Indian Travel Sector Could See 12-14% Growth: India Report

14.12.2023 - 15:59 / skift.com

The Indian tour and travel sector anticipates 12-14% growth in the current and upcoming fiscal years, according to a report by Crisil. 

The driving factors include sustained high airfares and nearly pre-Covid levels of volumes across various segments. This growth encompasses long-haul travel, where visa challenges are gradually easing. 

Operational Resilience: Despite increased promotional spending, the operating profit margin is expected to exceed 6.5% in both this fiscal year and the next. This resilience is supported by operating leverage benefits and various cost optimization and automation initiatives implemented since the pandemic. Healthy cash flows and strong balance sheets are expected to bolster credit profiles.

Overseas Travel Dynamics: Growing outbound travel, especially post-pandemic, and rising demand for short getaways propel the growth of Indian tour and travel operators. The recent Tax Collected at Source (TCS) rate hike is predicted to have a limited impact, as individual trip expenditures typically fall below the INR 700,000 threshold for over 80% of tour packages.

Challenges and Considerations: While the sector is poised for growth, tour operators may face difficulties monitoring per-traveler limits during the transitional period due to a lack of sufficient tracking mechanisms for travel spending. Key monitorables include the growth in commercial air fleet, airfare fluctuations, changes in tax structures, and inflation trends.

Leisure Segment Insights: In the overseas leisure segment, short-haul destinations, primarily in the Middle East, parts of Europe, and Southeast Asia, will drive growth. Long-haul travel to the US is expected to recover, especially for students, although full pre-pandemic recovery will take time..

Promotional Strategies: Travel operators are likely to increase promotional spending by 100-150 basis points to capitalize on the surge in demand. Debt protection metrics, such as interest coverage, are projected to be over 4 times, compared to approximately 3 times in the last fiscal year. 

In March of this year, Crisil had predicted that leading operators in the Indian tours and travel sector were to report 6-7 percent growth in operating profits in fiscal 2023, after having reported losses for the past two fiscals due to pandemic-induced travel restrictions. 

By 2030, the Indian aviation sector is projected to have over 200 airports, with a notable emphasis on Tier 2 and Tier 3 cities, anticipating the movement of more than 400 million. passengers. 

This information was provided by aviation minister Jyotiraditya M Scindia while laying the foundation stone for a new terminal building at Rajahmundry Airport in Andhra Prad

Domestic air passenger traffic in the first