Slowdown to hit travel companies

With the economy slowing and corporate houses tightening their purse strings, travel houses in the country are feeling the heat.

While a few say that they have already recorded a significant drop in bookings, others say that if the trend continues, the effects will be reflected on the revenues for the next three to six months.

Mumbai-based Sree Raj Travels, for instance, has seen a drop of more than 36 per cent in international bookings between January and May. The company, however, refused to give the booking details of the corresponding period last year. So far this year, it has recorded a dent of Rs 54 crore (Rs 540 million) in turnover.

To combat inflation, the company has planned to cut down on advertising, recruitment and on the travel expenses of executives to exhibitions abroad. It has also put its expansion plans on hold for the time being.

"We roll out two branches every month at an investment of Rs 25 lakh per branch. But for the moment, we have put it on hold," said Lalith Seth, managing director, Sree Raj Travels.

According to sources in the travel industry, corporates and banks have suggested a cut in the travel expenses of their executives.

"They are booking a suite instead of a deluxe room. Companies are looking for the lowest possible air-fares and are also shuffling the travel arrangements from first class to business class and business class to economy class," said the travel head of a Mumbai-based travel company. 

Thomas Cook says that the kind of impact economic slowdown will have on the travel industry would be clearer in the next couple of months. "Travel is not impacted heavily as of now. But we need to see how the next few months pan out," says Nalini Gupta, Head of Travel, Thomas Cook.

The online travel industry says that their revenues could be impacted if the downturn continues for the next three-six months.

"There has not been any noticeable impact on the online travel industry so far and has not affected our forecast yet. However, if the trend continues for the next three to six months, bottomlines could shrink," said Stuart Crighton, CEO, Cleartrip, an online travel agency. 

The online travel industry in India clocked revenues of  around Rs 8,400 crore ($2 billion) in 2007. Experts believe the industry could do similar business this year despite the slowdown.

"Though its not a great time for the travel industry, the online travel agents (OTAs) have an edge.There is a big shift happening from offline to online travel bookings and people are looking for cheaper fares online. Though the slowdown in the airline industry could get passed on to OTAs, there might not be significant impact on the industry in terms of revenue," said Deep  Kalra, CEO, MakeMyTrip.Com, an online travel agency.