In a bid to help India’s tourism industry recover from the impact of COVID-19, the government should consider easing travel restrictions for fully vaccinated people, EaseMyTrips’s chief executive officer and co-founder Nishant Pitti told Moneycontrol in an interview.
The government should set up funds, and not just provide guarantees for loans as there is a lot of joblessness in the sector currently, Pitti said.
In the past year, his company has worked towards improving its operating margins and commissions, and has also reduced operational expenses, Pitti added. Here are edited excerpts of the interview:
Q. What are the additional steps the government can take to help revive the sector?
A. The government should look at seamlessly opening international travel, especially for fully vaccinated people, and bring forward a long-term strategy or policy on managing such waves in case the country faces the next one soon.
The government should also incentive domestic travel to revive the sector quickly.
Q. The government announced a slew of measures to boost the tourism sector last month, including free visas and loans to government-registered tour operators. How will they help revive the sector?
A. The sector has witnessed one of the highest contractions since the pandemic, and we believe that credit relief will play a crucial role in reviving the sector.
We believe that the measures announced by the Centre will enable the travel and tourism sector to restart business, and this will further strengthen the services provided by all players, including us.
Tourist guides and other stakeholders are the backbone of the industry. We believe the special outlay of funds will enable them to rise from the challenges they have faced over the past year and a half.
With the increased pace of vaccination in the country, the proposal to provide free visas to the first 5 lakh tourists is well-timed and is a strong step in boosting inbound tourism.
Q. What has been the pandemic’s impact on your business? How much did bookings pick up after the first wave of COVID-19 and the second wave?
A. The travel sector across the world was, undoubtedly, among the worst-hit due to the pandemic, but our business model has turned out to be effective in maintaining profitability consistently. In fact, EaseMyTrip was the fastest Online Travel Agency (OTA) company to recover. Between Q3FY20 and Q3FY21, the company made a recovery of over 70 percent in air tickets.
The second wave has impacted the entire tourism industry, though the third and fourth quarters of FY21 have been good. In FY21, our revenues were down by 31 percent, compared to FY20, on account of travel restrictions during the first half of 2020.
However, in Q4FY21, we witnessed a V-shaped recovery, clocking almost 89 percent of the gross booking revenue of the corresponding quarter in the previous fiscal. Our profit was up eight-fold at Rs 30.5 crore in the corresponding fiscal, while the adjusted total income jumped to Rs 103 crore from Rs 60 crore.
We did witness a downfall in ticket bookings initially during the second wave. But the past few weeks have hinted a return to normalcy despite state-centric lockdowns.
EaseMyTrip recently said it aims to grow 100 percent this financial year. What are the revenue-boosting steps being planned?
A. There is a huge pent-up demand and we expect a significant growth as vaccination picks up. We expect the travel industry to bounce back, at least once when 30 percent population is inoculated. We believe that the travel and tourism sector will be the biggest gainer of the vaccination programme.
EaseMyTrip is a cash-rich company, with zero debt. We do not expect a large capital expenditure in the future as 100 percent of the business is on website or app. With minimal finance cost and low depreciation and capex, going forward, we anticipate a majority of EBITDA flowing down to PAT.
We are also looking at leveraging existing B2B network for holiday bookings. Additionally, we are preparing customised packages for our customers that shall cater to the new normal in the travel industry. We will offer personalised packages based on customer preferences. We are also looking at venturing into tie-ups backed by strong technological infrastructure.
While air travel has been a key component of our bookings, we are also expanding our ambit across other sub-sectors, like hotels, buses, trains and holidays.
Q. EaseMyTrip has been growing 50 percent YoY since 2016. Will your ‘no convenience fee’ policy help scale up further?
A. EaseMyTrip’s cost and expenditure on all fronts are lower, compared to others on a GMV basis. In the travel and tourism industry, companies have only four costs: discounts, marketing, employees and other admin expenses.
EaseMyTrip has primarily grown through word of mouth and the goodwill of the customers. Other companies are caught up in the vicious cycle of becoming profitable through extra convenience fees. We see convenience fee as a tool to retain our customers for a longer period. We enjoy a high customer retention rate of over 85 percent, and are the only profitable OTA company since inception to be listed, while being completely bootstrapped.
All these factors have been key profit drivers and shall continue to be so.
Q. COVID-19 has given rise to a new market in the tourism industry in the form of out-of-station work-from-home facilities. Is the company looking to invest and expand into that segment as well?
A. The company has tied up with multiple hotels, homestays and resorts to offer attractive packages to customers looking for out-of-station work from home facility. We have ensured that the partners ensure proper safety and hygiene for the safe stay of customers.
Q. How much has the dip in corporate bookings affected your business?
A. Corporate bookings play a minuscule part in EaseMyTrip’s business model. Overall, in FY20, 87 percent of our business came from consumer bookings, 10 percent from travel agents and 3 percent from corporate bookings.
However, for other OTAs, 80 percent business is dependent upon corporate bookings, because of which they are facing issues. We are the least likely to be impacted by any changes in corporate travel plans due to our minimal dependency on the sub-sector.
Q. Revenge tourism has been a new term that has come into existence after the outbreak of the pandemic. How are COVID-19 protocols being ensured during these times when there is a sudden rise in demand?
A. We can very well see that the tendency for revenge travel has already kicked in with a significant increase in queries and bookings. We see a lot more people going on leisure travel in the next few weeks. While there is a sudden rise in demand, we ensure that COVID-19 protocols are clearly mentioned for our customers.
Hotels are diligently following the 50 percent capacity norm. So are airlines in terms of sanitisation. We also provide sanitisation details of every hotel to make it easy for customers to prioritise their safety now, more than ever.
Q. The travel and tourism industry is expecting a slow recovery. How do you foresee the growth path for EaseMyTrip?
A. While the pandemic has universally affected all travel companies, we have leveraged our lean business model to adapt to the situation. During this period, we increased our margin and commissions and reduced operational expenses, making us the only profitable OTA in the country during the pandemic.
The company’s annual turnover was Rs 4,200 crore in FY20. EaseMyTrip has always been profitable since inception, including during the COVID year. In fiscal FY20-21, we almost doubled our profits at Rs 61.4 crore as against a net profit of Rs 33 crore in FY19-20. This was despite halving Gross Booking Revenue in a pandemic-struck year.
We anticipate a huge pent-up demand for travel and tourism sector, post the vaccination drive across India, giving us strong revenue visibility in the years to come. We aim to continue with the record growth in the airline ticketing vertical with increased revenue margins and market share.
With new avenues for growth from hotels and holiday sector and leveraging our existing base of customers for cross-selling, we anticipate increased wallet share from our customers and will look at enhancing the revenues and profitability, going forward. Also, the company aims to expand overseas through its subsidiaries and use a 360-degree marketing approach to attract customers and revenues.
Q. Vaccinated customers are being offered discounts to travel. How long do you expect the industry to offer discounts to vaccinated customers, and will the heavy discounts affect the balance sheet of the industry?
A. The objective of offering travel discounts is to revive the travel industry and boost travel confidence. Such offers are expected to be in the market till there is normalcy. With a fall in travel demand during the initial pandemic period, we believe that these offers are necessary to encourage people to get vaccinated and resume travel.
Q. There are a number of experts predicting a third wave of COVID-19. How will a third wave affect the tourism industry?
A. Following a sharp reduction in COVID-19 cases after the second wave, we have witnessed a recovery in travel and hotel bookings, more so since the end of June. While a third wave might be possible, it is expected to be less intense as the most recent wave.
Alternatively, the pace of the vaccination drive has accelerated, compared to the situation during the second wave. This will serve a long way in reducing morbidities due to COVID-19. Thus, the tourism industry will suffer with a probable third wave, but the impact is expected to be less intense than what was witnessed during the second wave.
Q. In 2019, you had plans for international expansion. How has that panned out? When do you expect international tourism to and from India to return to pre-COVID-19 levels?
A. EaseMyTrip has set up small subsidiaries in London, Singapore and Dubai. These places have a huge Indian population.
We anticipate a huge pent-up demand in the travel and tourism sector, post the vaccination drive. However, the immediate preference would be for domestic travel. We can very well see that the tendency of people for revenge travel has already kicked in and there has been a significant increase in queries and bookings for domestic as well as international destinations, which we believe is a positive sign.
While international travel will majorly be based on the travel restrictions imposed by countries, with COVID cases seeing a downward trend, we expect restrictions to ease soon, and interest in international travel to gradually pick up in the coming months.
Q. What are some of the major long-term changes that you expect will stay in the tourism industry due to the outbreak of COVID-19?
A. Ever since the onset of the pandemic, there has been an increased emphasis about the safety and sanitisation of passengers, right from travel to hotel stay. The contactless passenger experience will be more in prominence and more advanced self-service options, including at airports and hotels, and biometric devices might come into play in the near future, leading to a wider utilisation of technology throughout the course of travel and stay.
Travellers opting for insurance have also gained momentum since the pandemic and are set to vastly grow in the coming months. Most travel insurance companies have expanded their offerings to cover travellers who get infected during the trip and other pandemic-related issues.
The role of travel agents will be completely redefined in the post-COVID world as they will now make a majority of their earnings from holiday bookings, where they will be guiding customers on making their travel easier and more enjoyable. There might be a reduction in the number of people who reach out to tour operators for group holidays due to safety concerns.
The role of vaccination also comes in as airlines and regional authorities could come out with a diktat that would allow only travellers who are fully vaccinated to board a flight or visit a tourist hotspot. New tools such as digital health passports and vaccination visas might be introduced and required as an additional identification to verify one’s health status.