Tourism Booming in India

At the recent Paris Air Show, Indian companies were among the biggest spenders, spending a total of US$13 billion on 150 new aircrafts at Le Bourget. This dramatic expansion in the aviation industry indicates a spectacular growth in Indian tourism over the past two years, with both inbound and outbound travel galloping ahead of targets. With tourist inflows barely dented in the aftermath of the tsunami, India’s travel industry is targeting five million visitors this year.

This follows record inbound traffic in 2004 when visits soared 25% (to more than three million) from January to November.

Abacus recorded an increase of 18% of bookings – from 229 704 to 270 799 – to India from Asia Pacific over the January to May period of 2005 compared with the same period last year.

The stellar outlook for India’s travel and tourism revenues is confirmed by Oxford Economic Forecasting in a report commissioned by the World Travel & Tourism Council.

The industry will bask in an annualised real growth rate of 9% over the next 10 years, double the rate predicted for overall world tourism growth and outpacing China’s progress (at 8.6%).

Annual overall revenue from India’s travel and tourism industry will increase to around US$90 billion, from the current US$39 billion, within 10 years. Over the same period, travel-related jobs will grow by three million, from 24.5 million – one in 18 jobs will be in the tourism sector. New opportunities will open in travel-related call centres, airport handling services and tour agencies.

India is now firmly on the tourists’ radar, especially around Southeast Asia, says Mr Kaushnesh Thakur, director of the Singapore office of the Ministry of Tourism (MIT), India. “The Indian economy is rapidly expanding and there are more trade and investment activities. India is being talked about more. Previously, people around Southeast Asia didn’t know much about India.”

Mr Thakur also credits the “Incredible India” tourism marketing campaign for the unprecedented visitor traffic from offshore and for kick-starting the phenomenal growth in domestic tourism.

While a yearning for a return to basics, to rediscover simple pleasures and embrace a unique experience has always been a major incentive to visit India, there’s more than just “spirituality tourism” driving today’s record tourism industry growth,’ explains the MIT’s Mr Thakur.

"While the pilgrimage places such as Buddist centres are a big attraction for visitors especially from Singapore, Thailand, Japan, and Korea – many regions in India have established themselves as attractive destinations.”

They include Kashmir, neighbouring Himachal, and Kerala on the south coast that is fast gaining its reputation as a premium spa centre offering popular backwater cruises. 

While the Golden Triangle of Delhi, Agra and Jaipur continue to draw large number of tourists.

“We are seeing more secondary destinations open with the explosion of inbound and domestic tourism,” says Mr Thakur.

India is also now in the top ranks of incentives and meeting destinations. Mumbai, for instance, has had 30% growth in business travellers over the past 18 months.

India was ranked among the top five destinations by 20,000 travellers who said they would most like to visit when polled for the latest Travellers’ Pulse Survey by influential Lonely Planet. 

And it’s not all one-way traffic.

According to the Oxford Economic Forecasting Report for the World Travel & Tourism Council, the burgeoning middle class in Asia’s fourth largest economy is directing more of its spending to travel. An additional US$420 billion is expected to be generated by this group over the next four years.

Personal travel is forecast to grow 9% to US$46.5 billion over 10 years (from US$19.5 billion). A 7.6% rise in business travel will earn US$5 billion, double the current take.

The steep growth in business travel demand is sustainable, says Dhrubo Mukherjee, a director and head of business travel for Cox and Kings. “India is evolving as a knowledge economy. We are seeing more business outsourcing, major banks and airlines establishing back offices and continued call centre expansion.”

Heaviest demand for business travel comes from established centres such as New Delhi, Mumbai and Bangalore. Mr Mukherjee notes Pune, 170km south of Mumbai, and Kolkata, are also emerging as top-tier business destinations.

“Increased demand has changed the role of travel agents,” says Mr Mukherjee. “We are no longer just issuing tickets. Increasingly, our role is one of a facilitator – offering solutions, managing budgets and online tools and contents for clients.”

According to Viiveck Verma, Managing Director, Abacus India, this shift in roles for travel agents is being driven by the demands of the changing Indian traveller. He says, “In India, traditionally, the agents have mostly been focused on air tickets. Although many say the receding airline commissions have played a significant part in this evolution of the agent, I believe it is more so being driven by the needs of the traveller. The Indian traveller, similar to many other travellers in the world, expects greater access to more information within a shorter time frame. 

We understand these needs and have developed solutions and content that allows travel agencies to effectively manage the complexities and the demands of their customers. Abacus TravelNetwork and Abacus HotelSmart collectively meet the requirements of travel agents looking to sell non-air packages to their travellers,"” said Mr Verma.

Exponential growth will bring major challenges. One of the most obvious is a looming shortage of expertise – more travel training centres, for instance, are needed – and hotel rooms in popular centres such as Kashmir.

But one of the most pressing concerns for agents, notes Sudhir Patil, is red-hot competition for airline seats.

The director of leading Indian agency - Kesari Tours - points out the country’s middle class, already numbering 50 million, is fast expanding, which will put more heat on agents to fulfil burgeoning travel demands.

“Our technology systems, backed by our partners such as Abacus, are easily meeting the extra demand from more travellers, but agents often face the issue of not getting enough tickets,” said Mr Patil. 

But he is confident India’s open skies policy will increase inbound and outbound capacity over the next few years.

One of the most visible developments of unprecedented domestic demand is keener competition in the skies over the sub-continent making it more convenient and affordable for overseas visitors and domestic travellers to see more of India.

With MIT confidently predicting India’s international travel market to grow 50% year-on-year during the current summer period, recent new airways entrants are aggressively trawling for market share and discretionary travel dollars.

Jet Airways, India’s largest domestic carrier has carved out 43% of the domestic flight market, overtaking veteran national, state-owned Indian Airlines.

Jet Airways is determined to increase its passenger traffic – domestic and international – by 15-18% this year. Hence, over the next 30 months, it will spend US$400m on buying and leasing 17 Boeing aircraft, adding to its current fleet of 42 planes.

The company’s confidence was backed in February’s IPO when 17.27m Jet shares sold out in 10 minutes.

Price pressure is also coming from low-cost competitors, including Air Sahara, domestic budget carriers such as Air Deccan, Kingfisher Airlines, Spicejet and Magic Air. And, waiting in the wings is another future entrant, Indigo Airlines, which placed an order for 100 A320's at the Paris Air Show.

Attempting to get ahead of the competition, Indian Airlines extended its distribution network by signing an agreement with Abacus in January 2005 giving the GDS access to all Indian Airlines domestic fares. With this agreement, Abacus-connected travel agencies across India were booking travel for their customers on Indian Airlines directly from their Abacus terminals. This agreement has enabled Indian Airlines to save costs on maintaining their standalone reservation terminals while providing travel agents with an easier way to access Indian Airlines fares directly through their Abacus terminals.

These are exciting times for the travel and tourism industry in India. China had better watch out – India’s fast catching up!

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