Hybrid models will be something to watch out for in the days to come, Thomas Cook (India) Managing Director Madhavan Menon tells Nivedita Mookerji in an interview. While online travel companies may move into parts of traditional travel business, bricks and mortar companies are likely to migrate to online to some extent. Edited excerpts:
What is the kind of competition that you are facing from the online travel and tourism segment?
We all serve different segments. Obviously, in the point-to-point travel, online business has come to dominate. It’s a segment where we were not a major player. It was predominantly a space serviced by the mom and pop stores earlier, which is now being controlled by the online firms. But, it is still a very small portion, compared to the total size of the market.
What is Thomas Cook’s core business at present?
The area where we operate in is providing travel management to corporate. We are in the holiday business where we send groups as well as individuals on trips. This is far more difficult to do in terms of rules and regulations in the markets today. If somebody wanted to go on a holiday with groups of people, you have to go through a bricks and mortar exercise. So while online firms compete with us in our space, it is not necessarily a pure online play.
But, haven’t you been dented by the online business?
Nobody can deny the advent of the online players in this space. And the penetration will only grow as broadband becomes far more viable in India. So, let’s not deny the existence of online space.
What is Thomas Cook’s role in the online travel business at present? Also, what are the innovative measures that one can expect to see in this space in the times to come?
We are players in the online space, but we operate in a totally different model from what MakeMyTrip, Yatra or ClearTrip does. To that extent, what you are going to see in the days to come is hybrids. You are going to see online travel agencies (OTAs) moving into our space. And you are going to see the bricks and mortar players cover some of the areas of the OTAs. I think what you will really see is convergence.
So, where are we headed?
In a few years’ time, you may not be able to tell the difference between an OTA and a bricks and mortar travel company in India. Also, primarily because of the nature of our country, you may not see 50 and 60 per cent internet connectivity soon, that you see in some other countries. My expectation is that India will be a different ballgame. OTAs are likely to migrate to parts of our business, and we migrating to parts of their business. So, you will see lots of hybrids, but different players will dominate different parts of the business.
Can you explain the industry dynamics vis-à-vis online and traditional?
If you look at point-to-point travel within India, OTAs have about 14 per cent market share. In terms of online hotel reservation in India, OTAs are the only players. But in terms of building holiday plans for say seven days in different cities, bricks and mortar players are much stronger. In international travel, bricks and mortar players are substantially bigger than online companies. It’s not that we are better than them or they are better than us. It’s the way market is structured. The advent of Air Arabia and Air Asia are changing things in terms of international travel. And you will see all sorts of models operating in this space over a period of time.
Is Thomas Cook planning anything new in online?
Like I said, we have an online presence. We are constantly reviewing it, but we are not going to go down the route that OTAs have taken. We will build our business on a slightly different model. Ultimately what matters is how we deal with the end customer. If you are talking of holiday travel, you are talking of a large number of first-time customers who are not computer-savvy, who are far more comfortable dealing with the person across the counter. If you look at corporates, they do things mostly through their secretaries. So, while OTA invasion has increased, our point-to-point business has also gone up. Customers who have historically dealt with us will continue to come to us.
Any acquisition plans that you have in India?
While we are always open to looking at propositions, very honestly I haven’t seen anything viable coming our way in several years. The last was when we acquired LKP and Travel Corporation (India) TCI in 2006. We are five years down the line now, proposals keep coming, but none of them are genuinely viable.
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In the travel and tourism space in India, do you see mergers and acquisitions (M&As) happening?
Not really. If you look at this space, it’s not that there is no intent. But this is a space dominated by the small entrepreneurs, whose expectation is something totally different. How do I as an acquirer go out and ensure the business that I am buying is sticky. Very often, these are one-man shows. The loyalty lies between the owner and the employees and the customers. We have no assurance the customer will continue.
How has Thomas Cook grown over the years?
We have grown organically. We have opened up new businesses, including one on visa. I think that’s an interesting innovation. We provide retail facilitation for visa. That’s an interesting business. We are realising that in a disorganised market, people are worried that their passport may go into wrong hands. They are comfortable dealing with Thomas Cook when it comes to parting with a document like the passport.
Are you doing anything in the hospitality space?
No, we are not a player in the hospitality space. We don’t own hotels, nor do we manage hotels. But in the hospitality sector, there are a couple of very interesting emerging trends. That includes entry of new three and four-star hotels and emergence of new international hotels. Even that is not enough to satisfy the demand. One of the biggest challenges in India today is that hotel room tariffs are way ahead of what is charged in other countries. Unless we get that straight, India is not going to attract tourists the way we should. And the second issue that we have is that related to visas — it is becoming increasingly difficult for foreigners coming into India, as it is for an Indian going abroad. The government of India needs to find a way to sort this out.
Currently, which are some of the hot international holiday destinations?
Indians are becoming more and more exotic. Obviously, the traditional destinations are the US and Europe. Canada and the Caribbean had become the new destinations. Now we are discovering people wanting to travel to South America. For the first time in our history, we sent a group to South America recently. Earlier, we had sent individuals, but never a group to South America. We are witnessing an entire evolution in terms of travel. It’s no longer just the 45 plus who are travelling abroad. We are now beginning to see youngsters — 25 and 30 year-olds — travelling with us.
I think it is a reflection of the Indian demographic system.
Will this trend continue despite security trouble around the world?
Yes, the trend of international travel will continue. What’s driving it is our country’s economic growth, and increase in per capita income.
Do you think Indians are going on longer vacations now?
On the contrary, Indians always went on longer holidays to overseas destinations. Now we are observing people taking shorter vacations to go abroad. So you see people travelling to places like Sri Lanka, Bangkok, Singapore and Dubai for three day-trips. More and more people are travelling on short haul.