The epidemic, which caused severe travel restrictions worldwide, had a devastating effect on the travel industry.
After experiencing losses in the previous two fiscal years, the Indian tours and travel sector is expected to report operating profits in the current fiscal year, according to a CRISIL report. The travel industry was severely impacted by the pandemic, which resulted in extensive travel restrictions worldwide. The report states that operating profitability is predicted to reach 6-7%, and revenue is expected to surpass 90% of pre-pandemic levels, driven by a robust recovery in both corporate and leisure travel segments, both in India and internationally.
According to the CRISIL report, the operating margins in the travel sector are expected to remain consistent in the next fiscal year, owing to the cost optimization and automation initiatives implemented by travel operators. The report highlights that this improvement is notable, particularly when compared to the operating losses of 25.8% and 2.7% reported in the fiscal years 2021 and 2022, respectively.
According to the CRISIL report, the travel industry’s credit profiles will be strengthened by an improvement in operating performance, healthy liquidity, and net debt-free balance sheets. The report also predicted that revenue would surpass pre-pandemic levels in fiscal 2024, due to the rising trend of business travel, increasing return-to-office and preference for face-to-face meetings, and consumer preference for short breaks. However, the recovery of leisure travel to the US may take longer. Revenue from long-haul international leisure tours, including the US and Europe, was impacted by visa issues in fiscal 2022. The implementation of cost optimization and automation initiatives reduced the proportion of fixed costs to around 33% of total revenue, ensuring better operating profitability on a sustained basis. The leading players maintained a cash surplus of around Rs 4,400 crore as of September 2022, while their debt was around Rs 2,300 crore (mainly short-term), according to the report.
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