In The Big Chair - Aloke Bajpai of Ixigo

In early September, Phocuswright published its India Total Market Report, which provides a comprehensive view of India’s travel market, including detailed market sizing and projections, distribution trends, analysis of major travel segments and key developments. Below, PhocusWire dives deeper into Ixigo, including its growth and priorities, with group CEO and co-founder Aloke Bajpai.

Where would you say Ixigo is in terms of recovery to pre-COVID levels?

We ended fiscal year 2022 at 3.4X pre-COVID revenue. So, in terms of recovery we were probably the fastest to not just recover but also exceed pre-COVID levels of transactions, traffic, revenue and GTV. That's reflecting the fact that we are very domestic focused, the largest business for us is trains, buses and flights. 

We have international flights but that’s a very small part of the business so we were therefore less impacted by COVID restrictions, and we were able to bounce-back quicker because a lot of the domestic traffic happens for utility purposes or going back to family or to your work city. 

On the overall market side, the recovery wasn’t really fully there especially for flights. Even as of last quarter the recovery was only 75 to 80% of pre-COVID domestic flight levels. On trains the market had already recovered to about pre-COVID levels even last year because the government pushed more people to reserved trains because they didn’t want crowding inside the trains, so that added more reserved capacity. We benefited from that because we play largely on the reserved side. We have a very large share of IRCTC’s (India Railway and Catering Tourism Corporation) online bookings. 

On the bus side, a lot of the asset owners had run out of cash and some lost their assets, but as the third wave started to recede in March, we started seeing good recovery again. I think as of last quarter the overall market would have been back to almost 80% of pre-COVID levels, the same as flights. We expect these two will also recover fully some time later this financial year.

I think the big challenge is fares because the Russia-Ukraine war has meant oil prices have been quite high in the past few months. If the fares were similar to pre-COVID then we would have been above pre-COVID levels of demand, but they’re still 30% higher than pre-COVID on many routes.

What’s your prediction for full industry recovery?

In the last quarter, we heard leisure travel picked up really well for hotels, and some corporate travel started to come back, especially large groups, so the MICE segment saw good growth also. 

So, the hotel industry started recovering as of the past quarter, but I don’t have accurate numbers because hotels is not a large part of our business. Our impression is that that’s the one that will take the longest to recovery because corporate demand is still far off pre-COVID levels.

Leisure has bounced back very nicely. In any long weekend in the past couple of months, I don’t think you would be able to find a room in the popular leisure resorts. That’s a good sign and the rates have also shot up so I’m pretty sure hospitality players have started to recover well financially.

If I look at the mid-tier segment or the budget segment, which is where a lot of our users come from, I think there is still a long way to go for full recovery because discretionary spend hasn’t really come back in a big way yet.

So, if you had to ask me when will industry fully recover, I would say by the end of this fiscal year.

Ixigo made a number of notable announcements in 2021 including getting funding, a potential IPO and Confirmtkt and Abhibus acquisitions. What did the funding go towards?

Out of the $53 million about $36 million was primary, and we raised that from a clutch of investors. We haven’t really used cash in any other way apart from the acquisitions. Beyond that I think we’re still sitting on a good part of it in the bank. 

The last financial year was cash EBITDA positive, so whatever loss is visible is largely due to ESOPs because we were going to IPO so we gave all our employees ESOP stock options so there is an accounting hit on our PNL.

We filed for the IPO in August last year with SEBI, and we got the approval in mid-December and it’s valid until mid-December this year. The first half of calendar year 2022 has been tumultuous for the markets and it’s very volatile out there. Things seem to be not so bad in the India context compared to the rest of the world. The Indian stock market is at very similar levels as peak last year, so we will continue to see what the best timing is for us.

Are there more acquisitions on the cards?

None that I could comment on at this time, but our Red Herring Prospectus lists investments and acquisitions as an important use of capital as well as pursuing new verticals and new ancillary services. 

We don’t do hotels today, we don’t do packages, we’re not a full bouquet of services yet for our travelers. We had 56 million monthly active users as of March 2022 and, as and when we add more services, monetizing other verticals will be an important part of our future, and whether we do it organically or inorganically is something we will evaluate.

You have commented on funding in the past and the amounts of money available are not sustainable. Now that U.S. investors have advised startups to cut costs, what are your views in the current climate on startup funding?

I think I’ve seen this cycle now at least three times where you have periods of abundance and everybody forgets the playbook and investors and entrepreneurs keep making the same mistakes. 

I think this time what is different is the realization that both in late-stage and mid-stage that the playbook of raising a lot of money and spending it on customer acquisition with no real positive unit economics, and also mindless growth in the number of people followed by letting them go when you run out of money, is being questioned across the board. There has been a lot of human toll, jobs and people’s lives have been impacted. Our philosophy has always been very different. Even during COVID we chose not to let people go, we all took a pay cut and tried to make it through.

Our philosophy on customer acquisition is that we don’t spend more than what we earn. Our playbook has always been to try to keep our customer acquisitions costs as low as we can while we grow. Also, on the marketing side we have been very frugal and we have done a lot of organic, viral video marketing, which gets us a lot of shares and eyeballs without having to spend a lot of money.

The reason why we did all that is because we had constraints. I think it’s important to have constraints. Any unconstrained capital ambition is bound to have some negative outcome because practical life has constraints. Anybody who believes that there will be no constraints will always be proven wrong. It’s important to be mindful when building a company to only expand as fast as your business can support and what the product market fit deserves. Many companies have chased vanity metrics in the past, and we’ve seen that unravel very quickly.

What are your priorities for the next six months?

I can’t make forward-looking comments, because we may still be regulated by SEBI until such time as we actually list. Our strategic priorities are clearly defined in the prospectus and there are four buckets. 

The first is to look at new verticals and new ancillary monetization avenues, because we have a large user next billion base we will explore whatever verticals makes sense and whatever ancillary monetization. 

For example, Ixigo assured is a product that was the need of the hour during and after the pandemic, which we built and conceived in house. It’s a product that allows you to cancel for any reason and get a full refund. We built it in house, and we underwrite it with our data and can give an instant refund rather than make people wait. 

This product has become an important part of our existence across train, flight and bus where a good percentage of people opt for this and benefit from it. We will invest more time and energy into these sorts of products. We have just launched one into testing, we can't talk about it yet. Assured is a product that allows you a free cancellation but there are other things you want flexibility on when you book a flight.

What we realized is that travel is one of those categories that we’ve made too complex for users to make choices. Prices keep changing, availability keeps changing and terms and conditions for modifications, cancellations etc. are not very clear upfront. There are a lot of surprises.

There is a lot of pain when you want to do something that is not booking. As a company we believe that unless someone solves all these things you cannot expect great customer experience in this category. Assured was a way to provide more predictability around the experience of canceling and getting money back. Similarly, are there other use cases where people don’t know what will be charged and how long will it take. For that added predictability are people prepared to pay a bit more? They will for no hassle later on.

It’s a good experience, increased revenue for us. It’s a product you shouldn’t logically lose money on. Those sorts of things are quite rare, finding that sweet spot where the customer is happy and you’re happy. We’re trying to find more such avenues, we call it embedded finance. A bit like the approach Hopper takes in the U.S. Fred is on our board and our discussions with him helped us build more conviction that these work but we built them independently with the data.

We also want to create more brand awareness. Ixigo is one of the few companies that has grown organically to this scale without spending a lot of money. Even last year almost 90% of our traffic was organic and non-paid essentially, but I think brand does instill more confidence and improves conversion rates for new users, so it’s worth investing in. We’d love to see how we could create more awareness especially in tier one cities.

One of the areas we talk about in the prospectus is how we can cross-sell or upsell to the train user. We have millions of transactions happening every year, can we for a percentage of those users figure out that if the train booking is wait-listed to the last day, which you only know on the last day, whether booking a flight or bus on that route is viable at a price point that makes sense. We demonstrated to ourselves during COVID that this has been a significant reason for our growth. If we continue doing that, which also means those people see us as not just as a train-centric brand but as a full-fledged OTA.

Some competitors mention the vacation rental market and its potential for growth. Is that something you would pursue?

Accommodation as a bucket is something we’re still not active in. We’re tied up with Booking.com with an affiliate-type partnership with all our hotel bookings done with them. As and when we explore the accommodation side is when we’ll look at homestays or B&B options. At this point we’ve got enough on our hands with flight, train and bus going on.

Where do you currently see the biggest growth opportunities for Ixigo?

The biggest opportunity, if you had to put it in one line, is that we already have a lot of users using us for utility use cases - just checking the train schedule or figuring or to see if their waitlist will confirm, so the top of the funnel is very large. Our challenge, and what we have been working on in the past few years, is how do we have more and more people buy from us and trust us to complete their ticket purchases. 

We're different from other OTAs in that we started as a meta product not as a transactional app, but we have huge legacy traffic that now we trying to convert so that is driving a lot of the growth.

How will you leverage new technologies to improve the business and the experience for consumers?

There are two pieces of technology we have built that we are very proud of. One is Tara, which started with a Phocuswright Launch event in 2017 and we were runner up. 

The vision is that we want more and more customer support to be handled by bots that understand your past profile and your past interactions. The first step was that when we converted to an OTA model, Tara helped us immensely with the operating leverage required because going from a meta to an OTA is a massive DNA change. 

The biggest thing companies typically struggle with is how do you service your customers because you need call centers, chat, agents etc. We use Tara very intelligently. It’s a homegrown, machine learning-driven chatbot which learns over time and answers queries. End-to-end Tara was solving more than 85% of our queries last year, which means that only 15% was falling into the manual bucket of chat and calls. That gave us tremendous operating leverage because you don’t need thousands of people in call centers. 

That piece of tech sounds very trivial but it’s very hard. Most of the generic bots out there companies deploy are not well-suited to travel related use cases where the context might be related across conversations. It’s not a small problem, it’s something to do with your trip that needs a lot of context and needs a more nuanced answer. We’ve managed to automate a lot of that on Tara.

The other piece of technology is the engine that powers Ixigo assured because analyzing booking and cancellation data across the customer bases, the types of products we’re selling and advanced purchases, there are so many factors in consideration. Then, dynamically being able to price that and being able to tweak that across COVID waves. So that product is a very data science intensive product, and the next one we’re launching is a similar complex data science problem.

We love things that can be solved using immense amounts of data. One more, which is the core driver of a lot of growth on the train side, is the way we show accurate running status, which is a very complex algorithm. Early on people would go to a official website where, every time it updated, it would give you train times, but it was not real time. In India a lot of trains run delayed so people want very accurate information because they can plan when to leave their home accordingly. 

We started using the data of people sitting inside the train if they had their GPS on, sharing it with other travelers that brought a lot of upside to the business, because at our scale we had enough data on most trains in India to give accurate running status. 

Then we went one step further and started giving train delay predictions based on not just where the train is now, but also if it is running late now, is it going to catch up over the next few stations or run even later. 

Over time as we got more data, this became more accurate. Then, we reached a point where we said a lot of people might not have GPS turned on or access to internet during the journey, and we started using cell tower data but to do that you need to mine a lot of data.

Taj announced a super app, do you believe super apps will take off in India?

A lot of people believe super apps could potentially disrupt how travel is bought today. if you look at what’s happening globally, even in travel, over time mature users gravitate towards a specialist because they realize it’s not just about finding the best fare but also the right end-to-end customer experiences, someone who can reach out to if things go wrong. 

We expect to see a similar behavior India, and at this point we believe that if we focus on our users and try to solve their problems better than others, if we get beaten at that by super apps then customers deserve to be at the place that gives them the best experience, but I think its very hard. The amount of time, energy, attention and resources that some of these travel problems need, it depends how important travel becomes on those super apps. It will be interesting to see how it plays out but, at this point on most of these categories, the market leader in those verticals is actually a specialist.

Given everything that has happened in the past 2.5 years, do you have a lasting experience or learning?

The biggest learning for us has been to believe in yourself and not get distracted by noise. We’ve been very focused on what customers want and not looking much at what the competition is doing or what the market is telling us. If you solve  customers’ problems better, faster, cheaper, then that’s the only reason why you grow and everything else is just noise. During COVID we learned to just believe in ourselves and don’t think you’re going to die, because everyone was in that mode and we took a huge leap of faith in ourselves.

When we acquired Confirmtkt we did it by raising some venture debt and the funding happened later. It was a huge bet on them and ourselves and last year they grew almost 3x. Since we acquired them, the bet has started to pay off. Some of those moments it’s all about not giving up, believing in yourself and not getting distracted by noise all around you.