In recent years, the travel industry has witnessed a significant shift in how people plan and book their trips. Gone are the days when travelers relied heavily on neighborhood travel agents to arrange their flights and accommodations. Instead, a growing number of travelers, particularly digital natives, have embraced a more independent approach to travel planning. This shift in consumer behavior, coupled with increasing tax compliance challenges, has placed traditional travel agents in a state of crisis.
Changing Travel Trends
The recently released Travel Trendz Report 2023 sheds light on the evolving preferences of Indian travelers. According to the report, a staggering 71% of Indians now prefer to plan their holiday trips independently. This trend underscores the fact that travelers are becoming more self-reliant and well-informed, equipped with the tools and knowledge to curate their own dream vacations. While only 20% of travelers opt for the expertise of traditional travel agents, approximately 44% choose to make their bookings through Online Travel Agencies (OTAs).
Factors Contributing to the Crisis
Several factors have contributed to the challenges faced by travel agents in the modern landscape. The COVID-19 pandemic acted as a catalyst for change, accelerating a shift that was already underway due to the rise of social media and large booking platforms. Many small tour operators were forced to shut down during the pandemic, leading to a loss of trust among travelers.
Manoj Jain, director of Gem Tours & Travels Pvt. Ltd in Pune, emphasizes the impact of these changes. While he has managed to thrive by offering competitive rates and building a strong reputation, he acknowledges that attracting younger clients has become increasingly difficult.
Tax Compliance Burden
One of the significant hurdles faced by domestic travel agents is the burden of tax compliance. In addition to filing GST returns, travel agents in India are now required to account for a higher Tax Collected at Source (TCS), which has increased from 5% to 20% starting from October 1. This higher TCS rate applies to spending above Rs 7 lakh on foreign tour packages booked through online or offline travel agents within India.
For Harjinder Singh, who operates 24×7 Travels in Delhi, implementing the new TCS rate feels like a final blow. Handling both domestic and overseas tour packages, Singh is concerned about the financial implications and the additional workload that comes with increased tax compliance.
Appeal for Reconsideration
Recognizing the impact of these tax changes, the Travel Agents Association of India has appealed to Finance Minister Nirmala Sitharaman to reconsider or delay the implementation of the new TCS rate. They argue that this tax increase will lead to a further decline in business for domestic travel agents.
The Ongoing Relevance of Travel Agents
Despite the growing trend of self-reliant travel planning, travel agents still hold value in certain situations. Shreeram Patel of Unicorn Travels in Ahmedabad highlights the role of travel agents in handling visa appointments and crafting complex itineraries. Moreover, travel agents continue to provide essential assistance during emergencies and crises abroad, demonstrating their ongoing relevance.
In conclusion, the travel industry is experiencing a significant transformation, with travelers increasingly opting for self-reliant travel planning. However, traditional travel agents continue to play a vital role in specific scenarios, even as they grapple with tax compliance challenges and changing consumer preferences.
