On-Line Travel Retailer makemytrip.com Shifts Focus to India
The travel retail sector constituted 17% of the travel and tourism industry in 2005, and was the second largest sector, valued at Rs274 billion. With 25% growth in 2005, it was responsible for driving much of the value growth in the overall market. Sensing opportunities in this area, with Indian travellers becoming more Internet savvy, dropping costs of broadband and a general increase in access to information, on-line travel retail intermediary MakemyTrip.com shifted its focus from returning Indians primarily from the American market to Indians within the country.
Low Cost Carriers and Indian Railways Popularise the Internet
E-ticketing and e-travel in India took off as a result of efforts by Indian Railways in late 2004, accompanied by good deals offered by new generation budget airlines, which sell most of their stock through the Internet. An estimated 7,000 tickets with an average price of Rs1,500 each are sold each day on the Indian Railways website. However, in terms of value sales, Internet rail transportation constitutes a lower proportion of the total than air transportation.
Consumers sought out Internet access through various means and made sure they did not get left out of the benefits - usually price discounts. On-line hotel reservations in India have also picked up, but constitute just 3% of the business. According to the Internet and Mobile Association of India, 16% of on-line shoppers spent in the Rs10,000 plus range, including spending on computers, hotel rooms, jewellery, airline tickets and home appliances.
Company-owned sites, as well as specialised travel portals, drew in travellers in thousands. Travel agents also recognised the importance of the Internet as a means to distribute and market various deals, drawing in 7% of business from this medium. Much of it is still, however, not real-time.
Outlook Well on Way to Growth
By 2020, the government of India expects travel and tourism to contribute Rs. 8,500 billion to GDP, almost four times the value in 2005. With successive governments committed to reform, a strong manufacturing sector and a private sector that already has a critical mass that is needed to drive growth, it is unlikely that the strong growth in GDP is likely to be reversed. The rising middle class is also becoming increasingly affluent, mobile, Internet savvy and more sophisticated in terms of what is demanded in terms of tourism products and services, and more importantly the price they are willing to pay for it.
A boom is expected in travel accommodation, as more serviced apartments, budget hotels (2-star category) and highway motels are established.
Significant changes are expected in travel retail, with the arrival of more international players, such as Le Passage and Cox & Kings, particularly in outbound travel. British company Cox & Kings plans to relocate its corporate headquarters from London to Mumbai as a result of its being bought out by its Indian arm in late 2005. Global interest also includes the American millionaire Alfred Ford with plans to set up a Himalayan ski resort. Internet intermediaries are expected to expand significantly and grow the market without significantly adding to volume growth. Rural tourism and medical tourism for inbound tourists will also give rise to new products and services in this sector.
Until recently, not much emphasis had been given to the maintenance and development of the historical and heritage sites in India, which resulted in a large number of tourists staying away from these. However, the Indian government's increasing investment in the upgrading and modernisation of infrastructure will translate into better facilities, amenities and access to the leading tourist attractions and sites.
Internet Holds Much Promise
According to International Data Corporation (IDC), India is expected to record the highest compound annual growth rate (CAGR), of 84%, among Asia-Pacific countries in e-commerce revenues between 2003 and 2008, exceeding the CAGR of 81% expected in China. It is estimated that travel will account for one third of this. Much of the growth is expected to be driven by intermediaries.
By 2010, India is expected to have 100 million Internet users, with the majority of them aged 25-39. Transportation and accommodation transactions will grow as they seek out newer experiences and get more comfortable with the medium.
Across all the sectors, much higher growth is expected from the Internet in contrast to bricks-and-mortar business operations. 16% of travel retail business in 2010 is expected to be sourced through the Internet, as the nascent dynamic packaging subsector picks up due to the efforts of on-line retailers.
While there is no direct danger of bird flu at the moment, it is definitely a potential threat as India sees a significant number of migratory birds from China, Tibet, Mongolia and Russia. Having said that, India's pharmaceutical industry is more than sufficiently equipped to provide supplies of medicine for the purpose. A significant proportion of India's poultry industry is small scale and scattered, translating to a low level of threat.