India’s Travel Operators to Grow Revenue by 15-17% This Year, Says Crisil
India’s tour and travel operators are set to expand their revenue by a robust 15-17 per cent this fiscal year, driven by rising domestic tourism and an increasing propensity for overseas travel, according to a report by Crisil.
The growth will be supported by improving infrastructure, rising disposable incomes, a shift in travel patterns, and the government’s focus on boosting domestic tourism. This follows a strong fiscal year where revenue surged by approximately 40 per cent to around Rs 14,500 crore, surpassing pre-pandemic levels by about 20 per cent.
The credit profiles of travel operators are expected to remain healthy, supported by strong balance sheets and steady operating margins of 6.5-7 per cent, resulting in substantial cash flows and low reliance on debt, the Crisil report noted.
An analysis of four major travel operators, accounting for around 60 per cent of the sector’s revenue, supports this optimistic outlook.
Key Factors Driving Growth
Poonam Upadhyay, Director at CRISIL Ratings Ltd, said, “The trend of ‘revenge travel’ seen after the pandemic has evolved into ‘regularised travel’ in recent years with a significant shift towards shorter and frequent vacations, for both domestic and overseas trips.”
She added, “Growing middle-class aspirations, rising urbanisation, affordable packages, steadily increasing income levels, and the government’s focus on boosting Indian tourism will maintain the strong momentum in the tour and travel sector. This will, in turn, ensure healthy double-digit revenue growth for travel operators this fiscal as well.”
Overseas and Domestic Travel Trends
The growth in overseas travel is driven by higher disposable incomes, visa-free access from 37 countries, simplified visa processes, and easing visa-related challenges for long-haul destinations. Attractive travel packages and the increased focus of Indian airlines on new destinations in Southeast Asia and Central Asia are also contributing to record-high outbound travel this year, despite the recent hike in the tax collected at source (TCS) on overseas travel packages.
Domestic tourism growth is fueled by micro-holidays (e.g., quick getaways or staycations over long weekends), growing spiritual tourism, and better infrastructure (improved last-mile connectivity) facilitating travel to newer destinations.
Observing the current trend, Anil More, Associate Director at CRISIL Ratings Ltd, said, “Strong customer retention, diverse revenue streams, various cost-optimisation measures, and investments in technology/automation undertaken since the pandemic will keep operating profitability of travel operators healthy at 6.5-7 per cent, in line with last fiscal, despite higher marketing spend. Interest coverage ratio will also continue to be strong at over 5 times, in line with last fiscal.”
Doubts Revealed
Crisil -: Crisil is a company that gives ratings and research about businesses and the economy. It helps people understand how well companies are doing.
Revenue -: Revenue is the money that a company makes from selling its products or services. For travel operators, it means the money they earn from booking trips and tours.
Fiscal year -: A fiscal year is a 12-month period that companies use for accounting and financial purposes. It doesn’t always start in January; it can start in any month.
Domestic tourism -: Domestic tourism means people traveling within their own country for vacations or trips. In this case, it means Indians traveling within India.
Overseas travel -: Overseas travel means going to other countries for vacations or trips. For example, an Indian family going to Europe for a holiday.
Disposable incomes -: Disposable income is the money people have left after paying their taxes and essential expenses. They can use this money for things like vacations and shopping.
Credit profiles -: Credit profiles show how well a company can pay back its loans and manage its debts. A strong credit profile means the company is financially healthy.
Operating margins -: Operating margins are a measure of how much profit a company makes from its regular business activities. Higher margins mean the company is making more money from its operations.
Debt reliance -: Debt reliance means how much a company depends on borrowed money to run its business. Low debt reliance means the company doesn’t need to borrow much money.
Shorter vacations -: Shorter vacations are trips that last for a few days instead of weeks. People are taking more of these quick trips, which helps travel companies make more money.