Travel industry on cloud nine as more Indians queue up for overseas trips, short getaways

livemint.com:

NEW DELHI : India’s travel and tourism industry is poised for significant growth this financial year as more people travel overseas or make time for short getaways despite rising airfares, as per a new study. Collectively, revenue is expected to increase by about 30% in the ongoing financial year, and by about 18% over pre-pandemic peaks, ratings agency Crisil said in a statement.

For 2024-25, however, growth in India’s travel and tourism industry is expected to moderate at 12-14%, given the high base of FY2024. The agency has based its report on an analysis of four travel operators that account for 60% of domestic sector revenue–Thomas Cook Ltd, MakeMyTrip India Pvt Ltd, Yatra, and EaseMyTrip.

These companies provide air or bus ticketing as well as hotel-bookings for leisure and corporate travel within India and abroad. Despite challenges such as the recent tax hike on overseas travel packages and visa-related delays for long-haul travel, the overall outlook for the travel and tourism industry is positive, Crisil said.

Operating margins are also projected to remain strong at above 6.5% for both the current and the next fiscal year despite higher spending on marketing promotions, it said. The agency attributed this to operating leverage benefits and cost-optimization initiatives implemented since the pandemic when strict restrictions were in place.

Operating leverage, in the context of the travel and tourism industry, refers to the ability of a company to increase its profit at a faster rate than its revenue by having a high proportion of fixed costs compared to variable costs. Poonam Upadhyay, director at Crisil, said the impact of the tax rate hike will be limited as the expenditure per individual per trip for over 80%