Mumbai: Cox and Kings Ltd, one of India’s oldest travel agents, will sell more profitable products, including specialized international school trips, children’s adventure holidays and study tours, in the next financial year as part of a diversification plan.
Specialized educational trips for age groups of 8-11 and 11-18 are niche products of Holidaybreak Plc., which Cox and Kings bought recently. Peter Kerkar, 49, director at Cox and Kings, said Holidaybreak’s revenue contributes about half of the group’s total revenue.
“In the next three years, the revenue mix of Holidaybreak and Cox and Kings would be 60:40, and in 10 years, it would be 70:30,” Kerkar, who lives in London, said in an interview during a visit to India.
Kerkar, who is also the group CEO, said the leisure business has an average margin of 20-23%, depending on countries. Cox and Kings is largely into leisure travel, which it does by organizing specialized tours through its vast network.
In September 2011, Cox and Kings, through its UK unit Prometheon Holdings (UK) Ltd, had acquired Holidaybreak for £312 million (around Rs.2,673 crore today) in an all-cash transaction, marking the biggest overseas acquisition by an Indian travel company and the ninth acquisition by Cox and Kings.
Holidaybreak is a UK-listed specialist travel company operating in education and activity travel groups. It has operations in the UK, Germany, Switzerland, Austria, Belgium, the Netherlands and Ireland.
In August, private equity firm Citi Venture Capital International had invested $137.75 million (around Rs.724 crore today) in Prometheon for an undisclosed minority equity stake. The investment proceeds will be largely used to retire part of the debt raised by Prometheon for the Holidaybreak acquisition.
Kerkar said, post the Holidaybreak acquisition, Cox and Kings now operates across three major travel categories—leisure tours, education travel and camping holidays.
“We will introduce education travel to India and Australia in the next financial year. We will bring these travel products to Mumbai, Delhi and Bangalore next year. Camping tours will also be introduced next year to India,” Kerkar said.
In education tours, Holidaybreak provides curriculum-based outdoor tour packages to students of primary and secondary schools with an aggregate capacity of 9,200 beds that are equipped with indoor classrooms, meeting rooms, conference halls, swimming pools, football pitches and activity areas. These trips are conducted during school terms typically from March to October. The normal duration of residential outdoor trips is between three and five days.
Holidaybreak designs specialized itineraries for such students to encompass a broad range of curriculum related topics including drama, music, history, and foreign language.
For camping holidays for age up to 18 years, Holidaybreak owns approximately 8,300 accommodation facilities (including about 7,000 mobile homes).
Cox and Kings would be able to spread its risk by bringing Holidaybreak products in India, a travel consultant said, requesting anonymity. “Cox and Kings would be better placed among hospitality companies considering its beds and margins. But they will have to compete with unorganized sector that are doing education tours. Also, slowing down Europe would pose a big challenge to Cox and Kings,” the consultant said.
Kerkar said the future investment would be largely into the education travel with the help of internal accruals. Kerkar, who had joined Cox and Kings in October of 1986 as a general manager, said the diversification was carefully chosen. As airlines were reducing the travel agents’ commission on tickets sold, Cox and Kings had diversified into tour products, business travel and foreign exchange business as complimentary to its business.
While bringing UK’s products to India, Kerkar is also focusing on India network by adding more rural franchisees. He said 80% of its business will start coming from tier II and tier III cities as there is more disposable wealth in those regional towns.
“We are forced to bring out our brochures in five languages as these towns are growing. The sophisticated travellers in the cities are self dependent though they may buy our products. But travellers of tier II and tier III cities still need a conventional travel agent like us,” Kerkar said.
After scaling up operation through Holidaybreak, the company is now aiming to trim down its debt, Rashesh Shah, senior analyst at domestic brokerage ICICI Securities Ltd, wrote in 22 August report. The current debt stands at Rs.3,706 crore and the company is planning to bring down its debt by Rs.500-600 crore every year through the cash generated from business. Shah wrote that Citi Venture Capital’s investment would further improve profitability.
