Last minute bookings a challenge: Natesan
Raja Natesan, Chief Operating Officer, TUI India, discusses the potential of outbound segment and a few challenges faced by the industry.
The rupee depreciation, heavy taxation and increasing airline costs have affected the outbound market for this year. “This summer was impacted but the result cannot be quantified. There was a definite slowdown in the industry but there were no large scale cancellations,” says Raja Natesan, Chief Operating Officer, TUI India.
TUI handles all non incoming travel and this includes domestic and outbound traffic. In the last few years, they have seen positive impact of domestic traffic. “We believe that regular sustainable tourism that is not dependent on summer vacations and other small time slots is only domestic. In domestic travel, you will have the vacation travel but you will also have shorter four or five days break and even weekend holidays and that are not dependent on vacation times,” adds Natesan.
In spite of all the difficulties, this winter looks promising for the outbound industry. TUI thinks out of the box, does things differently and suggests new ways of selling destinations. Discussing some of the important issues being faced by this industry, Natesan gives us his opinion on key issues.
Challenges Faced
There are challenges in every service industry but some especially pertaining to our industry include, pricing of packages. There is no particular format used for packaging and pricing. Our biggest issue is that there is no understanding of what the other person is going to do. We have no way of standardising a service. A quality rating does not exist and that is a big problem in the package tour industry. One can rate hotels and airlines but one cannot rate a package.
In this industry no one really talks to each other as everyone feels that they can get a better deal individually. There is no consolidation. At present, we have much larger margins than airlines and can afford to be on our own but this won’t last long. We don’t factor in the price spent to acquire a customer. No one considers this as a huge factor.
Last minute bookings are also a challenge. India, as a country, still considers leisure as a last minute plan. It’s not like we decide and book six months in advance. Luckily because of visas, we wake up 60 days earlier but people don’t understand that they can save up to 20-25 per cent of costs if they are early birds. If you book in December for June you will have a good offer, but we will only see five per cent such advance bookings. Therefore, to make the customer understand that the choices are much more and costs are much less, is a huge challenge for the Indian leisure industry.
A lot of small time or unorganised players are also present in the industry. Their cost of operation for these unorganised players is very low. Therefore they can afford to undercut anyone and they do. Unfortunately quality organisations get compared with smaller organisations. It’s important for people to understand that larger companies are more reliable. So for larger companies there is a long gestation period.
Growth potential
If everyone pulls their weight together, we can do 10 times more business than present but that means the government has to have the right policies in place or airline tax regime should be regularised, our potential dependent on all these factors together.
In the next one-year, if all things remain the same and the dollar price is not fluctuating and if the taxation regime also does not change, then I would expect about a 15 per cent growth next year.
We are looking at destinations as a company and will organise some joint marketing with hoteliers in these destinations; Lucknow is one such place that we are gung-ho about. It’s well connected and easy by train. Its one of the cleanest cities in India and the hotels are good. Fantastic shopping, delicious food and some nice places to see, the city is an architectural marvel. So by promoting new destinations, we can develop tourism.
B2B model
We have a portal that is connected to around 10 xml’s and the logic we follow is that if someone wants a hotel somewhere, it will go through our negotiated rates and all the xml’s pick up the cheapest available option and if that suits the agent we’ll connect the two. At present, a chunk of our business is coming from our B2B model; about 70 per cent.
At present, we have much larger margins than airlines and can afford to be on our own but this won’t last long