Second wave clogs rebound route for travel operators: Crisil

Mumbai (Maharashtra) [India], June 23 : The tours and travel industry which was beginning to recover before the second wave of Covid-19 infections began will now see revenue this fiscal reaching only 35 to 40 per cent of the pre-pandemic levels, Crisil Ratings said on Wednesday.

While companies raised capital last fiscal and will continue with cost-control measures to cut cash losses, a significant decline in travel and continued uncertainty about the pandemic will weigh negatively on their credit profiles.
Crisil studied three sector majors that account for over half of the domestic tours and travel industry with reported revenue of Rs 11,300 crore in fiscal 2020.

Tours and travel operators provide services such as air/bus ticketing, hotels/packages for both leisure and corporate travel within India and overseas.
These companies saw their revenues plunge to Rs 2,300 crore last fiscal which was only 20 per cent of fiscal 2020 levels after the nationwide lockdown and other restrictions led to a sharp reduction in travel.

The industry was brought to a standstill in the first quarter of last fiscal -- the peak travel season because of summer holidays -- which eroded revenue 95 per cent on-year.
However, fortunes started to mend gradually with improving air traffic and demand for short domestic holidays lifting revenue to 55 per cent of the pre-pandemic level by fourth quarter.

Then the second wave set in. Under its impact, the first quarter of this fiscal is expected to be almost a washout once again, this time because of state-level lockdowns.

Manish Gupta, Senior Director at Crisil Ratings, said with states beginning to ease restrictions and vaccination rates expected to improve, "we see domestic travel picking up slowly from the second quarter".
However, segments like international holidays and inbound travel may see recovery only in the second half, and that too only if travel restrictions are eased in foreign countries.
"Also, with meetings and events shifting to the online mode, corporate travel is expected to remain under pressure. Overall, therefore, revenue this fiscal may reach only a little over a third of the pre-pandemic level," said Gupta.

The industry was in the red even pre-pandemic on account of high marketing and promotion expenses. Under additional pressure because of the pandemic, players cut their sales promotion expenses and other fixed costs by 45 to 50 per cent which limited their cash burn last fiscal to around Rs 700 crore.

This fiscal too, the industry is expected to post operating cash losses of Rs 150 crore to 200 crore, though significantly lower than last year, with improved bookings and continued control of costs.