BY Mohammed Shoeb
DOHA: The road map for developing a vibrant and competitive tourism and travel industry in Qatar has started taking shape, following double-digit growth in the number of travel agencies and airlines over the past several years.
Massive public spending in preparation for the 2022 Fifa World Cup and for realising the goals laid down in Qatar National Vision 2030 has created several hundred thousand jobs, resulting in the influx of a large number of foreign workers. This is creating business opportunities for airlines and travel operators.
Growth in the number of airlines and travel agencies over the past four to five years has created opportunities for investment, but these opportunities are not without challenges. In an attempt to survive in the relatively small market, some travel agencies are allegedly violating rules.
A large number of travel agencies have entered the market within a very short period of time, with many of them lacking experience and expertise, according to industry sources.
Critics say that many of the players, especially the new entrants, are violating standard practices and have created unhealthy competition for those who abide by the rules, pushing many out of business.
The cut-throat competition is not confined to travel agencies; the aviation sector has not been spared. As a result of the tough competition, some regional airlines have gone out of business, including RAK Airways (the national airline of Ras Al Khaimah, the UAE) and Bahrain Air.
The exact number of tour and travel operators in Qatar was not readily available. However, according to industry sources, the total is nearly 165.
However, the total number of IATA-accredited travel agencies in Qatar jumped to 143 in 2013 from merely 17 in 2007, according to statistics provided by International Air Transport Association (IATA), to this newspaper, which in itself illustrates the pace of growth of Qatar’s travel industry.
Between 2008 and 2013, nearly 126 travel agencies from Qatar received accreditation from IATA, and many more are queuing up to join the international aviation body.
The year 2009 witnessed the highest growth in the number of IATA-accredited travel agencies in Qatar, with 55 travel companies joining the association, making the number of such firms in the Gulf state the third highest in the GCC region.
As a result of the number of airlines and travel agencies growing, fares have gone down considerably, making air travel from Doha much more affordable than before.
The growth in the number of travel agencies has been complemented by a considerable number of new airlines flying to Doha. Between 2009 and 2012, some 35 airlines started operating from Doha, with an average of nine new airlines coming here every year. Over the past six years, 41 new airlines (figures include only IATA member airlines) started flying to Qatar, accounting for nearly 20 percent of the 211 new airlines that have entered five of the six GCC countries (except Saudi Arabia) since 2009, according to figures provided by IATA.
“We are looking forward to a year of strong passenger growth of 13 percent, and increasing industry profitability to a record QR8.74bn ($2.4bn) for the Middle East, which is good news for customers and the economy of the region,” said Hussein Dabbas, Regional Vice President at IATA for the Middle East.
The travel and tourism business in Qatar is expected to remain bullish for several years. With the ambitious new airport (Hamad International) on track for mid-year opening, Doha is emerging as a new aviation hub in the region. Once fully operational, the $15.5bn airport is projected to receive about 360,000 aircraft (nearly 1,000 flights daily) carrying nearly 50 million passengers and 1.4 million tonnes of cargo per annum.
“The industry is growing fast, so are the challenges,” said Fahad Mohammed A A Fakhroo, Chairman of Fahad Travel, which has nearly 14 branches across the country.
Fahad said: “Challenges are, directly or indirectly, related to the long bank settlement period’ which is currently two weeks, but we expect that soon it will be reduced to one week. With this policy reform, nearly 80 percent of the problems will be automatically sorted out and the market will become very, very clean.”
Over 50 leading local travel agencies recently held a meeting at the Qatar Chamber (QC) headquarters to discuss and address the challenges faced by the industry.
Ahmed Hussain, Chairman of Tourist Travel Bureau, one of the leading agencies in Qatar, while speaking with this daily on the sidelines of the meeting at QC earlier, said: “We are actively pursuing to form an association or a formal body, which will be working in close cooperation with all concerned authorities, such as Qatar Civil Aviation Authority, Qatar Airways, Qatar Tourism Authority and QC to address the problems and obstacles faced by the travel industry.”
“We are looking forward to two important policy reforms: One, information about clients with poor payment records should be passed on to all agencies to save others, and secondly, non-IATA agencies should be asked to join IATA with a given time frame or quit air booking,” noted Hussain, also a member of the Travel Committee at QC.
Many leading agencies, especially the IATA-accredited ones, alleged that new entrants with underqualified staff and short business histories were undermining the rules of the game to “steal business”.
“Currently, there is an absence of a level playing field in the market. As an IATA-accredited player, we are required to maintain bank deposits, a sort of a guarantee for conducting business, while others, not accredited from IATA, are free from complying with such obligations, thus, they save the amount for buying stocks and investing in other lucrative businesses enjoying leverage on us,” said Fahad.
Comparing IATA and non-IATA travel agencies, he said: “Non-IATA operators are like motorists without any driver’s licence and road permit. If they violate rules or meet with accidents, it is difficult to take legal action against them.”
To obtain IATA accreditation, travel agencies are required to satisfy many conditions, such as have a valid licence, other legal documents, qualified staff and business experience, in addition to maintaining a security deposit as per the volume of their sales.
Commenting on the general business outlook of the industry, a senior official of Tourist Travel Bureau, said on condition of anonymity: “There is no doubt that we have lost many of our old customers to rivals, but due to rapid population growth we are getting more business.”
“About 16 years ago, when I joined the industry, we were the only travel agency operating in Al Khor, and today there are more than eight, but all of us are doing good business,” he said.
Asked about factors responsible for such sharp growth, despite many people opting for online booking, he said: “A significant increase in the frequency of travel is one of the important reasons.
“Earlier, the majority of people used to travel only once a year, but as a result of high income growth and prosperity, people are travelling more frequently, especially the Qataris.”
With growth in the size of the market, the prices of tickets have gone down substantially over the past several years, enabling a large chunk of people in the lower middle-income group to travel more than once in a year.
“During 1998-2000, a round trip ticket from Doha to Cochin (a city in the southern Indian state of Kerala), during peak seasons used to come at a price range between QR2,400 and QR3,000. But now, many airlines are offering tickets at almost half that price, at QR1,400, for the same destination, despite a considerable decline in the value of the currency due to inflation over the past 15 years,” he said.
Increasing competition has hit profit margins substantially, but due to strong growth in the volume of business travel agencies are still able to earn a good income.
“Market forces have led to change in the old business model. At times we work at a profit margin of QR10 or even less to retain a customer. But whenever we get an opportunity, such as a good customer or the peak season, we make better deals to balance our business. Thus, one needs to conduct the business smartly and strategically,” he said, adding, “perhaps this is the reason why many companies start a business and shut down within a few months.”
On promotional offers from airlines, he said one had to be very careful about technicalities and other details, because the seats were limited. They are allocated to all agencies according to an inventory system and discounts are applicable only on base fares, while taxes and other charges remain the same. Secondly, the discounted tickets often come with stringent conditions and very limited rescheduling flexibility.
“Sometimes the difference in fare or fee charged on date rescheduling on a promotional ticket is so high that people prefer to buy a new ticket instead of paying the fee,” said the travel agent.
“For us, whenever there is an offer we struggle to make a profit because in such cases the base fare is very low. At times it can be as low as QR300. So if we charge even seven percent commission on QR300, the amount will be too meagre to work with”, added the agent.
The non-IATA operators argue that competition is inevitable in a rapidly growing free market economy where sellers are price takers rather than price makers.
“We assume Qatar is a free market where there are no restrictions on entry and exit of businesses. So it’s like perform or perish,” said a travel agent working for Al Deera Travel agency.
Speaking about the implications of a proposed BSP policy, under which the payment clearance window period is expected to be reduced to seven days from two weeks, the manager of a newly opened non-IATA travel agency said: “Given the volume of tickets and number of days it takes (up to 90 days) to clear bills, no one likes to see a one-week BSP system. No one will survive.”
“I have also heard that the concerned authorities are planning to notify all the travel agencies about clients which are not good paymasters so that no one deals with them in future. It will be a great step,” she added.
Rejecting the idea of a conflict of interests between IATA and non-IATA agencies, she said: “I think there should not be any controversy between the two agencies, because at the end of the day the non-IATA agents are dealing with IATA agents only. We attract business because of the quality of service. Without us, IATA travel agencies would be like a car without an engine.
“Every travel agency requests us not to offer less than five percent commission to customers. If we don’t get some incentives from airlines, it will be really difficult to survive.”
She said that despite being a new entrant in the industry the company had been performing well, and had plans to open more branches and was preparing to apply for accreditation from IATA.
Asked about the number of new entrants, she said: “Nearly 30-40 new companies entered the market between 2012 and 2013, and most of them are in the business. According to my information, some four branches were closed during the period but they were old players. Perhaps they shut down due to lack of modern business acumen and partly due to high rentals.”
Speaking about rentals, she said rents for shops may vary by 50 to 100 percent. For instance, a 100 square feet shop in Najma may be available for QR15,000 a month, but the rent for a similar shop in places like Rayyan and Al Shafia Road may go up to QR30,000.
“No doubt the competition is growing every day. We do not charge all customers a uniform price or commission... it largely depends on the type of customer and the season of travel,” said the agent with more than 14 years of experience in the region, including in the UAE. “At times there are some tickets on which the airlines offer free rescheduling of travel dates, but we may charge QR500 or even more than that, depending on the ticket details.” THE PENINSULA
