Building a rural tourism model

Rural Tourism Network Enterprise (RTNE), a rural tourism initiative launched by IFMR Trust, has recorded significant success in its pilot project in Sindhudurg district, Maharashtra.  

RTNE is a business model that seeks to identify gaps in the rural tourism sector, and invest in financially viable rural tourism business opportunities across the country, for the benefit of travellers and providers of accommodation and travel services. Simultaneously, by making use of local resources and entrepreneurial capabilities, RTNE ensures that the host communities also benefit. 

RTNE is tapping into a big shift in domestic traveller preference. “The domestic traveller is demanding new destinations, budget deals, shorter breaks, and better value-for-time at a destination,” explains Karmveer Rathore of the RTNE team. 

Sindhudurg is one of India's rural regions with great tourism potential

RTNE began operations in 2008 by conducting an extensive survey of the rural tourism landscape, to examine various business models and understand weaknesses and opportunities in the existing system. The survey indicated that although rural tourism business models like home-stays, farm-stays and community-managed guesthouses had gained in popularity, rural tourism had not yet reached its growth potential.

This is due to several gaps in the rural tourism supply chain, such as lack of information on the destination, accommodation content and real-time availability of room inventory; lack of access to easy and cost-effective bookings; non-availability of cost-effective accommodation, and inadequate safety and hygiene at the accommodation.

RTNE seeks to overcome these challenges by extending financial and non-financial services to rural tourism stakeholders.

Non-financial services

To tackle non-availability of information, RTNE is building an offline-online platform that will be shared across all destinations identified by RTNE with property owners, travel agents and customers. The latest information from adjoining areas and markets on customer traffic, seasonal fluctuations, customer demand for new products and other industry trends will also be available on this platform.

Destination management companies (DMCs) will run the system, with one DMC per district covering all smaller destinations in the district.

The first DMC has been set up in Sindhudurg, a coastal district in Maharashtra with a number of tourist attractions. The Sindhudurg Paryatan Mahiti Kendra (DMC), set up in 2009 at Kumbharmath, Malvan Road, Malvan taluka, acts as a one-stop tourism shop. It covers 15 sub-destinations in eight talukas of Sindhudurg and makes available over 100 different accommodation options in the range of Rs 500 and Rs 3,000 for a night’s stay.

The DMC offers the best rates to its customers and the best travel agent commissions (TACs). The booking process is easy and based on a real-time payment solution, thereby reducing ‘no shows’ and improving cash flows.

Bala Tandel, owner of Omkar Deluxe Homestay, says: “This is my first tourist season and RTNE’s presence has helped us a lot in understanding customer requirements and making us quality-conscious. RTNE sends customers who pay in advance and therefore we do not have to wait for drive-in customers who negotiate heavily on their arrival. Our revenues have increased.”

While the Sindhudurg DMC is set up by NE Rural Tourism Pvt Ltd, the legal name for RTNE, the plan is to scale up this model through franchisees.

RTNE is taking many other innovative steps to increase the rural tourism business. It has developed a two-night, three-day holiday package in Sindhudurg, at Rs 1,000/day/person, which includes lodging at an RTNE-verified property, all meals, local sightseeing, fun activities, and logistics. The product was sold to 18 people from Mumbai soon after its launch. There are many other packages that have been developed and customised according to the customers’ needs.

RTNE works towards improving the quality of available accommodation options by first classifying them into ‘RTNE Trusted’, ‘Needs Improvement’ and ‘Non-saleable’ categories. Says Saurabh Jha of the RTNE team: “We are working on improving the quality of places falling under the last two categories. Our attempt is to bring all of them into the ‘RTNE trusted property’ category.”

For this purpose, RTNE has designed a training module and organised training for 30 home-stay owners. “Our aim was mainly to break the mindset. We want home-stay owners to realise that with minimal intervention and training they can move up the value curve and charge from the present Rs 300/person/night to Rs 1,000/person/night,” says Karmveer. The training was conducted by the Loke couple at their Pitru Chaya home-stay in Shirgaon, Devgadh taluka, Sindhudurg.

Ravi Khanvilkar, home-stay owner and president of Tarkarli Tourism Development Society (comprising 40 home-stays), says: “RTNE is helping us at every step. They not only consult with us on everything, but go a step further by providing training, basic solutions and finance to implement it. This is supported by sending us customers.”

RTNE provides managerial inputs on costing, pricing and operations. Normally, at home-stays, bookings are taken by various family members with no single database at home. This wastes time, duplicates bookings, and ultimately inconveniences the customer. RTNE has provided a customised booking register to its partner home-stays, whereby each member of the family taking a booking can check the room status on any particular date; information is stored by multiple people in a specific format at one common place. “This has not only improved the response time for a particular enquiry but it has drastically reduced duplicate bookings and resultant conflicts due to miscommunication,” says Karmveer.

Prior information available in a systematic way helps the home-stay owner plan grocery and kitchen purchases in advance, he adds.

RTNE’s non-financial services are supported by three revenue streams. It earns commissions on servicing direct enquiries for rooms, commissions on servicing direct enquiries for local travel and logistics, and a fixed transaction fee on bookings through B2B channels. 

One of the RTNE approved home-stays

Access to financial resources

RTNE is developing innovative financial products that focus on financing minimal quality improvements to home-stay models so that there will be increased revenue for the service-provider.

The RTNE team is designing and customising a financial product for Swami Samarth Nihari Nivas at Devbagh village, Malvan taluka, Sindhudurg. The team has done a need audit and assessed that an investment of Rs 30,000 is required for interior design and furnishings. RTNE is facilitating technical support for the design from Konkan Bamboo and Cane Development Centre (Konbac).

Rang de, a non-profit peer-to-peer online micro-lending platform, is acting as an escrow agent and will provide finance through RTNE’s DMC at a flat interest rate of 10% per annum to Swami Samarth Nihari Nivas. The amount can be repaid either through monthly instalments or will be deducted from the sales revenue. The accommodation will move up the value curve and will charge from the current rate of Rs 500/room to Rs 1,000/room during peak season.

As the service and collection agent, RTNE will retain 3% of the amount as a collection fee after servicing the interest and principal amounts.

With help from Rang de, RTNE is also developing a system where customers can ‘Adopt a Home-Stay’, suggest improvements, make investments in changes at the home-stay, and receive income on this social investment.

Says Niraj Vashi, CEO, Nivalink, a pioneering web-based customised travel solutions-provider: “RTNE is trying to do the difficult task of funding and organising the very unorganised and little-promoted arena of rural and home-stay tourism. Considering the wealth India has in terms of culture, craft, ethnicity, cuisine and naturally scenic locales, and the fact that urban India is constantly looking to explore the green and the unexplored, RTNE represents a tremendous opportunity for the cause of tourism and rural uplift. It’s an idea that should be supported by all to help it grow into a national-level movement.”

Immediate plans

RTNE, in collaboration with Konbac and Culture Aangan, a Sindhudurg-based organisation dedicated to the preservation of art, culture, and traditional customs and lifestyles, is planning a ‘tourism village’ at Khavane, 20 km from Kudal, with 15 families. RTNE will provide the village finance and market reach, while Culture Aangan will offer training, design and operational services.

In the near future, RTNE plans to expand its base to cover the adjoining Konkan districts of Ratnagiri and Raigadh. Operations in Uttarakhand will start in 2010. RTNE also plans to conduct workshops and road shows to invite potential DMC franchisees in new destinations. 

RTNE is documenting its learning, which will be published in a rural tourism guidebook in early-2010.

By a rough estimate, only 5,000 villages (100 villages per destination) directly benefit from around half the total tourism demand at 50 major destinations in India. RTNE has the potential to directly impact 50,000 villages in 500 destinations, increasing livelihood resources and diversifying the local economy.

Hari Nair, CEO, HolidayIQ, India’s largest travel and holiday information portal, observes: “What makes RTNE unique is how they work very closely with small hoteliers and property owners. Leveraging on the customers that HolidayIQ offers, they have been able to make a meaningful difference to rural tourism stakeholders in the Sindhudurg region.”  

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