April 15, 2021

ilpuntontc

Just Do Travel

The death of the small travel agent

8 min read

“I am out with a traveller for the first time since March last year,” he said. “I have no income.”

Nearly 25 years ago, Gupta became a tour guide catering to English-speaking foreign tourists after he completed a master’s degree in history and philosophy. The tourism industry seemed promising. Every year, lakhs of people flocked to see the Taj Mahal. In a good season, Gupta made up to 50,000 a month. And then came 11 months of endless wait, with the pandemic nearly vaporising the travel business.

“Some guides in Agra have moved on to other work. I opted to wait it out,” he said. “I don’t have the money to invest in another business.”

Gupta’s role is crucial, but he is also the lowest common denominator in an industry that has many layers. Like most guides, he is a freelancer—contracted by small travel companies, which are often called travel agencies. The smaller travel agencies, in turn, get their business from the larger travel companies that international tourists use. Gupta’s pain runs through the entire value chain. No travel company that serves international tourists has had any business. And this upheaval is nowhere more visible than in Agra—a faithful stop for many a foreign traveller.

Gupta was often contracted by Sanskriti Vacations, a travel company that specialises in experiential tours of Agra’s Mughal and colonial-era settlements. Director Rajiv Saxena sits in a freshly painted office with two employees. “We have not generated any invoice since 1 April last year,” he said. “We will have zero GST contribution from my company.”

India has thousands of mom-and-pop travel companies spread across the country which employ millions of people. They come in different shapes. “Inbound” operators handle foreign tourists; “outbound” companies service Indians travelling abroad. Then, there are the pure-play domestic tour operators. Smaller companies handle just one piece of the puzzle, like transport, while the larger ones are responsible for the entire value chain—offering custom-built packages and scheduling reservations to delivering experiences. The industry, nonetheless, is largely unorganized. Arriving at an estimate of either the number of companies or the employment that they generate is therefore difficult. The government of India’s ministry of tourism recognises 496 inbound tour operators, 194 travel agents, 149 domestic tour operators, and 50 adventure tour operators. In sharp contrast, the Indian Association of Tour Operators (IATO), one of the many travel industry bodies, has nearly 1,700 members.

“There is no mapping of how many people are engaged in the travel business. But we know that there is a multiplier effect, which involves guides, drivers, hotel staff, handicraft professionals, airline staff, porters, restaurant staff and many others,” Pronab Sarkar, president of the IATO, said. “Our estimate is that about 40 million people are involved. One tourist can generate seven direct and 14 indirect jobs,” he added. Many tour operators may never bounce back from the wreckage left behind by 2020. They may simply vacate the market to larger players who have the staying power. Foreign tourists are not expected to start visiting India at least till October 2021.

Domestic travel, meanwhile, is gathering momentum, but domestic tourists hardly use traditional tour operators any longer. They book hotels and airlines through online travel agents such as MakeMyTrip. Neither do they use the coaches and cabs that tour operators run. In the post-pandemic world, well-heeled Indians have indulged in “drivecation”, or a vacation where they drive on their own.

Nevertheless, the pickup in domestic travel holds out hope that normalcy in other segments of the business—such as meetings, incentives, conferences and exhibitions (MICE)—will pick up too, thereby cushioning the industry’s slow turnaround. Caution, nonetheless, remains the key word.

“It is early days. People are spending again. But we are only measuring the domestic side where the unit values are lower than an international holiday,” Madhavan Menon, chairman and managing director of Thomas Cook India Ltd, one of India’s larger travel services companies, said. “As an industry, anywhere between 30-40% of the 2019 domestic business is back. 2021 will be somewhere in the range of 50% of where we were in 2019, but 2022 hopefully will pick up significantly,” he added.

Survival mode

About a dozen cabs and coaches parked outside Travel Bureau’s head office in Agra’s Fatehabad Road have gathered a thick layer of dust.

The travel agency, one of Agra’s largest, started operations in 1980. Director Sunil Gupta’s cabin on the first floor resembles a curio shop, cluttered with mementos that fill the walls, work desk, coffee and side tables. He has visited 84 countries. The last was a month before the pandemic hit in December 2019—to Antarctica.

Every year since he started operations, the company added more business, staff, coaches and cars. “It was a happy situation. We started with one vehicle and last year, we had 95, including Volvos and Mercedes commercial vehicles. We expanded to eight cities. I employed 155 people full time,” Gupta said. “Not even a single vehicle has moved an inch since March 2020.”

To sustain operations, Gupta is trying to sell off his vehicles. But the resale value has shrunk because there are few buyers of commercial vehicles in a distressed market like Agra. “There are no buyers even when we are ready to sell them at 30% the market price. I have only managed to sell about six vehicles,” Gupta said.

Other travel companies are trying to rationalise the real estate they own and have already shrunk manpower. Rajeev Kohli, joint managing director of Creative Travel, an inbound travel company, said he has 80% of his employees on furlough since June 2020. “The bigger players are hurting much more than the smaller ones because our expenses and obligations are higher. I have my entire finance team functioning seven days a week with no revenue simply because the burden of compliances is so high,” he said.

Meanwhile, banks are telling the larger travel companies that they are now a non-viable risky concern. “I have to sell some real estate at a major loss. I have no choice. Which business in the world can survive 11 months without revenue?” Kohli asked.

Desperate tour operators are now trying to attract international customers with flexible booking options. A helpful message pops up when one visits the website of Pioneer Personalized Holidays, a company based in Kerala. “For all new bookings,” the message reads, “we will hold all arrangements without charges until 30 days before your trip”.

The company has had a few enquiries from potential customers in the US and Europe who want to travel towards the end of 2021 and the first quarter of 2022. “These are not big numbers. And no one is committing or putting a deposit. They are just looking for a plan, an itinerary,” Ranju Joseph, owner of Pioneer, said.

Domestic green shoots

Shweta Singhal, Yatra Online Pvt. Ltd’s marketing chief, joins over Zoom. She appeared happy. Online travel companies have been cornering the lion’s share of the domestic travel business ever since the lockdown lifted.

“There are green shoots but only in domestic travel. In domestic flights, in the December quarter, we were at 50% of pre-covid levels and this number jumped to 65-70% in January,” she said. However, February and the first week of March has been flat versus January as many states have started to report an increase in covid-19 cases.

“We are hoping that by the time the peak summer season is upon us, the vaccination drive would have become widespread, and the second wave will be under control. We are hoping for a much better June quarter,” she added.

MakeMyTrip’s numbers also suggest green shoots although business is far lower when compared to the same period last year. For the quarter ended December 2020, the company totalled revenues of $56.8 million, a nosedive of 61% versus the same year-ago quarter. However, revenues from its air ticketing business increased to $18.2 million in the December quarter of 2020 from $10.9 million in September 2020. Revenues from hotels and packages increased to $24.4 million in the December quarter from $4.4 million in September, underlining that a gradual recovery is on.

So where are people travelling? “In Goa, hotels are reporting significant occupancy. Kashmir is totally sold out. Then, there is Mount Abu, Jaipur, Udaipur—they are all beginning to ramp up as holiday destinations,” Madhavan Menon of Thomas Cook India Ltd said.

Smaller traditional tour operators who are trying to tap the domestic market have a handicap though. Larger companies such as Thomas Cook India could quickly pivot to digital as consumer behaviour changed. Smaller companies today have much less resources to be able to make any investments in technology.

“The reality is that smaller companies will start getting into action only as business picks up. But we are witnessing a change in consumer behaviour,” Menon said. “Till such time everyone feels absolutely safe, we will see a larger proportion of contactless booking. Those of us who have the ability and have upgraded our technology will be transacting a bigger proportion,” he added.

For some operators who are used to the high margin international business, pivoting to domestic travel is simply not worth the investment or time. They would rather wait for better times.

Sunil Gupta of Agra’s Travel Bureau is one such operator. He believes the domestic business requires a different set of skills and mindset because it is an ultra-competitive arena. He has been working on domestic enquiries from three potential customers, which adds up to a margin of 500 per person. He exchanged 20 emails and a similar number of WhatsApp texts with them. And yet, they backed out.

“The domestic budget market doesn’t value the knowledge, convenience or the role of the tour operator,” he concluded.

A wait for visas

Early in January, SOTC Travel Ltd, a subsidiary of Thomas Cook India, hired three chartered flights to take 750 people to Dubai—probably the largest group travel for a MICE event from India post the pandemic.

UAE is open to visitors, and so is Maldives, Russia, Turkey, and Egypt. More countries are expected to follow soon, depending on the progress made in inoculations. Pandemic-fatigued Indians have thronged in large numbers to UAE and the Maldives in particular. As Indian tour operators await the opening up of tourist e-visas, can the outbound market rebound faster? It probably will. Thomas Cook/SOTC has sniffed an opportunity and is back with print media advertisements highlighting new tour packages for countries like Maldives.

What must the Indian government do now to revive the sector? Opening up chartered flights will greatly help is the unanimous answer. “We should start opening up the borders on a reciprocal basis,” Pronab Sarkar, president of IATO, said. “We have requested the government to announce the opening up three months in advance. International tourism doesn’t start overnight,” he added.

Tour operators in Agra, meanwhile, would like the government to understand the importance of the city in India’s tourism landscape. A few decades ago, Agra welcomed an equal number of domestic and international tourists. The proportion of international travellers dropped to 25% three years ago, Rajiv Saxena of Sanskriti Vacations estimated.

“The ratio of foreign travellers is dropping further because the focus of the government is on religious tourism,” he said. While religious tourism attracts domestic travellers, foreign tourism brings in multiplier effects—one foreign tourist staying for seven days spends anywhere between $3,000 and $5,000 on average.

Tour operators also hope international travellers who cancelled trips in 2020 will start re-booking once India begins rolling out e-visas. If India’s vaccination drive goes well, the first phase of international arrivals can begin between October and December. That would bring in much-needed cash that is necessary for operators to re-invest in their businesses, which remain in deep freeze. India’s attractiveness as a destination on the world travel circuit hinges in the balance.

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