As Morgan Stanley and Goldman Sachs turn match-makers in the marriage of MakeMyTrip Limited and Ibibo, two of India’s largest travel booking portals, consumers receives the news with joy and gladness. The trend set by increasing number of mergers in the global travel industry makes the impact look promising.
The ever growing expansion of the travel industry that accounts for one out of every 11 jobs globally, has been conducting many a calculated experiments with the market players entering liaisons in the pursuit of seeking greater control over the market, invariably sounding the death knell for players in a shared economy. The most talked about merger of Marriott International and Starwood Hotels and Resorts, French company Accor Hotels’ acquisition of FRHI Holdings (the parent company of Swissotel, Fairmont and Raffles), Alaska Airlines and Virgin America wanting a larger piece of the sky together, all make 2016 the year of conceding and making friends to ward off the greater foes. This attempt to revamping business models in the trailing of capturing economies of scale, upping the face of products with an objective of providing better quality and most importantly, seeking a convergence that aids sustained profitability is an indicator of the seeming insecurity in an increasingly competitive market. Size indeed matters, and Indians look at the MakeMyTrip and Ibibo merger from a bigger-the-better perspective.
The consequence of tying the knot
It’s been a big week for the @Naspers Ecommerce team: on Friday the $3.25B exit from Allegro, and today the merger of Ibibo and MakeMyTrip !
— cristina berta jones (@cristinagberta) October 18, 2016
MakeMyTrip did not stay out of the news since its announcement of becoming a travel partner for the Global Citizen Festival India 2016 (GCFI). Cox&Kings shrugged when it heard of how South Africa’s Naspers (a conglomerate that owns India’s favourite classifieds portal Olx and has an important stake in valued e-commerce company Flipkart) and China’s Tencent (an internet mid-size giant that owns weChat) were catalysing the merger in an all-stock-deal. Netizens are evidently excited.
— TheSwamy (@TheSwamy) October 18, 2016
Online travel portals MakeMyTrip and ibibo announce merger https://t.co/LRFf7sDmwJ makes sense….the space was getting too crowded.
— Amit Paranjape (@aparanjape) October 18, 2016
— gopinath BANDARI (@themidnightrage) October 18, 2016
The coming together of two entities invariably leads to a larger buying house that can negotiate between greater margins owing to the scale, itself. Earlier this year, Yatra, another big name in the Indian booking portal business, announced a reverse merger deal with Nasdaq listed American company Terrapin 3 Acquisition Corporation (TRTL). The optimum use of infrastructure is perhaps one of the best outcomes of such mergers as the consumer’s experience is improved by drawing more attention towards customer care, wider accessibility, opening up of newer prospects in the travel and tourism sector. The cost of operations too, is significantly reduced. The market-share disclosure for this merger-scenario is still a hush-hush affair.
Previously a loss-making entity, MakeMyTrip (Nasdaq enlisted), has already started seeing a stock-market soar. While consumers hope that other names in the industry step up to not let the merger turn out to be a market monopoly, so far, the travel and tourism industry in India is smiling broad at this prospective happily-ever-after affair.