The tour and travel sector is expected to post a healthy growth of 12-14 per cent in fiscal 2025, said a report by CRISIL Ratings.

It said the growth will be driven by continuing growth in high airfares and volumes post-Covid.

This includes long-haul travel where visa-related challenges are easing.

The revision in the rate of tax collected at source (TCS) on overseas travel packages may not have a material impact on demand.

“The growth in fiscal 2025 will be on a high base of the current fiscal, where the sector is poised for a robust on-year revenue growth of ~ 30 per cent, or ~18 per cent above the pre-pandemic peak,” the report said.

“Growing overseas travel aspirations of people, especially after the pandemic, and rising demand for short getaways are propelling the growth of Indian tour and travel operators,” said Poonam Upadhyay, Director, CRISIL Ratings.

“The TCS rate hike may have a limited impact on demand as expenditure per individual per trip is usually much less than the Rs 7 lakh threshold for over 80 per cent of tour packages,” added Upadhyay

Operating margin too is expected to be above 6.5 per cent this fiscal and the next, despite higher promotional spend, backed by operating leverage benefits and various cost optimisation/automation initiatives undertaken since the pandemic. Healthy cash flows and strong balance sheets will support credit profiles.

The report also highlighted that the tour operators could face some challenges concerning monitoring the limit per traveller in the transitional period due to lack of adequate tracking mechanism of travel spends.

Growth will be driven by the short-haul category, just like last fiscal, in terms of overseas leisure segment.

This segment primarily comprises the Middle East, parts of Europe, and south-east Asian destinations. Long-haul travel to the US is also expected to recover with visa-related delays reducing.

Nonetheless, it will take a while to recover to the pre-pandemic level, except for students pursuing education in the US, where visas are being prioritised.

While for the domestic segment, the report said it will continue its healthy growth trajectory, fuelled by increasing preference for short breaks and improving infrastructure and last-mile connectivity, besides the corporate and MICE (meetings, incentives, conferences, and exhibitions) segments, which are already riding high.

CRISIL Ratings said that the growth in commercial air fleet, movement in air fares, change in tax structure and inflation will bear watching.

Last month, while speaking on the occasion of the completion of 75 glorious years of the Aeronautical Society of India (AeSI) Union Minister of State Dr Jitendra Singh had said that air travel in India is no longer a luxury of the elite.

This has been possible not only due to affordable air fare, but also the number of airports has more than doubled in the last over 9 years from 75 in 2014 to over 150 today, the Minister added.

Minister said the credit for making Air Travel as a common man’s mode of travel goes to Prime Minister Narendra Modi through visionary schemes like UDAN (Ude Desh Ka Aam Nagrik), doubling in the number of airports, affordable airfare etc.

He added that it is now a common sight at airports to see people wearing “Hawai” chappal boarding the “Hawai-Jahaz” (Air Flight).