Travel companies rake it in as busy season comes good

This story first appeared in DNA Money edition on Sunday, December 23, 2012.

Nothing, it appears, can spoil the Indian traveller's holiday right now – not high airfares, nor a weak local currency. Travel and tourism companies are witnessing significant traction (both offline and online) for booking flight tickets, hotels, holiday packages and other allied services.

So much so, between October and December, the business may have grown a quarter over the corresponding period last year. "These are the peak travel months and business has been good both for domestic and outbound travel. The industry has grown by over 25% and packaged holidays have grown around 23%,\" said Arup Sen, director - special projects, Cox & Kings.

Within the overall business, the domestic holiday segment grew significantly higher than international. This, despite the airfare for domestic destinations witnessing substantial increase due to reduction in the number of flights.

Pratik Mazumder, head - marketing, Yatra.com, said travel portals have seen tremendous growth in the holiday business. "Over last year, our domestic business has seen more than 250% growth and the international outbound business more than 150% growth.”

As for international holidays, industry players said the depreciating rupee made foreign destinations more expensive for travellers this year. Movement in currency exchange rate affects the cost of holiday on the whole as hotel, accommodation, air tickets and visa charges fluctuate depending on the prevailing exchange rate.

"However," said Vishal Suri, deputy COO - tour operating, Kuoni India, "This led Indian travellers to identify alternative holiday options within their budget. A substantial number of travellers reduced the duration of their holidays and opted for shorter vacations. Budget travellers explored domestic holiday destinations. Weekend packages for destinations at drivable distances gained popularity."

Stimulating the demand for leisure travel, airlines had launched a 30-plus days Apex fares, offering 50% of their inventory at discounted rates. The strategy played well for the airlines, ensuring that over 40% of their seating capacity was booked well over 30 days in advance.

Noel Swain, executive vice president - supplier relations, Cleartrip, said, "The average pricing this year is 20-25% higher than what it was last year. The Apex fares bring the differential down to just about 10%. This gave customers a pricing advantage of 10-15% on airfares, which is a considerable benefit in terms of pricing for planning holidays in advance," said Swain.

"This year, people were smarter. They planned in advance and started booking early, since October, which is why we were sold out by early December. Besides, contrary to market perceptions that people would be cutting back on their travel spends, spends have increased considering average package costs are 10% higher than last year due to airport duties, taxes and higher hotel costs. Our standalone hotels business, where people are taking 'drivable distance' holidays, has also seen a nearly 100% growth," said Mazumder.

Industry players also indicated that average bookings (domestic air tickets) tend to decline marginally in December as most people are travelling between December 20 and January 5. However, the numbers are up marginally compared with November.

"Overall, there is a 4-5% increase in bookings compared with November and at Cleartrip, we have seen 13-15% increase over last year. On the hotel bookings front, the month-on-moth growth is about 35%. The numbers essentially mean there are a lot many people travelling in December this year compared with last year. This is a clear indication that December is going to be much better for the hotels and airline industries with very robust bookings through the Christmas week going past the new year," said Swain.

On the international front, Cleartrip has witnessed a 75% growth over last year. This is mainly because of increased capacity from low-cost carriers (Indigo, Spicejet) that launched multiple international destinations from India to the Middle East, SAARC and South East Asia, etc.

The focus is on free individual travellers, or FITs, who make up more than 65% of all international travel. "The FIT customers are the slightly evolved set of travellers who pretty much know what they want to do when in a particular destination and hence plan their own route and activities," said Suri.