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pumped about travel during a pandemic?

pumped about travel during a pandemic?

there are interesting bets being made on travel companies.
August 1, 2021
2 min read
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pumped about travel during a pandemic?

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pumped about travel during a pandemic?

in March, online travel platform Easy Trip Planners (EaseMyTrip) made its debut on the Indian stock market with a ₹510 crore IPO. with vaccine coverage low at the time, its share didn’t go much higher than its issue price of ₹187 per scrip. now it is trading at around ₹511.50 per scrip, over 2.5 times that price. 

now take a step back. there is a lot of excitement over Ixigo’s ₹1,600 crore IPO. big names such as Elevation Capital and Fosun are expected to cash out. in fact, the company had even become profitable until the pandemic hit. it’s not just Ixigo though. EaseMyTrip also had an encouraging quarter. 

what’s happening in travel?

despite the second wave of the pandemic, EaseMyTrip reported a six-fold jump in profit for Q1 FY22 at ₹15.42 crore vs ₹2.49 crore in Q1 FY21. this was largely due to a robust performance in the air passage segment, which contributed a revenue of ₹18.87 crore in the previous quarter, as opposed to  ₹3.5 crore in the year-ago period

even MakeMyTrip, which is listed in the US, is currently trading at around $25 per share, nearly 2 times its pandemic lows, and around the same it was pre-pandemic.

all signs point North

there are several factors contributing to the anticipation:

  • a potential pandemic-related health expenditure and the unpredictability of the economy since its onset led to a lot more Indians saving up money. with many avenues of expenditure, such as restaurants and movie theatres unavailable, plenty of usually disposable income also ended up in savings. according to a survey by YouGov, nearly 40% urban Indians made pandemic nest eggs. with vaccine coverage growing fast and travel options opening up, many will take that much-needed vacay from the pandemic life.
  • there is a consolidation taking place in the travel sector. many of the smaller players have gone out of business under the hardship wrought by the pandemic. even established players have fallen prey. consider, for example, the $40 million Cleartrip fire sale to Flipkart. most of their business will now go to the bigger players in the market who will also have many advantages over any new entrants.
  • another direction that the flow of business is shifting towards is online portals, away from offline bookings. for example, Ixigo saw a jump in the share of online bus-ticketing to 35% of the total, more than twice its 15% pre-pandemic share. online platforms also have at their disposal the tried and tested methods of habit-formation, with the use of discounts and more. thus, they are primed to be the future of travel.
  • towards the end of June, the Indian government announced a stimulus package, which includes specific measures to support the tourism sector. among them are  working capital guarantee, and personal loans of up to ₹10 lakh for travel and tourism players, and up to ₹1 lakh for travel guides. but perhaps the most significant is the move to provide five lakh free one-month tourist visas to India until March 31, 2022. this not only acts as a beacon for budget-conscious globetrotters, but also sends out a powerful message that India is ready and eager to welcome guests. the tourism ministry has also signed MOUs with many private players as part of these revival efforts.

birds of a feather

a look at the recent performances of industries closely associated with travel further strengthens the above reasoning. EaseMyTrip’s jump in air passage revenue reflects an overall rebound in the industry. on August 1, India’s domestic passenger traffic crossed the 2 lakh mark after a gap of 110 days, and the flight count crossed the 2,000 mark. a fare-cap imposed by the government may prevent airlines from making the most of this rebound at the moment, but it’s only a matter of time.

meanwhile, after a subdued end to Q1 FY22, the Indian hospitality industry has really picked up over the past month or so. stay-aggregator OYO’s business has also recovered, and Microsoft is said to be booking a stake in it ahead of a potential $1.2 billion IPO.

whether one chooses to step out right now or not is a personal choice. but it may be a good time to hop aboard a travel stock and enjoy a thrilling trip.