Airfares are down but insufficient hotel rooms are keeping travel costs high: Thomas Cook

Iyer said while international airfares are flat compared to last year, a stronger euro—up 5% versus the rupee over the past year—could dent European travel demand. However, relative stability in the US dollar vs the rupee (USD is up 1.9% versus INR over the past year) means Indians are holidaying in the US at levels similar to last year, he added.

Euro woes

The sharp rise in the euro is expected to hit international outbound tourism, especially this summer, as Europe is generally a larger part of the holiday portfolios of many travel companies, including Thomas Cook India. Europe contributes 41% of its international travel business in the peak of summer. 

"Even a 3-5% change in pricing pushes up the overall holiday price," said Iyer. That said, he expects the overall outbound travel industry to grow 4-5% over last year, led by US and Europe, as well as various short-haul (3-5 hour) destinations around India.

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Consumers, he said, are likely to get better travel deals owing to the 4% year-on-year drop in average domestic airfares this fiscal – barring holidays and blackout dates. Blackout dates are dates when travel rewards and other special discounts and promotions are not available. These dates typically fall on or around major holidays or other peak travel seasons.

But the pressure on domestic hotel prices is likely to continue, Iyer said. "So domestic holidays, average ticket size, and spending on holidays won't change this year," he added.

According to independent hospitality consultancy Hotelivate, hotel room rates in India rose 70% over 2023 and 2024. Mint reported in October that five-star deluxe hotels saw average nightly rates rise 20.2% to ₹15,655 in FY24, while standard five-star hotels saw a 19.8% increase to ₹8,756. 

Pahalgam effect

Airlines and hotels have seen a rise in cancellations over the past few weeks owing to the Pahalgam attack and the ensuing India-Pakistan conflict. Iyer said until three weeks ago, Thomas Cook was seeing high-double-digit growth in its travel and tourism business in FY26, but since the attack it has seen "some amount of softness" its forward bookings for holidays. 

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"The Pahalgam effect was seen on our business. We didn't see full cancellations but requests for changes in destinations. We are now seeing some amount of normalcy coming back to the market. The bad news is behind us. Both the domestic and international holiday porfolios will grow between 15-18% in FY26 as well," he said.

Tariffs put corporate travel in limbo

However, changes in tariffs have had an impact on the company's B2B or corporate business. Companies, especially IT and ITES firms, are still evaluating their travel budgets for employees. "The full impact of tariffs is yet not known because there is a hiatus at this time. Once there is more clarity on how the export markets will behave and how IT companies will be impacted, we will know more," he said. 

This segment comprises 40-42% of the company's corporate travel portfolio. For the full year, Thomas Cook still expects to see a double-digit growth in the corporate and meetings, incentives, conferences and exhibitions (MICE) business.

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The company's various businesses, he said, saw growth ranging from 12-20%, in FY25. "We have held our margins while growing our volumes," he added. The company's travel and travel-related services business saw 15% growth in income from operations, with equal contributions from the consumer and B2B segments. The consumer business largely grew on the back of outbound and domestic holidays, which grew at 20%. Inbound travel saw 25% growth in volumes, he said.

Bigger tax burden

The company’s income from operations rose 11.5% to ₹8,139.5 crore in FY25 from ₹7,299.3 crore in FY24. However, profit declined 4.7% to ₹258.3 crore from ₹271.1 crore in FY24.

Some businesses that made losses in FY24 became profitable in FY25, which increased the company's tax burden, Iyer said. "Thomas Cook contributes about 50% of the group's profit, still continuing to be at the old tax rate. Sterling Holidays also contributed to higher taxes this year," he added. 

The company added 13 new resorts to its portfolio in FY25, and Iyer expects them to reach their full potential and contribute more to the business in the current fiscal year.