MakeMyTrip Limited (NASDAQ:MMYT)
Q4 2016 Earnings Conference Call
May 18, 2016 10:00 AM ET
Deep Kalra - Group CEO and Founder
Rajesh Magow - CEO, India
Mohit Kabra - CFO
Lloyd Walmsley - Deutsche Bank
Gaurav M - Citigroup
Shaleen Kumar - UBS
Welcome to MakeMyTrip’s Fiscal 2016 Fourth Quarter and Full Year Earnings Call. At this time all participants are in a listen-only mode.
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 9, 2015. 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, Group CEO and Founder. Sir, please go ahead.
Thank you. And welcome everyone to our fiscal 2016 fourth quarter and full year earnings call. It’s been yet another exciting year for us where we witnessed the Indian domestic hotel market opening up with fast-growing mobile-led Internet penetration. This momentum helped us grow our online hotels business significantly and achieve our long-term strategic goal of improving the hotel and packages revenue mix.
I am happy to share that we improved our fiscal 2016 full year hotel and packages net revenue mix by about 6 percentage points driving contribution of non-air businesses to an all-time high of 54.4% for the full fiscal and 56.5% during the reported fourth quarter. The vibrant mobile ecosystem was one of the key drivers for the dramatic growth this year.
We now have nearly 52% of Indian online visitors, reaching us via the mobile platform versus 21% a year ago. In the strategically important online standalone Indian hotel segment, mobile now accounts for over 70% of the total online transactions. The rapid strides we are making on improving our mobile apps is validated by the fact that the MakeMyTrip Android app was declared the Best Android Travel App of 2015 by Google Play Store India in January 2016. Our app will also be featured in Google I/O, Google’s Annual Developer Conference as a case study later this month.
Our objective for the reported fiscal was to leverage the rapid smartphone growth to drive online penetration as well as grow market share in the predominantly offline hotels market in India. Accordingly, from the second quarter of the fiscal 2016, we had initiated transaction growth guidance for our standalone online Indian hotels business. We followed it up by posting significant acceleration from 78% year-on-year growth in Q1 to 168% in Q2 and 326% YonY growth in Q3. Our investments during the year in driving online penetration in this key segment and growing our customer base have paid rich dividends, and we sign off the fiscal with the sterling year-on-year growth of over 500% in Q4 in the online standalone Indian hotels business. We believe we have made the most of the increasing mobile penetration and improving ecommerce adoption in the country and during the reported fiscal have laid the foundation for robust all around growth in the online standalone Indian hotels business in the years to come.
Millward Brown, a leading research agency in a recent study estimated our share of domestic hotel transactions booked via OTAs at nearly 29%, approximately 600 basis points more than our nearest competitor’s share. Millward Brown, also estimated that we are the OTA market share leader across hotel star categories and domestic geographies.
Domestic air traffic on the other hand, saw an upspring with YoY passenger growth of about 21% and seat occupancy hitting a five-year high largely driven by lower fuel prices. Discretionary travel has also grown well as sales declined by 15% to 20%. Our air transactions growth was higher than the industry growth at about 28% YoY and as per DGCA, the Director General of Civil Aviation, we currently have approximately 15.8% share of the entire domestic air market in India. In the forthcoming fiscal and domestic Civil Aviation Industry is expected to continue traffic growth along with modest capacity expansion from some of the airlines.
Some of the trends witnessed in financial year 2016 like cheaper air fares, increasing online penetration and standalone hotel bookings, including in the budget segment has impacted the sales of domestic packages. However, in the outbound packages business, the growth has been healthy as destinations in Southeast Asia and Europe continue to remain popular international holiday destinations with Indians.
The reported fiscal also earmarked the beginning of a strategic relationship with the leading in OTA in China Ctrip. At a time when the investment claim in the private e-commerce industry in India is experiencing rough weather, the investment from Ctrip helps us in building strategic competitive advantage with the ability to continue making investments in marketing to grow the online hotels market in India, as well as in building more scalable platforms, particularly on mobile.
In line with our objective of tapping into the increasing mobile customer base in India, we launched a high decibel advertising campaign to promote booking of online hotels on mobile with leading Bollywood celebrities Ranveer Singh and Alia Bhatt as our Brand Ambassadors. The campaign will strengthen the brand’s appeal and stature with the growing audiences across the country, especially beyond the Tier 1 cities. In line with the objective of market making and driving online penetration, we used the campaign to provide tangible reasons to non-users to come to MakeMyTrip for booking their hotel requirements online.
As we enter fiscal 2017, the MakeMyTrip team continues to be very excited with the rapid growth of online users in India. We also remain confident about India’s rising long-term growth prospects and the concomitant travel demand that will be generated by the expanding middle class. We therefore remain committed to invest behind improving our customer’s experience, which we believe will be the key driver of sustainable success barring the MakeMyTrip brand. This will also allow us to keep strengthening our market leadership in online travel in India at present and in the long-term.
With a view to ramp up our technology team in the pursuit of accelerated improvement in customer service, we are also investing behind setting up second technology hub in Bangalore to be able to attract talent from the southern cities and town. The facility will be fully operational by the end of second quarter of the next fiscal.
With the investments we are making behind technology, brand building, marketing and sales promotion and the increasing accommodation options being provided to enhance customer experience, we believe we are well on course to achieving our longer term strategic objective of driving the hotel and packages segment to account for over two-third of the net revenue mix over the next few years. We also expect to transform the business into a mobile dominated one.
Now, I would like to turn the call over to Rajesh to give you more highlights from the quarter and past fiscal year.
Thanks, Deep. In the fiscal 2016 fourth quarter and full year, we delivered exceptional transaction growth and increased our market share in domestic hotels in India. As we pursued excessive share gains through transaction growth during the quarter and the fiscal year, we continue to invest in our brand promotions to drive online penetration, mobile technology, hotel supply and product innovation.
Deep mentioned our relationship with Ctrip. From the earlier discussions with Ctrip, it got further validated that it is essential to keep investing, particularly in brand, technology, customer service and supply even in the midst of aggressive competition and discounting.
I would like to begin with elaborating on the exceptional performance in our hotels and packages business. Transactions growth in standalone hotels and in the hotels and packages business overall was very strong. H&P transactions, excluding ETB grew by over 322% in fiscal 2016 fourth quarter versus the guidance rolled out in the last quarter of 170% to 200%. This was driven by standalone hotel bookings year-on-year growth of nearly 507%. Even more encouraging is the fact that standalone hotels booked on mobile grew over 1000% on a year-on-year basis.
During Q4, we also achieved an all-time high share of hotels and packages net revenue at 53.6% of our total net revenue. The growth we delivered in our hotels and packages and air businesses during the year was driven largely by mobile, which remains a key growth driver for e-commerce in India in general, and more so at MakeMyTrip particularly.
The standalone hotels growth was largely delivered on account of the following. One, brand investment; apart from the spends on our brand campaigns, we also launched two more additions of the hugely successful app-fest, a promotion that was available only on the mobile app. We leveraged a strong association with hotel partners and airline partners, tourism board and leading banks to offer unmatched deals to our customers.
Two, aggressive customer acquisition on mobile apps. We ended the year with more than 18.5 million life-to-date downloads of our apps. Downloads in the fourth quarter increased by 141% annually. In Q4, more than 70% of the online hotel transactions, and 40% of flight bookings in India were booked through mobile devices.
Three, increasing hotel network and options for the customers. We ended the quarter with more than 30,000 hotels in our domestic network, up 25% from a year earlier. Our international network included approximately 300,000 hotels, up 33% from last year. Our domestic hotel supply is not only getting larger, it is also becoming more geographically diverse as rapidly increasing smartphone penetration enables Indians in mid-and-small tier towns and cities to book travel online whether or not they have wide Internet access. Our aggressive signings of hotels combined with smartphone penetration in small towns and rural areas has improved the breadth of the hotel business. In Q4, we sold stand-alone domestic hotel room nights in more than 677 distinct cities, up from 440 distinct cities in Q4 last year.
Four, improved customer experience on the app in particular. We now allow our users to find getaways with great deals at hotels where they live. This has allowed us to make the app relevant to our users not just when they travel but every weekend of the year. In our Android app, users can now see Google Street view integrated with each international hotel. This allows them to virtually see how the area surrounding the hotel of their choice looks like giving them more comfort about their choice.
We've also started showing users’ insights [indiscernible] hundreds of reviews for every hotel. In the space constraint mobile world such as [indiscernible] more insightful than the reviews themselves. We have also launched a fully featured help and support section on our Android and iOS app, which allows our customers to quickly and easily resolve service and product issues without having to call or email us. Furthermore, both our Android and iOS apps now allow users to discover and book holidays on the app itself. Despite such strong mobile results, we will continue to seek improvements in our apps, for example by adding and rearranging content and by increasing and improving payment choices. We continuously review what worked and did not work on apps because we believe that mobile will continue to drive online travel booking in India.
Talking about air business now, our air ticketing business delivered strong transaction growth of 31.5% year-on-year for the fourth quarter and 28.1% for the full fiscal year. Net revenue grew by 28.2% for the fourth quarter and 14.4% for the full fiscal year in constant currency terms. Full year revenue growth trailed transaction growth due to anticipated margin compression as well as lower transaction value partly due to reduced mix of traditional inbound bookings from US to India. We maintained our domestic air market share, lead among the OTAs with nearly 15.8% market share of the total domestic air market in the month of March ‘16.
Let me know hand the call over to Mohit to share our quarterly results in detail.
Thanks Rajesh, I’d like to start by talking about the actual growth delivered vis-à-vis the previously issued guidance. During Q4, transaction growth in our hotels and packages business excluding ETB was 322%, which is significantly higher than the guidance of 175% to 200%. Similarly, during Q4, transaction growth for India stand-alone hotels booked online stood at 507%, which is significantly higher from the guidance of 325% to 375%. Additionally, the full-year 2016 transactions in our India stand-alone hotels business booked online grew by almost three times over full-year 2015. The full-year 2016 constant currency revenue less service costs or net revenue growth stands at 29% and adjusted for customer acquisition, inducement spends reclassified and presented under marketing and sales promotion expenses will still be around the top end of the guidance. I'll talk in greater detail on the presentation of marketing and sales promotion expenses as a separate line of expense and the related reclassification in a short while.
We are extremely pleased to deliver revenue growth at top end of the guidance, while delivering significantly higher transaction growth in the strategic hotels and packages business and more so in the India stand-alone hotels booked online as driving market share gains in this business continues to be a key strategic objective. We report adjusted operating loss of $29.3 million for Q4 full-year ‘16 and $50.1 million for the fiscal full-year 2016. These losses have been the result of our ongoing customer acquisition and inducement programs to drive market share gains particularly in the strategic business of India stand-alone hotels booked online and are reflected in the significantly higher than expected transaction growth delivered in this business. Fiscal 2016 was a year when MakeMyTrip rolled out various high-impact customer acquisitions and inducement programs to leverage the growing smartphone user base which is driving up mobile and Internet penetration in India to generate trials among new users to address these customer promotions.
This was supported actively by rolling out engaging brand campaigns to drive repeat usage and brand royalty as has also been mentioned earlier by Deep and Rajesh. Considering the effectiveness of these customer activation programs, we have rolled out in the reported fiscal and the currently prevailing market dynamics we would want to continue investing behind such programs in the new fiscal 2017 as well. We recognize net revenue, net of cancellations, refunds, discounts and taxes. As mentioned, we executed various customer induced spent on acquisition programs during the year ended March 2016. Cost related to these programs incurred for acquiring customers and promoting transactions such as cash incentives and select royalty programs are recorded as an element of marketing and sales promotion expenses instead of as a reduction or deferral of revenue while regular discounts which are not part of the above programs are netted of from revenue in accordance with applicable IFRSs and consistent with the revenue recognition policy of the company.
Accordingly, reclassification of such costs have been made in the consolidated statements of profit or loss and comprehensive income for the relevant quarters for Q2 and Q3 of full-year 2016 to the tune of about $10 million in order to confirm to the manner of reporting for the quarter and in year ended 31 March, 2016. Additionally, marketing and sales promotion expenses which were earlier referred to as advertising and business promotion expenses and reported as part of other operating expenses have now also been presented as a separate line in our consolidated statement of profit or loss in other comprehensive income. This presentation is also in line with the current manner in which the group evaluates its business performance and manages its operations. There are no changes from the reclassification to the group's consolidated statement of financial position, consolidated statements of changes in equity and consolidated statement of cash flows. In the aforesaid representation and reporting will help in providing more accurate reflection of growth in net revenues as well as in marketing and sales promotion expenses here onwards.
I will now elaborate on the financial performance across our key business segments beginning with hotels and packages. The key highlight of this segment on a full-year basis is that the mix of this segment has shifted significantly in favor of India stand-alone hotels booked online. And full-year 2016 India stand-alone hotels booked online accounted for about 78% of the total transactions and 44% of the total net revenue reported within the segment compared to 45% and 15% respectively in full-year 2015. In Q4, our net revenue from hotels and packages business grew to $27.8 million which was about 79% year-on-year growth in constant currency terms. For fiscal full-year 2016, our revenue less service costs in the hotels and packages business reached $86.5 million, which represents 45.2% year-on-year growth in constant currency terms. This strong year-on-year growth was a result of more than 126% growth in transactions driven primarily by the transaction growth of about 294% in our India stand-alone hotels booked online.
While domestic packages transactions declined during full-year 2016, there was a transaction growth in the teens in our outbound packages business. With the improved mix of hotels within the hotels and packages segment, we were also successful in expanding take rates within the segment from 13.2% in the previous fiscal year to 15.3% in the reported fiscal year. The robust all-round performance in this business segment during the year gives us confidence that we can continue to grow this segment driven by our scale, network effect, brand strength and superior user experience on the mobile. I will now move on to present the financial highlights of our air ticketing business. For the fourth quarter, net revenue from the air ticketing business grew by 28.2% year-on-year in constant currency terms. For the fiscal full-year 2016, net revenue from the air ticketing business grew by 14.4% year-on-year in constant currency terms. This was largely driven by strong year-on-year increase in transactions by 28.1% as we saw the return of strong passenger growth in the domestic aviation market. This was driven in part by more consumer-friendly fares offered by the airlines throughout the air and the ongoing shift from offline to online bookings. Air ticketing margins have compressed from about 6.1% in fiscal year 2015 to about 6% in fiscal year 2016. We expect to see greater margin compression in the forthcoming fiscal 2017.
I’ll now share more details on our operating expenses. Most of the operating expenses in full year 2016 then reflected as a percentage of gross booking remained largely in line with full year 2015. The key increase in operating expenses as a percentage of gross bookings has happened only in marketing and sales promotion expenses and this has been in line with our strategy of driving significant market share growth in the key India standalone hotels business booked online.
Our marketing and sales promotion expenses have increased from about 2.6% of gross bookings in fiscal year 2015 to about 5.9% of gross bookings in fiscal year 2016. We will continue to judiciously invest behind marketing and sales promotion activities to gain market share in the predominantly offline hotel segment in India, leveraging the growing online customer base in the country.
I'll now move on to the business outlook for full fiscal year 2017. We remain optimistic of leveraging increasing smartphone driven internet penetration in India by acquiring new users through aggressive customer promotions and driving repeat usage as well as brand royalty through engaging brand campaigns as well as good customer experience. In doing this, we shall be guided by our longer term key strategic objective of driving up the hotels and packages business mix to over 70% in the coming years. Enthused by the high transaction growth in fiscal 2016 in the India standalone hotels business booked online, we will continue to remain focused on increasing our market share in this business in fiscal year 2017 as well. Our outlook for year-on-year constant currency net revenue growth in fiscal full year 2017 is approximately 25% to 30%.
With that I'd like to pass the call back to the operator for Q&A.
And our first question comes from the line of Lloyd Walmsley with Deutsche Bank. Your line is now open.
Thanks. I was wondering if you can give us an update on the competitive environment and how much of your marketing spend plans is a function of the competitive environment and how that's trending. And then when you look at the 25% to 30% revenue growth guidance, it seems like it would suggest actually less spending on marketing and kind of a return to more normalization, but your commentary suggests you are continuing to spend pretty heavily. So, can you just kind of square that slower growth with kind of how you think the competitive environment and marketing spending plans are shaping up?
Yeah, hi, Lloyd, this is Deep. I will take the first part and then either Rajesh or Mohit will talk about the second. So competitively the hotel landscape has been I think fairly intense through year. And there have been at least two competitors who have continued to invest strongly discount pretty heavily through cash backs and other promos. This is both Goibibo as well as OYO. And while that has continued to grow the market and as you know, midway through this last fiscal we also changed that and we’ve also been fairly aggressive in maintaining and then growing market share across the different segments.
So I think the maximum competitive intensity is - currently has moved a bit from being only in the budget segment to even moving upwards. As I shared during my talk, we’ve actually managed to increase market share across all segments. And as per the latest third party report by Millward Brown we are clear market leaders across all segments. And overall, we are fairly ahead of the competition by about 6 percentage points or about 29% and growing. The last quarters have consistently grown our share, but intensity continues from these two competitors in the market.
Yes, and I guess on the second part, Lloyd, maybe if I could just add to that, linked to the guidance comment that you made, we - what we’ve just mentioned, we continue to see the momentum, I mean, one is from the competition side large amount of discounting that is happening, but we are also very encouraged with the fundamental momentum in terms of tailwinds that are coming from shift that is happening from offline to online bookings as well. So keeping that in mind, what we have factored in this revenue growth guidance is largely led by the transaction growth, so therefore our investment and both on marketing and the promotional activities would continue and we have factored all of that in.
And our next question comes from the line of Gaurav M. Your line is now open.
Hi, thank you for the opportunity. One question, so you mentioned that the net revenue guidance is for next year 25% and 30% and I believe you did around 22%, so you are actually guiding for higher growth even though you are saying that the competition from Ibibio and OYO remains pretty strong, so where will the - so I would assume you will be going faster than the market, so any sense on whether growth is going to come from given these two guys of late has continued to be aggressive?
Hi, Gaurav, Mohit here and I will take that. So if you really look at now that we have kind of started showing the marketing and sales promotion expenses separately and started reflecting all customer acquisition, promotion related spends under that expense line, the revenue growth kind of remains largely reflective of what the transaction growth is from here on. And therefore, if you really look at it, the reported growth for the full fiscal currently reported is about 29% and what we have guided in line with the [indiscernible] for the coming fiscal is in the range of 25% to 30%.
So what we are saying is, we will continue to remain aggressive in the market to kind of keep tweaking our aggression in terms of promotions to ensure the transaction growth remains unhindered and continues to be very, very robust and strong, but we are also confident that with our improved ability to kind of not only just generate lot of first user trials, but also kind of drive repeat users in the coming fiscal, the net revenue growth in terms of our current best estimates right now seems to be in the range of 25% to 30%.
Gaurav, I think you were referring to the dollar growth number, what we are talking about is constant currency growth, so constant growth is 29% versus 25%.
Okay, thank you.
[Operator Instructions] And we do have a follow-up question from Gaurav M with Citigroup. Your line is now open.
Yeah, hi. Just one question on the share-based compensation. I believe that you had set aside a certain number of shares and that was going to get vested over four years. So FY18 will be the year end of that. Is any thought of expanding this further or you will do it as and when the time comes?
So, for us, we’ve typically looked at it in buckets of 4 years. So, the first employee share based program was for the period 2010 to 2014 and the second one which is currently on, continues until about 2018. So as we kind of get closer to the expiration of the program, we will start looking at this and at the renewal around that time, I think for 2017 and 2018, we're kind of well covered.
Okay. Thank you.
And our next question comes from the line of Shaleen Kumar with UBS. Your line is now open.
Yeah. Hi, everyone.
Hi. Just one question over here. So, our marketing expense has gone up pretty significantly over here and we’re saying that competition intensity is high. So seeing that and we’re going to continue to burn our whatever spend in marketing, so that means that maybe for the next FY17, our marketing budget would be - could be in 100 million kind of thing and in terms of the cash we right now have, something around $200 million. So, do we see that this can come down or we have to continue with this much and this would - burning 100 million will result in 25%, 30% kind of growth, isn’t it too expensive?
So, I think we’ve been calling out right through the reported fiscal as well that this is - this for us is kind of long-term investment in to the market. This is a market, particularly the hotels market which is currently also predominantly offline, has just about started getting all line and if you really look at it over the last few quarters, the market movement in terms of online penetration has almost doubled over the last 3 to 5 quarters. That’s our momentum that you would want to kind of leverage upon and keep investing, because this is a very crucial segment for the OTA companies.
Therefore, even in the current fiscal, as we had called out last year also, at least we’ve taken a two year view that we would want to continue investing behind the market opportunity and keep growing our market share in this particular segment and once we kind of - once the segment goes online, beyond say 25%, 30%, we believe a lot more rationale pricing and accretion and promotion will continue to come in gradually, but for at least the forthcoming full fiscal year, we feel we are well funded, the balance sheet is strong and the commitment to kind of invest behind this market remains.
And Shaleen, just to add in line with what Mohit said, a lot of first time users being acquired currently and really spreading the word and as you might have seen, you might have picked up from Rajesh’s speech earlier where he mentioned that a number of unique cities and towns that we are now actually getting the hotel sides coming from has also grown. So fundamentally, the idea is to acquire new users and then to track repeat very carefully and we’re very encouraged by the repeat numbers, which have been actually improving, so the overall cohorts of customers acquired for hotel business, particularly through mobile and even in specifically through app are showing very positive signs of good repeat.
So therefore, there is a clear argument for lifetime value analysis here and keeping that in mind, we think again this is a long-term investment at a very critical phase of the market, we had probably reacted a quarter or two late, but when we did, I think we’ve managed to clearly catch up and then increase the lead and we’re going to - we’re committed to continue to do that and we think the investment will pay off in years to come.
Right. Thanks. Just to follow up on that, clearly, this is again my observation that I could see MakeMyTrip much ahead in terms of at least brand building exercise and the advertisement, whatever visible, on various channels compared, and I do not see much of other competition, actually they’ve completely dried up if I’m not wrong. So, but then if those guys are not spending, are they also growing in the same leg and you’re facing the complement density?
So, I think it’s fair to say that we’ve been growing faster and I think that crossover has definitely happened in the last two quarters. A lot of money has been spent by competition and promos, and discounts, but we think the brand building is important again to increase the overall customer reach. Again, the same point, you can be same set of customers or you can actually increase the reach fundamentally. So 18.5 million downloads is very healthy and way ahead and then growth in new users, first time users will be attracting is very relevant and this burst that you’re seeing currently has obviously worked very well, we’re seeing a very good, healthy increase which is coming.
And like I’d explained, touched upon, there was clear rational behind what we chose on our hotel campaign, these were user insights, which we had got through research, the biggest blockers that we were hearing were being answered, these were blockers around fears of cancellation being too high, these were blockers around that, hey, I can show up and negotiate and get the best deal that being answered through a pretty creative, which is hard hitting as well as lot of people showing up at destination using cab drivers, et cetera as their guides. And so those myths being exploded really, which is what I had alluded to while talking about the campaign, but we’ve seen that resonate very well with our customers and the response has been actually fantastic.
Also, Shaleen actually, you made that comment and I think it’s a very important and I just wanted to add an additional comment on that, it is actually with respect to competition, very well thought through differentiated strategy from our side, while everybody is busy on doing discounting and sales promotions and all and spending millions of dollars there. We wanted to make sure that we have a differentiated strategy, not only kind of just go exactly one customer acquisition side, but also make sure that where we are very, very strong, I mean our brand recall has always been very, very strong, we further continue to strengthen our brand.
And like Deep mentioned, the whole idea was to actually attack the use cases where market could potentially move from offline to online. So we do believe that this differentiated strategy actually will give us long term edge, when market kind of overall slows down on discounting and promotions, it would - our brand could have been much more stronger than ever before and therefore, it would be lot more beneficial to us at that point in time.
Great. So Mohit, just last question, so our margins in both the categories have improved significantly, so is it because of this strategy, but we’ve followed more of an advertisement and less of a promotion and second is are these margins sustainable?
So, honestly, the key reason for the margins improving, particularly in the hotel and packages segment is and I was carrying that out in my section is that the mix of hotels has been increasing significantly right through the year. Hotels now kind of account for almost 45% of the revenue mix in the hotels and packages segment, compared to hardly about 15% in the previous fiscal and as we’ve been calling out, hotels do have much better margins compared to packages and that’s been - that’s also been one of the core reasons for this significant push behind improving the mix from hotels.
So that’s where I would kind of place the large part of margin accretion coming in, particularly in the hotels and packages segment. The small increase or the small change in the margins that you see as reported for full fiscal compared to the earlier quarter is for the fact that all the sales promotion expenses are kind of now being filled under the sales - under the marketing and sales promotion line and not being deducted from the margins and therefore, the dilution from the comparable margin of last year is only about 10 bps, but we believe it’s a tough time that over the next year or two, we should gradually be looking at margins which are kind of lower than these - more in the 5% to 5.5% range.
Okay. Great. Thank you so much.
And I’m showing no further questions at this time. I would now like to turn the call back over to management for closing remarks.
I would like to thank everyone for joining and we look forward to speaking to you in a quarter’s time. Thank you.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.
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