Aditya Agarwal, Chief Financial Officer (CFO) of digital travel platform Cleartrip assures Education Post’s Tanay Kumar that travel and tourism management students in India are looking at a great time ahead, as the sector is projected to have a super growth rate, even more than India’s cumulative figure.
Recently, Cleartrip introduced a new feature – “Cancel for No Reason,” where people can cancel the hotel till the last hour and can get a complete refund. What is the feedback from hotels and hotel chains?
The idea behind CFNR (Cancel for no reason) is that we want to make it much easier for customers to make their bookings. And one of the roadblocks has been that people’s plans change. So, there’s always uncertainty around whether some plans will change and they will not be able to travel, or even if they travel, they may or may not like what they see. So, that has been a friction point which may have held back some people from making bookings that they would otherwise do.
Thus, the idea was to make it easier for people. We take out this uncertainty, we give them that assurance, that don’t be afraid, go ahead and make the booking. And for whatever reason or even for no reason, if you have to cancel it later, we will cover for you. And our partner hotels are also very excited to see that the objective is to benefit the customer and if the customer benefits the entire industry benefits. And, the purpose is to spur the demand. And that’s the reason we brought it in.
Cleartrip is now on an ambition to focus on the hotel business. What exactly is your plan in this regard?
I think the hotel sector is very large in India, as big as flights. And it is very under penetrated when it comes to online bookings. Almost 60% of all flight tickets are booked online, but that number for hotels is probably 15-20%. So, we see there’s a lot of scope to drive the industry there. Move more people and consumers into the online channels. And this sector itself is very fragmented.
Once again, if you compare it with flights, there are maybe four or five airlines, which command the bulk of the domestic market share. In hotels, you have probably 40 to 50,000 hotels, which don’t even cover the entire market, making it around covering 80-90% of the market. So the industry is very fragmented on the supply side, and it is very under penetrated on the demand side. And we have done very well in building digital businesses. We feel that this is a segment of the travel sector which is ripe for disruption. And we would want to be the leading player to do that.
Flights, hotels and buses are integral parts of the tourism industry in India. What future projections do you see for these three domains in terms of employment, as there are students who are studying courses like hotel management, tourism management, hospitality?
I think there is massive potential. See, overall, if you look at India, our country is one of the fastest growing large economies in the world. And typically, tourism in a country like India is fast developing. The thumb rule is that the travel sector will typically grow at one and a half to two times the rate of GDP growth. So, if we are expecting GDP growth of say 7 or 8%, travel is expected to grow at 12 to 15%. That is the kind of growth that we are foreseeing.
Hence, governments are massively promoting travel and tourism. They are investing a lot in infrastructure. Lots of roads are getting built and investment is getting infused into trains and airports. If you look at all our airline carriers, Air India and Indigo have probably ordered one of the largest orders globally of any carrier. And that is surely going to drive huge growth of the industry and therefore, obviously employment will also be there.
What would be your advice to students and professors of those academic institutions that are teaching tourism and travel management?
First, for professors, I would not presume that I’m qualified enough to give them any suggestions. All I would say is that the industry has great potential. And the industry is going through a massive change. So, while the growth is there, which offers a lot of opportunity for people coming into the industry and to see that there is a lot of change, which means that people who are coming into the industry, who are doing these courses right now, need to be prepared to be very agile. Because whatever they are learning today, tomorrow, who knows what is going to change after some years.
Now we are talking about artificial intelligence so much. Students need to be flexible and to be able to move fast with changing times, because all of these developments are going to affect the travel sector in a big and positive manner.
It’s a changing sector, online penetration is rising, digital penetration is rising, incomes are rising, which means that what has worked in the past for the sector may not necessarily work, because the customer demands have changed. After COVID, people are looking for a lot more flexibility. I think until three years ago, the industry never really had to worry about things like changing plans and cancellations and amendments. In the beginning of this interview, you asked me about CFNR. That is a response to the fact that customers are now demanding more flexible options. Now we have seen that even in flights, we have launched the same product, we call it FlexMax, and we have seen almost one in every three or four customers is willing to pay to get a protection from cancellation charges and amendment charges, which is a huge new insight.
Typically, we have always seen that travel is a very price sensitive sector where customers want to go for the cheapest option. But this has shown that now there is a consumer change. Consumer is willing to pay 5% 10% extra at the time of booking a flight if they are getting the flexibility to make changes. So, what I’m trying to say is that this is a time of a lot of change, which will bring a lot of benefit to all the participants in the industry, but the participants will need to be prepared so that they don’t get left behind. We have worked with partners like insurance companies to be able to provide this product at an affordable cost.
In India, has the infrastructure and other material advancement for tourism progressed at a similar ratio to the digital adaption of this industry?
I would say that it’s not really a right comparison because I think both are moving ahead in parallel. The digital adoption is led far more by private players and that’s why you cannot compare that the speed of digital adoption with what’s happening on the infrastructure side, which is where there’s a mix of public investment as well as private one.
I think in general, I would say that India, as a country, can absorb a lot more investment into the tourism related infrastructure. A lot of the market today, has a supply constraint. For example, as a country, we have about 400 to 500 aircraft, which is even smaller than some individual airlines in the world. China has three or four airlines and each of them is larger than the entire India market. So, even today, even out of these aircraft, a lot of them are grounded and there are issues with certain airlines, which have run into some engine troubles and so on.
Capacity constraint is sort of limiting the size of the market today, the market can absorb far more demand if the supply was there, which tells me that yes, a lot more investment is required. We have definitely come a long way in the last few years in terms of the investment that has gone in, but yeah, it’s very far to go.
You have spent almost a decade in Europe, a continent known for its phenomenal tourism environment. Have you come across some good travel behaviors or practices in Europe that we should learn?
I’ve lived in Europe for about five years. But to come back to your question, I think there is always so much things that we can learn a lot, in terms of how some of these places really preserve some of their heritage, in terms of doing a very good job of preserving their museums, their historical monuments, and making it very accessible to these generations, where people can easily visit some of these places, enjoy the experience, understand the history of the place through guided tours, and audio visual aids and many others.
Definitely a learning that India has so of a rich culture and history. I think, in many places, we have also done a good job, but I would say it’s not uniform across. This is one learning that I think we can definitely take and do a much better job of preserving and showcasing our amply rich tradition.