 "Tour operators face margin pressure in outbound travel")
Tour operators hope to weather the rupee blues by promoting offbeat foreign destinations, shorter holidays and domestic tourism, but could face a hit on margins and profits in outbound business.
“Bookings have slowed down this month and people are adopting a wait-and-watch mode because of the rupee movement. I anticipate tour companies to try and grab their share of customers by giving discounts for the winter packages. This could squeeze the margins,'' said Ashwini Kakkar, executive vice-chairman of Mercury Travels.
According to Kakkar, people who have saved for their holidays will travel. “We are witnessing closer-shorter-cheaper-later phenomenon in respect to holiday bookings. People are planning short duration budget holidays close to their homes rather than going on long-haul routes and they are booking last-minute.”
Kakkar expects leisure travel business to grow on a year-on-year basis. Small tour operators and travel agents are facing problems with clients reluctant to make payments contracts despite booking commitments as the rupee depreciated sharply. Some agents are forgoing their commission and incentives for their long-term clients.
According to experts, corporate business accounts for 60 per cent of outbound business for travel agents and a dip in business travel is a matter of concern.
On the other hand, leading tour operators such as Cox & Kings and Thomas Cook are optimistic about business growth and do not seem unduly perturbed at the rupee crisis. "Close to 95 per cent of Cox & Kings India revenues come from leisure and MICE (meetings, incentives, conferences, and events) business. The outbound portion is 65 per cent of the total leisure business,'' said Cox & Kings’ chief financial officer, Anil Khandelwal.
Thomas Cook said travel business contributes 40 per cent of its overall revenue and outbound and MICE is a key segment. However, the companies refused to share details with respect to profitability and margins in outbound business.
“We have introduced significant savings by leveraging upswings in the rupee against certain currencies, and this has worked very well for our holidays business: Australia and South Africa bookings have grown by 30 per cent and 40 per cent, respectively. Fresh new short-hauls have been introduced, keeping in mind value as also evolving Indians’ demand for engaging new experiences: the new emerging south-east Asian destinations like Myanmar, Vietnam, Cambodia, the Philippines — and these work well in light of the depreciating rupee,'' said Madhavan Menon, managing director of Thomas Cook.
Domestic travel is now a strategic focus for us and our new offers showcase ‘value-adds’ such as the under-sea walk and snorkeling at Andaman islands included at no extra cost. Our ‘Wintervals’ holidays features ‘saver’ options like stays at hostels and apartments; economical rail travel for a shorter duration via a newly-launched two-day Swiss Rail pass
In order to induce bookings, Cox and Kings is offering car, motorcycle, smart phones and home appliances in a lucky draw. Industry experts see this move as a sign of tepid demand. The company, however, disagrees. “We are not yet seeing any significant slowdown owing to either a slowing economy or the exchange rate,” Khandelwal said.
“India is still a nascent market with huge potential. There was only 14 million total outbound departures in 2011, with just a small fraction of this people going on holidays (others would be business travel or visiting friends and relatives). Several new customers are travelling for the first time, from large cities and smaller towns,” he added.
Khandelwal said Cox & Kings is able to gain market share from the unorganised sector because customers prefer to travel with a reputed brand that offers safety and superior service, along with a large basket of holiday options at competitive prices. “Fifty to 60 per cent of travel costs are generally rupee-denominated (airline tickets, visas, insurance) and hence not impacted by the weakening rupee. In addition, our large international operations ensures we buy overseas hotels and other local components much better/cheaper than our competition. Hence, we have the flexibility to provide holiday options to customers within their budgets,” Khandelwal added.
“Bookings have slowed down this month and people are adopting a wait-and-watch mode because of the rupee movement. I anticipate tour companies to try and grab their share of customers by giving discounts for the winter packages. This could squeeze the margins,'' said Ashwini Kakkar, executive vice-chairman of Mercury Travels.
According to Kakkar, people who have saved for their holidays will travel. “We are witnessing closer-shorter-cheaper-later phenomenon in respect to holiday bookings. People are planning short duration budget holidays close to their homes rather than going on long-haul routes and they are booking last-minute.”
Kakkar expects leisure travel business to grow on a year-on-year basis. Small tour operators and travel agents are facing problems with clients reluctant to make payments contracts despite booking commitments as the rupee depreciated sharply. Some agents are forgoing their commission and incentives for their long-term clients.
According to experts, corporate business accounts for 60 per cent of outbound business for travel agents and a dip in business travel is a matter of concern.
On the other hand, leading tour operators such as Cox & Kings and Thomas Cook are optimistic about business growth and do not seem unduly perturbed at the rupee crisis. "Close to 95 per cent of Cox & Kings India revenues come from leisure and MICE (meetings, incentives, conferences, and events) business. The outbound portion is 65 per cent of the total leisure business,'' said Cox & Kings’ chief financial officer, Anil Khandelwal.
Thomas Cook said travel business contributes 40 per cent of its overall revenue and outbound and MICE is a key segment. However, the companies refused to share details with respect to profitability and margins in outbound business.
“We have introduced significant savings by leveraging upswings in the rupee against certain currencies, and this has worked very well for our holidays business: Australia and South Africa bookings have grown by 30 per cent and 40 per cent, respectively. Fresh new short-hauls have been introduced, keeping in mind value as also evolving Indians’ demand for engaging new experiences: the new emerging south-east Asian destinations like Myanmar, Vietnam, Cambodia, the Philippines — and these work well in light of the depreciating rupee,'' said Madhavan Menon, managing director of Thomas Cook.
Domestic travel is now a strategic focus for us and our new offers showcase ‘value-adds’ such as the under-sea walk and snorkeling at Andaman islands included at no extra cost. Our ‘Wintervals’ holidays features ‘saver’ options like stays at hostels and apartments; economical rail travel for a shorter duration via a newly-launched two-day Swiss Rail pass
In order to induce bookings, Cox and Kings is offering car, motorcycle, smart phones and home appliances in a lucky draw. Industry experts see this move as a sign of tepid demand. The company, however, disagrees. “We are not yet seeing any significant slowdown owing to either a slowing economy or the exchange rate,” Khandelwal said.
“India is still a nascent market with huge potential. There was only 14 million total outbound departures in 2011, with just a small fraction of this people going on holidays (others would be business travel or visiting friends and relatives). Several new customers are travelling for the first time, from large cities and smaller towns,” he added.
Khandelwal said Cox & Kings is able to gain market share from the unorganised sector because customers prefer to travel with a reputed brand that offers safety and superior service, along with a large basket of holiday options at competitive prices. “Fifty to 60 per cent of travel costs are generally rupee-denominated (airline tickets, visas, insurance) and hence not impacted by the weakening rupee. In addition, our large international operations ensures we buy overseas hotels and other local components much better/cheaper than our competition. Hence, we have the flexibility to provide holiday options to customers within their budgets,” Khandelwal added.