Business Standard

20% of offline travel companies have shut shop in the past few years

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Almost four weeks before his death, had approached a leading travel company to sell Raj Travels. It was not the first time he was trying to sell the company, industry sources told Business Standard. Sheth, chairman of Raj Travels, jumped to his death from the Bandra-Worli Sea Link last week, due to accumulated debt.

is not alone in trying to sell itself off. Over last few years, about 20 per cent of all travel agents have shut shop in the country, statistics of the (Iata), which has around 3,000 members in India, revealed. Globally, too, the numbers have fallen significantly. Iata membership figure in the UK has fallen from 60,000 to 3,000 in the last one decade.

While the jury is still out on whether it is the beginning of the end for the traditional offline travel agents, there is no doubt that challenges for the sector have multiplied. Online travel companies are eating into the pie, leaving the offline agents with few options. However, that alone is not reason enough to write off the street-side travel shop. Desperate to rope in customers, the offline agents often burn themselves by providing excessive discounts and personalised services, experts say.

As Arjun Sharma, managing director of Le Passage to India, explains: “Top line is vanity, bottom line is reality. Companies need to devise their strategies more practically in terms of costing to survive in this market.” Economic slowdown has not made things any easier for the travel industry as a whole, but particularly for the smaller or regional players, many of whom have been looking for a buy-out. Sharma’s travel company itself is witnessing around five to six such sale offers annually for the past couple of years.

“Every year, in our Iata conventions, we discuss how we need to improve our yields and bring some discipline into the industry. Several offline players have diversified into totally different businesses, because they could not keep up with the changing times,” said Ajay Prakash, president of the Travel Agents Federation of India.

The ticketing business has drastically shifted towards the online platform. The Internet and Mobile Association of India (Iamai) has found in a study that online bookings of train and air-tickets grew 36 per cent in June, compared to last year. While 5.83 million bookings were registered in June 2012, compared to 4.30 million in June 2011, airlines witnessed 1.45 million online bookings in June against 1.07 million in the corresponding period last year, according to Iamai data.

In the backdrop of falling margins in the ticketing business, smaller agents who do not enjoy economies of scale and do not offer any specialised services are finding it hard to survive. “Companies who have been tech-savvy and constantly adapted to changing times have survived,” said Prakash.

For instance, Cox and Kings, a significant offline player, is fast building its online expertise. To cater to the unique Indian consumer needs, Thomas Cook also offers options of buying online and paying offline. “We want to make high-value purchases more convenient in the online space,” said Rakshit Desai, executive director, Thomas Cook India.

Internationally big names in travel services like Bookings.com, Expedia.com or Agoda.com have done a pure play in the online business. Given the consumer mix in India, companies have gone for a hybrid model. So, the online travel players like MakeMyTrip and Yatra.com have opened outlets in tier one and tier two cities. Traditional companies like Cox and Kings and Thomas Cook have been pushing their online product. The travel space is already seeing consolidation with mergers and acquisitions taking place in both online and offline travel industry. Yatra’s acquisition of Travel Services International, and MakeMyTrip buying stake in Luxury Tours and Travels Singapore have all been part of a consolidation process which is going to continue.

“Holiday packages, which is where the moolah lies are most widely sold offline, as customers prefer face-to-face interaction. That’s one reason the traditional travel agent is not going to die,” a senior travel company executive said.

For offline companies, experts say, the way to survival is to innovate and build specialities like adventure, religious travel or sports tourism. It is not like they haven’t done it already. Sheth, among many of his innovations, would always be remembered as the brain behind the first ever kitchen caravans in Europe.

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