Method amidst mayhem

By Madhavan Menon
MD, Thomas Cook

This was a year of consolidations and it was after a long time that companies in the travel industry - LKP, Thomas Cook and TCI - actually got together. This was the first major consolidation after the Kuoni-Sita partnership several years ago. Globally too, we saw a spate of consolidation this year, especially in the UK, when TUI Thomson linked up with First Choice and Thomas Cook AG, the former German parent of Thomas Cook with MyTravel. In effect, the UK market is now polarised with two major players. This will be reflected in the Indian market as well with further consolidation.

In terms of travel, we have witnessed immense growth riding on India's economy. Clearly, India is the flavour of the season with high economic growth driving corporate and outbound travel. But this is not to say that inbound is too far behind, despite the overhanging threat of terrorism.

Surcharges will keep fluctuating but in reality, attempts by the major airlines to raise fares have really not worked; both internationally and domestically. Also, with a lot more travel taking place, the constraints of infrastructure are beginning to tell and I am unsure how long some of these airports will sustain this sort of traffic, considering the increasing levels of risks associated with it.

Talking of international travel, there have been capacity enhancements with several new airlines like Finnair and Austrian operating in this market. All major airlines have increased their routes into India and are now operating in multiple destinations apart from Mumbai and Delhi. This allows rational distribution of traffic and the inventory.

Having said that, with the acceleration in outbound traffic, the additional capacity that has been created over the last three years is gradually being wiped out and securing seats has become increasingly difficult even with Air India, Delta and Continental Airlines starting non-stop flights to the US. That is reflected from the fact that Jet Airways' new departures to the West are filling up quickly.

Moving forward, we need to look at the constraints:

• Infrastructure continues to be a major constraint, be it sub-standard airports or transportation. Hotel room rates have clearly moved into the zone of overpricing - so much so that tourists from neighbouring Thailand, Malaysia, Sri Lanka and Singapore might cancel India from their lists.
• The rupee appreciation hasn't helped either and tourists are obtaining fewer rupees for every dollar they spend; while the euro and sterling has remained stable. So if the rupee continues to fluctuate at 11-12 per cent per annum we are likely to have a big problem. It is a double whammy and not a single one.
• We keep advertising 'Incredible India' but has anybody tried to find out the experience of tourists in India? There are several industry organisations which have been pleading to measure what the tourist experience in the country is. It is a variety of issues that are plaguing the system. Nonetheless, it has been a good year and the next year looks promising as well despite all these constraints. India is India - nobody has been able to explain how we have achieved 10 per cent growth despite all the constraints.

However, the industry is getting structured. Next year we are set for further reduction in commissions, making life for the smaller players even more difficult. We need to move from a price-driven industry to more of a service-driven industry - a point where service and price meet.

Another interesting aspect is observing the increasing maturity of Indian travellers. FIT growth rates this year have been really good and we expect the next year to grow at the same if not a higher rate. More and more people are becoming first-time travellers and B, C and D cities are beginning to emerge. As a result, the travel industry will have to go more into retail. It cannot afford to remain only in the big cities and expect to grow.

As perceptions of the traveller changes we will see greater changes as we progress. There will be demand for more exotic locations, greater variety of tours, locations, hotels, etc. For example, in the last year, we actually saw the trend of self-drive holidays which were absent in the past because of driving on the opposite side of the road. Barriers that are differentiating countries are falling apart. You are going to see a far more quality-conscious, price-conscious traveller and the segments we will have to cater to will widen. Overall, I foresee a very positive outlook for travel; provided at least some of the problems are resolved.