Travel Trends

Cautious Optimism
Optimistic results at the end of the first quarter of 2010 have got
the leaders in travel trade re-strategising says Shalini Seth

T
he closure of the financial books in 2009-10 fiscal year has given a reason to officially pronounce India
“cautiously optimistic”. Talking to travel trade industry leaders to understand strategy and outlook for the rest Adding value
of the year, the term is now familiar to TGI, along with other trends that have emerged on the eve of strategis-
ing for recovery. At the sixth Hotel In-
The Union Minister of Tourism, Selja Kumari set the tone. “Now we can safely say that the negative impact vestment Conference
has been totally mitigated. Tourism in India is now on the path of recovery,” she says, commenting on the - South Asia 2010,
growth rate of 12.8% in foreign tourist arrivals (FTAs) in the first quarter of 2010. one of messages from
In fact, December 2009 saw a huge rise of 21% growth in comparison to the corresponding period during the previous year. hoteliers such as Martin
The trend continued with 16% growth in January 2010 and about 10% in February 2010. Rinck president, Hilton
Going forward, the key trends are: Worldwide, Asia Pacif-
ic; Liam Lambert, pres-
ident, the Oberoi; and
Too much room Domestic traveller Capt CP Krishnan Nair,
chairman, the Leela,
Smart operators increased their room capacity last The Indian traveller leaving home to go for pilgrim- was to do with adding
year. In India, traditionally, land prices have not per- ages, short weekend breaks, business or meet- value. “We do not want
mitted budget hotels, but now there is oversupply, ing relatives is finally getting his due. Srinivas of to be the biggest. We
at least temporarily. “Occupancy seems to be here Deloitte India, analyses the trend thus: “Domestic want to be the best,”
but rates are going to stay where they are because travel numbers are bound to increase. We don’t says Liam Lambert.
of oversupply,” says Uttam Davé, president and CEO even think about the domestic tourist, when they “Rather than having a
of InterGlobe Hotels, Accor’s key partner in India. are the only reason to exist for much of the travel nice time physically,
Keys Hotels is set to launch soon. And, Hilton plans trade industry in the country. There are 500 million people want to have a
to add 1500 keys in the next 12-15 months, with travellers in the country – a 100 times more than nice time intellectually
six out of its 10 global brands – Hilton, DoubleTree, outbound travellers.” The ministry has supported and to participate in
Garden Inn, Hampton, Conrad and Waldorf Astoria. this claim with Selja Kumari calling domestic community activity. If
Experts say that this is not the case of too much of tourism “the backbone of the economy”. there is an eco-friendly
a good thing. “In the short term there will be over hotel and a non eco-
supply. But no hotel or tourism product is built for friendly hotel available
three years. There is a seven-year time frame for in the same price, I’d
recovery,” says P R Srinivas, Industry Lead, Tourism, Scaling down probably go for the
Hospitality and Leisure, Deloitte India. Things will not be the same, at least for some time. eco-friendly one. Peo-
“The customer is trading down. He was earlier look- ple want things tailor-
ing for a five star deluxe hotel, today he’s happy with made rather than be a
a five star,” says Arjun Sharma, MD, Le Passage to part of a package,” he
Business moves India. “We are dealing with a new customer psyche says, speaking on the
– tendency to book late and trade down.” So, re-strat- trends that are shaping
One of the first sectors to show improvement was egising does not include hiking prices, for the moment. their strategy.
business travel, says Srinivas. “Business travel in the
country has been on the mend. It was never down in
the dumps as it was abroad,” he says. Business travel-
lers, both men and women, have caused the industry They are not coming back
to sit up and take notice of what they need. “Business The most important lesson the industry has learnt is to go lean. “Lot of these
travel and business delegations have picked up very jobs that are cut won’t be added back. At least not for a couple of years,”
smartly. That trend started a little earlier instead of lei- says Christopher Mumford, MD, HVS Executive Search.
sure. So I think if you are a hotelier in business areas “They had become quite fat and they really need to lean and mean and
you see smart revival. If you are a hotelier in leisure they realise that they can operate. So they don’t need all these people. They
segment you are struggling still,” says Sharma, adding need people in hotels but in the head office and corporate office I don’t see
that business travellers will travel to less-than-perfect people being added back,” he says. Industry leaders are a bit gleeful at having
destinations while leisure travellers would look out for learnt this. “That was a great initiative. We are trying to institutionalise the
the right amount of sunshine. culture of cost control,” says Davé.

www.hotelierindia.com Travel Gazette India – May 2010 15

 REGIONAL NEWS
Travel Trends Cautious Optimism

Cautious optimism
It will take a long time for the industry to reach the euphoric high of 2007. Experts do see some recovery, specially in Asia, but the mood
is underlined by Sharma, who says, “The recovery has probably nearly brought us back to even keel in terms of numbers on the 2008-09
numbers. Obviously, there is no growth at the moment. I am just preparing myself, my organisation to not get carried away based on today’s
growth. I think the jury is still out, in the world. Indian is still best positioned about it. I am not negative. I am cautiously optimistic.”

Ankur Bhatia.
Kumari Selja. Managing Director, Amadeus
Minister for Tourism & Housing & India and Executive Director of
Urban Poverty Alleviation Bird Group
“Tourism in India is now on the path of recovery. The growth rate in foreign “The last year was undoubtedly tough. Bat-
tourist arrivals in December 2009 over the corresponding period of 2008 tered by the economic debacle, businesses
works out to 21%, which is the highest positive growth registered in any month had cut down on travel to manage cost. In
of 2009. The first quarter of 2010 has also seen a healthy growth of 12.8% over addition, leisure travel was hit as travellers
the corresponding period last year and now we can safely say that the negative exhibited conservative spending patterns.
impact has been totally mitigated. Aggressive marketing and concerted efforts However, with the global economies poised
of all stakeholders has resulted in this growth. The news of normalcy return- for recovery and showing promise, we are
ing to the global economies has given us all reason to cheer up and expect the positive that the tourism industry in India is
buoyancy to return soon to the industry.” deemed for a second wave of growth in the
days to come.
The past year had been tough on the indus-
Expect buoyancy to return try and like others we too had taken measures
to keep a tight rein on the costs all along. Our
soon to the industry ” strategy was to pursue a cautious yet a pro-
gressive growth plan.Though we paid bonuses
during recession to keep the employ-
ees’ momentum going, the pay hike was
market-linked. Now with the restoration of
global econ-
Arjun Sharma. omies, the
Managing Director, Le Passage to India industry is
“The year 2009 taught all of us a great lesson on removing the fat from estimating
the system. We all went back to our balance sheets to see how best we rapid growth
can profit in that climate. It was a very useful exercise because a lot of in the com-
excesses and indulgences had been built in the businesses in times of ing months
2007 and 2008. and the hiring
The big challenges going forward are many. Inflation is definitely going of manpower
to hit us. There are still challenges in terms of finding, retaining and moti- is picking up
vating people. You have to probably give reasonable increments. You propor tion-
could probably hold them back last year but you have to do that now. It will be difficult to keep too ately.”
much cost under control as revenues are under a strain, there is new capacity growth.
We have challenges today from European and industrial world – our source markets – in form of very
weak currencies. We have seen a smart recovery in foreign tourist arrivals. It started very late last year, and Battered by
in the first quarter of this year. We see a forward looking growth for the next 6-9 months.
I’m one of the few people who does not believe we have seen the worst yet. I believe there is another the economic slow
double dip happening. I am not running out of the market. I wouldn’t exit and I wouldn’t enter. But I
won’t forget not to exit. There is no buy-and-hold strategy left in this world anymore.” down, businesses
cut down on travel
I wouldn’t exit and I wouldn’t enter ”
to manage cost ”

16 Travel Gazette India – May 2010 www.hotelierindia.com

 REGIONAL NEWS
Travel Trends Cautious Optimism

Liam Lambert.
President,
Oberoi Hotels & Occupancy seems to be here but
Resorts
“We have injected a
rates are going to stay where they are
certain bit of opti-
mism in the bud-
because of oversupply ”
get for this year. The Uttam Davé.
economy is going President and CEO, InterGlobe Hotels, Accor’s
to turn around. Green shoots are showing. We feel key partner in India
that the restructuring of sales division in America, “There is uplift in the travel trade. There is lots of optimism
Canada, the UK, Europe and Middle East alone will now. Things are looking better.
deliver the much needed revenue. Just being the Most of our hotels saw a decline in occupancy and rates by
place where we were not before... is optimism. We 10%. Occupancy seems to be here but rates are going to stay
are now looking at the Indian middle class that is where they are because of oversupply.
growing every day. They are starting to travel over- We all went back and looked at each and everything in our
seas and they are familiar with the Oberoi brand. overheads or operations and asked ourselves if we really
We have been hit by recession and we have felt the wanted to spend that money. At operations and head office
effect. We have been reinventing ourselves… hiring levels, we also implemented measures like cutting costs by 10%.
new team members… appointing PRs, general sales That was a great initiative. And it has become a catalyst for having workshops on cost cut-
agents… [and] increasing our general marketing. ting. We do see that the customer has more choice so the rates are not going to go up. At the
We feel that by reducing our inventory we can lever- same time we are looking at the domestic sector and we believe it will grow at the same rate as
age the luxury brand. Like everyone else has. We the country’s economy – at about 8-9%.”
have kept our price integrity. What we are looking to
do now is innovate… and add value.
The challenge is to retain our people. My fear is
that all of these new hotels coming up are going to
come knocking on my door.” Avis India has seen a boom
in the business in the last three to
We have four months and the graph has
injected a certain shot up dramatically ”
bit of optimism in the
Sunil Gupta.
budget for this year ” CEO, Avis India
“I would not call it a recession but an eco-
nomic slowdown due to a loss of business
confidence regarding the future prospects
Kashmira Commissariat. of business. Avis India utilised this period to
COO, Outbound, Kuoni India carry out a strategic review of our business.
“There are clear indicators of the market sce- We were clear that our manpower resources
nario being buoyant and offering a positive are the best in the industry and are a key
trend with Indians spending more. differentiator for us. We retained all our staff through the slow-down and
Exotic/varied places in India, theme based utilised the time to carry out training programmes...Now that business
and experimental holidays are becoming has revived, we are well-placed with well-trained manpower resources.
popular. Most progressive companies have re-examined their cost structures in
The experienced traveller opts for authen- the last couple of years. We in Avis India have done this as well to become
tic, off-the-beaten-track vacations in remote more operationally efficient, taking care not to cut cost at the expense of
and less well-known places as against luxurious five-star vacations, lead- our employees. We notice that our corporate clients who had kept a con-
ing to an interest in rural and ethnic tourism. Weekend breaks are becom- trol on costs so far have started re-investing in their businesses and their
ing popular, so is neighbouring country tourism. human resources to exploit the improvement in the economy.
India has also been looked upon as a potentially lucrative market by Avis India has seen a boom in the business in the last three-four months
various National Tourism Offices (NTOs). NTOs are setting their offices and the graph has shot up dramatically. We have clients across indus-
keeping in mind the high disposable incomes of Indian travellers. NTOs tries who are dispersed geographically and we are seeing the boom right
now market the destinations with a dual approach of reaching out to the across. Avis India saw the green shoots early and has been scaling up our
Tier II and Tier III cities. In addition to the leisure holidays, NTOs have operations to serve the anticipated demand in the forthcoming months.”
started promoting the MICE segment.”

www.hotelierindia.com Travel Gazette India – May 2010 17


Travel Trends Cautious Optimism
Christopher Mumford.
Managing Director, HVS executive search
“In terms of market conditions, there is some improvement.
London, for example, is doing pretty well and starting to see
a little bit of recovery. The US is slower. But there is definitely
some more cautious optimism. Asia is much more resilient.
I like to say that Asia is like a bamboo stalk. You bend it over
and it springs back up. It’s always quicker to spring back up
than Europe and the US.
There is more demand for hotel personnel in hotels in Asia. There has been more move-
ment in management in Asia. In Europe it has been static. Last year no one was hiring.
Last year, the story was all about cost-cutting. There was restructuring of the organisa-
tion – taking out layers and lot of redundancy. They cut 10-15% of their workforce. Take
big groups such as Starwood, Hilton, Marriott – all have hiring freezes in Europe and the
US. In Asia it is a different story. There are so many hotels coming up. They have to hire.
But hiring is at hotel level. At the corporate level it is a bit slower. Corporate office is where
a lot of cost efficiencies were introduced. Jobs were cut. A company like Accor – they have
five regional offices worldwide. They reduced that to three. You have a regional vice pres-
ident for one area and you have a regional vice president for another area and suddenly
now there is only one regional vice president, looking after two. That is still the case and it
is not going to change soon. Lot of these jobs that are cut they won’t be added back. At least
not for a couple of years.
Lot of companies have learnt the lesson. They had become quite fat and they really
need to lean and mean and they realised that they can operate. So they don’t need all
these people. They need people in hotels but in the head office and corporate office I
don’t see people being added back.
In India, even in retail or real estate need for people from hospitality industry. Even
the banking sector in Switzerland is the biggest employer of people out of Swiss hotels
schools. They see the service ability. I think the hotel people are very attractive to other
industries. And it is one of the biggest challenges the hotel industry is how to keep
their people. That is the biggest problem the hotel industry has.”
A lot of these jobs that are cut
won’t be added back. At least not
for a couple of years ”
Sharat Dhall.
Managing Director, TripAdvisor, India
In hindsight, I would say that we met a need. There was a gap
in the market. In a situation where you are careful about each
rupee that you spend, you could end up doing more research
than you would have done a year ago. So a travel planning and
research site, which is what we are, did really well. We did not
get impacted by recession. Worldwide too we had an excellent
year – we grew in double digits last year when most companies
in the travel space tumbled. Our EU business has grown tre-
mendously in the last three years. It’s not that people stopped travelling in 2009. They scaled
down their travel. A lot more people chose domestic destinations over international ones so
they still needed to at which hotels they needed.
Last year one piece of data in all our forum discussions was that the use of words related to
budget travel – discount, value, deals – had gone up by 100%. That is the one thing that has
changed this year. We are seeing much less of that.”
Last year...the use of words
related to budget travel – discount,
value, deals – had gone up by 100% ”
18 Travel Gazette India – May 2010
REGIONAL NEWS
You did not have
time to react and plan
your expansion in the
boom years. You went
and recruited... ”
PR Srinivas.
Industry Lead,
Tourism, Hospital-
ity & Leisure,
Deloitte India
“There is 70% increase
in outbound. From the
inbound perspective we’re
getting to summer and it’s
going to go bad until Octo-
ber lull into inbound. That is usual for us.
Looking at source markets – they are not fully back
into holiday mode. India continues to be expensive. The
new traveller is business-oriented rather than leisure-
oriented. Delhi and Mumbai both airports will be ready
which will cater to increase in numbers.
Infrastructure and tourists is a chicken-and-egg situa-
tion. As far as hotels go, the land prices are high, so hotels
could not start at less than five star prices. If you encour-
age mid-market travel to India it has to be catered by
mid-market hotels.
People have gone lean. You did not have time to react
and plan your expansion in the boom years. You went and
recruited because you had to get those properties work-
ing and services operational. Hotels, airlines, cafes – the
entire value chain was like that. I think companies will be
retaining the same level of staff in back office procedures,
procurements.
Cost cutting has become important. We work with one
of the largest branded restaurant chains. We worked on a
lean procurement system and on how to manage costs
and bring down overall cost issues in the run. Stuff like
wastage, procurement of raw materials in time, standard
industrial stuff adapted to the hospitality space – things
like CRM or how would you train staff to be multi-task-
ing. There are always better ways of using technology, of
ensuring waste management. We do time and motion
studies. It had all gone into thin air when there were jobs
and there were people to offer them to. The trigger for
all these has to be something that hurts the bottom line.
That happened last year.
The market is aiming to please the mid-market. If you
do expectation management and the gap is well-set, ser-
vice level is defined, expectation is not built up. We are not
going to promise the earth to the consumer – to start with.
The high-end traveller from abroad is not necessarily
coming to India. There are better page3 locations that they
can go to. If I am in UK, I can go to Brazil rather than come to
India or Argentina, unless you are doing an upper upscale
kind of crowd.”
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