''Thomas Cook is an authorised dealer, which means it is similar to a bank except that we do not do regular banking business.” - Views on News from Equitymaster

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  • Jul 24, 2002 - ''Thomas Cook is an authorised dealer, which means it is similar to a bank except that we do not do regular banking business.”

''Thomas Cook is an authorised dealer, which means it is similar to a bank except that we do not do regular banking business.”

Jul 24, 2002

Mr. P. Sreekumar is Executive Director - Finance at Thomas Cook (India) Ltd. He brings with him several years of senior management experience from diverse industries like pharma and oil & gas. His educational qualifications of CA and CS reinforce his position. In an interview with Equitymaster, Mr. Sreekumar spoke about the travel industry in light of 9/11, communal riots and advisories. He also highlighted some of the reasons for the company's impressive performance.

EQTM: To what extent do you believe the travel warnings issued by several countries against India and Pakistan will affect inbound traffic?

Mr. Shreekumar: To my mind, inbound travel will be impacted marginally. The impact is likely to be on the business traveller, especially those who are looking at the region for the first time. But businesses that already have presence in India would be more resilient, as they are not likely to abandon operations. They are more aware of the ground realities, as otherwise projected by the advisories. The holiday travel industry would not be significantly impacted, as inbound holiday season begins in October. I hope by that time the negative perception clears, which will allow holiday goers to better assess ground realities and take a decision. Even today, I believe, the general perception abroad, despite the advisories, is that the situation is not as bad as was projected. If this positive perception continues and the issue stops making front-page news, we could be in for a good upcoming season.

Having said that, travel advisories are nothing new to India. The last advisory was issued during the Kargil war. But this time around it carried a magnified impact, as it coincided with high profile visits of dignitaries from UK and US. Therefore it got associated with a full-fledged war or at least a perception of war.

EQTM: Could you give us some indication on the amount of time it takes for travel, especially inbound, to recover after a country experiences events like December 14 or communal riots?

Mr. Shreekumar: It must be recognised that pubic memory is extremely short. The impact of riots is likely to be more regional depending on the areas affected. If the traveller is not visiting those regions then he/she is not really worried. A lot also depends on the magnitude of riots. If the riots are localised, then it is not expected to impact a lot on the aggregate level. However, if riots are widespread, it is something to be worried about. But that is not the case, now.

A lot of impact for these events also depends on the publicity they received. The time lag for holiday travel to recover should not be significant. I would suspect that established businesses would anyway make their trips. The casual traveller would tend to postpone the trip for the time being. Therefore, depending on the purpose of travel, the time taken to recover will be different. The time for drop in travel and its recovery is likely to be the same.

EQTM: Few hospitality companies have reported improved revenues in April and May 2002. Is the travel industry corroborating the trend? What has been instrumental for this reversal?

Mr. Shreekumar: The hospitality industry is also segmented into business and holiday. A lot depends on the customer mix the hotels cater to. The business travel segment has certainly seen a decline for various reasons, including advisories. The U.S. for example was already confronting recession before September 11 event occurred. The recessionary trends continue. However, there are other segments like the NRIs who travel to India but stay with their relations. They push airline tickets, car rental sales and the like. Hotels in the holiday segment may or may not get as impacted since there could still be some domestic tourists who they can target.

EQTM: In the money changing business, especially considering the inventory of forex in each branch, what is the extent of forex risks? And what tools does the company use to minimise these risks?

Mr. Shreekumar: Thomas Cook is an authorised dealer, which means it is similar to a bank except that we do not do regular banking business. This means it can maintain nostro/vostro or foreign currency accounts, and has SWIFT or remittance transactions. This allows Thomas Cook to manage its risks like any other bank. We maintain our balances in foreign currency accounts and hold only as much cash, as required, which could take care of depreciation. In case we feel there is absolutely no need to hold cash, the currencies can be sold in the international markets. Like any other treasury operation, Thomas Cook has a dealing room and can use financial risk mitigating instruments. Further, as a matter of policy we do not speculate.

EQTM: Could you share with us the details of your charter flight services?

Mr. Shreekumar: Regarding outbound charter services, we are actively pursuing our case with the Government to get permission. As soon as we get permission we will move ahead but as of now the approval is awaited. The aviation policy does permit outbound charters but it is not economical to operate them under current regulation. Outbound charter is currently permitted once in a fortnight. The latent market could be one flight a day, through out the year.

In inbound charter, during the last season, we had about six flights a week coming in. This was particularly to Goa and a few to Kerala.

EQTM: The company has undertaken a cost cutting exercise, could you indicate the key areas that are likely to contribute to these savings? What are the targeted savings from this exercise?

Mr. Shreekumar: We expect to continue with the same momentum on managing our costs throughout the year. Areas one can look at for savings are really across the board including advertising, personnel and general expenses. We took on this initiative, among others, last year, which is reflecting in our bottom line.

EQTM: The company has implemented an ERP system. Could you give few examples of how technology benefits Thomas Cook?

Mr. Shreekumar: One of the most important benefits is access to and sharing of information. Thomas Cook (India) Ltd. is present in over 45 locations and 14 cities. The ERP allows the company to share information online, real time basis. This provides access to key management information, be it statistical data, sales trends, which regions are performing better, which products are fast moving and those that are not and information on costs. So a larger spectrum, of management information is available.

Second is speed. All this information is now available a whole lot faster. This information is now available on demand. Earlier to collect this data from 45 branches across 14 cities, tabulate and, analyse would take days and weeks. So despite diverse businesses like forex, outbound travel, inbound travel etc. The technology allows Thomas Cook to get all this information instantaneously.

Third is what I call the benefits of homogeneous processing. For example, with 45 branches across 14 cities spread across the country you may get data at different points of time. Also the data may not be complete or in the required format and this could be across departments. The system will allow you to process all the data accurately and in a timely manner.

Fourth would be the benefit of virtual mobility. For example, a job needs to be done at a particular location but resources are scarce. The system enables resources from other locations to be used for completing the job. Let’s say, during the outbound season, Bombay office is facing shortage of resources to complete transactions. Goa, on the other hand, is in slack season, as peak season is from October to February. Consequently, resources in the Goa office can be used to complete transactions. The person in Goa does not have to come to Bombay nor do you need to recruit additional hands, you are therefore saving on costs but not compromising on quality and still meeting obligations. This virtual mobility allows anybody, sitting anywhere in India, to access files and complete transactions.

Lastly, the wide I.T. infrastructure, include VSAT connections, leased lines, WAN, coupled with customer driver interfaces like call centres, enables the company to provide high quality of service to its customers. Our last phase of IT development is the customer relationship management (CRM) and the front office package, which is under implementation.

EQTM: On a lighter note, do you have a favourite book / personality? Why?

Mr. Shreekumar: No favourite books or personalities but I can share what I read recently and liked a lot. The book is called Customers for Life, written by Carl Sewell and Paul Brown. It is a very interesting book that enumerates the principals and practices revolving around service and customer focus that converts a first time customer to a lifetime one.

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