Business:Package Tours: Free For A Price

India Today, April 12, 1999
April 12, 1999

PACKAGE TOURS
Free For A Price

With profit margins coming down, package tour firms are ladling out unbelievable offers to attract tourists. But these freebies are loaded with hidden costs.

By Priya Ramani

P L Kapur, Director, Sita World Travel A free air ticket every time you book a holiday? A free holiday every time you book a holiday with a free ticket? The country's leading package tour companies would have everyone believe that outbound tourists have never had it so good.

Increasing competition, dwindling margins and sagging bottom lines in the package tour industry are forcing operators to entice customers with such unbelievable offers. Market leader SOTC virtually triggered off a war of freebies when it first advertised its offer of free air tickets on its tours to Europe and the US earlier this year. Other travel biggies like Thomas Cook and Cox & Kings immediately whipped up almost identical offers. Not to be outdone, SOTC hit back with an offer few could resist -- a free ticket and a free bonus holiday if you signed up for its tours to Europe or America. Cox & Kings was quick to match that offer with bonus holidays in Europe, Singapore or the Bahamas.

The hardsell is understandable. Only 50,000 of an estimated 4.4 million outbound Indian tourists go on package tours in a year. Sharply increased competition has ensured lower margins which are down from 20 per cent three years ago to a mere 5 per cent now, forcing companies to come up with newer, more innovative marketing gimmicks every season. "It has become a numbers driven game," admits Meher Bhandara, general manager, corporate communications, Travel Corporation India (TCI).

In the rush to garner numbers, tour operators are even offering loans for holidays. SOTC affiliate Happi Holidays has tied up with Kotak Mahindra K-Value for a scheme that offers credit to holidayers headed for Europe, the US, Australia, the Orient and Dubai. Thomas Cook too is giving the finishing touches to a similar scheme. Loan offers have been introduced by Sita Travels and TCI as well. Even players like Saraswat Cooperative Bank have jumped into the fray with Pravasi, a holiday loan of up to Rs 50,000 that can be repaid over 24 months.

But, as senior officials in the industry admit candidly, there are no free lunches in this world. "Companies collect the entire amount from the clients. They integrate it into the dollar fare and then tell them that it is free," says S. Basu Mallik, managing director of the Calcutta-based Club7 Holidays.

Not so, says leading travel firm Thomas Cook. Ajay Bali, who heads the company's leisure holidays division, points out that this year's mark-up would barely cover the rise in marketing expenditure (the company's adspend, pegged at around Rs 1.4 crore in 1998, has already shot past Rs 2 crore this year) and the fluctuations in international exchange rates. He says Thomas Cook is dipping into its marketing funds to pay for the cost of the free ticket.

Hogwash, say rivals, about the latest round of travel offers. "There is no such thing as a free ticket. Companies that make these promises are taking with one hand and giving from the other," says P.L. Kapur, director in the Mumbai-based Sita World Travel (India) Limited. Agrees Subhash Goyal, president of the Delhi-based Indian Association of Tour Operators: "Companies are taking the money in dollars and the poor consumer thinks he's getting a free deal."

Indeed, companies that scrawl "free air ticket" across the rupee component of the tour price, say they have hiked the dollar component of the trip to make up for inflation. Take a look at SOTC's latest offer for its "All of the USA Tour". Till December 1998, a 15-day trip to the US, including a Bahamas cruise, cost about Rs 1.1 lakh -- Rs 42,990 plus $1,599 (Rs 67,957). The same trip is now offered as a 12-day US trip priced at $1,999 (Rs 84,957) and the Bahamas cruise is touted as free. Keeping in mind last year's offer of 50 per cent off on spouse's fare, and the effective savings per person works out to be far less than the Rs 44,990 touted in the SOTC ads. "The savings per couple is around Rs 25,000," admits Zubin Karkaria, SOTC senior vice-president (marketing) and chief operating officer, attributing the hike in the dollar component to "inflation".

Not just that. Tour companies are using all the tricks in the trade to recover the cost of the free ticket. Goyal estimates that the dollar component of a 10-day tour to Europe should not be more than $600 (Rs 25,200) per person on a twin-sharing basis. Most leading leisure travel firms are charging double that amount. Some even charge more than what is actually paid in visa fees and other taxes. For instance, Raj Travels and TCI charge nearly Rs 11,000 (or 30 per cent extra) in visa fees and airport tax for the European tour.

To be fair, some of these penny-pinching strategies are not new. Many companies avoid expensive -- but interesting -- cities like Paris, Rome and London, heading instead for cheaper alternatives like Brussels. Even if they take the tourists to London, hurried schedules and time constraints prevent tourists from getting to see famous sights. Besides, the best sightseeing is usually kept optional and tourists end up footing the bill. Most leading players, for instance, charge an additional $20 for a visit to Madame Tussaud's wax museum in London. Sita covers sights like the Big Ben, Changing of the Guards and Buckingham Palace within a half-day bus ride through the city.

Only now the companies are cutting corners more unabashedly. In normal times, one day of the tour was spent in an airplane or at the airport. Not anymore though. The first day of a 14-day European tour from a leading company -- which is booked solid until May -- is an overnight flight to London. But that is not the only day lost. The brochure's description for day 14 simply says: "This morning a packed box breakfast will be provided as we check out and transfer you to Charles de Gaulle Airport." The selection of cheaper hotels outside the city and fewer meals further helps cut costs on this budget tour. Also, most tour operators do not mention upfront in their brochures costs like a $99 high season surcharge or a $118 port charge.

Tourists need to watch out for other cost-cutting ploys. TCI flies travellers back from its 17-day Europe and UK tour from Manchester instead of London. Manchester is a cheaper air destination but day 17 of the tour is spent travelling from London to Manchester before boarding the afternoon flight to India. Customers taking the US tours of SOTC and Cox & Kings spend one night in an airplane and are taken for sightseeing directly from the airport, never mind the jetlag. They check into their hotels only in the evening. In Raj's European tour, you drive through Pisa in Italy during the night. Clearly, if holidayers are not careful they might be taken for a ride.

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