Travel cos: Brick & mortar stores reap profits

Online travel agency Musafir has decided to launch its first offline agency this year with the intention of having a hybrid model.

With 14 stores in the GCC region, Musafir wants to emulate a similar model in the Indian market.

The Mumbai-based travel agency felt that while it is easy to achieve scale in its online model, having a brick & mortar presence will assure profitability in the long run.

Today, most online travel agencies are used for ticketing purposes but when it comes to booking holidays, which comprises the bulk of the travel business, it is offline agencies which continue to dominate.

For instance, global travel management company FCM Travel Solutions entered the country with its brick & mortar stores under Flight Shop in 2014 by acquiring a local company.

Today, it is mulling having an online presence but going offline has helped it get profitable for a couple of its stores.

“When one looks at the travel industry, the established players with significant offline operations are profitable whereas the OTAs are yet to achieve break-even. We believe in a hybrid model where the customers can choose how they want their services delivered. Today, 30 per cent of our inquiry is sourced online. While we remain on investment mode, we will consider an online initiative as well since a few Flight Shops are already profitable,’’ says Rakshit Desai, Managing Director, FCM Travel Solutions, which owns the Flight Shop stores. Recently, the Indian travel agency Orbit Tours & Travels was acquired by PE fund Emerging India but the owner of the domestic agency will continue with its 14-odd brick & mortar stores, while a new online consumer facing brand under Goomo is being created for an online presence.

Varun Gupta, CEO, Goomo, said: “While the OTAs are reeling under losses, we would be setting up a travel tech company and are ready to face the challenges in the Indian market.’’

Then, there are new online companies like Travkart.com, which has the backing of its offline profitable parent Sahibji Tours & Travels.

“Offline travel companies tend to be profitable due to consolidated bulk deals they strike with airlines for ticketing, while online companies tend to have mark-ups on the net cost to sell the inventories of hotels and airlines,” observes Manheer Singh Sethi, Co-Founder, Travkart.

At the same time, there are online companies like Yatra and Clear Trip who are steering clear of the offline model.

“We started our offline stores to bring credibility to our online brand of travel. Though we have a physical presence, it is not easy to scale up like an online model,” said Sharad Dhall, COO, Yatra.com.

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