The travel agency secures from an overseas tour operator an annual contract, often quoting very low or zero commission, to take inbound tourists on a guided tour. The tourists are taken to a shop, where a few craftsmen are fiddling around with their tools trying to simulate a traditional workshop. Tourists buy wood-carved Buddhas, which sell elsewhere for Rs 30, for $30. The total commission for the guide, bus driver and travel agency is 45 per cent.
That was how Ajay Singh, a first-year law student of Delhi University and a part-time guide for a Delhi-based travel and tour agency, summed up the travel agency business in India. And unofficially, at least, old-timers wouldnt disagree.
No wonder, then, that there are so many travel and tour agencies coming up in the country. At last count, there were some 1,000 registered with Travel Agents Association of India (TAAI), though industry analysts would put the unofficial number at 5,000, all jostling for a piece of the Rs 6,000-crore industry.
Its not just the numbers that are important but the quality of the travel agencies that have mushroomed over the years. According to the department of tourism, A travel agency is one which makes arrangements of tickets for travel by air, rail, ship, passport, visa etc. It may also arrange accommodation, tours, entertainment and other tourism-related services.
If this definition were strictly applied, few of Indias travel agents would actually be able to claim that label. Adi Katgara, Director, Travel Corporation of India (TCI) says, Barely 25 of these could claim to be pure travel agents, whose business includes domestic, inbound, outbound and ticketing.
There is, in fact, a clear segmentation in the business. There are the big travel agencies, like Thomas Cook, who cover everything from forex to travel management. The smaller players, by far the larger segment of the business, are the ones who are sharply focused on the inbound-budget tourist, who have started visiting India in distressingly larger numbers than the big-spending corporate tourists. Explains Madan Nayar, vice president, northern India, Sita Travels. These tourists go shopping from one agency to another looking for discounts.
This is where the small agencies come in. Little more than telephone-and-table outfits, these agencies deal in cash and work on thin margins. For example, on an international ticket, the commission works out to 9 per cent; these agencies often pass on as much as 8 per cent to the customer.
It is the airlines that have actually encouraged the growth of small-time agencies to fulfill their short-term goals by creating a discount war between the different agencies, says Sushil Bhatt, Head of Leisure Travel (inbound), Thomas Cook. Adds Mashanta Romani, assistant director, government of India tourist office, There have been cases of more than three different rates available for the same seat.
Since margins are wafer-thin at the lower end of the market, the bigger players pay greater attention to the corporate and high-spending segment. Thomas Cook, for instance, plans to set up representative offices abroad to promote its packages in India. The company is also commissioning several mobile forex vans to provide easy currency exchange services to the inbound tourist. And Mercury Travels will soon have a home page on the internet.
Clearly, this is a promising segment and, if India were to tap its full tourist potential, possibly the worlds largest. But this is not the segment in which the action is. Corporate travel, inbound or outbound, is every travel agencys current favourite.
According to industry estimates, corporate travel now accounts for more than 75 per cent of the travel business and is growing at the rate of 20 per cent. Travel budgets have increased substantially and large corporate accounts can at times exceed Rs 5 crore. An added incentive is that corporate travel is much less volatile. Corporate accounts are a regular, steady business, not affected by events like the plague outbreaks which hurt leisure tourism badly, says Nayar.
Predictably, the competition in this business is also high. Corporates have realised that they are now in a position to bargain and spiralling travel costs have encouraged them to do just that. An increasing number of corporates are demanding stand-alone services, for instance, where a travel agency sets up Computerised Reservation Systems (CRS) at the clients office (see page 2).
With few differences in the CRS and discounts offered, agencies are working full stretch to improve service quality. Today, almost every big travel agency has a staff at the airport, providing round-the-clock service.
This change in attitude and ways of doing business have been a result of economic liberalisation, attracting many global majors to the country. It has also presented Indian corporates an opportunity to expand within and outside the country. Consequently the travel needs of corporate houses have changed considerably. A boost to this has been provided by the relaxation of the foreign exchange norms which has allowed a rise in the basic travel quota (BTQ) from $ 500 every three years to $ 2,000 per year.
Add to this the jump in the disposable income of the middle class, and another promising segment, outbound leisure travel, emerges. Roughly 4 million people travel out of India every year. Industry estimates put the number of leisure travellers at 1 million, growing at the annual rate of 20 per cent.
This is partly the reason many travel agencies are opting for foreign tie-ups to establish global networks. Sita Travels, for example, has tied up with Woodside Travel Trust of USA, giving it access to 3,600 locations in 50 countries, and Cox & King has tied up with Business Travel International.
As part of that exercise, agencies are also going in for vigorous branch expansion. American Express launched its expansion plan in 1992 with a Representative Network Program plan. The network has now grown to 28 spreading across 24 business and tourism-related cities. Thomas Cook has added five more outlets in last two years, taking its tally to 24.
All this expansion, however, comes with a caveat an acute shortage of trained personnel. To try and solve this, some agencies have started specialised training programmes. American Express has fare construction courses, customer-handling skills and professional counselling programmes. Sita Travels has gone a step ahead and opened its own Sita Travel Academy which organises specialised courses in travel and tourism and ticketing.
Does this mean an end to the smaller travel agencies? All is not lost for them. There is always a market for small agencies that provide quality service, says Siddiq Wahid, vice president, strategic planning, International Travel House Limited. One way out for the small agencies is forming consortiums on the lines of Woodside Travel Trust of the US, a partnership of 500 independent agencies.
But the challenges are still great. Says Mohini Datta, chairman and managing director, Stallion Travel Services, This is the best time to get into the travel agency business provided a long-term view, backed by a professional approach, is taken. With 5 million tourists expected by 2000, the real battle is yet to begin.
(Additional reporting by Vikram Bhat)
