Aspirational India heading to airport lounges, says DreamFolks CMD

Liberatha Peter Kallat is the founder of DreamFolks Services

Frequent flyers in India may have noticed that queues outside airport lounges are sometimes longer than security check lines. Liberatha Peter Kallat, chairperson & managing director of DreamFolks Services Limited, an aggregator platform for airport lounges, said in an interview to Moneycontrol that airport lounges have become an essential element of air travel as they provide a luxurious and comfortable experience.

She said customer acquisition is key and lounges can differentiate themselves by offering new services to travellers.

In September 2022, the stock made a blockbuster debut at a premium of 56 percent to its issue price of Rs 326. It hit its all-time high of Rs 550 on its debut day and has been trading lower ever since. On March 9, it closed at Rs 435.15

Edited excerpts:

DreamFolks has access to lounges at all Indian airports with 68 percent market share and 22 percent exclusive airport lounge access. Now, it plans to expand in the Middle East and Southeast Asia. What’s the strategy?

The strategy will be the same as in the Indian market in terms of handling clients. We have network providers and banking partners who will contribute to the business. Even in these regions, the focus would be the same set of clients. In terms of revenue, it would be too early right now to say a good pie is coming from the global market. However, three to four years down the line, we expect a contribution of 15 to 20 percent from these regions. Having said that, the primary market for us will be India.

When you talk about expansion and focus on India, what is the competitive landscape looking like?

When we started in the Indian market, the competition was present. Big players who were older than 30+ years were already existing in the market. What we bought was a differentiator in terms of solutions and services and that's why DreamFolks is a market leader today. We innovated & developed our own proprietary technology solution, which enabled us to organize the sector and offer tailored solutions for each client enabling them to enhance their customer journey. Similarly, we would bring the same differentiation in the global market which would actually help us grow there as well.

With acquisitions like Vidsur Golf and wellness services picking up at airports, what other major travel trends have you picked up?

Our main focus is travel, but apart from lounges, we have already added spas and it is also one of the offerings that banks are providing to their card holders. If we feel that anything can be of potential benefit or added value to not just the bank, but also its customers, and if there is anything which is interesting and will complement our offerings, we will look at it. Also, there are more offerings which will be announced soon.

The acquisition will allow Dreamfolks to utilise Vidsur Golf's expertise and offer a selection of exclusive golfing privileges to its clients.

There's rising credit card penetration in the market. Is there a trend you’ve picked up in terms of cross-sections of customers?

During COVID, we saw it was more of the business traveller using the lounges. Now, post-COVID, we see a change in pattern – passengers are moving towards more leisure travel and families are actually using lounges.

Also Read: Do you travel frequently? Here are five best credit cards with complimentary airport lounge access

What about tier-2 and 3 cities? How crucial is that space? What are the expectations?

Awareness is growing and that is one reason we have suddenly started seeing a large number of people using lounges in tier-2 and 3 cities. It’s not that lounges were not available – there were lounges in these airports as well. But yes, awareness was low. Usage is now happening in these cities. And even airports are focusing on lounges because initially there were airports where there were no lounges. Now, with more privatisation, lounge spaces are growing.

With more awareness, how is customer acquisition looking compared with a tier-1 city?

The trend is rapidly changing but the number remains higher in the metro cities and that means you've five to six cities that are the major contributors. But tier-2 and 3 cities are booming too and in the coming years, we may start seeing that even if the footfalls are not equivalent to what the metro cities have, there will be a good contribution from these cities. Tier-2 and 3 cities are more aggressive than metros. Even though there are local players in the cities, they're more aggressive and understand what value it brings to their business and the airport.

Also Read: Delhi airport cleanest in Asia Pacific: ACI

Your margins have improved from single digits to 12-13% currently. How do you plan to increase them?

We try and maintain our margins. Even if you have seen that margins are varying, the difference was not considerable. So, now we have tried and maintained it across all our services. The way we have actually modelled the business today, any operator who's actually coming up with a lounge would really want to first have a tie-up with DreamFolks… that is how we will grow.

How will you capitalise on the market’s potential, given the rise in air traffic, credit card users, number of airports and airport privatisation?

The two driving factors to our business are airport traffic and the increase in credit card penetration rate. The focus for DreamFolks has now changed to other industries and sectors. Now, we are directly working with airlines, different corporates. We are trying to segregate in different areas as well ensure the business growth factor is not just going to be only for one industry.

Secondly, in airport infrastructure, space constraints or limitations are not there because airports understand the value or the revenue provided by lounges. When we started, the average size of lounges used to be around 2,000 square feet and today, within seven to eight years, the average size has become 30,000 square feet-plus and it is increasing.

Within a few months or a year, additional space is coming up in existing airports also. So we don't see any limitations in the lounge space. We aim to add different travel-related services, so we also want that it should not be just one service where there are limitations. We can also have different services which can be offered to customers in terms of the growth factor.

DreamFolks has also tied up with railway lounges. How does that space look when demand for air travel in India is rising and airport infrastructure is growing?

There are expansion plans and more railway lounges in the pipeline. Even though airport traffic or passenger traffic is good, I believe railways are also growing similarly. And now with the government taking the initiative and expanding infrastructure, I would say, luxury travel is coming in and there is a growth potential in railways as well.

Also Read: Railway station or charming café? Rail minister’s pic stuns Twitter