The travel and tourism industry is likely to reach 35-40 per cent revenue of the pre-pandemic level in the current financial year, according to a report.
With states beginning to ease restrictions and vaccination rates expected to improve, we see domestic travel picking up slowly from the second quarter.
However, segments such as international holidays and inbound travel may see recovery only in the second half, and that too only if travel restrictions are eased in foreign countries,” Crisil Ratings Senior Director Manish Gupta said.
He also noted that with meetings and events shifting to the online mode, corporate travel is expected to remain under pressure.
“Overall, therefore, revenue this fiscal year may reach only a little over a third of the pre-pandemic level, that is 35-40 per cent, he added.
The Crisil Ratings report further stated that while companies have raised capital last fiscal and will continue with cost-control measures to cut cash losses, therefore, a significant decline in travel and continued uncertainty about the pandemic will weigh negatively on their credit profiles.
Tours and travel operators provide services such as air or bus ticketing, hotel packages for both leisure and corporate travel within India and overseas.
These companies’ revenues declined to Rs 2,300 crore last fiscal, which was only 20 per cent of FY20 levels, after the nationwide lockdown and other restrictions led to a sharp reduction in travel, it said.
The industry was brought to a standstill in the first quarter of last fiscal the peak travel season because of summer holidays which eroded revenue 95 per cent year-on-year.
However, there was a gradual turnaround thereafter, with improving air traffic and demand for short domestic holidays lifting revenue to 55 per cent of the pre-pandemic level by the fourth quarter, the report said.
Then the second wave set in and under its impact, the first quarter of this fiscal is expected to be almost a washout once again, this time because of state-level lockdowns, it added.
In FY22, too, the industry is expected to post operating cash losses of around Rs 150-200 crore, which is significantly lower than last year, mainly on account of improved bookings and continued control of costs.
Moreover, the report stated that the travel operators have limited dependence on debt as their working capital cycle is typically negative because of high customer advances and creditors compared to low receivables.
Further, companies raised capital last fiscal amid near-term uncertainties, which boosted their cash balance to over Rs 4,300 crore, against modest debt repayments of Rs 85 crore due this year, it pointed out.
The silver lining for the industry is people’s fundamental urge to travel may not have diminished as multiple European countries, including France, Italy and Spain, began opening up their borders over the last two months to bring back tourists and the US is expected to soon follow suit, Crisil Ratings Associate Director Naveen Vaidyanathan said.
“However, uncertainties continue in the Indian context, including an improvement in vaccination rates, opening up of international borders for Indian travellers, and how corporate travel actually shapes up in the post-pandemic world. These uncertainties, along with continued losses, drive our negative outlook on the sector and are also key monitorables, he added.
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