Trying times for tourism industry

By Ramnath Subbu

MUMBAI, JULY 7. The Indian tourism industry is going through trying times because of the general global recession, uncertainty in the political scenario and cheaper options available in the Far Eastern destinations. The outbound travel has been particularly affected though inbound travel continues to grow at a steady 6 per cent.

The tourism industry is classified into outbound, inbound and domestic and there are different opinions about the size of the industry.

According to Mr. L. Prithviraj Singh, chief operating officer, leisure, Cox & Kings (India), ``Around 2.5 million tourists are coming in while outbound is still a nascent market. The potential for growth in the latter segment is much more than for incoming tourists.''

Mr. Sunil Gupta, head, leisure travel, Thomas Cook (India), said, ``Inbound tourism is growing at a consistent CAGR of 6 per cent annually while outbound tourism is growing at 15 per cent year-on-year.

Mr. Ranjit Malkani, chairman and managing director, Kuoni Travel India (KTIL), at a recent press gathering, said there was a definite slowdown in outbound travel. Further, ``Growth in inbound travel so far has been due to tourists from West Asia, Latin America and Japan. The trend in European arrivals has been flat, though a 5-6 per cent growth is expected courtesy the rise in airline seat capacity.''

In fact, the recent rise in airline seating capacity to India and increase in hotel rooms have spelt greater affordability for the foreign traveller. But Mr. Singh said incoming traffic has grown only marginally. ``Unfortunately, foreign agents look upon India as a troublesome country - in terms of operations not in terms of safety. We have also got into this trap of India becoming an expensive destination - added to an expensive air fare - as there is `no open sky' policy. The entry points are the metros where hotel tariffs are very high. Basic infrastructure too is a problem.''

Inbound tourism is concentrated largely in the North and Rajasthan. Industry sources say that even today, the South accounts for only about 25 per cent of inbound tourism. ``The first time traveller will invariably go to Agra and Rajasthan and not venture to other locales.'' However, added Mr. Singh, ``With the thrust given by Kerala, it is an exotic option and Gujarat too is a destination of the future.''

Domestic tourism needs to be buoyed up. ``Domestic tourists are looking at 3-4 holidays in a year in India and the concept of booking through a hotel directly is moving away and customers are increasingly coming to travel and tour agencies.'' said Mr. Singh. The most favoured destinations continue to be the hill stations and Rajasthan and now, with the marketing thrust, Kerala is the largest destination for people in the West and South.

``One has to really bring tourism to its potential. We have not even scratched the surface. The need is to evolve a long term policy. Disinvestment of Government stake in Indian Airlines, Air India and ITDC in the long term will be a good thing and if ITDC hotels are privatised, that will open up a new level of affordable hotels.'' said Mr. Singh, adding, ``The problem in India is the absence of `open sky' policy. If there is one, prices will drop, capacities will improve and once that happens, all the other problems will be sorted out.'' Among the leading players, Kuoni Travel (India) (KTIL) is the country's biggest, fully owned by the Zurich-based Kuoni Travel Holding. Last week, the company acquired Tour Club which caters to the outbound segment from West Asia to India. Inbound travel from West Asia has been growing at 15 per cent, among the highest growth rates in the segment.

KTIL had already spent Rs. 200 crores in earlier acquisitions, which included travel majors SOTC (Kuoni's route to an Indian presence) and SITA World Travel.

The company plans to go public once market conditions improve and will divest 25 per cent of its equity. In 2000-01, KTIL registered a pre-tax profit of Rs. 34 crores on a turnover of Rs. 600 crores and its forex earnings for the fiscal were worth Rs. 179 crores.

Cox & Kings India too has an open mind on acquisitions both in the domestic and overseas markets. ``We will look at niche companies overseas as well which we feel we can develop.'' said Mr. Singh. The company claims the second largest share of the domestic pie after Kuoni in inbound and outbound travel. ``What separates us is the charter segment which, for example, comes into Goa. We set up a subsidiary 18 months ago - Far Pavilions - to cater to this segment and that has made a fair amount of progress,'' said Mr. Singh.

Approaching the market with an IPO is an option Cox & Kings would consider in the long term. In the short term, ``We are looking at revenue being generated internally,'' he said.In 2000-01, Cox & Kings had a turnover of Rs. 320 crores and in the current year, expects to touch Rs. 350 crores.

Thomas Cook (India) has shown a 10 per cent increase in revenues for the quarter ended March 31, 2001 over the corresponding quarter the previous year at Rs. 22.01 crores (Rs. 20.02 crores).

The company had said increased investment in marketing leisure travel and expansion of distribution network is expected to yield significant benefits in the peak travelling period between May and July this year. There has also been continued investment in building businesses in Sri Lanka and Mauritius along with completion of back-office implementation of SAP, call centre infrastructure and telecommunication network.

Earlier, TCIL was mainly in the business of forex dealing and travel and tours. But, according to Mr. Gupta, ``The domestic sector needs more focus and we realise that the customer wants quality service. Reliability is a major issue. A focus area for us is A/C rail charters where we book and pay for an A/C railway coach and tourists can visit different cities/ locations."

``We are likely to see healthy growth in inbound tourists due to our association with Conrad & Neckermann (C&N), handling GMC charters in Goa. We have also opened offices in Kerala and Goa and have the right to operate in Maldives, Mauritius, Sri Lanka and SAARC countries," Mr. Gupta said.

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