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Mar, 04 2015

Launch a successful travel services business

TFW services special edition brings out opportunity for franchisees who want to enter into travel & car rental biz.

Check out why franchising is regarded as the cost effective model for spinning small investments into big returns and augment retail footprint across new geographies…

After China and the US, India has the world's third largest number of internet users and third largest Facebook users after the US and Brazil. Rise in number of generation Y or millennials, smartphones, immediate booking of travel plans by way of user-friendly mobile applications and ease of access via wifi or mobile networks are the main growth propellers that are driving the travel industry. In fact, the mindset of Indian traveller is also changing as there is a widespread media exposure, internet and credit card penetration, flexibility to pick-up travel plans, more options to explore the unexplored destinations and the assortment in price points.  Presently, the travel industry in India is flourishing aggressively via franchising as brands are focusing on streamlining their expansion strategies to reach the target customers. Now booking travel plans is just a click away and all credit goes to internet penetration among rural and urban cities. Read on to know how online and offline travel agencies are routing the ship of travel industry ahead. 

Why invest in travel industry?

As per a report by Redseer Consulting, “Indian travel and tourism market is 42 billion USD industry growing with a CAGR of 10.2 per cent over the next 10 years.” Presently, the industry is booming and is recognised as the largest employment generator in India. Via franchising model, many brands such as  MakeMyTrip, Thomas Cook (India) Ltd (TCIL), Cox & Kings, Kuoni India, and many more players are doubling-up their market share by venturing into hybrid model (online & offline format) for expansion.

“The tourism and hospitality industry is one of the largest segments under the services sector of the Indian economy. Tourism in India is a key growth driver and a significant source of foreign exchange earnings. In India, the sector's direct contribution to gross domestic product (GDP) is expected to grow at 7.8 per cent per annum during the period 2013-2023. The total market size of the tourism and hospitality industry in India stood at US$ 117.7 billion in 2011 and is anticipated to touch US$ 418.9 billion by 2022,” says Daniel D'souza , Head of Sales- Tour Operating, Kuoni India.

Talking about focussing on various retail distribution channels, Jatinder Paul Singh, Senior Vice President & Head - Sales & Distribution Leisure Travel (Outbound), Thomas Cook India Ltd, says: “We have given our strategic focus on retail expansion; we have constantly explored innovative and impactful opportunities in the distribution space. For us, pioneering innovation in distribution channels is clearly earmarked as the way forward. We will keep exploring new avenues to reach out to our consumers and provide them with access and convenience right at their doorstep be it via holiday stores, franchise outlets, our shop-in-shop model, call centre or online channels. Our hybrid 'click and brick' strategy ensures delight to the new-age tech savvy Indian consumer.”

On the other side, Daniel D'souza feels that franchising has significantly contributed towards its brand's growth. He says: “We have been able to penetrate into smaller towns thereby growing the business considerably.” Agreeing on the same, Neelu Singh, COO, says: “Franchising has helped us achieve better market penetration, wherein we were able to tap the latent potential of tier I and II markets. It also provides improved brand visibility and recall, which is a crucial element in attracting prospective customers.” While, Ranjeet Oak, Senior Vice President-Flights, MakeMyTrip, says: “Opting for franchise has given us more opportunities to partner with entrepreneurs who not only can manage businesses but also give us access to key markets in the Indian geography. These retail stores help us reach out to customers who may not be comfortable while transacting online.” Exploring new geographies by partnering with franchisees is the best way to reach to diverse set of consumers. Ranjeet Oak says: “The plan is to drive greater partnership in the market and add 20 odd franchise stores. We are targeting stores pan-India with special focus on category B and C cities.” Whereas Daniel D'souza confirms: “We are currently launching three stores in Raipur, Guwahati and Bandra. We plan to open 15 more in the span of the year.” In case of, Neelu Singh says: “We will be adding 15 new stores this year.”

Dealing with challenges

Challenges are regarded as a part of every business entity. In the travel biz, e-commerce portals are emerging quickly and offering best of travel deals to the internet savvy consumers. But the challenge that few brands face is about tapping the consumer who is apprehensive about exploring online route to get best offerings. Expressing his views on same, Ranjeet Oak says: “Internet penetration and robustness of network have been the key concern areas for the growth of e-commerce in category B towns. Online payment options are among the most secure options available to the customer with data-privacy virtually guaranteed compared to offline credit card payments. Yet, there may be customers who are apprehensive about online payments. To target these customers, cash-on-delivery payment option is offered by most service-providers. To counter this situation, we offer secure payment options to make the travel-buying experience convenient and safe.” He feels: “Travel companies also need to think of ways to add to the post-sales experience while booking online. With mobile internet slated to eclipse broadband growth and penetration, it is important to provide secure and convenient booking options on the mobile platform.”  On the flip side, Neelu Singh shares a different viewpoint. She says: “For us, post-launch operational support was proving to be a cause for concern. We ensured that the pre and post launch support teams remained involved with franchisee operations simultaneously for a period of 30 days to ensure a smooth transition.” She further adds: “Despite the initial confidence, franchisees were finding it difficult to regularly generate leads from their network, in many cases. This resulted in low business volumes and mounting fixed costs led to a lot of disenchantment and frustration among them. At the pre-signup stage itself, we now specifically highlight the need for franchisees to consistently indulge in marketing activities to ensure regular generation of leads.”

Considering various factors such as availability of wifi network, searching various travel related deals on app available on smartphones, mobile internet, awareness and disposable incomes has surely given a boom to the travel industry. Talking about industry's outlook, Ranjeet Oak adds, “In the mid to long-term, we intend to use our core strength of technology to innovate with products and provide best-in-class service and be recognised for creating customer delight.” Whereas, Neelu Singh thinks: “India with its huge population and increasing consumer class is the biggest growth driver. Increase in entrepreneurial drive, risk taking abilities among investors, easy availability of investments and increased investment capability are certain to fuel the growth of franchising in India.”

Car Rental Industry: drive your way to success

Car rental is another biz segment which will boom quickly in coming years. Rising tourist inflow, rise in business and leisure trips, booming B2B businesses via corporate tie-ups with travel agencies and airlines, global economic growth and immense rise in airline services are the key factors that are consistently fuelling the car rental market in India. Now many government and private organisations are undergoing strategic alliances with car rental companies, travel agencies and airlines to meet the demands of corporate consumers. “The major share of the industry is still unorganised, giving organised key players opportunities to expand their business. As per various industry researches, current market size is pegged at around Rs 38,000 crore to Rs 45,000 crore of which less than 9% is organised,” says Aditya Loomba, Director, ECOS (India) Mobility & Hospitality Pvt Ltd.

ECO Rent a Car is now exploring the FOFO model to expand its footprint. Adding further about industry growth and plans, Aditya says: “The car rental market in India will grow at a considerable CAGR rate thus exceeding Rs 80,000 crore by 2020 due to the increasing number of bookings done online and through mobile phone apps. For ECO Rent a Car, we are expected to maintain focus on emerging markets and expansion in tier II and III cities to expand our network.”

The way ahead!

India is a dynamic market and has always attracted foreign countries to build strong trade ties. Seeing the changing mindset of Indian travellers, the industry expects a promising growth.  Looking at the growing number of B2B businesses, the travel and car rental industry will certainly become next engine of growth for travel agencies and car rental companies in India. To sustain profits and grow exponentially, constant innovation in technology and services will become a key growth driver for brands.

-Direct contribution of tourism and hospitality to GDP. The tourism and hospitality sector's direct contribution to GDP totalled US$ 37.3 billion in 2013.

-The Indian car rental market revenues have grown at a Compound Annual Growth Rate (CAGR) of over 20% from 2009-2014. Source: Ken Research

-World Travel and Tourism Council's annual economic impact report 2014 for India shows that travel and tourism's economic contribution is expected to grow by 7.3% this year, outperforming the general economy by 2.5% points.


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