MakeMyTrip (MMYT) Q3 2022 Earnings Call Transcript

MakeMyTrip (MMYT -3.76%)
Q3 2022 Earnings Call
Jan 25, 2022, 7:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, everyone. We're starting the earnings call now. I'd like to now turn the call over to Vipul, please.

Vipul Garg -- Vice President, Investor Relations

Thank you, Lutchee. Hello, everyone. I'm Vipul Garg, vice president, investor relations at MakeMyTrip Limited. And welcome to our fiscal year 2022 third quarter earnings webinar.

Today's event will be hosted by Deep Kalra, our company's founder and group executive chairman. Joining him is Rajesh Magow, our co-founder and group chief executive officer; and Mohit Kabra, our group chief financial officer. As a reminder, this live event is being recorded by the company and will be made available for replay on our IR website shortly after today's session. At the end of these prepared remarks, we will also be hosting a Q&A session.

Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties, and actual results may differ materially. Any forward-looking information relayed during this event speaks only as of this date.

And company undertakes no obligation to update the information to reflect the changed circumstances. Additional information concerning these statements are 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 July 13, 2021. Copies of these filings are available from the SEC or from company's investor relations department. With that, I would like to now turn the call over to Deep.

Over to you, Deep.

Deep Kalra -- Co-Founder and Executive Chairman

Thank you, Vipul. Welcome, everybody, to our third quarter earnings call of fiscal 2022. I sincerely hope everyone joining us today is keeping safe and healthy. Let me start by giving a quick update on the COVID situation in the country.

India, like other countries in the world, is going through another surge driven by the omicron variant. This wave started in December 2021. And while the positivity rate continues to remain high, India's vaccination coverage gives hope and assurance that the severity of infections this time around will remain low. It is definitely reassuring to see that the country's cumulative vaccination coverage has crossed 1.6 billion, with over 72% of India's adult population being fully vaccinated.

Around 52% of children in the 15- to 18-years-old age group have also been inoculated with the first dose of the vaccine. Going by predictions of health experts, India should soon start seeing decline in the number of daily new infections. Travel in India, much like other countries, also slowed down with the onset of the omicron wave, albeit with relatively lower travel restrictions than the previous waves. As the severity remains low, the country continued to see domestic travel being undertaken in the form of essential travel but with caution.

Leisure travel has understandably taken a backseat temporarily. That said, overall travel sentiment remains moderately high, with people waiting to hit the road again, as the situation begins to ease out in the coming months. During the reported third quarter financial year 2022, domestic travel witnessed a strong recovery, riding on the back of pent-up demand, further fueled by festival travel and winter holiday season. Unfortunately, as omicron began to spread in December, we saw demand for leisure travel sliding down toward the end of the quarter, although broad travel sentiment remained considerably higher during the quarter.

As a result, the good news coming out from the reported quarter is that we recorded our best adjusted operating profit during the pandemic. The past two years have been tough. But the silver lining is that similar to global trends, India has gained momentum in becoming a truly digital economy with significant improvement in online buying behavior. Studies indicate that e-commerce in India has seen tremendous growth across the country during the last two years.

It's heartening to note that Tier 2 and 3 cities in the country are now transacting online more than ever. And tools by this new base of internet users and increasing online penetration, we are focusing on growing the penetration of online travel bookings by making the end-to-end process of planning and booking travel simple and convenient for buyers across Tier 1, 2, 3, and the hinterland. This is one area where I believe we have made tremendous progress in the last quarter, from launching the platform in Hindi language, India's largest native language, to supporting regional air connectivity by powering Uran or the regional flights on our platform and the government's AirSewa portal to introducing real ticket booking service on redBus with IRCTC and more. We are committed to bringing more Indians to make their first-ever travel booking online.

We are also aggressively ramping up our efforts to build travel products that are more inclusive and diverse. I must mention that along the journey of building products for all, we are also focusing on personalizing the experience of each user to make the booking experience more relevant and meaningful across all our platforms. With the third wave expected to subside soon, we believe 2022 holds better prospects for the entire travel and tourism industry. We have seen strong recovery of demand following the previous waves, giving us adequate optimism for a strong recovery post the omicron wave as well.

We also believe that with our recent investments in new platforms like myBiz, myPartner, hosted app feature for homestay segment, and others, we are well-poised to tap into new demand segments. My optimism is further fueled by the latest developments in the U.S., U.K., and other parts of Europe, where restrictions have begun to gradually ease. We believe that the recovery in travel demand post the third wave will be led by domestic travel. While resumption of scheduled international flights has been postponed until February 22, we can expect graded opening up of destinations for Indian travelers in the next fiscal year.

In the previous quarter, while only few international destinations were open for fully vaccinated Indian travelers, we observed a steady increase in bookings to destinations, including the Maldives and Dubai, on our platform. I'm pleased to also share that recently, MakeMyTrip was recognized as the only Indian travel company to be honored with a Top Producer Award at Travel Trade in the Maldives. I would also like to briefly talk about our corporate social responsibility, or CSR, initiatives and especially the ones that focus on taking care of those impacted due to the ongoing health crisis. As part of MakeMyTrip Foundation, we have launched a scholarship support program, Padhte Raho, Badhte Raho, for underprivileged students who unfortunately lost their parents due to COVID.

We are also closely working with the government of India, Ministry of Tourism, and other not-for-profit organizations, such as Tata Trusts, to boost community-based tourism and extend support in scaling up travel infrastructure across the country. With that, I would request Rajesh to share highlights from the last quarter.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Thank you, Deep, and hello, everyone. As Deep mentioned, India, like many other countries, is also battling its way through the third wave. But thankfully, while this virus variant is highly contagious, it is less severe. With a higher rate of vaccination and less hospitalization, there is hope of this wave subsiding soon.

While essential travel is continuing even in the middle of this wave, our growth-oriented performance in the reported quarter is a strong indicator that as the situation eases, India will jump back to traveling further leisure trips. We continue to stay watchful of the situation on a daily basis and are managing the business accordingly. Now, let me share some highlights from the previous quarter. I'm happy to share that we recorded one of the most profitable quarters of the year, linked to strong business growth coming in from pent-up demand.

On gross bookings, we grew 95.1% over the same quarter in previous year and 58.5% over Q2 in constant currency terms. In our air business, we continue to stay on an upward recovery trajectory, following the momentum picked up during July to-September quarter last year. The good news is that we have managed to recover faster than the market in our domestic air ticketing business, touching 68% year-on-year growth in passengers flown. Festive travel season further propelled demand, with November recording highest daily segments during the pandemic.

Huge surge in demand came from domestic leisure destinations that accounted for 94% increase in volume of tickets as compared to the same quarter last year. On the other hand, international travel demand recovery continued to be slow overall, with the exceptions of Maldives and Dubai, where we saw robust growth. On the product side, we launched MakeMyTrip bundles, a custom fare option, that allows customers to bundle various convenience-based offerings, such as zero cancelation, travel insurance, airport meals, and cabs in one booking. Moving on to our hotels and packages business now.

Our domestic hotels and packages business saw a robust quarter-on-quarter and year-on-year growth during the third quarter. We recorded year-on-year growth of about 125% in constant currency terms and gross bookings. We also recorded highest check-ins during the pandemic for the Christmas weekend, although the bookings had started to dip by that time as the third wave was setting in. While B2C platform showed solid recovery, growth was also partly aided by our corporate platforms, namely myBiz, Quest2Travel, myPartner B2B platform.

I shared earlier, our myPartner platform aims to deliver on its promise of empowering travel agent partners with quick and easy access to our wide range of inventory across hotels and flights and more products in the future. We are now ramped up to currently about 22,000-plus registered travel agents on myPartner. And we are adding around 1,500 agents every month. On various segments of hotels, while premium hotels continue to lead recovery, glad to share that budget- to mid-segment hotels have also started to see pickup in demand, leading to inclusive recoupment of all price segments over the last quarter.

On our homestay segment, bookings for villas managed to surpass pre-pandemic numbers. On the product side, we continue to strengthen our offerings for the hotel segment. We have scaled up packages across 450-plus premium hotels and are beginning to see great traction on both supplier, as well as consumer side. We have further refined the user-generated content collection flows, mobile site, and post-sales flows.

On Goibibo, we introduced daily steal deals to make booking through the platform more value-driven and rewarding. In Q3, we also introduced insurance-driven products to help make travel planning worry-free amid the ongoing uncertainty. These included zero cancelation fee on any last-minute cancelations and more. On our homestays product, I'm excited to share that we recently launched the beta version of our in-app host feature called Become a Host.

The feature allows accommodation owners to list their villas, apartments, and other independent properties on the platform in just a few clicks. We're already seeing early wins here since its soft launch. In parallel, we continue to stay focused on enhancing our products to further improve the booking experience. We have also ramped up homestays inventory further and closed the quarter with about 30,000 properties, recording a 66% increase in supply over pre-pandemic.

On the holiday packages side of the business, we saw 2x bookings in domestic packages sold when compared with the same quarter in 2019. On the other side, while bookings for international destinations remained muted, Maldives that was open for vaccinated travelers registered 300% growth over the same quarter during peak overtimes on our platform. Now, I would like to share updates on our bus ticketing business led by redBus brand. This business has been a -- has seen a significant quarter-on-quarter growth of 77% in gross bookings.

During the quarter, as the festive season added to the travel demand, along with well-timed fuel price reductions, we saw 93% private supply and 102% Regional Transport Corporation operators supply coming back online. Apart from bringing back supply, our focus remained on driving personalization and customization of booking experience on the platform, such as introduction of boarding point, dropping point feature. We also introduced customized nudges, persuasion triggers based on parameters, such as on-time performance, and ratings from similar cohort of travelers who help customers choose the right bus service. Furthermore, our Primo program for top-rated sellers is taking shape nicely.

We now have close to 1,800 Primo-branded buses across the length and breadth of the country. And this is already helping build good top-of-the-mind awareness. It is encouraging to note that about 85% of customers who took our Primo services state that their next trip would also be on a Primo bus. We have launched a number of new initiatives to differentiate the Primo experience, including an ongoing Primo launch pilot at one of the popular bus boarding point in Bangalore.

I'm also happy to share some exciting news coming from overall ground transport business. While MakeMyTrip and Goibibo platforms have been offering rail booking services for a while, we have now launched redRail on our redBus web platform and have plans to have a redRail app soon as well. Through redRail, we aim to leverage the customer overlap between bus travel -- bus travelers on redBus, who also happen to be a part of India's large train passenger base. Another initiative that also kept our ground transport busy during this period is the pilot launch of Ride, a network of cab franchisees across the country that operate on the Ride's umbrella railways, with superior technology at the backend.

It powers all aspects of booking, fulfillment, and travel, and will help improve the reliability of supply. Currently, we are running a pilot in Delhi NCR and Bangalore and plan to scale this up in other cities in the future. With these new initiatives, we hope to build on the strong brand and user base of redBus to create leadership positions in ground transport categories other than buses in the future. Moving on to our corporate and SME travel business, while business travel overall saw a sluggish recovery pattern, but for us, the growth was robust this quarter, partly aided by new accounts acquired over the past few quarters.

We recorded 122% recovery in comparison to the same period in fiscal year '19, '20. More than 250 key accounts, 340 SMEs were onboarded on myBiz during this quarter. On Quest2Travel also, we celebrated some big wins. We bagged accounts of 11 large groups, including Tata Capital, Nykaa, and K Raheja Corporation, and more.

Now, sharing updates from some of our recent strategic initiatives. We continue to invest in our fintech initiative called TripMoney. After having launched successful products including travel loan, or book now, pay later, and insurance offerings, we are ready to launch forex card on MakeMyTrip and Goibibo. As international travel picks up in the coming months, we are confident that this card will make its way into wallets of Indian outbound travelers.

In GCC, during the last quarter, our focus was on building supply modes and products for best-in-class booking experience for Indian nationals, other experts, and local Emirati population. Happy to share that there was a 96% quarter-on-quarter increase in new user acquisition in Q3, albeit at a low base. Our focus will continue to remain on increasing our penetration in the region, considering that 93% of UAE population uses the internet on a daily basis as per research estimates. Lastly, allow me to give a short update on our loyalty programs.

To continue extending value to our loyal customers, we organized the MMTBLACK Fest, a sale campaign ran in partnership with key hotel and flight partners, which has received positive feedback from our customers. Since the launch of the program, about one lakh user has been added to the top two tiers of MMTBLACK. And 72,000 users were able to upgrade their deals by transacting for more than one lakh gross booking value on the platform. For Goibibo, loyal consumers under goTribe, we further simplified the flow of Tribe Coin or goCash redemption, helping improve usage by 94% in the quarter.

We also launched personalized instant cashback engine on Goibibo to reward consumers with instant goCash to offer more value against a single booking. With this, let me now hand over the call to Mohit for financial highlights of the quarter.

Mohit Kabra -- Chief Financial Officer

Thanks, Rajesh. Hello, everyone. I hope you're all staying safe and healthy. The report for the third quarter of the fiscal year started on a positive note, with customers more confident than ever to step out of their homes and plan a much-needed holiday break.

Strong supply side recovery across all travel segments, further boosting demand side momentum during this high seasonality quarter. Since international travel was strictly restricted during this quarter, domestically hit destinations in India saw a major recovery before bookings were slightly hit in December due to the omicron scare and the beginning of the third wave of the pandemic in India. Over the last few updates, we have spoken about our cost optimization efforts through structural reductions in fixed costs and building efficiencies in variable costs like marketing and sales promotional expenses. In Quarter 3, we could see the multiplier effect of these cost efficiencies, which aided by demand recovery, led to a doubling of the adjusted operating profits compared to the last quarter.

Our adjusted operating profit for this quarter stood at $13.2 million, which is almost two times compared to $6.6 million in Q2 and almost 2.6 times compared to $5.2 million reported in the same quarter last year. Adjusted further for noncash depreciation and amortization expenses, the current quarter's adjusted operating cash profit reached nearly $7.6 million, the highest in a quarter achieved by years 'til date. Our Q3 total gross bookings stood at $1,155.7 million, which was the highest since the pandemic, representing a strong growth of 58.5% over the previous quarter and about 95% growth over the same quarter last year in constant currency terms. Moving on to our business segments, the air ticketing adjust margin stood at $52.9 million, representing 105.9% growth over the same quarter a year ago and 38.4% growth over the previous quarter in constant currency terms.

We continue to be one of the most preferred air ticketing platforms with a market share of about 30% in the domestic air ticketing business, including both the online and offline modes of booking. The adjusted margin for our hotels and packages business increased to $54.1 million during the quarter reported, which is an increase of 117.6% over the same quarter a year ago and a 53.6% increase over the adjusted margin reported in the previous quarter in constant currency terms. As for our bus ticketing business, the adjusted margin stood at over $14.1 million and represented a 58.4% increase over the same quarter last year and a very robust 79.1% quarter-on-quarter improvement, led by supply recovery in the domestic bus business. Our redBus brand continues to lead in the bus ticketing segment in the country.

And in the future, we'll be expanding the redBus brand franchise to intercity cabs and rail bookings as mentioned by Rajesh earlier. Lastly, the adjusted margin in other businesses was $5.9 million, an increase of 44.4% over last year's same quarter and an increase of 33.3% over the previous quarter in constant currency terms. Let me now share some details around the operating costs during the quarter. During the reported Q3, after a lull of almost two years, we finally returned with our Jo Hoga WOW Hoga campaign on the MakeMyTrip brand on the Indian television.

The campaign was targeted at boosting confidence while highlighting the convenience and flexibility offered on the MakeMyTrip platform. Goibibo's new marketing theme, Apna Rule Toh Paisa Vasool, was centered around the brand's promise to always offer best value and value adds on travel bookings. Even with the increased brand spending of overall marketing and promotional expenses during the quarter, it stood at 5.6% of gross bookings, marginally higher than the 5.4% reported in the previous quarter. Adjusted personnel costs and SGA costs for the quarter stood at about $34.7 million compared to the pre-pandemic run rate of about $45 million per quarter, aided by significant long-term fixed cost acceleration and efficiencies in our customer acquisition spends built during the last six quarters.

Under the pandemic, we could witness the impact of scale economics, filtering down to adjusted operating profit. During this quarter, we have increased our stake in Quest2Travel as part of the acquisition framework and are excited about the strong future prospects of this business, which is directed toward facilitating travel bookings for large corporate customers. Within the corporate segment, we have surpassed pre-COVID levels. And it remains one of the key demand segments for our company.

It also gives some color on a few nonoperating P&L elements. During this quarter, we recorded a profit of about $2.5 million from exchange of our shareholding in Inspirock, which was acquired by Klarna, a Swedish fintech company. We have also recently provisioned for $8.4 million to fully provide for all the travel and awards in the ongoing litigation with the founders of the HT Group on a conservative basis, while we'll continue to take all available legal remedies in the matter. During the ongoing quarter, we continue to focus on tight cost control amid muted demand.

However, with the reports that many of the key cities in India have already seen the big of the third wave, we believe there is a good possibility of a sharp recovery in demand in the coming months. As Indians plan their next summer vacations, soon, we'll be with them with the most trusted brands, MakeMyTrip, Goibibo, and redBus, to make their travel more connected and convenient. With that, I'd like to turn the call over to the operator for Q&A.

Vipul Garg -- Vice President, Investor Relations

Thank you, Mohit. We are now ready for Q&A. Anyone who wants to ask a question, can you please raise their hands and the lines can be unmuted. Thank you.

Questions & Answers:

Operator

Vijit wants to ask a question. Vijit, you can speak now.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Hi, Vijit.

Vijit Jain -- Vice President, Investor Relations

Yeah, hi. Sorry, can you hear me?

Deep Kalra -- Co-Founder and Executive Chairman

Vijit, there's echo at your side. Now, it's -- I think it's better now, yeah.

Vijit Jain -- Vice President, Investor Relations

Yeah, sorry. My question is just from the business. Now, I know that international has barely recovered in Q3 and them omicron probably is a dampener for the ongoing quarter. But did the domestic business return to its pre-COVID levels in Q3, given that you were, I think, approximately 75% to 80% of your pre-COVID peak, if I understand it right, for Q3? That is my first question.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yeah. Hi, Vijit. This is Rajesh. Good question.

Let me just take this. You're right, Vijit. You know, October-November-December quarter, the quarter that we are reporting now, we did see, on a run-rate basis, few days where -- you know, actually, even for ticketing business, we had seen recovery up to 90%, 95% on some days as well. In fact, even for -- even hotel bookings, you know, as I mentioned very briefly, just in one line, that we had seen during the pandemic recorded check-ins during the Christmas weekend as well, which was very close to the pre-pandemic peak as well.

So, you know, I guess that was a good indication of overall demand sentiment improving across the board and recovery coming very close to us. But as domestic travel is concerned, you know, I think with an exception of, I would say, business travel to an extent, leisure segment was definitely back, you know, in some, you know, visiting friends and relatives, but in any case, happening. So, with an exception of, I would say, business travel, which was taking a little bit more time to come back, I mean, for us, it was a good story, given that we had acquired a lot of accounts. But at an overall basis, business travel was lagging behind a little bit.

But all of the segments were coming very close to pre-pandemic level on a run-rate basis. I think that will be fair to say.

Vijit Jain -- Vice President, Investor Relations

Correct. Thanks, Rajesh. Rajesh, my second question is on the advertisement vertical, if you can give some updates. Because I think, last time, you guys had mentioned that you're looking to make further investments in that space.

So, any further update on that side of the business?

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yeah. Sure. Sure.

Vijit Jain -- Vice President, Investor Relations

And also, if I can add an additional question. If you can give, you know -- just a housekeeping question, if you can share what your sense is of market share in the aviation business and in the bus ticketing business?

Rajesh Magow -- Co-Founder and Chief Executive Officer

Sure. OK. Let me just take the first one first. Yes.

So, the platform that we had built, which was a third-party advertisement platform, we've been making continuous investments on that. In fact, we've been just improving the product offering also on that. So, you know, more recently, we have scaled up the sponsored link, you know, sort of ads that any partner can come in and, you know, advertise on our platform, further from what it was in the last quarter in terms of just the product enhancements that we've been able to do. And we've been continuously getting good traction from, you know, all our partners, especially on the on hotel side, but also on ground transport.

You know, and in some cases, even some of the airlines have been very, very interested in participating and advertisement -- advertising on our platform as well. So, you know, this is a long-term initiative. We are continuously going to keep making our platform far more robust with additional features. So, you know, we do have plans to add, you know, a lot more analytics as times -- in the coming quarters for our partners and keep making their product, you know, far more sort of attractive and robust, you know, from, you know, people who would come and advertise on our platform standpoint.

And so, it's going to be a continuous sort of investment area from our point of view. And, you know, like I said, it is already giving us good traction, you know, on the number of advertisers who are increasing quarter on quarter. Now, talking about the civil aviation market share, I think Mohit just called out, as part of his speech, we continue to be close to about 30% of the total market, both online and offline put together as far as domestic ticketing business is concerned. And as far as bus segment is concerned, we continue to be the market leader, I guess, you know, by far from the online booking space standpoint.

And we should have -- of the online booking space on bus, we should have, you know, close to about 65%, 70% share, I would have thought.

Vijit Jain -- Vice President, Investor Relations

Got it. Thanks a lot, Rajesh. Rajesh, I have one final question before I jump back into the queue. With the cab business that you called on ground transport, that's part, I guess, of the bundled offering, I noticed from the ad that it's really a marketplace, right, where you are showing availability of cars on range from third-party partners and stuff like that.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yeah.

Vijit Jain -- Vice President, Investor Relations

Can you talk a little bit about monetization on that? What is the commission structure like on that business with your partners? And I'm assuming this will be housed under other revenues, right?

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yeah. So, let me just tell you a little bit more about this, you know, the whole car business that we are trying to build. You know, it has two sort of products out there. One is airport transport, which is effectively an attached to a flight customer, you know, who would be at the airport and he would like to just, you know, come to the airport or go from the airport to the destination.

And the other one is the intercity cab product. And I think what you were referring to was more the marketplace or, you know, a lot of partners who are already listed out there and the customer has the option to pick and choose from the car option.

Vijit Jain -- Vice President, Investor Relations

Yes.

Rajesh Magow -- Co-Founder and Chief Executive Officer

And then, it would be fulfilled by, you know, various sort of partners or the operators that we have at the backend, which we have aggregated. And we had -- if you -- if I miss sort of, you know, also or argued that we had mentioned it in the past, that we had made an investment on the supply side, you know, a software where we were trying to just, you know, provide the supply side, you know, technology platform for the operators as well or the cab aggregators. So, that's one model on the intercity cab. What I was trying to highlight in the script early on was also there is one more initiative that we have launched.

You know, we are already pilot testing it out in the two markets, Delhi NCR and Bangalore. And that is called Ride, which is a slightly different model where we are signing up partners, you know, who already have a pool of cabs. We are, you know, sort of branding the cars on the road. We are, you know, taking better control of the inventory to improve the overall product experience, like the actual ride experience, and trying to position it to more like a, you know, differentiated experience.

So, there's a set of partners that we are going to have. I mean, we're calling it Ride franchisees, the partners who would work with us. The model for either the aggregator model or the Ride model is going to be either a commission model or a revenue share model. So, that's really the monetization plan on that.

But it's early days in this market. We're right now doing some strategic investments in this area, but we definitely see this as a very big opportunity. And we're going to sort of scale this up in the coming quarters.

Vijit Jain -- Vice President, Investor Relations

Got it. And thank you so much. I'll just jump back into the queue. Thank you.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Thanks, Vijit.

Vipul Garg -- Vice President, Investor Relations

Thank you, Vijit. Any other participant who wishes to ask question can please their hand?

Operator

Vikas wants to ask a question. Vikas, you can speak now, please.

Vipul Garg -- Vice President, Investor Relations

Vikas, your line is muted. You have to unmute and speak.

Operator

Vikas, you have to unmute, please. Ashwin wants to ask question. We'll move to Ashwin. Ashwin, you can ask question, please.

Ashwin Mehta -- AMBIT Capital -- Analyst

Yeah. Can you hear me?

Operator

Yes, please.

Ashwin Mehta -- AMBIT Capital -- Analyst

Hi, thanks for the opportunity. So, I had one question in terms of the hotels segment, wherein the ATVs materially went up almost to the extent of 20% sequentially. And there was a drop in terms of the take rates this quarter. So, was it largely due to the skew toward the premium hotels?

Mohit Kabra -- Chief Financial Officer

Ashwin, I could take that. You know, there are two reasons. Clearly, one, you know, that these skews kind of, you know, being more toward, you know, the premium hotels. And also, during this specific quarter, you know, the mix change was also in favor of the holiday packages.

So, you know, a lot more growth is what we have seen coming through our holiday packages as customers have chosen the comfort of a package product instead of, you know, doing stand-alone bookings. And since the holiday package product is more like a slightly muted margin business compared to hotels because it's a combination of hotels, as well as, you know, air tickets, etc., therefore the segment kind of margins have come down a little bit. But the hotel margins per se haven't really seen any significant contraction but for the mix change toward premium.

Ashwin Mehta -- AMBIT Capital -- Analyst

OK. And just one more in terms of the air side. So, domestic passenger growth, if you look at it sequentially, was up, I think, more than 60%. But in terms of our flight segments, there was a lag.

So, is it more a timing issue? Or what is driving that?

Mohit Kabra -- Chief Financial Officer

Sorry, Ashwin. Could you just repeat that? Sorry, missed that one.

Ashwin Mehta -- AMBIT Capital -- Analyst

So, essentially, if you look at the domestic flight traffic in India, that was up almost 60% sequentially in this quarter, wherein, for us, the flight segment growth was a tad lower. So, is it more to do with the timings? Or --

Mohit Kabra -- Chief Financial Officer

Yes, absolutely. You know, you got it right. You know, what BGC reports is, you know, flown passengers. What we report is booked passengers.

And therefore, you know, you will see a little bit of a, you know, difference across quarters based on the emerging trends on, you know, booked versus flown.

Ashwin Mehta -- AMBIT Capital -- Analyst

Thanks, Mohit. Thanks, and all the best. Thank you.

Mohit Kabra -- Chief Financial Officer

Most welcome. Most welcome.

Rajesh Magow -- Co-Founder and Chief Executive Officer

I think we have a question on chat as well. Maybe we can take that because I think Saurav's mic is not working so he's not able to speak. So, maybe, very quickly, before we go to Kushagra, I can just quickly respond to that question. And the question for everybody's benefit is, how has your initiatives translated into improvement in client stickiness and LTV over the years in different businesses? Yeah, no, it's a great question, Saurav.

So, I'll tell you one sort of metric where we very closely track. You know, I think the short answer to this question is it has played out quite well, especially for our majority of, you know, lines of products and the offerings. And we measured it through the repeat rate. And, you know, on any given quarter, you would have, you know, anywhere between 60 -- or depending on the quarter that you specifically look at, anywhere between 65% to 70% of their transactions will actually come from the existing customers.

And the rest will come from the new customers in that particular quarter. So, it's a pretty healthy repeat rate. In fact, it's a very sort of good balance between, you know, the repeat transactions coming from the existing consumer base, but also the new users every quarter, quarter after quarter, that keeps coming our way. So, overall, you know, given that we've been in the business for many years, it has been playing out.

All these investments have been really playing out in a manner, you know, that, you know, sort of it helps the overall P&L as well. I think we can go to Kushagra now. Kushagra, please feel free to --

Operator

Yeah.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Ask your question.

Unknown speaker

Sure. Thanks for the opportunity. Just one question on -- so, if I look at your overall structure -- cost structure, if you can give more sense on which of the segments is sort of taking a higher share in the expenses part, where you have been, you know, a market leader in air ticketing for a fairly long time. So, this segment would be sort of cash generating for you guys.

And generally, hotels is one which would be taking a relatively higher share in the overall expense, right? So, just a broader sense on -- if I have to look at it on the operating profit base, which of the segments probably is taking a higher share in the overall spend? Yeah.

Mohit Kabra -- Chief Financial Officer

Hi, Kushagra. Maybe I can take that. You know, while it's kind of difficult to, you know, exactly how to kind of, you know, segment-wise kind of, you know, profitability because, you know, guess what, like Rajesh mentioned, we have a lot of repeat. And a lot of customers come in and kind of transact across, you know, business segments.

And therefore, it's kind of very difficult to allocate, you know, these customer acquisition costs by the segment. However, broadly, at a high-level sense, what we've always been calling out that, you know, the air ticketing business has been kind of profitable for a very long time. You know, almost since the time of our IPO in 2010. And therefore, the overall kind of, you know, customer acquisition expense in that business are very well-optimized.

Clearly, we have been calling out the accommodation space, you know, specifically hotels. And within hotels, the budget segment of hotels has been an area of investment over the last few years in 2016 onwards. And therefore, a large part of these spends have been directed toward that particular segment. The good part is, you know, are kind of -- you know, pretty much, on investment cycle even on this, you know, segment or in this space also has pretty much played out now.

And therefore, the unit economics kind of, you know, started looking much better. And overall, therefore, if you see, our marketing and commercial expense have trended down very well over the last five or six years. You know, they used to always be at a peak. They used to be almost close about 15-odd percentage points of gross booking.

And we are now closer to about 5, 6 percentage points of gross bookings. So, we've seen that significant efficiency coming in as the entire accommodation, you know, business has got built, so much so that if you see on a normative basis pre-pandemic, you know, the hotels business, you know, accounts for almost like, you know, half of the business mix. It used to be a very small contribution until about seven years back. So, that's broadly how it is kind of, you know, playing out right now.

Unknown speaker

Sure. No, that's helpful. Second, last one from my side, like how do you see the commissions in the hotel space overall? You know, the reason I asked this -- the commissions moving for the medium term for the hotel segment. And the reason I ask this question is so -- and you're largely dependent on -- I mean, you are -- you have a fairly -- you have fair presence in the premium hotels.

So, one point of all these hotels and all will also more and more digitized. Second, a lot of these new models which are coming up, so there is a trend or there is an indication toward more capital coming in at this part of the hotel segment, right? So, where do you see the commissions overall heading over the medium term for the hotel segment for you guys? Yeah, that's it for me.

Mohit Kabra -- Chief Financial Officer

Yeah. If you look at the entire hotel space, you know, you need to keep in mind that overall, occupancy in India, you know, even in kind of, you know, normal times, you know, pre-pandemic, it used to be more in the 60s, you know, for the industry as a whole. And, you know, when it comes to, you know, this particular business, any room night which goes unoccupied is actually, you know, kind of a wasted room night or is a -- it's almost like a perishable room night, right? And therefore -- and also, the incremental costs on an added room night compared to, you know, the incremental margins coming in, you know, for the hotel are very disproportionate. So, the hotel is extremely incentivized in terms of taking the occupancy levels as high as possible.

But like I said, you know, overall, at an industry level, also, you know, occupancy rates used to be kind of, you know, in the 60s. Therefore, compared to a lot of the other, you know, the overall market or the mature markets where the occupancy rates are much higher, and the fact that, you know, the hotel industry is extremely fragmented in India with more and more of, you know, independent mom-and-pop kind of properties rather than chains of hotels, the landscape per se does offer a slightly better margins compared to the mature markets. However, from our own kind of, you know, point of view, we've always kind of looked at, you know, creating long-term sustainable economics with all our suppliers, irrespective of the line of business. And therefore, over the last few years, we have actually brought down our overall margins in the hotels business from being in the early 20s to kind of being more in the high-teens now.

And that, we believe, is kind of, you know, sustainable both in the short term and to the longer-term period for the reasons that I called out.

Unknown speaker

Yes. Got it. Thanks, and all the best.

Operator

Arya wants to ask question. Arya, you are unmute now, please.

Unknown speaker

Yeah. Thanks. Am I audible?

Operator

Yes, you are.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yes.

Unknown speaker

Yeah. Hi. Thanks. Thanks a lot.

So, I mean, firstly, you know, you mentioned that this deeper internet penetration outside of the metros and Tier 1 cities. So, how has the share of transactions, traffic, etc., move for you on, you know, outside of metros and Tier 1 cities? Do you track that? And can you share any numbers on that, and maybe across the segments of overall?

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yeah. No, happy to just give you our directional sense of this area. And it's obviously a good question, given the fact that the next level of growth has already been sort of coming in from the smaller cities now. And more and more in the future, it's going to come in from there.

You know, as we all know, as Deep also mentioned as part of his speech that, you know, thanks to pandemic, you know, the penetration on the adoptability of internet and even e-commerce sort of accelerated, you know, in these cities as well. So, we are taking a bunch of initiatives. Some of them we've already called out. But I think it'll be fair to say that the new user acquisition, for instance, for our rail bookers or, for that matter, even bus bookers.

We've been getting, you know, out of the new users, as I called out, about 30% of their transactions in the quarter come from new users. Our overall -- and the contribution coming in from smaller cities, you know, through the rail bookers or the bus bookers off that new user base is about 25%, 30%. So, about 25% or 30% of the new users are coming through the smaller cities and, you know, doing rail bookings or bus bookings, and sort of budget hotel bookings, etc., as well. And the other, you know, sort of product that -- and the area that we've seen a lot of traction coming in is on the air ticketing side is the Uran flights.

So, all the regional small sectors, you know, all those bookings at Uran sectors are effectively Tier 2, Tier 3 cities, in fact, even beyond. And in the future, also, the expansion of the airports are also going to be like that. And we've been actually more than line share of all those sectors, even on the air ticketing business. So, all in all, we -- you know, good traction coming in from [Inaudible] -- Arya, I don't if it is from your side or somebody else's.

Unknown speaker

Sure. Sorry, the 25% to 30% of the 30% new users you mentioned is on the entire base of new users, or only for rail and bus users?

Rajesh Magow -- Co-Founder and Chief Executive Officer

New -- entire base of new users. Yes.

Unknown speaker

Secondly, you know, can you talk a little bit about your sort of -- you know, how you expect the margins to move next year? Assuming it's a more normalized year than some of your investments, some of your ad spend, etc., is also going to come back. So, can we expect you to be profitable on a full year basis? And what sort of, you know, range of margin are you looking at?

Mohit Kabra -- Chief Financial Officer

Sure, Arya. I can take that. You know, like I just called out, you know, on the hotels business, we do expect margins to kind of largely remain stable in the high-teens. So is the case with the bus ticketing business and of the margins kind of largely remaining probably stable, closer to the 8.5% to 9.5% kind of a range.

And on the air ticketing business also, we do expect margins to remain, you know, around 6% to 7% range at least. Now, with that kind of a margin structure, you know, by line of business, we do believe, you know, with the kind of efficiencies that we've seen on the customer acquisition expense side which we've just talked about, we do expect that, while there might be small increases in the overall kind of, you know, marketing and promotional spend, it is unlikely to kind of, you know, go beyond, say, the 7% or 8% kind of, you know, percentage point of, you know, gross bookings level compared to the 9 to 10 percentage points of gross booking that it used to be, you know, pre-pandemic. And therefore, that kind of gives us confidence that we kind of should kind of remain on a profitable path. I mean, just to kind of, you know, give a little bit of color on how, you know, give kind of an affair at least over the last two years, if you see last year, which was a high pandemic hit kind of in your -- we were kind of almost cash breakeven.

And this year, we expect to be kind of, you know, officially, you know, have a profitable year. And therefore, that gives us even more confidence. And if you see in this particular quarter also, you know, a bit the volumes kind of, you know, recovering and with kind of, you know, a good recovery in the couple of months of the quarter coming through. We've actually been able to scale up profitability nicely.

And therefore, we believe if the recovery kind of comes back and, you know, normal travel recovery is kind of, you know, back in place as the pandemic ends, we should be in a good space on the profitability side.

Unknown speaker

Sure. And lastly, any update on the listing plans on what could be the --

Mohit Kabra -- Chief Financial Officer

I'll just request, you know, those on the call who are not on the -- who are not speaking to kindly put it on mute because there's a lot of, you know, background voice.

Unknown speaker

Sure. So, can you give me, you know -- did you get my question, Mohit, or do you want me to repeat?

Mohit Kabra -- Chief Financial Officer

Please go ahead.

Unknown speaker

Yes. So, any update on the India listing plans? Would it happen next year? What are the sort of -- how are you thinking about that?

Mohit Kabra -- Chief Financial Officer

I didn't really call out any --

Unknown speaker

Is it not on the agenda?

Mohit Kabra -- Chief Financial Officer

We didn't really call out any listing plans as such. But, you know, we'll keep our options open on that. No plans as yet, but yeah, we remain open. And like I called out, you know, the focus is to kind of -- you know, if you look at it from a cash position point of view, we kind of have -- we're very comfortable on the cash position.

We've got over $450 million of free cash and cash equivalents on the balance sheet. And I also just kind of mentioned that we should probably be cash accretive and not be kind of, you know, deploying cash for operations. We also don't believe there is any large investment opportunity requiring a significant amount of, you know, capital infusion. And so, therefore, keeping all of that in mind, I think the focus right now is in terms of making sure that, you know, the recovery on the travel side kind of comes through.

We see through the end of the pandemic and kind of have a much better kind of, you know, cost structure and continue to be on the path to profitability. And as that happens, we will kind of, you know, take an appropriate view if we can do kind of look at alternative capital raise models.

Unknown speaker

Sure. Thanks. That's all for me. Thanks.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Mohit, maybe we can take that. And, Vipul, there is a -- I can see one more question from Vikas on the chat, and then there's an anonymous and a similar question. And I guess, you know, the question on profitability. Because we're already profitable, we actually called out that it's the best-ever profitable quarter that we just reported out.

And as we've been sort of recovering out of the year, whenever there has been recovery on the quarter based on all the measures that we've taken, you know, historically, just to restructure our cost base, we've been profitable and profitable at scale.

Mohit Kabra -- Chief Financial Officer

I guess, Rajesh, that also answers the anonymous question that we have on the --

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yes. Yes.

Mohit Kabra -- Chief Financial Officer

Anonymous on the --

Rajesh Magow -- Co-Founder and Chief Executive Officer

Yes. Yes.

Mohit Kabra -- Chief Financial Officer

Sounds good. I mean, if you have any last questions, we could take that now. As you know, we'll kind of look at wrapping up the call.

Vipul Garg -- Vice President, Investor Relations

I think, Mohit, we can end the call for now. And any further questions, we will -- I do request the participants to mail us, and we'll get back to you guys. Our email ID is updated on the 6-Ks and the disclosures and on the website. So, please feel free to reach out to us.

Mohit Kabra -- Chief Financial Officer

Thank you, everyone.

Vipul Garg -- Vice President, Investor Relations

Thank you. Thank you, everyone.

Operator

Thank you.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Thank you. Thanks.

Deep Kalra -- Co-Founder and Executive Chairman

Thank you, everyone.

Rajesh Magow -- Co-Founder and Chief Executive Officer

Thank you.

Duration: 64 minutes

Call participants:

Vipul Garg -- Vice President, Investor Relations

Deep Kalra -- Co-Founder and Executive Chairman

Rajesh Magow -- Co-Founder and Chief Executive Officer

Mohit Kabra -- Chief Financial Officer

Vijit Jain -- Vice President, Investor Relations

Ashwin Mehta -- AMBIT Capital -- Analyst

Unknown speaker

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