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Thomas Cook sees growing preference for short trips over long distance trips

Mahesh Iyer, Managing Director and CEO of Thomas Cook, expects summer travel demand to continue until August this year, unlike in previous years when it declined in June.

He also observed a change in travel trends, with a greater preference for short-haul trips over long-haul trips.

“Group trips used to be longer. Now we see the trend is moving towards shorter trips. And that’s because people are looking at shorter stays,” he said. said during a post-earnings chat with CNBC. -TV18.

Iyer expects the Mumbai-based travel company to continue the upward trajectory of its margins.

During Q4FY24, Thomas Cook’s revenue grew 27% to ₹1,664 crore as the margin increased to 5.5% from 2.8% last year.

This is the verbatim transcript of the interview.

Q: How has business been during the summer so far, peak travel season and holiday months as well? How are things looking at the moment?

A: Forward bookings look very strong. We are currently looking at forecast booking growth of approximately 18% compared to the previous year. So summer has become very strong. Obviously, due to the elections in the country, there was some postponement. And we are convinced that this time we will see a longer summer season.

Usually we see the peak starting in April and ending somewhere in June. This time we expect it to happen through August as well. So we have a long pipeline ahead of us. And I remain very optimistic for the summer ahead.

Q: So last time you spoke to us, you said that you would see double-digit growth in FY25, both in terms of revenue and profitability. Could you give us an idea of ​​the outlook now that you’ve seen forward bookings growth of 18%? How fast is the company as a whole likely to grow in FY25? What type of margins are you targeting?

A: If you look at the past year, we have seen very strong growth, our revenue has increased by around 45% and as a result, EBITDA has increased several times. Our EBIT margins also improved by approximately 300 basis points in the current quarter and for the full year.

We expect this trend to continue, both in terms of revenue growth and profitability, and one of the drivers is the strong desire to travel and we are seeing the volume growth really manifest. And our forward bookings reflect this. Additionally, the cost transformation initiatives we took during the pandemic have all been successful and sustainable.

Third, digital adoption is working well for us, which has significantly improved our productivity. We believe that the three drivers we have in this business should help maintain the growth momentum in FY25.

Read here | Thomas Cook India expects leisure travel to increase despite rising prices

Q: You had also mentioned that you would surpass pre-pandemic levels in FY25, do you stand by that statement? And the second part of my question is about travel trends: Are you seeing more short-haul travel during this booking season that you’re witnessing?

A: Let me answer the question in two parts, first for FY25, you are right, we expect growth momentum to continue, we expect margin expansion continues to happen.

When it comes to the travel trend, we’re definitely seeing a shift earlier, it used to be longer trips. In the past, group trips were longer, but today we see the trend moving towards shorter trips. And that’s because people are considering shorter stays. This trend is therefore clearly visible and our short-term recovery is much higher than that in the long term.

You will recall that we said that long-haul travel was impacted last year during the summer due to some visa issues. Much of this is behind us, the Schengen regime has changed. They’re talking about long-term visas ranging from two to five years, which I think will also propel the short-term travel trend, because now people who have a long-term or multiple entry visa on their passport can plan their vacation on very short notice. We believe that all this will contribute to the growth of the short-haul sector.

Short-haul destinations like the Middle East, Singapore and the Far East are also excited about India, which appears to be the biggest market for them. They have doubled their investments in this country and I think a lot of the growth momentum will come from the short-haul market.

Don’t miss the domestic side of the portfolio. I think spiritual tourism and adventure tourism in the country are catching up very quickly. We are seeing strong demand from there and we have operated our first charters to Bhutan from Bangalore and we have seen a 100% occupancy rate on the charters. So clearly I think the trend towards the domestic market also bodes well for the company.

Q: Let’s talk about two other areas of your business, which are relatively smaller, but which may also experience underlying disruption: financial services and the Digiphoto business. For financial services, in a world of easy FX transactions and UPI that extends beyond India, how much growth do you foresee? Also in the fourth quarter, growth was less than 6% here, and even at Digiphoto, most of the things that you offer in Digiphoto can be replicated with the phone that everyone has. So what is the growth potential and underlying disruption?

A: When it comes to foreign exchange, we do about $3.50 billion per year in terms of turnover, so that’s a significant volume of business. And on this volume, the growth will be around 10 to 12% and that is what we expect. If you look at the portfolio as a whole, we do a retail business, which is more like the student segment, there’s the remittance segment, there’s a corporate segment, I think all of them are experiencing a double-digit growth. Now the retail segment also includes students as well as travelers and we are currently seeing high double-digit growth.

In fact, retail products increased by 18% and the margin reached around 20 basis points. It is therefore clear that growth in retail will fuel great demand from the travel segment.

From our prepaid wallet, we have a lot of prepaid wallet and I think that’s where we meet the UPI challenge. Why UPI and cross border is something that is happening in neighboring countries, I think global acceptability is going to take some time. And this is where our prepaid offering, which is the Thomas Cook prepaid card that we offer, really comes into the picture because we have a multi-currency wallet under one wallet that the customer can load seamlessly .

We have also launched digital KYC for the customer so that they can sit in the comfort of their home, load a card for themselves, get it delivered to their doorstep and travel with ease. The first is to do it by telephone. The other is to do it on a card and the card is also digitally activated. Which means, like UPI, you can put the plastic on their card and they can use it seamlessly abroad. So I think we’re spot on in terms of how we can look at the UPI part as well, but I’m also happy to let you know that we’re also working with RuPay and we’re in active conversation with NPCI to see how how we can expand our offerings in terms of further development on the RuPay side.

Read also | Upside down | Thomas Cook aims to reach 65 hotels by 2025

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