Thomas Cooks New Recipe

Updated: Oct 19 2002, 05:30am hrs
Thomas Cook India is in a makeover mode. It is brewing plans which aims at transforming an essentially till-now travel agency and money changing house to a one-stop travel shop. For, cooking on its plate are a slew of initiatives ranging from an entry into the hotels business to being the global hub for back-end operations for its worldwide parent company.

Ashwini Kakkar, Managing Director and Chief Executive Officer, Thomas Cook India
For starters, as part of a related diversification project, the company is exploring opportunities to get into the hotels business. A beachhead for this may be from Goa. This is seen as a logical extension, given the fact that company undertakes bookings for nearly 1600 rooms per day in Goa alone, during the peak season that spans for seven months a year. Says Ashwini Kakkar, Thomas Cook India managing director and chief executive officer, Globally, Thomas Cook Worldwide owns 730,000 rooms and 85 aircrafts and it makes sense to vertically integrate with those businesses. The company will perhaps initially invest in a property of about 200 to 300 rooms. There are reports that the company may be in talks with five star hotel to invest in its Goa property. The hotel acquisition will help in improving the quality of hotel services provided to the traveller to the companys package tour clients, says Prashant Mulay, analyst, Stratcap Securities India.

Next on Mr Kakkars agenda is to make India the hub for back office processing and call centre for their global business. In early 2003, Mr Kakkar is scheduled to put forward a strategic plan towards this end at the global headquarters.

Further, the company is also awaiting government approval for outbound charters. It is estimated that the shakeout in the airlines industry post 9/11 has seen as many as 1.4 million seats per year been withdrawn from the market. This capacity reduction, it is argued has made operating charters viable. This would significantly improve margins on outbound tours, says an analyst. The company currently operates 6 to 7 charters per week to Goa and Kerala.

But clearly, all of these have been further extensions of diversification forays that had already been initiated in recent times. For example, it had got into the travel insurance business, as a corporate agency for for Tata AIG. Today, it is also expanding in this business to areas like Mauritius and Sri Lanka. Thomas Cook offers travel insurance worldwide and when the insurance industry in India opened up, the company was amongst the first to apply for corporate agency and thereby integrate vertically.

Thomas Cook eventually launched its first insurance product in May this year. Currently, the company sells three focussed products: Travel Care, Scholar Care for students going abroad and Corporate Care. With the insurance industry in India at its nascent stages, Thomas Cook considers itself to be well poised to grab a sizeable chunk of the market. Explains, Mr Kakkar, The railways carries 1.5 million people everyday, and even if the company can ensure everybody for a paltry Rs 10, the amount is huge. By the end of next year, it expects its market share to be anywhere between 10 and 20 per cent. The company plans to focus on the domestic markets and has already launched schemes for pilgrimage centres like Vaishno Devi and back and will be launching similar programmes for Tirupati etc. Currently, analysts estimate the travel insurance market to be around Rs 40 crore.

But despite the tall ambitions, Mr Kakkar who is driving this makeover does so with his trademark casual style with complete disregard for a boss-subordinate relationship. This for example, is evident as he moves from one cupboard to another, fetching press releases, financial details and previous media coverage of his company, without calling for his secretary even once. A down-to-earth approach as this, is rare in a man who has his eyes firmly set on the highest peak. Everyone knows Mt Everest, but who remembers the third or the fourth peak, asks Mr Kakkar.

Strong Fundamentals
It is perhaps this desire to excel that has enabled him to put the company on a growth trajectory. His mission today is to make Thomas Cook a one stop travel shop that boasts of world-class services and transparent deals. From an organisation which was one of the three non-banking authorised dealers of foreign exchange, before the Reserve Bank of India (RBI) gave 1,500 licences to money changers in 1993, Thomas Cook has come a long way to be one of the fastest growing travel shops in India. Little wonder then, that Thomas Cook group, the third largest travel group in the world, considers India as a very strategic market and has thereby increased its stake in its Indian arm from 40 per cent to 60 per cent by means of an open offer in October last year and also made Mr Kakkar the chief of the Indian Ocean region, whereby operations from Egypt to Burmah report to him.

This year, the company has posted a 102 per cent growth in net profits in the first nine months, from Rs 8.2 crore to Rs 16.6 crore, despite the 9/11 incident, Gujarat riots and travel advisories against India by various countries. Even operating margins have improved from 22.9 per cent to 40.1 per cent. We are probably going to close the year (October 31) a shade better than our target of Rs 30 crore, says Mr Kakkar.

This comes a pleasant change from the fate of most of its peers, players in the travel industry and airlines industry who have not had much news to cheer about.

Core Business
What has made Thomas Cook stand out The company operates in all areas of travel services: inbound and outbound tours, domestic holidays, MICE (meetings, incentives, conferences and exhibition) and offers other travel related services like flight ticket bookings and money transfer. Initiatives like internet bookings and call centre services have paid huge dividends. Today, 5 per cent of sales come from online bookings and 10 to 11 percent of sales come from the call centre based in Chembur in Mumbai and accessible to all metros.

Corporate travel accounts for 25 per cent in terms of overall profitability only next to forex which contribute around 50 per cent. The rest 25 per cent is accounted for by leisure travel, insurance etc. However, this pattern is all set for a change. Leisure travel is the fastest growing business and we expect it to be the greatest contributor to our business in another 3 to 4 years, says Kakkar. By far the largest in the country in corporate travel and second after Kuoni, in leisure travel, Thomas Cook has also ventured into domestic travel packages about 18 months back.

The domestic travel market is huge with 25,000 to 30,000 small and medium sized travellers operating across India. An average of 180 million people travel every year for religious purpose and even if we can capture a fraction of that market it will mean big business for us, says Mr Kakkar.

However, the most crucial issue here will be pricing. Dominated by the unorganised sector, players offer packages at incredible rates, and it will be a tough call for Thomas Cook to match those rates. Mr Kakkar argues that services will again be a crucial differentiator.

We want to be looked upon as the mythological Shravan, who had carried his blind parents on his shoulders. Our packages will treat these pilgrims with equal personalised care, says Mr Kakkar. But only time will tell if the price-sensitive Indian consumer will be willing to bite into this service proposition.

Finally, how does the company manage to do all this. Mr Kakkar has a short and simple answer: people. What most companies forget is that they have a knowledge base that can be harnessed for the better good of the customer, believes Mr Kakkar. I have 1000 employees who on average have 10 years of experience, which means I have 10,000 man years of experience. Which consultant can provide me with the same asks Mr Kakkar. Ever since he joined the company, he has laid emphasis in conducting workshops to empower people, to lay down a strict code of conduct and developing a culture of superior service. So far Mr Kakkar has been able to cook a healthy meal. It remains to be seen how well he garnishes his platter in the future.