Travelling is different for different people. Some travel to take a break, some to rediscover themselves. Some travel to explore new places while others do it for the novelty of it. Regardless of preferences, the one factor that remains constant is the Cost of travelling. Whether a person travels alone or as a group, the immediate step after deciding a place and checking its availability is to determine how much the trip will cost and marshalling the funds accordingly. To be precise, it ensures that the traveller has all the funds required in cash and is ready to dispense. New-age fintech players are providing many alternatives that can make planning and successfully executing a trip a breeze. In an exclusive conversation with Financial Express Online Akash Dahiya, Founder, SanKash talked about the impact of pandemic on travel and tourism, its recovery, latest trends and more. Excerpt:
How would you analyze the travel & tourism industry in the past 2 years?
Once considered an evergreen industry, agnostic of ups and downs, saw a disaster which was never anticipated by any business pandits, the travel trade has undergone massive change impacting almost every stakeholder.Travel Merchants: Indian travel industry is roughly $ 40 billion in size and with about 60% serviced offline by travel agents the pandemic impact was different for different agents depending on their size, journey, and position in the market. For example, small and medium travel agents (which handle the bulk of volume) had impacts basis their operating model, Model 1 agents are those for whom travel is a second or a tertiary business these guys were able to switch off very easily and had minimum impact on household revenue and were able to come back faster as soon recovery started.
Model 2 agents who work only as a travel agent were impacted significantly with revenue almost ZERO for most part of the year 2020, they were able to survive either by shutting shop and surviving on savings with an eye to revive or pick up an alternate business / job depending on the scale they were operating. 50% of these turned this situation into an opportunity by using their captive existing customer base and their repo with them to sell alternate products like Health insurance, Life insurance, other investment products or even switching to offering essential services during lockdown. This allowed them to stay connected with their market, stay relevant to an extent, and come back strongly as soon recovery was in sight.
The major impact was felt by OTA or large offline players like Thomas Cook, SOTC. They had to cut down on their manpower cost significantly which resulted in under-serving their customers for refund, which further resulted in dissatisfaction eventually impacting customer buying shifts as soon the market opened. Very large players, who were sufficiently funded, were able to survive with significant layoffs but other players like travel triangle, trip shelf, Yatra and others who were already under stress are still not able to come back and will face a tough road ahead.
On the customer side though the buying volume was already skewed towards offline travel agents, customers further realized agents’ value when trip cancellation and refunds came into picture, as soon as the lockdown was announced. Travel agents went the extra way to get the refunds or manage customers for long term goals but unfortunately OTA and large merchants saw their NPS dropping significantly resulting in loss of business. This realization at the customer end led to a shift in buying pattern as things started picking up. Customers now prefer booking through travel agents as it gives them a face to rely on and customization which takes care of safety, hygiene and support when required. This shift resulted in numbers as well. For example, travel aggregators like TBO (who service the majority of offline travel agents to buy inventory) saw 85% of pre-covid volumes already recovered in the month of August while OTA are still scouting for 50% of pre-covid volumes.
Financially during this time, customers went into a SAVE and SPEND mode, which means they want to go out and spend, but not use their savings for this, as uncertain times could possibly impact their future income / salaries. Call it pent-up demand or revenge tourism, the volume on the domestic side is back on track with customers coming out and willing to take a much deserved break. We being the only travel FinTech servicing offline point of purchase for travel as a purpose, saw a jump in volumes by 3X as compared to our best month before COVID. SanKash became a preferred partner for industry as we stood ground and offered our services, while most banks were shying away to lend for travel.
On the pricing side, we are seeing that customers with a budget to spend on European trips are spending the same amount on domestic destinations like Rajasthan, so we are seeing some drop in average booking price but it is negligible in front of the huge volume that started coming back in November 2020. The extra spent is in fact going to a small domestic vendor at these destinations, who are dependent on tourism, providing and helping them to cover up on their lost revenue due to the pandemic.
Though there has been a setback due to the pandemic, how soon do you foresee the recovery?
We started witnessing recovery from October 2020, we reached our pre-covid numbers by January 2021 and by April 2021 we were doing 3X of our volume as compared to our best month pre-COVID. The second lockdown put the spanner again but this time recovery was even faster. We started seeing applications from June, with July witnessing 80% of our April volume and we are expecting to breach our highest monthly volume in September 2021. Owing to future waves and lockdown we will continue to see this cyclic pattern for a couple of years till we reach the vaccination threshold.
Please highlight the journey of Sankash from the beginning and you making the first move in the industry.
We started on a very strong foot with OYO being our first travel partner and then 1500 travel merchants followed suit. We today are proud to be associated as the only player associated with large key accounts like Thomas Cook, SOTC, Veena World, Kesari, Balmer Lawrie and other medium / small players across 40 Indian cities.
Our strategic investment partnership with the country’s largest travel aggregator TBO gave us access to 40,000 active travel agents spread across the country. Our financial partners like ICICI, Aditya Birla, Manappuram gave us almost a bottomless lending line. With all partnerships and an almost complete checklist we successfully raised our seed round within the first year of operations through marquee angels and corporates.
Later, we were able to negotiate and agree on a pre-series A round with marquee VCs but in March 2020 the investors backed out on a signed term sheet. Initial 3 months were tough with no idea where we were heading but instead of waiting for things to get better, we decided to expedite and work on our product portfolio so that we are ready when things get better. The strategy paid off, as we were able to launch some exclusive win back campaigns in the market with our partners, and launched 4 services during this time which gave us some revenue to sustain.
However, like most businesses in the vertical the time was ruthless, and we had to let go of a little of our manpower but with that we were able to cut cost by almost 80% and stay afloat. With volume coming back our manpower is back in full throttle with new hires across cities and now with investor sentiment inching towards positivity we are getting interest from investors to fund.
What kind of new trends are you witnessing since the past few months?
As mentioned, the SAVE and SPEND trend amongst customers is a very strong trend we are witnessing, we are also seeing strong demand on hygiene and safety standards from customers.
There is also a perception shift for consumption of few products with case in point example of “insurance” which earlier was a push product with only few countries asking for it as a mandatory requirement for visa but now with almost all countries are or will make it mandatory and self-realisation amongst customer themselves making it as an easy sell now.
We are also seeing a shift in the purchase behaviour of customers, earlier customers tend to ignore fine print, TnC of bookings which impacted them in case of eventuality like lockdowns, today customers want everything in black and white, the prints for customers are no more “fine”. Last, given the demand from customers, travel agents who used to ignore domestic destinations are now exploring and curating destinations within the country which has a meaningful impact on customer experience.
What kind of packages do tourists prefer to book?
Customers looking for domestic packages with high safety standards and with no compromise on budget, are willing to go for a premier domestic holiday which would otherwise have been a budget international holiday.
We are also seeing a shift in focus with “SHOPPING” taking centre stage as compared to other activities like water sport and adventure. Customers asking for more free time and knowledge around markets in their destination and asking for extra credit to fund the shopping appetite. Further, fear of flight is weaning off as people are now taking medium haul destinations and preferring air as a choice.
Has the travel booking this year increased or decreased for the festive season as compared to last year?
Overall the bookings are low as compared to 2019 but for SanKash this is the all time high season with the highest number of enquiries per month.
Travel loan category is becoming a hit among consumers during the pandemic. What is your m-o-m sales in terms of travel loans?
On an average every month we see about INR 5 crore worth of applications coming our way but given the poor approval rates due to travel as a purpose we lose a lot of our funnel. We will be able to improve it significantly with confidence improving among banks for lending in this category. However, this volume is still about 2X higher from our pre-covid volume.
How much do you think consumers and travel partners are warming up to your idea of travel first, pay later concept?
Again referring to SAVE and SPEND mode this is a common phenomenon which we have seen in the past, be it Sept ’11 twin tower blasts or 2008 market meltdown, customers get into saving mode and it creates natural demand for BNPL products (Buy now, pay later). With known very large players starting services this time and made a big presence felt in the Indian lending market.
Do you have enough competition in your industry?
We don’t compete, instead we complete the ecosystem on both sides of travel merchants and financing partners by being a neutral player. With promise to have highest approval rates, best products, and least risky customers. We have not come across any direct competition at offline point of sale for travel as a purpose.
Any latest developments?
Betting on the future we are seeing positive sentiments on the vertical, with few large IPO in pipelines and similar business outside India showing signs of significant recovery, we are seeing a lot of interest form international investors and government alike. A very large government (a city metropolitan group) has invited us to set up SanKash in their country and one of the US based large accelerator shortlisted and inviting us to be part of their cohort, all of this eventually validates SanKash model and recovery in the vertical
What are the growth plans for the next 5 years?
With focus on increasing our partner productivity by 5X and doubling our monthly activation rate, we plan to service 1 million customers by year 5 and have a lending book of INR 5000 crore. Further with an eye on reaching operational profitability in the next 3 years we plan to double our merchant base by 50% every 6 months and once we achieve all this, we will still be scratching the surface of the 250+ million transaction industry.