Tourism in 21st Century: Sharks in the Ocean
Ahuja, Shiri, Journal of Services Research
This case concentrates on the developments that have been initiated in the business of tourism. These developments are a combined effect of the macroeconomic changes taking place at a global level. As this industry has universally distributed market, the technological developments around the globe impact the business processes more than the local technological environment. Through this case attention is being drawn to the radical changes that are approaching the total tourism business environment.
While the most lucrative western markets get techno savvy, the Indian tourism industry needs to gear up to approach them closer with technology. Back home, new competition is threatening those who are slow to change. Whilst earlier, the inter-industry competition came only from the accommodation and travel industry, today the entertainment industry and its business giants seem to be set to eat up the major share of the pie. Though new to the tourism industry, the entertainment and the ICE sectors have the modern technology and required infrastructure to beat the existing players.
Oceanica started off as a manufacturer of synthetic textiles. Every phase of its subsequent expansion was based on a strategy of backward integration: from textiles to fibres and yarn, PTA, petrochemicals, petroleum refining and finally crude oil itself. This might be an important reason for the success of the company. Every expansion had to be executed and operated with high efficiency because the profitability of the down streams activity depended on it. The success that the company has had with backward integration in the petrochemical chain would lead one to expect a similar strategy to be executed in other lines of business as well.
The two major forays the company has made outside petrochemicals are in tourism and telecom.
The Oceanica group already has real estate in most parts of the country. The estates till now were used to maintain the marketing and ware housing network created to serve the industrial customers for its existing products. With the advent of internet marketing and e-commerce, these estates are not being used to their fullest potential. Oceanica's total underutilized estates aggregate to 60 cities. It has approached Tourism Finance Corporation (TFC) for two loans of up to $400 million-comprising both dollars and rupee-denominated loans-for its real estate projects. Oceanica Estates has already signed an agreement with the Tourism Board and has also tied up with Foster Wheeler of the USA for the Marketing and service contract for the tourism venture.
RI is also interested in acquiring 20% stake in a travel company (TTA) for an estimated 65 crore; The group is the largest private sector shareholder in this travel company with a stake of 14.82 percent.
Through this offer, the company is pursuing attractive growth opportunities in the tourism sector and has broad based plans to enter the ICE sector. The group believes that this step might be in the best interest of both companies and may contribute to enhancement of overall shareholder value for shareholders of Oceanica and TTA. The travellers will be attracted through the TTA and provided tourist attractions at the different real estates of Oceanica which will be developed by international tour consultants With a last mile access of close to two million travellers in the world- to which it caters on a membership basis-TTA is certainly the catch for any company that wishes to network.
Since the travel business is regulated globally, profits are constrained both by regulation and stiff competition. So, the world over, travel companies are trying to improve their revenue streams through diversification into tourism. What makes this easier is that they already have the travel infrastructure and agreements through their earlier business-something that is very time-consuming if built from scratch. …