By Hari Ganapathy, Co-founder, Pickyourtrail
The outbound travel industry in India has seen an unprecedented surge in the last couple of years with a burgeoning workforce of young professionals, who are powered with global aspirations and deeper pockets for discerning interests. The UN World Tourism Organisation, in fact, has estimated that about 50 million Indians will travel abroad by 2020, contributing about USD 28bn in outbound spending by Indians. Indian travellers on an average spend around USD 1200 per visit, which is more than the Americans (USD700) and Britishers (USD 500). It is also more than Chinese and Japanese tourists. The growing share of experience seeking travellers from this part of the continent has led more countries like Malaysia and Thailand to make travel visa-free for Indians.
Fortunately, the outbound travel industry in India has been largely unscathed by the ongoing clamour around economic slowdown. Over the last seven years, Indian outbound travel has been consistently growing at 10-12%. With 75 million+ passport holders in the country, the advent of direct and low-cost airlines from Tier 1 and Tier 2 cities and rising internet penetration in the country, the appetite of consumers has not taken a sizable hit. With short-haul destinations like Thailand costing as low as INR 25,000, there’s an emerging tribe of travellers who are willing to shell out a couple of more grands on an international vacation than undertake a domestic trip at almost the same cost. So what does it take to keep the ball rolling for international vacation planning companies like Pickyourtrail in a diffident economy?
Reassess Tax on Travel Industry
Almost 35 per cent of gross margin for any international holiday planner in India ends up being a part of GST limits, making travel an extremely low margin business especially when a majority of these services are rendered in a foreign country. We hope that the 2020 annual budget relooks into the tax model for outbound tourism, facilitating robust growth, and eventually lending more clarity to the consumer on what he is paying for, while also building trust in the travel advisor.
Relevance of Pure Agent Concept
For a majority of the travel start-ups in the country, digital marketing, especially through Google and Facebook, remains the paramount customer acquisition channels. The current rate (18%) of Google and Facebook tax makes the customer acquisition cost (CAC) fairly expensive and at times unreasonable. Therefore, it becomes almost impossible to overlook the merits of a Pure Agent concept to bring down the CAC and target more high intend customers as a company scales.
Tax Relief to Fuel Growth
In the initial years of a start-up, entrepreneurs are not only under the cosh to scale their businesses but also spend a considerable amount of energy sorting out tax issues and frequent regulatory changes. It would be very beneficial if the State acknowledges this inevitable dilemma of every entrepreneur out there and provides 100% tax relief in the first 10 years of the company’s inception. This will help firms focus on expanding revenues and creating more job opportunities in the country, thereby building a robust startup ecosystem in India.