The inbound tours organised by Foreign Tour Operators (FTOs) are routed through Indian inbound tour operators who in turn make all bookings for hotels, travel and transport, guides and other arrangements. Largely, the whole system works on credit offered by the service suppliers to Indian tour operators, who in turn offer credit to foreign agents as well. This is how most of us practice our businesses. But this time around, the financial mess that all of us are in, including hotels, transport companies and others, the suppliers will ask for money upfront that we are yet to receive from our FTO partners. Our coffers are already empty. It’s high time we took stock of the entire credit system that we practice here in India.
The entire tourism industry businesses across segments, from tour operators to hotels and resort owners and operators to tourism transport operators and travel agencies, are financially stretched. Therefore, this working system is bound to witness a sea change. Most of the enterprises have reduced their workforce substantially. They had no choice but to let go experienced and skilled staffs, without whom it may be a very uphill task for individual businesses as well as India tourism to revive in the post-Covid world. In such a situation all service suppliers will require advance payments or at best immediate payment when the services are provided.
In the post-Covid world, since we will all start afresh and with a clean slate, it is also time to introspect on the credit system that we practice in our businesses.
Rest assure that the banks are not coming to our rescue anytime sooner. And needless to say that the government has little time to listen to the woes of the tourism sector at the moment. Any loans, interest-free, soft or hard, for enterprises in our segment of business, wouldn’t happen or easily happen. As tourism is the worst hit sector globally, the banks have made their system very rigid to provide fresh loans. Wherever, it is possible the overdraft limits and other credit facilities being availed by the enterprises in the tourism and hospitality sectors are being substantially reduced.
In my own case, our overdraft has been reduced from Rs 10 crore to Rs 6 crore. And looking at the growing liquidity crunch in our economy, there is no guarantee that this will not be further revised to our disadvantage. With no revenues and heavily impacted working capital it will pose new sets of problem for tourism to re-start. The situation could be particularly grim for small and medium sized tour operators.
These challenges, and more, are already on the horizon. The industry needs to be prepared and ready to fend for itself. There is need for IATO and other associations to engage within their memberships, with other associations as well as suppliers in order to develop clarity on these matters of concern and develop synergy and workable solution to support each other. It is high time we bid adieu to the impractical credit system and refrain from extending any credit to FTOs. In any case, the foreign agents are mostly selling tours on cash basis.
I strongly feel that we can circumvent most of these challenges by simply asking for upfront payments for the services from our FTO partners. And again, it could be particularly difficult for smaller tour operators to respond to these challenges. Now is the time to act in the interest of all, and the industry.
By Sarab Jit Singh, MD, Travelite (India). He was also the Founder and Former Vice Chairman, FAITH; Former Sr. Vice President, IATO and Founder and Former President, ITTA.
