 "Rajeev Wagle")
You believe that online travel agencies (OTAs) haven't had much of an impact on your business and that you didn't fall behind your competition. Please explain.
The online travel scenario has made great strides in India, just like e-commerce but they deal only in components. OTAs deal in standalone hotels and flights but we deal in itineraries. When it comes to that, they are less than 1 to 2 % of the market share in packages sold. OTAs believe in no-touch and automation while we are the exact antithesis of that. We sell experience, they don't. I would like to challenge these OTAs to come into our business and do what we do. A lot of OTAs ventured into the MICE (meetings, incentives, conferencing, exhibitions) business but were forced to close down because even though it's B2B (business-to-business), it still needs a high touch. Our growth rates are not as high as OTAs, but our growth stories and operating areas are different as well. I don't sell tickets, I don't sell train fares, I don't sell hotels, I sell itineraries and in that space, we are doing great.
Then why is Kuoni India selling out its tour-operating division if it's such a profitable business? India was one of your long-term growth prospect plans as well, then why the decision to exit?
It comes down to an individual decision on why Kuoni global is selling. The executive directors and the board felt that for a B2C (business-to-consumer) model to succeed in the current environment, they'll have to make greater investments and they want to focus on the B2B market right now. Kuoni doesn't have enough resources to fund all 4 divisions -tour operating business, global travel distribution (GTD), global travel services (GTS) and VFS Global. So the decision is part of a global strategic initiative to focus on the B2B market.
Kuoni said that it "will focus on markets with attractive, long-term growth potential such as Asia, the Middle East and Africa". According to your own admission, the tour operating business is great in India. Yet, Kuoni is exiting India. Could it be because you have been losing market share in the tour operating business over the past few years?
The first part of your question's answer is that the focus is more in the B2B sense than in the B2C sense. As for the second part, if you look at the 2014 figures, all the market share "loss" has been regained. We have grown faster than the market and we have grown faster than our competitors. Also, in FY 2015, I believe we are going to come back with a big bang. Yes, we went through difficult times because the rupee went for a free fall but now we are stable and doing great. Kuoni group's decision to exit the B2C space could be because, in their view, it requires more investment and 40% of the group today is B2C. Therefore, they could believe that they should be in the backend of the global travel industry.
Is Kuoni going to maintain the inbound travel business?
Yes. Only the business travel and leisure division are to be put out for sale.
How many people are likely to be affected by the ownership change and restructuring in India? Also, do you have any assurances or plans in place as to what the change in ownership will entail for your current team?
Close to 1150 people are likely to be affected by the change. Someone as high up as Kuoni's chairman of the board has stressed that we are going to look for owners who will try and ensure safe passage to employees. While there are no iron-clad assurances as such, even we will look for owners who offer safe transit to our employees.
It is said that Kuoni never had the strongest foothold in India because it wasn't nimble enough to adjust to the Indian market. Do you think that view has any merit?
I do not agree at all. A few years back when the conditions were not exactly benign, the entire industry suffered. However, we recovered and had a great 2014 and based on our forward bookings, I can say that we had a great 2015. Also, travel is a surrogate for GDP growth, so we believe that we will grow at a much faster clip in the coming few years.
You have fixed yourself the deadline of December 2015 to sell off your unit. In the worst-case scenario that you can't finalize a deal by December, do you have a plan B?
I feel that there's no obstacle to a deal at least in India. Maybe in other geographies, this question may be more relevant but we have enough number of suitors for Kuoni India. So we haven't looked for a plan B. Even globally, Peter Meier (CEO of Kuoni Group) has maintained that we don't have a plan B and I stick to that.
So are you quite confident that by December, you will get a potential suitor?
Yes, perhaps even earlier than that.
The closer the deadline, however, the greater the leverage your potential suitor has in the prospective agreement. Don't you think that poses a problem because of your own acceptance of the absence of a plan B?
I think that the way the offer is designed is that it will attract big private equity and strategic investors because of Kuoni's leading position in the market and the brand. So only if there are no consolidated offers for all geographies, will markets be sold separately. I can't answer for other geographies but I'm sure that Kuoni India will not face that problem at all. We have a host of strategic buyers and private equity firms who will have to compete to acquire. So I don't foresee any problem with Kuoni India at all.
