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Flying high

india Updated: Jul 07, 2008 22:21 IST

Indians are expected to spend $20 billion on overseas travel by 2011. The number of people travelling within India is set to triple by 2010, while the number going overseas is poised grow from eight million to nine million by that year.

The increase in disposable incomes in India and an exposure to the west mean more people want to travel. That, together with the fact that the population is increasing anyway, means that demand for travel agents is likely to increase.

Each year, more than eight million Indians travel overseas and half that number travels within the country, according to the tourism ministry. The number of people travelling at home is set to triple by 2010, while the number going overseas is poised grow by one million by that year, the ministry says.

International air traffic is set to grow at 8.4 per cent annually and domestic air travel is set to grow at 12 per cent per year up to 2009.

It is a healthy sector to be in. The average turnover of a small agent employing 20 staff is estimated at Rs 1.5 crore per month, according to the Travel Agents Federation of India, while the Travel Agents Association of India predicts that Indians will spend $20 billion on overseas travel by 2011.

According to the International Air Transport Association (IATA) the organized travel agent sector (that is IATA approved agents 'annual turnover) is worth $6 billion (Rs 23,480 crore).

But although there are opportunities, the sector faces challenges. IATA estimates there are one million travel agents in India, but only 2,839 are IATA accredited, 480 of which are in Mumbai. Meanwhile only 341 of the agents in India are Ministry of Tourism-approved.

As real estate prices and staff costs in Mumbai zoom up, and operating costs and advertising costs get higher, margins are shrinking and more takeovers are expected.

Attrition rates are high as well-trained staff are getting poached and price cutting and credit problems owing to late payments are also affecting agents, Anoop Kanuga, chairman TAAI Western region, said. "Companies that don't change with the times or that are unable to keep up with Internet advancement will end up closing shop," he predicted.

According to Kanuga, today's travel agents have to know even more about destinations because customers today will have done research on the Internet. "You can't just offer ticketing anymore. You have to offer hotels and rentals. Niche markets are growing but there is not enough awareness of things like adventure tourism and health tourism," Kanuga added. "My advice to an entrepreneur would be to go niche or link up with a global agent and be their exclusive agent on the ground here."

Kesari Tours director Veena Patil says: "In the future I think you will have to grow big to survive and you will need venture capital, and you also need to operate in niche markets.

"It is a low margin industry and so budgets need to be controlled. You need to innovate all the time. Without marketing nothing will work. If we cut prices our company will not be able to be sustained so we are concentrating on the services themselves. Nobody is thinking long-term and we want to be a long-term player," she added.