Traffic from Varanasi to Bangkok is phenomenal

How do the current Christmas and New Year travel bookings compare with the figures last year?

The industry has seen a 35-40% growth in travel bookings this season compared with the same season last year. We are talking about domestic and short-haul travel, which is a great sign. Travelocity, of course, has seen a growth rate of 100%. The activity has increased in the last two months.

What about hotel reservations?

Exciting developments: Singh at the Safdarjung Tomb in New Delhi. He says passenger traffic from ‘beyond the metros’ has created a buzz in the industry. Ramesh Pathania / Mint

What kind of destinations are Indians choosing?

Goa, Rajasthan and Kerala have been and still are the hot favourites for the season. However, last year, post-26/11, we saw an interesting trend. The high-value customers cancelled their bookings in India and took flights out. It was a significant trend. We did a dipstick (survey) and found that they were worried about safety. It was a disturbing but a clear trend. This year, people are coming back.

Are Indians still hooked to Singapore?

Yes. Singapore, Hong Kong and Bangkok continue to be the top three favourites with Indians. Airfares are also climbing. Today, the lowest return-fare to Singapore would be around Rs18,000. Five months ago this was going at Rs10,000.

Not specifically for this season, but Turkey is picking up as a destination. The reason could be that a holiday in Turkey is only slightly more expensive than a holiday in Asia. We don’t see the same level of activity for the US, probably because the values are higher. But Asia is supercharged.

Any other notable travel trends?

The number of people travelling from what we call “beyond the metros" is growing. There is more traffic from, say, Chandigarh. Traffic from Varanasi to Bangkok is phenomenal, as the carpet exporters from Bhadohi (near Varanasi) are travelling. So is movement between Gujarat and Antwerp (Gujarat is the centre of India’s diamond industry and Antwerp, in Belgium, is the global hub of diamond trading).

The big opportunity is beyond the metros, as most businesses in these cities are catering to domestic consumption. They are not the salaried class and more insulated from the slowdown. Business from the metros is bouncing back, but this is clearly a good segment that has excited us.

Travelocity will be three years old in India in February. How do you view the business opportunity in the online space?

Online opportunity in a country has three segments. There is hotel bookings, there is outbound—that is, people booking international packages—and then there is the domestic flight business.

In India, each business is very different because of their level of penetration. Domestic flights has a 40% penetration in the online space.

Categories like outbound and hotels have low penetration but are growing.

Hotel reservation has grown 100% to reach a penetration of 6.5% this year. Travelocity leads in both the hotels and outbound space. Five months ago, we acquired the local Indian travel agency TravelGuru to become the largest player in the online hotel reservation space. In outbound travel, we have product strength as we offer 80,000 hotels and share a relationship with 450 airlines.

What is the size of the online travel industry in India?

There are a couple of syndicated researches and they are at least 15-20% off each other. We are also fascinated by research—we have looked their numbers as well and arrived at our own figures.

The online travel industry includes the “supplier direct" numbers; that is, tickets or bookings sold by the airlines’ or hotels’ in-house online systems (business transacted through the Jet Airways India Ltd website, for instance, will be “supplier-direct"). The domestic flights business in this calendar year was $2.4 billion. That said, around 82% of this business is supplier-direct, which is, bookings made on SpiceJet.com and Goindigo.in, etc. The remaining 18% is through online travel agents.

Almost 40% of the total domestic flights are booked online. So the $2.4 billion is 40% of the total domestic flights business. This business has already matured and will probably grow at 12-14% CAGR (compound annual growth rate) for next three years.

The online domestic hotels reservation business is roughly $170 million. The penetration in this category is at 6.5%. Clearly, there is a huge potential in this space. Even outbound travel is a $350 million business, with 4% penetration. These numbers characterize the attractiveness of a category to a player like us.

Are the margins attractive?

In the domestic flights business, the average transaction value is small and the margin is a 3% standard commission.

Margins in the outbound business are better, as the average transaction value is three-four times that of the domestic business.

In hotel reservation, the margins are between 10% and 30%.

But the commission on domestic flights is being scrapped.

We do expect some change around that space. There is nothing definitive yet. That’s why we decided to bet on outbound and hotel segment.

If the commissions go, will travel agents in the space close shop?

It will be unfair for me to comment on anybody’s business, but I would not like to bet on this segment.

Did you buy TravelGuru for Rs50 crore in a distress sale?

I cannot talk numbers. All I can say is that it was a very strategic transaction for Travelocity. It is a 100% acquisition and the same people are still running the company. Business is not about brands but about brands that people build. I am very bullish on growth in online travel in India. If I had very little money and was asked to put it in one business in one country, I would put it in the online travel business in India, preferring it to markets like China.

Which is your favourite holiday destination?

It is deep in the heart of the Himalayas. I like to go trekking. Of course, ever since I’ve joined Travelocity, I haven’t found the time.

Any trek in the pipeline?

Yes, whenever the weather is suitable, I will go to the Milam Glacier, close to the Tibet border. My wife comes from that region in the Kumaon hills.

Any favourites outside of India?

One of the places I have loved is Thailand. Not the Bangkoks and the Pattayas. If you just drive into its local villages, that’s just beautiful.

Which international hotel/holiday would you recommend?

I just love Denis Island in Seychelles. It used to be a Taj property once. I don’t know if they still run it. The island property is spread over 100 acres. There are no watches and televisions there. The BlackBerrys don’t work. So, initially, you feel very uncomfortable. But if you stay there for a week…and you don’t have a watch, you lose sense of time and just let it go.

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