In what will be a year gone by in a few days, 2013 has not been bad one for tourism, says Madhavan Menon, managing director, Thomas Cook.
Speaking to CNBC-TV18 in what is the peak of festive season in India, Menon says the company is likely to see a 20 percent plus growth on outbound travel. And while inbound travel was sluggish, it started seeing an improvement recently from Russian and American tourists.
Furthermore, Menon says the company’s 74 percent acquisition of Ikya Human Solutions is working as per plan. The operations are in-line with expectations and the margins, too, are steady, he adds.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: How exactly has travel business been this holiday season both inbound as well as outbound travel?
A: If you look at on a year on year basis 2013 has not been bad despite all the volatility and price increases that we witnessed during the first half of the year. In fact the stability of the rupee in the last quarter has actually helped us. So if I look back at 2013 and compare it to 2012, we will still do a 20 percent plus growth in our outbound travel.
On the inbound travel things have been a little slower. However, in the last two quarters we have actually seen a pickup in demand for India bound tourism. Part of it is coming in from Russia and the other part of it is surprisingly from the US.
So, we are actually seeing a lot of activity around that and that is going to happen last quarter of 2013 into Q1 of 2014. So it looks good, I cannot complain at this point of time.
Q: How much does domestic travel form as a part of your total revenues?
A: If I look at all the travel segments domestic, it is clearly the fastest growing segment and I think with the development of airlines, the establishment of new hotels across India have contributed extensively to the growth. We actually see this as a fastest growing segment.
This is something that I have been saying for quite some time now that domestic tourism is bound to explode at some point of time and I think we are seeing the initial stages of that.
Q: If domestic travel is not doing too well in spite of it haven't you lost in volumes and margins to players like Make My Trip and Clear Trip?
A: Both Makemytrip and Cleartrip got into this business fairly early and especially Makemytrip has built up their business substantially. We got into it a little later.
However we have actually not seen a decline in margins because the demand is so substantial in this segment. If you look at each one of the major domestic players we are all running between 300-400 different products across the country and each of us has got a separate niche that we are trying to target. So, I expect demand to grow substantially in this space for all the major operators.
Q: Could you take through the performance of Ikya Human Solutions margins and the revenue growth?
A: Ikya came into the family in April of this year. So as of December 31, you will see about eight and half months of turnover and revenue coming in. It has been operating to our expectations and margins have been steady.
We recognise this as sunrise industry and there will be some impact on margins as we go forward. However, right now it has been a good performance and a steady margin profile that they are operating on.
Q: Doesn’t it reduce your companies overall margins?
A: They operate at a lower margin, so it will dilute the margins for us initially because we operate at better margins but the growth Ikya will generate will be substantially higher than the growth that we will generate and my expectation is that over a period of time that will stabilize.
Q: What will be the blended margins for this year and the next year?
A: The third quarter was the first full quarter of Ikya that came in, so to give numbers at this point would be misleading. By first quarter we will be able to give a correct profile of the margins.
Q: How painful has been the transition after you lost support of Thomas Cook’s global offices? Was it tough getting inbound business?
A: We had an arms length relationship with Thomas Cook and the only relationship was bringing tourist from – territories that they operated into India. On the outbound we have been independent since we got into the business and therefore there was no transition at all.
Coming to the outbound business, we expect looking at forward bookings as we look at it into 2014, the response has been very good and part of this has to do with the steady rupee. Currently, if we look at forward booking in December and Q1 of 2014, we are looking at about a 30% growth.
So my concerns at the beginning of this year that weaker rupee would impact growth has not actually happened and Indians are still going for the holiday.
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