Insight Tribune

India’s travel operators poised for 15-17% revenue rise this fiscal, ET TravelWorld

India's travel operators poised for 15-17% revenue rise this fiscal, ET TravelWorld


(Representative image)

India’s tour and travel operators are set to experience a significant revenue growth of 15-17 per cent this fiscal year, driven by a surge in domestic tourism and an increasing propensity for overseas travel. This robust growth follows a remarkable 40 per cent on-year revenue jump in the last fiscal, which saw the sector surpass its pre-pandemic peak by approximately 20 per cent, reaching around INR 14,500 crore.

Key factors contributing to this growth include improving infrastructure, rising disposable incomes, behavioral shifts in travel patterns, and the government’s enhanced focus on boosting domestic tourism. These elements will collectively support the continued expansion of the sector’s revenue.

Poonam Upadhyay, Director of CRISIL Ratings, notes the evolving travel trends, “The trend of ‘revenge travel’ seen after the pandemic has evolved into ‘regularised travel’ in recent years with a significant shift towards shorter and frequent vacations, for both domestic and overseas trips. Moreover, growing middle-class aspirations, rising urbanisation, affordable packages, steadily increasing income levels, and the government’s focus on boosting Indian tourism will maintain the strong momentum in the tour and travel sector. This will, in turn, ensure healthy double-digit revenue growth for travel operators this fiscal as well.”An analysis of four major travel operators, which account for about 60 per cent of the sector’s revenue, indicates that the credit profiles of these operators are expected to remain healthy. This is supported by strong balance sheets and steady operating margins of 6.5-7 per cent, resulting in significant cash flows and low reliance on debt.

Domestic tourism growth
The domestic tourism market is thriving, fueled by several trends:
– Micro holidays: Quick getaways or staycations over long weekends are becoming increasingly popular.
– Spiritual tourism: There is a growing interest in spiritual tourism.
– Infrastructure improvements: Enhanced last-mile connectivity is making travel to newer destinations more accessible.

Additionally, an increase in inbound travel to pre-pandemic levels and high demand from the corporate and MICE (meetings, incentives, conferences, and exhibitions) segments are bolstering domestic travel.

Overseas travel trends
For overseas leisure travel, growth is driven by:
– Higher disposable incomes.
– Visa-free facilities from 37 countries and simplified visa processes (such as visa-on-arrival and e-visa facilities).
– Easing visa-related challenges for long-haul destinations.
– Attractive travel packages and increased focus of Indian airlines on new destinations in Southeast Asia and Central Asia.

The report identifies emerging markets for Indian travellers, including Southeast Asia, the Middle East, Africa, and Eastern Europe. Additionally, India’s online travel market is expected to grow at a CAGR of 10.5 per cent between 2024-29, rising from USD 17.24 billion to USD 28.40 billion, driven by the increasing accessibility of affordable technology.

Despite the hike in the rate of tax collected at source (TCS) on overseas travel packages effective October 1, 2023, outbound travel is expected to reach record highs this calendar year.

Anil More, Associate Director, CRISIL Ratings, comments on the financial health of the sector, “Strong customer retention, diverse revenue streams, various cost-optimisation measures, and investments in technology/automation undertaken since the pandemic will keep operating profitability of travel operators healthy at 6.5-7 per cent, in line with last fiscal, despite higher marketing spend. Interest coverage ratio will also continue to be strong at over 5 times, in line with last fiscal.”

Liquidity and future outlook
The tour and travel sector’s liquidity is projected to remain strong, given the inherent negative working capital cycle due to significant customer advances and lower dependence on debt. However, factors such as revisions in visa guidelines, growth in commercial air fleets, fluctuations in airfares, changes in tax structures, and inflation will need to be closely monitored to sustain this growth trajectory.

This optimistic outlook for India’s travel operators underscores a promising future, as they continue to adapt and thrive in a rapidly evolving travel landscape.

  • Published On Aug 2, 2024 at 01:55 AM IST

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