Peter Kerkar, Director and group CEO, Cox & Kings, speaks with T3 about the growth of the company as well as India’s travel industry
We have done a lot of work in the last five years to get an India reach. Our total distribution in India is 168 owned offices and around 500 GSAs. Our distribution is spread over 169 cities and there is going to be a progressive further consolidation. We are no longer just an Indian company, we are global. We are also no longer just a tour operator; we are now a specialised bed bank. We have over 55,000 beds within the group. It has changed the nature of what we do. We now have our own hotel chain in Europe, Meininger which is a hostel/hotel chain. It is trendy and caters to a client base whose average age is 21 years. It offers both dormitory style and private rooms and is always located at the city centre. This chain is growing at 40 per cent in Europe as we speak and we intend to globalise the product. We currently have six in Berlin and are set to add another one in Germany. Following that, we will begin operations in London, America, Barcelona, which are our first targets for expansion. India and Australia will follow suit with the same model of accommodation, but not until next year.
We also have an Education Travel chapter now which is again expanding rapidly. We will also bring that into India and Australia within this financial year. Our main focus for this FY is the expansion of these two products worldwide.
As far as tourism numbers are concerned, outbound and domestic travel growth is clearly ahead of inbound tourism. It has been growing at 30 per cent plus for nearly 12 years now with no signs of slowing down. In fact, even if the market is in double digits, we are seeing higher growth rates because we are just taking market share. When the economy isn’t robust, people spend more judiciously and spend with the players that they can depend on. Our forex business linked to our travel. We sell our forex to our clients. It is primarily a retail outlet. We sell to individuals and we are not in wholesale trading. What has been critical to us is our franchise network. And that has become 30 per cent plus of our outbound and forex. As we increase our distribution, our market grows.
In India the exciting aspect is that it is not just foreign tourism that is growing. Domestic tourism has beaten outbound growth. This is only natural as there are no visas needed. Inbound, unfortunately, is stagnant owing to some systemic issues. Airfares have gone up overseas. Some of our key markets like UK have large taxes they need to pay to visit us. From the UK, it is almost GBP 120-130 in taxes! You have got to look at the composite price. It is a deterrent to travel when you can go to Thailand or any of our neighbouring countries instead. There is not a trickle through of the hotel prices here. I think they are still overpriced. Maybe the economics in India demand it but compared to competitor destinations, it is too high. The world is your oyster in tourism and unless these issues, and issues like visas, are sorted out, they will always be a deterrent.
India is an expensive country, so our traditional markets are the western countries. To tap newer markets, India needs to be a cheaper destination which means cheaper infrastructure such as hostel accommodation etc. We need the government to stimulate the economy to give us that kind of infrastructure. The private sector cannot achieve this alone. The traditional markets will continue to be strong in India as long as the rate parity is not favourable.
Planning a holiday is a disposable income issue and most people today don’t want to compromise on this. They want to take their holiday. If they have to pay Rs 5,000-10,000 more, it’s not going to break their back. And more importantly, people who are being careful with their finances may not do multiple holidays. They will do one international and one Indian holiday or two short breaks. It’s always about the value for money. It’s not the ultimate value; it’s what they perceive to be good value.
MICE is still a small portion and do not contribute to more than 15 per cent of our business. Leisure is still our largest source segment. What makes it attractive to us is that it is a year-round market. Our main business, however, remains holiday packaging.
Our strategy has been very clear. Talk about values, not about net pricing. We have always known that we need to give an Indian traveller an Indian value, which means giving them Indian meals, nice city centre hotels to stay in, have chefs in the hotels so the guests don’t have to drive away far out of town to dine, etc. It is all about providing best experience to clients. This is the reason that we have been growing faster in the market. Our reputation precedes us. People know it will be value for money at Cox & Kings which they cannot get with our competitors. I am hence focusing on client experience, added value services and making packages unmatchable.
Travel is an industry that will continue to grow. In developing economies, travel always becomes a more of a necessity than a luxury as it grows. The world is going to become a smaller and smaller place. Approach to travel is already less mysterious owing to the internet and the travellers are already more connected than the older generation ever was.