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Dec, 07 2010

On a profitable voyage

Travel and tourism industry is set for an interesting journey. Rise in revenues from foreign exchange, robust growth and new investment avenues are opening up exciting destinations for investors.

SURVIVING the spank of slowdown, the Indian travel industry is on a smart ride. It has been dishing out profitable avenues to both international and domestic players to expand business. According to the Ministry of Tourism, Foreign Exchange Earnings (FEE) during the period from January to October 2010 have risen from Rs 42,395 crore in 2009 to Rs 51,334 crore in 2010. The growth rate has been up from 4.1 per cent to 21.1 per cent for the same corresponding period.

Business potential

The industry is estimated to grow at a rate of 4.5 per cent over the next 10 years, as per a research forecast by the World Travel & Tourism Council. Experts anticipate that a fair share of the travel companies will be aggressive towards franchising, as they are hopeful to double their present number of outlets through the franchise model. The industry offers a rewarding prospect to a franchisee willing to operate a travel agency. Ritika Modi, Regional President, Uniglobe Travels, South Asia says, “India is a huge country and franchising does give businesses a faster reach. The retail travel franchising is still in its nascent stage and although, there is a huge market but it is challenging to create a balance delivering value to the franchisor and the franchisee.” Uniglobe's area of specialty is the SME section of the business travel market.

Franchisability

As per industry experts, investment in a travel agency format varies, depending on the type of franchise one wants to take up. It varies between Rs 2 lakh to Rs 5 lakh along with guaranteed high returns. If one wants to take up a travel franchise business, a travel agency would be a desired and viable option. Besides, recognised travel franchise brands such as Thomas Cook, Cox & Kings and Uniglobe Travels offer lucrative franchise opportunities. Enumerates Karan Anand, Head, Relationships and Supplier Management, Cox and Kings Ltd, “Cox and Kings has a very good brand equity amongst travellers. In order to grow the market, we decided to partner with those who share our vision to grow. This in due course led to a win-win situation.” He adds that they hand-hold the franchisee so that he gets proper assistance. They provide training, technology and superior product offering. While Modi states, “In only eight years in India, Uniglobe has become one of the top five corporate travel management companies. The group turnover (based on travel sales) is over Rs 900 crore. The Uniglobe franchise programme provides support in four key areas of business management: sales, revenue enhancement, agency operations and financial management. The support is provided in a variety of ways, including, centralised supplier and vendor negotiation, benchmarking, modelling, individual consulting, group collaboration, networking, education and awards/recognition programmes.” Commenting on the level of franchisee's involvement in the business, she shares, “Each office is independently owned and operated, so owner is the key to success. The role of the regional team is to facilitate and support each agency owner's individual use of the franchise programme. The agency owner is the decision maker and drives all implementation.”

Expansion

Spread in over 40 locations across 17 cities in India, Uniglobe is on an expansion spree via the franchise format. Shares Modi, “This steady growth has set a firm foundation for the future. We see no reason to not continue adding agency members, who are looking to accelerate their growth. We can see doubling our membership, given the market opportunities coming up.” Says Anand, “Cox and Kings Ltd has grown at a rapid pace due to the quality of service, superior product offering, local knowledge of products and excellent customer service. These attributes have made us grow at a fast pace.” Notably, Cox & Kings has appointed 80 franchisees across 20 states covering 70 cities.

Flip side

When a franchisee enters the travel agency business, he has to confront several challenges. According to industry experts, the primary roadblock faced by a franchisee are competitive fares of trips because customers would always prefer an agency that charges the lowest. Besides, the presence of hundreds of travel agencies mushrooming in an unorganised manner often dilutes the profit share of a travel franchisee. Modi explains, “Developing a brand name is one thing, developing a brand reputation is another. Creating brand awareness takes time and dollars, so we are slowly building that awareness in our target markets through various marketing programmes. The brand reputation is actually achieved through the efforts of the franchisees.”

Exit option

On the exit options, Modi says, “Our franchise programme provides ongoing coaching on how best to build value into the business. We also provide the franchisees with agency valuation models to help them with their selling process.” The company also helps its franchisees scout for potential buyers.

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