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Cox & Kings strengthens its leisure offerings; distribution network

Peter Kerkar, Group CEO, Cox & Kings Ltd, discusses the sale of its education and other aspects of the business as well as emerging trends in the Indian industry 

Riding high on a great performance in 2018, travel conglomerate Cox & Kings is further expanding its distribution network in Tier- II & III cities in India. The company notched a net revenue growth in its leisure India business to 12.4 per cent in 2018. Moreover, Meininger Hotels also reported a strong expansion in bed capacity of 25 per cent and reported a revenue growth of over 26 per cent. It has sold its education business in the UK and demerged the forex business into a separate company, Cox & Kings Financial Service (CFS). Excerpts from interview:

Given the fact that Foreign Tourist Arrivals (FTAs) during Jan-Nov, 2018 just up by 5.6 per cent compared to 14 per cent witnessed in 2017 and Domestic Tourist Visits grew by 2.3 per cent in 2017 over 2016, how would you explain the emerging scenario for India’s tourism industry?

FTAs have been on a growth trajectory for the last couple of years. According to the Ministry of Tourism figures, the total FTAs increased by 15.9 per cent YoY in 2017. The growth in the first 11 months of 2018 is on the back of this high base and this has to be looked at from this perspective. However, we need to rethink on our strategy in order to grow the inbound market. First, we still rely on long-haul markets such as Europe and USA for our numbers. This must change. Most of the countries that receive a record number of tourists such as Singapore, France or Malaysia receive more than 65 per cent tourists from neighbouring countries, whereas over 60 per cent of our tourists come from long-haul markets. Second, we should focus our attention on China which is one of the biggest inbound markets for many regional and long-haul markets. Finally, we need more air seat capacity from short-haul and medium-haul destinations to encourage tourists to come to India.

In terms of domestic destinations, we are on a sound footing. There is much more that we can do to encourage domestic tourists to visit our picturesque country.  The domestic network of our airlines have been expanding and airlines are opening new routes which were not viable till a few years ago, and this creates demand for destinations.

Cox & Kings is seen as a leader in the outbound market. How do view the growth in the Indian outbound market?

The growth of outbound travel is expected to grow at a compounded rate of over 10 to 12  per cent YoY. One of the drivers for this exceptional growth is the eagerness amongst Indians to take a vacation overseas. More than 60 overseas destinations are represented in India and this is significant in itself as it explains the growing importance of the Indian market.

In 2019, we expect, Indian Low-Cost Carriers to mount flights from India to medium-haul and long-haul destinations thereby disrupting the market in terms of airfares and capacity. We are also witnessing a large number of LCCs from South East Asia targeting Tier 2 airports in India and this helps to increase the base of outbound travel. Overall, the prospects are rosy.

The Indian travel industry has been witnessing many disruptive changes, while a few OTAs have gone bust, others are reworking their business models. In such a scenario, how do you see the emerging situation?

The Indian travel market is highly fragmented but with the implementation of the GST, we expect many of the smaller operators to align with the big players in order to create scale.  While the OTAs have done a good job in expanding the market, most of them are burning cash and pursuing scale. I am not sure if they are building customer loyalty and it will only be known once the heavy discounting pauses.  India is a large market with several customer segments and growing rapidly. Hence, there is room for many players. But customers are demanding better experience rather than cheap holidays. Hence, those with scale or who focus on superior customer experience will thrive. The Indian travel market is a mix of online and offline. It has to be a blend of both in order to be profitable.

How has the overall performance been for Cox Kings for 2018 and what are your expectations from 2019?

Our performance in 2018 was quite satisfactory. In 2019, we expect to continue to grow our leisure India business with an emphasis on B2C segment. Leisure International business is expected to report double-digit growth in EBITDA. Currently, close to 95 per cent of our business comes from the leisure space. Meininger would witness a capacity expansion of 35 per cent to about 14,000 beds and would hit the 15,000 mark by May 2019. We have announced the sale of our Education business to Midlothian Capital Partners for an enterprise value of £467 mn and expect to complete the sale in January 2019. This will enable us to significantly deleverage our balance sheet. We expect to improve ROCE in our business from next year onwards.   

Cox & Kings has curated many new brands recently that cater to a range of travelers. How do you see these segments shaping up?

It has always been our desire to be part of emerging verticals and we identified a few of them that have potential. Second, some of them were being offered by smaller players and we wanted to expand it on a national scale. We launched Enable Travel—India’s first accessible holiday specialist. Last month, we partnered with Ezy Mov to make Goa an accessible destination. The holiday packages that we create are curated by our expert panel, who are either wheelchair bound or blind. They go out and recee airlines and hotels to confirm whether they are accessible. This brings authenticity to the whole experience.

Finally, last month we launched Tour To Feast to introduce travellers to unique handcrafted delicious journeys across India’s most popular culinary destinations, with a slice of history. Each of these journeys is designed and accompanied by hand-picked experts who will take travellers through the evolution of the indigenous cuisines of each region. Tour to Feast is also considering launching international thematic tours besides the domestic ones currently being offered. All these verticals have had an encouraging response.

There are reports of Indian companies planning to deploy vessels in Indian waters. What your opinion? Do you have any plans to foray into this segment as a cruise liner?

The measures by the government to promote cruise tourism in the Indian waters will encourage more foreign ships to dock at ports in Mumbai thereby increasing the number of foreign tourists visiting the country. One an average a cruise ship has between 2,500 to 4,000 passengers and this will benefit the local economy. Moreover, the Mumbai Port Trust is building a new cruise terminal and it should be complete in a couple of years. We do not have any plans to enter this segment. We are Passenger Sales Agents for large cruise companies and we will limit it to that.

With Cox & Kings selling its Education business, you are left with Meininger and the India business. What will be your strategy?

The strategy is to have a sharper focus on the India travel business and continue to execute well in Meininger. We are focusing on the B2C segment in the India travel business and signed up popular Indian actor, Anushka Sharma as our brand ambassador. We will expand our distribution network in tier-2 and tier-3 cities and leverage our strong brand to attract more retail customers. In Meininger, the strategy will be to execute on our expansion plans and ensure to maintain the same or higher level of customer satisfaction. We would also like to ensure a healthy balance between existing and new hotels to deliver superior margins.   

What are the challenges that you see in 2019, especially as it is an election year?

We have seen many election cycles and people know well in advance the election dates and prioritise their travel accordingly.  Summer is the peak travel season and this is the period when children have their vacations and families plan it accordingly.

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