Travel Now, Pay Later: An Emerging Trend

Tour operators and banks today are offering easy credit options for travel at affordable rates. Reema Sisodia, explores this concept which is slowly cementing itself on the Indian tourism scene…

Travel loans can be your best friend nowadays if you have aspirations of going on a tour and don't have the ready cash. Unlike in the past where there was need for documentation coupled with paperwork to get these loans, today the scene is extremely customer-friendly. According to sources from SOTC, a company that has been a pioneer of sorts for this scheme, explains the emergence of this trend. "The rationale behind launching such a product was to help in the fulfillment of desires and aspirations of people who want to travel abroad for a holiday. We saw an opportunity in making these holidays appear within the reach of a greater number of people through the easy installment option. It breaks the cost barrier and makes dream holidays attainable for the common man. Travel-now-pay-later is not a very recent phenomenon, as far as SOTC goes. We offered this scheme to customers way back in 1997. Like all other lifestyle products, travel too is making its products accessible to a wider Indian audience through schemes like these," says official sources.

Meher Bhandara In today's scenario where you can get a bank loan for almost any heavy expense, the concept is gaining a great deal of popularity

Travel Corporation of India (TCI) too had started this scheme seven years ago, but then it was not very successful because the idea of a loan for a ‘luxury’ like a holiday was not too popular. Explains Meher Bhandara, general manager, corporate communications (TCI), "However, in today's scenario where you can get a bank loan for almost any heavy expense, the concept is gaining a great deal of popularity. We have just re-launched this scheme."

Cox & Kings has tied up with UTI Bank for such a scheme. Kavita Bhalla, vice-president, marketing and incentives leisure division, Cox & Kings says, "The concept is still at a very nascent stage, therefore the volumes are still not there but the concept has fantastic potential."

Reasons For Growth

One can cite a number of factors behind this growing trend:

1) A steady change in the Indian mindset that has moved over from being a saving to a spending generation. People are investing in holidays and travel, which is a change from the past.

2) Loans today are easily available without too much documentation. Banks have come forward with schemes that are attractive and attainable. Today banks have excess funds and the interest rates have gone lower.

3) Banks have realised that the market is ready to spend even on intangible assets such as investing in a holiday experience. This has resulted in a series of marriages between tour operators and banks.

Kavita Bhalla The concept is still at a very nascent stage, hence, the volumes are still small

In this new dispensation, tour companies are risk-free because in the case of a defaulter, it is the banks who have to deal with the problem. For banks, promoting loan schemes for travel holidays is just another avenue of business. Today apart from large tour companies such as SOTC, Cox & Kings who have tied-up with banks like UTI, HSBC, HDFC, ICICI, Kotak Mahindra, even smaller tour operators are jumping on to the bandwagon of travel-on-loan. Explains Caroline Bhavnani, director, C R Tours And Travels, "We are using the concept with great success. We have an EMI machine whereby you can get instant loan through your credit card."

Hoshi Karanjia, proprietor, Anjmal Travels, also sees potential in the scheme. He observes, "The Indian market is definitely getting attuned to this concept."

Adds a spokesperson from SOTC, "The 'Holiday Now, Pay Later' scheme has been very well for SOTC. About 12-15 per cent of our total customers opt for this scheme. Our finance partner in the scheme is Kotak Mahindra Bank Limited, and they offer a bouquet of financial solutions to the average traveller. Our current rate of interest is 15 per cent on travel loans."

Bhandara says, "The financial institution's decision regarding the sanctioning/disbursement of the loan is final and the loan agreement is between the passenger and the loan dispensing bank. At present TCI has tied up with HDFC bank. The loans are offered in collaboration with finance companies at rates ranging between 14 to 16 per cent and tenures are normally between 12 and 36 months."

Globally, this is a concept that has tasted success in Europe, America and in several parts of Asia. For example, SriLankan Airlines has come up with a scheme called the 'SriLankan Holidays Travel Loan Scheme', which is a rapid loan offer that enables the tourist to travel the world. Paying for holidays is on an installment basis over a specified period of up to three years with a loan-processing period of one to three days. Those taking up the travel loan offer are entitled to a special five per cent discount on the holiday package.

Such holiday packages are tailor-made to suit specific requirements of individuals and groups and also for corporates to award incentive travel to their staff.

Banks Taking Initiative

With the travel loan market growing, public sector banks have decided to cash in on the concept. Indian Bank has tied up with Air-India and Singapore Tourism Board to offer a special discount package to Singapore ex-Chennai. Likewise, Indian Overseas Bank has introduced the Shubh Yatra scheme, which asks for a minimum gross household income of Rs 1.2 lakh per annum. Bank of India has introduced the Star Holiday Plan with loans up to Rs 10 lakh provided for tours, pilgrimages and excursions within India or abroad.

The future for such schemes is only set to grow in India. Today India is full of young, energetic people who are adventurous, and want to try out new things. They also have better disposable incomes to spend on luxuries; at the same time they are not debt averse. Also, today a growing number of travel companies are offering such EMI solutions to their customers, so the future of such schemes is certainly bright. Bhandara feels that travel financing has great potential. "With international holidays being affordable, you don't have to dip into your savings to fund it. With easily manageable installments you can get your exotic holiday today. Such schemes also create a new market," feels Bhandara.

"People are no longer waiting for a lifetime to reap the benefits of their hard work. The new mantra is 'here and now'," concludes Bhalla.