Polls slowing down travel but 2024 will have extended summer season, says Thomas Cook CEO

2024 will see extended summer holiday season due to increased travel appetite.

The ongoing general elections have impacted travel demand slightly, Mahesh Iyer, Managing Director and CEO of Thomas Cook India, told Moneycontrol.

"There is some sluggishness because of elections," he said.

Iyer says some travellers are deferring their plans. "I can say that it is a postponement because in the states where elections are done, we have seen demand trajectory going up. Forward bookings are around 20 percent higher than the same period last year."

He also expects the summer season to be prolonged this year. "The season will extend into the second or third week of August. It typically ends in the first week of July. But these four weeks of extension will happen in the current year," he said.

Sweet summer

Online travel platforms have estimated a 35 percent uptick year-on-year in travel demand during the summer across key metro markets, with a particularly high interest from Tier II and III markets across the country.

International destinations such as Sri Lanka, Malaysia and Thailand have recorded a 50-400 percent increase in bookings versus last year, especially due to the announcement of visa-free entry, a game-changer for closer-to-home destinations. Newer destinations, including Baku (Azerbaijan), Almaty (Kazakhstan), Uzbekistan and Georgia, are also seeing strong traction among Indian travellers and have seen a surge of 550 percent.

Locally, metro cities Bengaluru and Mumbai lead the chart as the most searched destinations this summer, while hill stations are the other top choice for travellers. Among the cooler locales, Ooty takes the lead as the most searched leisure destination followed by Srinagar and Manali.

The increasing appetite of Indians to travel is keeping Iyer optimistic about the growth momentum continuing in FY25. He estimates foreign tourist arrival (FTA) numbers to exceed the 2019 figures. "We got about 10 million passengers coming to India in FY20. So, my estimate is that it will be higher this fiscal year."

Strong demand expected to continue

The company reported a Rs 271.1 crore profit after tax in FY24 versus Rs 9.8 crore in FY23. In the March quarter of FY24, Thomas Cook's profit stood at Rs 56.5 crore, up from Rs 10.7 crore during the same period a year ago.

Income from operations stood at Rs 1,663.8 crore, up 27 percent from Rs 1,313.2 crore in Q4 FY24. On a full-year basis, it clocked Rs 7,299.4 crore versus Rs 5,047.7 crore in income from operations.

"We expect the momentum to continue because the appetite for travel is high and people are looking to take multiple breaks. They are taking shorter breaks and in a larger frequency than what they did in the past. Earlier, people took two breaks a year; now they are taking 3-4 multiple breaks in shorter durations. There is a shift happening from long-haul group travel to short-haul travel," Iyer said.

He added that FY24 turned out to be a strong year with rebound in travel both inbound and outbound as well as a recovery in Destination Management Services (DMS) operations across the globe. DMS is a vertical within Thomas Cook India.

"When we had acquired DMS operations, we were lossmaking and a transformation was underway. That's when the pandemic hit us. We accelerated our work on the DMS side and when travel bounced back we are seeing sustained growth and profitability. The DMS business that dragged our profitability down due to the transformation has bounced back and contributed to the bottom line," the Thomas Cook India CEO said.

DMS, under which the company also offers products to foreign travel agents, has a network in the Middle East, East Africa, South Africa, USA, Asia Pacific. It contributes 50 percent of the company's travel segment revenue.

Spiritual tourism

Iyer pointed out that the appetite to come see India is high and spiritual/religious tourism is becoming big. "Ayodhya attracts 300,000-350,000 people every day. That is a big draw. And more circuits (under spiritual tourism) are coming up."

Spiritual tourism holds the lion’s share of over 35-40 percent in the India tourism market. The segment is estimated to grow at a compound annual growth rate (CAGR) of 9-10 percent, while the India tourism market is expected to record 7-8 percent for the next five to seven years. The spiritual tourism market in FY23 stood at around $56 billion from $44 billion in 2020.

Travel emerged as a significant contributor to an-all time high goods and services tax (GST) collection at Rs 2.10 lakh crore in April, and within the travel market, spiritual tourism was a big driver.

Ram Mandir visits, and an aggressive capital expenditure drive in Uttar Pradesh led to impressive GST revenue growth in April, said Atul Thakkar, Director – Investment Banking, Anand Rathi Advisors Ltd.

"The total annual expenditure by tourists (domestic and foreign) in UP may cross Rs 4 lakh crore by the end of 2025. This will lead to an additional tax revenue of Rs 20,000-25,000 crore in FY25, given the completion of the Ram Mandir in Ayodhya and various initiatives taken by the state government to promote tourism," he said.

Supply constraints

While demand is growing, supply constraints are making travel cumbersome for passengers. Iyer expects challenges related to supply to see some improvement in 2024.

"Supply side constraints are easing off in 2024. We are looking at 1,300-1,400 aircraft coming into the country. But these aircraft won't come in a hurry because of the challenges that Boeing is going through (in dealing with issues related to its 737 Max aircraft)."

However, he doesn't expect any respite from high air fares despite the addition of new planes.

"From an airline perspective, it (adding more planes) is an investment. Also, demand is very strong so I think there is no need to reduce prices. There will be 2-3 percent softening in price but it won't be visible because inflation will take care of it," Iyer said.

This summer, airfares to Kashmir and Ladakh have risen 10-30 percent, and for international destinations such as Baku and Almaty, they have increased by 12-13 percent from last year.