Holiday demand strong despite elections, says Madhavan Menon

Backed by Canada-headquartered Fairfax Financial Holdings, Thomas Cook India Ltd (TCIL) has over the past few years made several acquisitions including 51.56% in Quess Corp and 100% in Sterling Holiday Resorts. Its latest acquisition is a majority stake in a Dubai-based souvenir imaging solutions firm called Digiphoto. Madhavan Menon, chairman and managing director, TCIL, in an interview with Ashish K Tiwari, spoke about synergies, the overall business scenario in the travel and tourism industry and more. 

You recently acquired an imaging company in Dubai. How does that business really benefit Thomas Cook India?

We don’t have a direct synergy with this company. However, if we look at our outbound and inbound business, what we do is take people to a particular destination which allows them to be a part of this exercise. So in reality, there lies the indirect synergy. If they have relationships at 250 parks or locations across 14 countries around the world, we have tourists that go to all these locations especially Asia, Europe and the US. So we can work with them and get a better rate than what we get today. We do have our own relationships so I think it will be a two-way benefit rather than one way.

What are the possibilities of TCIL taking the stake beyond 51%?

At Fairfax, we allow companies to operate independently so we will retain the stake at 51% because that’s enough for us to consolidate. We are making the acquisition out of our Mauritius entity so it will operate as our subsidiary. We will put two members on the board of Digiphoto Entertainment Imaging. We have no intention of participating in the management because we don’t know how to run this business. So the company founders will continue to run the show like before.

On the business side, how’s the year 2019 looking generally for the travel and tourism industry in India?

For outbound, 2018 was a good year and we see strong demand continuing in 2019. This is our investment period as we count bookings now. My sense is that summer will look good as our bookings are looking very comfortable in the high double-digit level. Both SOTC and Thomas cook are seeing good demand. Same is the demand scenario in the incentive business. The month of January has also been very good for our forex (FX) business. So, I am very optimistic on the way overall business is taking shape. Also, when you run a business to consumer (b2c) business there is always something that may suddenly pop up in front of you. We were worried about the upcoming elections but the demand doesn’t seem to be slowing. We were geared up that it may not be a great month but it doesn’t seem to be stopping people from making bookings.

Have you noticed any significant changes this year compared to how the market was last year?

We have observed that people are getting more adventurous. Also, the age groups are beginning to broaden out. If you look at our online booking of leisure holidays, almost 29% of our total package sales happened online. So we are beginning to see a player in all forms. At the end of the day, holidays are here to stay and we believe that with SOTC and Thomas Cook we play a very important role. Also, it’s the 70th anniversary of SOTC this year. Just the history, in terms of the holiday business between both these brands, it’s in excess of 110 years.

The 29% number is for overall online bookings or only from your own website?

No, it’s both from Thomas Cook India and SOTC. However, the majority of it is from the Thomas Cook India website. And we continue to invest in that space for the future.

Have the recent issues with MakeMyTrip, GoIbibo and OYO helped drive traffic to your websites?

We are both in totally different segments. They are selling components and a few packaged holidays, we only sell packaged holidays. I am not interested in selling components. I cannot fight or compete with them. In fact, between OYO and MakeMyTrip there is a battle out there. I can’t give the kind of cash discounts/cash back that they are offering. So I’m happy the way we are. It’s very difficult to capture traffic information from anybody in our industry because we are governed by different regulatory requirements. But I would also say that we are all quite small compared to the total holiday market. In reality, there are only upsides and no downsides unlike in the forex business where we control nearly 53% of the volumes in the organised market. We don’t really have that position in the travel market so I’m not too worried about that.

The forex situation is not much of a concern?

Not at all. We are seeing good demand both on the cards as well as… if I look at retail, we have got a 50-50 balance in terms of the cash and the prepaid card. That’s not something I have seen in a long time.

Are there any specific geographies turning into a hot spot for travellers?

India and Hong Kong are the two places where we run outbound businesses. Countries like Europe and Australia continue to be the primary drivers. The USA is another key destination. So, I have not seen that really change, but people are using these destinations and trying to broaden their experience.

And how’s the domestic market looking like?

The domestic market is just going somewhere else. We are seeing demand regardless of the destination that we are sending them to. Domestic holidays continue to grow over 30% and I do not see that tapering off for some time to come.

You have made quite a few acquisitions that were not in the travel space.

In my 11 years, Digiphoto is my 11th acquisition and in the last six years, it is my ninth. We did Quess, Sterling Resorts, then we did a whole lot of travel companies, a start-up called Ithaka and now Digiphoto Entertainment Imaging.

Any new acquisitions in the pipeline?

None for which I have the board’s permission to talk about.