla, we see a bit in the right stay model, so in our whole alternate accommodation, short-term rental market, et cetera, we see them focusing more there and in the ultra-budget segment, we don't actually see them so much in the three star and above, which is the area where we have maximum focus.

(Operator Instructions) Arya Sen, Jefferies.

Firstly, I wanted to understand the transaction growth number a bit better. I mean, where do you think it is coming from because clearly the overall market of hotel booking is not growing as fast. So is it to do with the share of online growing and if so, where you do think the penetration of online niche today as a proportion of the total hotel market?

Hey Arya, Mohit here. And clearly the larger part of this growth is coming in from the shift from offline to online because as we said, clearly the market is growing at this rate. [However,] in terms of what segments are we getting this growth from, I think that is --.

Arya, are you still there?

Yes, I'm still there. Yes.

However, as to this key segments from where this growth is coming, as Deep was calling out, we continue to kind of be focused more on the mid to the premium segment and even in the current reported quarter, with this high growth rate, our transaction mix continues to be skewed almost 70% of the transactions coming in from mid to premium segment of hotels.

Right. Where I'm -- sort of what I'm trying to ask is -- so because we had this broad number of penetration of online booking in India -- online hotel booking in India being somewhere between 5% to 10%, I think was a report long time back which talked about 10% to 12%. But clearly that seems to have been -- that does not seem to have been the correct number, right? So I'm trying to get a sense of where that number is today, because that will determine how fast we can grow going forward, right?

Yes. That number has clearly changed, Arya. So clearly that's what I was trying to allude in the first part of my response, that clearly this growth is coming in more and more from offline shifting to online. So clearly the online penetration number is now increasing. Now we don't really have a ready estimate on a third-party number to call out what the online penetration is as is the case of the air industry. But we believe this should be anywhere closer to about mid-teens.

Yes. So it's definitely improved. And with this kind of a growth, and you see this growth, Arya, happening not only with us, with other players in the marketplace as well. So the penetration is improving and that is kind of driving the growth. And fundamental reason for that -- underneath reason for that is mobile penetration. And as we called out that number, I don't know if you would have noticed that, we are now getting bookings from about 1,000 cities in India. So deeper penetration and people who were booking offline, people who were either booking on phone, calling up directly or walking in, because that was the large segment that was there about 35%, 40% would actually show up on destination than book. So they were like walk-in bookings about 35%, 40%. So that's one segment that's kind of moving mobile because you could book on the move even if it is last minute and stuff.

So from a headroom perspective, because I guess you were trying to get a sense of that as well, we think that this penetration, let's say it is close to 15% number today, we expect this penetration to improve to about 40%, 45% in the next three years to four years and that's the headroom for growth because we do very firmly believe that now this is only going in one direction, which is what had happened with air bookings few years ago, where the rapid shift from offline bookings to -- just using mobile and booking on Internet would continue to gain momentum.

And would it be possible to give some broad guidance of the transaction growth? I mean, you were doing that through last year, but now you seem to have moved back to giving only the revenue growth guidance. So possible to give any sort of broad number in terms of the transaction growth in standalone hotels?

Arya, the reason we are now staying away from it is because the trend is visible, the historical trend is visible. And for the last few quarters, since the time we've kind of changed our strategy. So now, I think there is enough historical data for you to be able to linking it with the sales promotion and as well as the marketing spend and all, and the kind of growth being delivered. I think it will be easier to predict. And that is why we thought it doesn't really make sense for us to just give guidance on transactions.

And also, secondly, on the margin, on the take rate front, so I know there was a classification of some sort last quarter. So just wanted to understand because now for the whole Hotels & Packages segment, you're almost at 17% and packages are clearly lower, right? So is it fair to assume that hotels is like 20% plus? And if so, how much of this is classification related and how much of it is reclassification and how much of it is improvement in take rates in hotels?

Arya, actually the whole purpose of the reclass last quarter was to try and show supplier margins clearly in the take rate rather than coloring it with any sales promotion expenses that we do. So therefore, I don't think this is getting driven by any reclassification process. I think this is the right way to look at it, we believe, so that you get supplier margins clearly known from the margin side. And whatever is market-facing, consumer-facing, customer-facing promotions, those are getting reported under marketing and sales promotions.

So that was just to try and kind of set the record straight in terms of how we kind of look at supplier driven margins. Clearly, the reported segment margin stands at about 17% and considering that hotels tend to be higher than packages, the margin on the hotel segment will be higher than the reported margin for the full segment. Just keep in mind that now effectively, as we had called out, close to about 90% of the transactions coming from hotels and therefore that will give you an indication of what the margin spread is between the two components of the segment.

Yes, it's driven by the mix change significantly. It is driven by the mix change because Hotel & Packages earlier used to be, from a transaction perspective, if you go back in history, like very close to 50-50 or more skewed towards packages, even if you go back little bit back in history and now it is completely changed on the other side. So therefore, the margin is kind of reflecting that mix.

But is there also any margin improvement that you've seen in the hotel side over the last say, three quarters, four quarters? The take rate improvement?

Margin improvement overall within the hotel segment, we have always been calling out, but as we kind of scale up volumes, our ability to drive performance linked bonuses in the hotel segment will also continue to improve. And this is kind of something that we've seen also in the air segment and needless to mention, we would see, continue seeing it in the hotel segment as well where the supplier base is much larger. So yes, that has been happening over the years. You would also recollect, we've always been guiding that we expect to take the overall business blended margins closer to about 10% as the orders and packages segment grows in the business mix and gets more and more driven by standalone hotels or domestic hotels. I think you're seeing that play out and therefore and I had called out that we are seeing for the last two quarters, our blended margins coming at about 10% plus.

Lloyd Walmsley, Deutsche Bank.

This is Kevin LaBuz on for Lloyd. Just wondering, aside from the growing standalone hotel mix, is there anything else that drove the improvement in take rate this quarter? I've got a follow-up as well. Thank you.

Hi, Kevin. Predominantly, the expansion that is kind of coming from the growth in hotels, and that is what we have been calling out for a long time, that we do believe the sustainable margin improvement will happen as we kind of keep increasing the mix of hotels within our business mix.

And now that the exclusivity period on TripAdvisor (inaudible) over, just wondering if you guys have any interest in joining that program? Thanks.

Well, we've been -- actually that's a good question. We've been thinking about it, and I don't know if they have already called out the exclusivity period is getting over, we've been kind of in constant touch with them. At this point in time, frankly we don't think there is any merit for us to join in India, in the Indian market, the situation is very different, as you know we've invested in HolidayIQ as well and we're getting user generated content reviews more from them. And they have actually helped us quite well as well because we are trying to kind of influence and get more and more relevant kind of review content, user generated content through HolidayIQ. And specifically on InstaBook participation, we at this point in time, we will continuously keep evaluating it, but we don't think it makes sense at this point in time.

Ashwin Mehtha, Nomura.

Just wanted to get a sense in terms of what could be the approximate mix of your H&P revenues between packages and hotels now, you give out a number in terms of transactions?

Ashwin, clearly with the significant growth coming through in hotels, the revenue mix is getting more and more loaded in favor of hotels within the H&P segment, that's close to about, I think about two-thirds of the segment now kind of comes in from hotels.

And secondly, in terms of the take rates in the air ticketing business at around 6.5%, we had earlier indicated that over a period, you see them going down to 5% to 5.5%, but is there anything changing in terms of the market, which could make the take rates stay higher, especially given the number of players that are emerging or the expansion in terms of the market and your 51% market share in the OTA space, does that change things in terms of take rate or you still stand by your view of take rates falling over a period?

It's a great observation, Ashwin, and I would still say from a mid-term to long-term perspective that we would stand by with what we had been talking about, we would see some pressure. I think we've been kind of lucky in the past few quarters where overall aviation market has just been booming because of the fuel prices being down and the transaction, overall market has been growing phenomenally and our volumes have been growing better than the market overall growth et cetera. And therefore, you feel less pressure from the airlines overall. And also if the prices are down, even the convenience fee kind of holds on, if you will. But I would not take like a firm long-term view on something fundamentally changing in favor of increasing in air margin. I would still -- we will keep kind of watching this space quarter-by-quarter. I think, we would continue to get some benefits as the market is steady and improving, but there will be time at some point where there would be pressure. So therefore, maybe a quarter or two short-term view is that it would hold around these levels, maybe around 6%, but mid to long term, I would still think that there will be depression on this.

So, Ashwin Mohit here, just to add, this optical percentage increase -- percentage margin, which is holding out higher than expected also comes in from the fact that air prices have been lower over the last couple of quarters, in line with the crude oil situation. So it's also a factor of what kind of pricing prevails and how long this low fare pricing will continue. Just thought we'll call that out.

Yes, that's true.

And just one last question in terms of from a competitive dynamics perspective. So you have now got effectively three players who are funded. Does that make the market more rational going forward in your view, or you think the guys who possibly lost out and now they've got funding, they start to get much more disruptive versus what they have been earlier?

It's a good question and I think it's the nature of the funding of Yatra which makes us quite interesting, because it is a listing, whether it's a reverse merger, backdoor entry, whichever ways, so they're going to be listed on NASDAQ. So we actually welcome a comp the first time we're getting a public comp from the same market. We think that will be good and that will work well for us, given where the product mix now is with hotels, how the growth has been going et cetera.

But in the private space, there is of course still Goibibo. So I think it's very, very hard to predict given what we've seen in the last few quarters, also promised funding is not necessarily happening, a lot of change in lot of dynamic, lot of stuff going on in the market. So I think next two quarters are quite crucial. And it's hard to actually, I think crystal gaze, but I think just the fact that the hotels market has now opened up appreciably, best estimate could be 15%, 16%, in some cases even 20% plus in the segments we care about of the online penetration is close to a quarter. So I think it's done its job in a good way. So even if discounting were to come down, I don't think people who bought a hotel online in India through a good channel are going to go back to buying it offline, if some amount of the discounts go down.

So further out, definitely expect a tempering down, I don't think the party can last forever, from a consumer point of view. And from a Company point of view also, I think like we called out, we are very closely watching the efficiencies and we shaved off almost $5 million in cost with around -- keeping same to same quarter-on-quarter. So I think you're going to see more of that happen from our side for sure. And I'm sure others will also be looking at similar stuff. Thank you.

And I'm showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's call. This does conclude the program and you may all disconnect. Everyone, have a great day.