Balu Ramachandran, Senior Vice President, Cleartrip talks about why Cleartrip remains bullish on India market potential, how Jet Airways grounding still haunts the Indian aviation sector and Cleartrip’s hotel play.
While several sectors have been facing slowdown blues, the travel industry has remained largely untouched by it, a top executive of a global travel firm said. However, the industry has its own share of woes that have been caused by low capacity expansion, Balu Ramachandran, Senior Vice President, Cleartrip told Financial Express Online. In an interview, he also talked about various issues ranging from the current slowdown, why Cleartrip remains bullish on India market potential, how Jet Airways grounding still haunts Indian aviation sector, Cleartrip’s hotel play and the company’s latest venture for MSME travellers.
Edited excerpts of Balu Ramachandran’s conversation with Prachi Gupta:
Considering the ongoing economic slowdown, how do you see the travel industry going on in the coming years? What has been the impact on the travel industry?
Let’s take the first six months of this year. If you look at that same time last year, we probably had a 20-25% growth in the passenger traffic year on year. But, that is also backed by any large capacity increase which was in the range of 25-28%. This year, all the capacity that’s getting added has gone to replace the Jet Airways capacity. Passenger growth numbers have remained in line with the capacity increase.
So as far as consumer sentiment is not hit, as long as jobs are not hit, we will continue to spend on travel as long as pricing is right. If prices are right and capacity is increased, there will be sustained demand. We need double-digit growth in capacity increase to get passenger growth number to double-digit as well. Obviously, travel is down, but India also has a large number of consumers who are travelling for leisure and not just for corporate travel. Currently, there is a blip which could last between six months to a year, but it is a blip.
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How do you see the two contradictory trends of rising affluence and consumer slowdown?
The slowdown is evident in certain sectors. If there is a decline in overall GDP growth, there will be areas that get impacted. Automotive and real estate, for instance, have other issues as well and not just consumer sentiment. Despite one or two examples of slowdown like Parle G, these are isolated incidents which are more company-specific. Obviously rural demand has come down but in the travel sector, the slowdown has not impacted significantly. If the growth rate come down, sentiments will be impacted.
But, there is a larger set of people which has the ability to spend more than it did in the last five years. And that is also on an increase every year. There will be short term pressures but the longer-term vision is what everyone’s talking about. And that is sustained.
So far we have been talking about the aviation industry and the effect that has had on Cleartrip. What about the hotel segment?
Hotels have a unique set of problems. We want to solve the hotel discovery problem which is focused on the product and tech side of it and make sure that inventory is available. Those are two aspects are we working on this point in time.
Because there’s a huge amount of discounting by other competitors and a lot of discounting is essentially to enable offline to shift to online. When the market is changing and is in the early stages, huge amount of money goes into enabling customer behaviour to change. We are patient on hotels. We are building what we think needs to be done and that investment will continue and when the market is ready, then we can make it focus.
How’s India market faring you? Do you remain bullish despite Jet Airways and Air India chaos?
India sales contribute to 50% of the overall Cleartrip group. India has some of the best dynamics in the world today. Yes, aviation is a tough business. More and more customers are choosing to fly on low-cost carriers because they are value-conscious. So what that was doing was forcing the full-service carriers to reduce the price as well. But the cost of the full-service carriers is more than the low-cost carriers. Financially, it is very tough for a full-service carrier to make money if they are not very efficient.
If India were not a good market, we would not have seen the money going on in the sector. Despite Jet Airways and Air India, a lot of money is still going into Indian aviation space. All the Jet Airways capacity was taken up really quickly by others. Even the airlines operating in India themselves are seeing very positive signs. A blip aside, those trends are fundamental. We are very bullish about the overall prospects of Indian aviation.
What is Cleartrip’s new launch about?
When we talk about corporate travel and corporate travel in India, it is a $30-50 billion market. Corporate fares come with a host of benefits attached like seat charges are waived off or reduced amendment charges etc. But not all of these benefits are available to those large bays of people who work for MSMEs because they are too small to be served by the typical corporate travel environment.
We’ve partnered with airlines and hotels to bring in the corporate fares into the MSME environment by the new launch called Cleartrip for Work. Travellers can directly sign up with a simple process of putting in your GST number and can avail corporate fare benefits. We are also offering four per cent cashback on flights and hotels, which can be accumulated and can be used for personal travel.