The Indian tours and travel sector is finally out of the red. According to a CRISIL report, the travel sector is set to report operating profits in fiscal 2023 after reporting losses in the past two fiscals. The travel sector was hammered by the pandemic that saw severe travel restrictions across the world.
Operating profitability is expected to clock in at 6-7 per cent, while revenue is expected to drive past 90 per cent of pre-pandemic levels. This jump is being driven by a strong recovery in both corporate and leisure travel segments in India and abroad, the report added.
The CRISIL report stated that operating margins are likely to sustain at similar levels in the next fiscal too due to cost optimisation and automation initiatives undertaken by travel operators.
The turnaround is significant, especially in context of the operating losses of 25.8 per cent and 2.7 per cent, reported in fiscals 2021 and 2022 respectively.
The report stated that credit profiles of the industry players will be strengthened by an improvement in operating performance, together with healthy liquidity and net debt-free balance sheets.
Poonam Upadhyay, Director, CRISIL Ratings said, “Rising business travel, along with increasing return-to-office and preference for face-to face meetings besides increasing consumer preference for short breaks will push revenue past pre-pandemic levels in fiscal 2024. Interestingly, preference for short holidays is seeing momentum, especially within India and Asian destinations. With revival in European visa issuances, forward bookings for the upcoming summer holidays have also risen. Recovery of leisure travel to the US, however, may take longer.”
Revenue from long-haul international leisure tours including the US and Europe was impacted due to visa issues this fiscal, which limited its recovery to 55 per cent of the pre-pandemic level. Amid receding concerns of a global recession will improve these long-haul segments and boost the revenue, the report added.
Shounak Chakravarty, Associate Director, CRISIL Ratings, “The implementation of cost optimisation and automation initiatives has substantially reduced the proportion of fixed cost to ~33% of total revenue from over 60% before the pandemic, ensuring better operating profitability on a sustained basis. The improvement in operating leverage will help sustain profitability even as marketing spend is seen increasing next fiscal.”
The leading players maintained a cash surplus of ~Rs 4,400 crore as of September 2022 as against debt of ~Rs 2,300 crore (mainly short term), the report added.