The acquisitions are part of the companys strategy to create a strong presence in India, rather than relying on small offices across the country connected to the main office in Mumbai.
We are looking at acquiring mid-sized specialist travel companies with a strong local presence and knowledge about the world, says Rajiv Duggal, managing director at Kuoni India. The parent firm was founded by Swiss Alfred Kuoni in Zurich in 1906.
It is difficult to create specialisations within the company and hence, acquisitions in north and south India will help the company grow faster, he said.
We want to be as strong in every region as we are in the west at the moment, he added.
According to him, the acquisition in the north will be able to handle requirements of the east as well. The travel operator is planning to announce the first of the two acquisitions in October.
The target companies should have sound financial health, a balance sheet that will lift our company and an operating margin anywhere between 12% and 14%, Duggal said. Kuoni India has an operating margin of 10% for its tour operating business at present.
Developing a strong network is crucial for tour operators, analysts say. PR Srinivas, leader, travel, hospitality and tourism, Deloitte Touche Tohmatsu India, said, The biggest challenge for large tour operators in the country is to strengthen their network in order to expand their market penetration.
Duggal, who became managing director of Kuoni India in May 2011, hinted at acquiring family-run travel companies with strong professional management. According to him, Kesari Tours, a Mumbai-based family-owned travel operator, is managed by professionals. His comments on Kesari are not linked to his acquisition strategy.
Mumbai-based Kuoni India has grown in the country through acquisitions. In 1996, the tour operator purchased outbound travel operator SOTC and in 2000, bought New Delhi-based Sita World Travel, Indias largest inbound travel company with a strong presence in Northern India.
Kuoni India is not listed on the BSE, but two of its large peers in the business, Cox & Kings and Thomas Cook India, are.
Cox & Kings had a market cap of R2,785 crore at close of business on Friday, September 23 as per data on the Bombay Stock Exchange, while Thomas Cook India had R1,023 crore. Yet another competitor in the business, TUI Travel, continues to be privately owned.
The size of the Indian travel industry is pegged at around R1 lakh crore, said Pradeep Lulla, former president of Travel Agents Federation of India (TAFI).
A media release by the ministry of tourism in January this year said 5.58 million foreign tourists visited the country in 2010, up 9.3% from 2009.
During January-August 2011, 3.81 million foreign tourists came in, 10.2% more than 3.46 million over the same period in 2009.
Meanwhile, domestic tourist visits to all states and union territories in the country was 740.21 million in 2010.
Only 25% of the total travel market in India is organised and run by established corporates, said Iqbal Mulla, president, Travel Agents Association of India or TAAI, that has 2,400 members.
Kuoni is also working on improving its online presence with a more comprehensive website, and expanding its tour offerings to cater to larger audience with different tastes.
Online bookings are still confined to airline ticketing or hotel bookings, but overall, tour packages are still sold through agents, Deloittes Srinivas said. It will be a while before everything goes online, he added.
You will see the next round of acquisitions in the space for expanding presence within India in a few years, Kuonis Duggal said. Many global travel companies, in the next four to five years, will want to strengthen their presence in India and have better understanding of the sub-continents needs, he added.
Good-will and sound market share of local travel companies will count in acquisitions by global firms, TAAIs Mulla said.
With the overhead costs of running the travel business going up, we are seeing small travel agents and tour operators either consolidating within themselves or merging with a bigger player, Mulla added.