According to a report released in June from the United
Nations, World
Population Prospects 2019, India will surpass China as the world’s most populous
country by 2027 and then continue to widen that gap in the years that follow.
The population of India stands at 1.37 billion people today and is
expected to grow by another 273 million by 2050.
And the majority of its citizens are young.
As of the country’s
last census in 2011, India had more than 50% of its population below the
age of 25 and more than 80% below the age of 50.
That’s helping to spur a strong economy – a January
report from London-based financial services company Standard Chartered predicts India will
become the world’s second-largest economy by 2030 with a GDP of more than $46
trillion, behind only China and surpassing the United States (which loses the
top spot beginning next year).
These factors – a massive and growing population of young
people and a strong economy – combine to fuel a very active travel market in
India.
According to Phocuswright’s
India Online Travel Overview, “Indians,
particularly the middle class, are traveling more than ever. The average Indian
online traveler took three
leisure and four business trips in
2017.”
Throughout July we are digging into the travel market in
India, beginning with an overview of how it is growing and why.
The travel market
According to an April 2019 report How
Does India Travel?, from Bain & Company and Google India, Indian travelers
took nearly two billion domestic and international trips in 2018 and spent
nearly $94 billion on transportation, lodging and consumption during those
trips.
And those numbers will continue to grow in the coming years.
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“The travel and tourism industry is the seventh highest
contributor to GDP and has increased from 6.7% in 2013 to 9.4%, nearing
developed market levels such as the United Kingdom’s 10.5%. The market is
expected by grow by 13% CAGR to $136 billion in 2021,” the report states.
Figures from the airline industry parallel those predictions.
While rail remains the most common mode of transportation for domestic
travelers, air travel is quickly on the rise.
IATA’s 20-Year
Air Passenger Forecast from October 2018 predicts that India, currently
ranked seventh in the world for air passengers to, from and within the country,
will jump to third by approximately 2024, surpassing Germany, Japan, Spain and
the United Kingdom and sitting just behind the United States and China.
The number of trips per person in India is expected to
increase 10% each year through 2038.
A strategic effort to simplify and expedite the country’s
passport issuance process is tied to the growth in outbound travel.
Working with Tata
Consultancy Services for the last decade, India’s Ministry of External
Affairs has opened dozens of new passport offices, modernized technology and
improved the entire application process.
In June 2018, the Ministry launched a mobile app to enable
citizens to apply, pay and schedule a passport appointment without the need for
a computer and printer – certainly a boon in a country that Google
reports has 70% of its internet users on smartphones rather than desktops.
It’s estimated that while there were about 23 million passport holders in India around 2007,
now that number is 75 million and still growing.
“For those in the business of travel, we are
living in very exciting times and we firmly believe that for India the best is
yet to come,” says Deep Kalra, founder and group CEO of MakeMyTrip, India’s
largest online travel agency.
“When we look at millennials
and Gen Z in corporate India, they are already averaging six holidays a year.
“We see millennials for
whom experiences mean more than ownership of assets driving growth in the
travel segment. GenZ will take it even a step further as they are
practically planning out their travel and experiences calendar as a matter of
habit – they all have a bucket list and they want to tick all the boxes.”
Social influence
The widespread penetration of mobile devices and affordable
data plans – Phocuswright analyst Chetan Kapoor says users can get 30G of data
for less than $3 per month – are also driving Indian consumers' interest in
travel.
According to the Digital 2019: India report from We Are Social and Hootsuite, 87% of India’s population –
about 1.19 billion people – have a mobile subscription and 41% of the
population is using the internet – that’s up 21% compared to one year earlier. And
they are staying online a long time – an average of nearly eight hours a day
across all devices.
With high penetration and affordable data plans, use of social
media is huge in India. The report estimates 23% of the total population – 310 million
people - are active social media users.
For those in the business of travel, we are living in very exciting times and we firmly believe that for India the best is yet to come.
Deep Kalra - MakeMyTrip
The most popular platforms are YouTube – used by 93% of
respondents – followed by Facebook (89%), WhatsApp (82%) and Instagram (69%).
And 91% of Indian internet users report watching videos on their mobile device
each month.
“We consumer a lot of content and we are exposed to a lot of
things,” Kapoor says.
“Media like films, television, user-generated content play a
huge role in how Indians make decisions around where they should travel and
what they should be doing. That’s a huge shift in how Indians now plan to
travel and then in effect aim to be influencers for the others that are
consuming that content as well. If travel companies want to garner attention,
these are the kind of platforms to use.”
Google’s
"Year in Search" report for India echoes this sentiment. The report
predicts India will have 500 million online video users by 2020, using those
videos to “search for, learn about, review and research products before making
purchase decisions.”
For travel specifically, Google says brand awareness is driving
search queries. Fifty-four percent of air travel searches and 25% of hotel
searches used a brand name in 2018.
And it’s not just consumers in India’s large metropolitan
areas that are exploring travel online – Google predicts by 2020 the country’s
Tier 2 cities will see a 22% increase in queries related to air, a 20% increase
in holiday searches and a 10% increase in hotel searches.
Shift to online
As Indian consumers become more accustomed to turning to their
digital devices for travel inspiration and research, they are also beginning to
use them more for booking travel as well.
According to Phocuswright, online penetration is about 43%
of total bookings this year but will increase to 47% by 2022.
“That is partly due to the high online penetration for air
and rail. Almost 50% of all rail is booked online,” Kapoor says.
“But what’s happening right now is that OTAs are
increasingly looking at the non-air segments. Hotels have started contributing
to that online buy significantly.”
According to Phocuswright’s report, India
Online Travel 2019: Key Developments, “Online
travel agencies (OTAs) are far ahead of suppliers in luring [hotel] bookers
through deep discounts and instant rebates to boost conversions, particularly
through mobile apps. Through strong pursuit of customers through incentives,
hotels will be the fastest growing online travel segment, with gross bookings
increases reaching 121% from 2017 to 2022.”
Kalra says MakeMyTrip is aggressively pursuing the
fragmented hotel industry in India.
“Just as MakeMyTrip has become synonymous with flights
booking in India where one out of four air tickets are booked on our platforms,
we are also bullish on the hotels opportunity as the domestic online hotel
market remains lowly penetrated at an estimated 15%, providing immense headroom
for growth,” Kalra says.
According to the company, when MakeMyTrip went public in 2010,
only 15% of its revenue came from hotel bookings. In fiscal year 2018, hotels
and packages contributed 54% to total net revenue, and Kalra says they intend
to grow the accommodation business to 70 to 75%.
Challenges and opportunities
For OTAs, airlines, hotels and other travel suppliers looking
to drive more online transactions, the payment experience is a critical part of
the strategy.
According to the report from Bain and Google, “Lack of trust
on payment gateways on online portals is the primary barrier to online bookings
across all customer cohorts.”
In tandem with a lack of trust is the simple fact that credit
cards are not widely used in India.
According to 2017 figures
from the World Bank, only 3% of India’s population age 15 and older has a
credit card, ranking it 111 on a list of 141 countries for credit card
penetration.
“This means that if people want to spend online, be it on travel
or anything else, they have to dip directly into their savings,” Kapoor says.
But he sees it shifting.
“Until the last couple of years there was very limited
consumer education toward digital payments. But what’s happened over the last
couple of years is that we now have over 30 fintech companies operating out of India
with solutions in the marketplace which act as a layer between the consumers
bank account and whatever merchants they need to pay.”
Understanding the preferences of Indian travelers is also
important – particularly for global brands looking to attract overseas
travelers.
Amadeus’ report, Journey
of Me Insights: What Indian Travelers Want, provides a variety of insights
based on a survey of 1,200 Indian consumers who had traveled by air in the
prior 12 months.
“One key observation was how important finding staff,
newspapers and TV shows in a language they can understand is to Indian
travelers,” says Sebastien Gibergues, Amadeus’ vice president of online travel
for Asia Pacific.
“Similarly, respondents from India want to eat familiar food
while travelling overseas. This is a good reminder to travel players about the
importance of accommodating local preferences at the destination.”
Looking ahead, Kalra believes travel will “be one of the largest slice of India’s
online pie,” and clearly others share that optimism. In April Ctrip, already an
investor MakeMyTrip, increased its
ownership to nearly half.
“Ctrip has global ambitions and India
will be a key strategic market in that play and this investment is a validation
of that,” Kalra says.