Prasan Das
Friday, August 2, 2024
Reading Time: 2 minutes
The credit profiles of travel operators are projected to remain robust, bolstered by strong balance sheets and consistent operating margins of 6.5-7 percent, similar to last fiscal year. This stability will result in substantial cash flows and continued low reliance on debt.
Domestic tourism growth and an increasing tendency to travel abroad are expected to boost the revenue of India’s tour and travel operators by a solid 15-17 percent this fiscal year. This growth will be supported by improving infrastructure, rising disposable incomes, shifting travel behaviors, and the government’s intensified focus on promoting domestic tourism.
Revenue growth is anticipated to build on the high base established last fiscal year, during which revenue surged by approximately 40 percent year-on-year to around Rs 14,500 crore, surpassing the pre-pandemic peak by about 20 percent.
An analysis of four major travel operators, which generate roughly 60 percent of the sector’s revenue, indicates that their credit profiles will remain healthy, backed by substantial cash flows and minimal debt dependence.
The domestic tourism market is experiencing growth driven by micro holidays (such as quick getaways or staycations during long weekends), an increase in spiritual tourism, and enhanced infrastructure that improves last-mile connectivity, facilitating travel to new destinations.
Additionally, a rise in inbound travel (foreign tourist arrivals) to pre-pandemic levels, coupled with strong demand from corporate and MICE (meetings, incentives, conferences, and exhibitions) segments, is bolstering domestic travel.
Overseas leisure travel is being propelled by higher disposable incomes, visa-free access to 37 countries, simplified visa processes (including visa-on-arrival and e-visa facilities), and the easing of visa-related challenges for long-haul destinations. Attractive travel packages and a heightened focus by Indian airlines on new destinations in Southeast Asia and Central Asia are further driving international travel to record highs this calendar year.
The increase in overseas travel persists despite the hike in the rate of tax collected at source (TCS) on overseas travel packages, effective October 1, 2023.
The liquidity of the tour and travel sector is expected to remain strong due to the inherent negative working capital cycle, characterized by significant customer advances and low debt dependence.
However, developments such as changes in visa guidelines, expansion of commercial air fleets, sharp fluctuations in airfares, alterations in tax structures, and inflation will need to be monitored closely.
