The strong lure to foreign visitors has endured through the global financial crisis, leveraging on India’s diverse offering of history, cultures and landscapes. Foreign tourist arrival (FTA) growth in 2011 was twice the global average at 8.9%, according to the Ministry of Tourism (MoT), and further growth is expected to maintain a level of at least 7.5% per year in the decade ahead. Yet the backbone of revenue generation remains homegrown, which is a boon for both domestic and international markets alike.
It has been almost two decades since the economy was unshackled, and India’s socio-economic transformation remains pervasive. In the past decade alone, gross national income (GNI) per capita has more than doubled. With a population of 1.2bn and a GNI per capita of $3590 in 2011, up from $1660 in 2002, according to the World Bank, India’s position as the world’s third-largest economy was secured in 2012.
The explosive growth in domestic purchasing power is reflected in the tourism industry. While India attracted 6.29m FTAs in 2011 and foreign visitor spend is expected to track at 5.6% over the next decade, outbound and domestic tourism continues to soar. Set to grow at 8.2% per annum to 2022, domestic tourism accounted for 82.2% of the industry’s Rp1.68trn ($31.3bn) spend in 2011, and a burgeoning middle class has helped India’s outbound market expand to become one of the fastest-growing in the world.
More than 12m Indians travelled abroad for tourism purposes in 2010 and the UN World Tourism Organisation estimates that upwards of 50m nationals will be travelling abroad by 2020. Given such figures, it comes as little surprise that the World Travel & Tourism Council (WTTC) expects the sector to retain its 6.5% share of GDP throughout the next decadent years.
While India’s economic momentum will carry much of this growth forward, the government is leaving nothing to chance. Tourism features prominently in India’s 12th five-year plan (2012-17), and the Ministry of Tourism (MoT) has earmarked Rp7.1bn ($132.09m) for 160 tourism projects.
Public-private partnerships (PPPs) have already demonstrated considerable success in infrastructure upgrades nationwide, which have also proven a boon to domestic tourism. New highway networks in tier-one cities (a government classification based on population), such as Delhi, Mumbai, Kolkata, Bangalore and Hyderabad, have helped open surrounding hinterlands.
India’s premier “Golden Triangle” destination between Delhi, Agra and Jaipur has seen considerable market growth since new highways were opened. The government is also rolling out new PPP airports across the country with the intention of having 500 operational airports by 2020. In 2012 alone, 15 new airports began operations and 50 others saw upgrades in tier-two and -three cities, local media has reported.
Yet with the leisure market dominating industry spend at 73.8%, according to the WTTC, India has yet to hit its stride in the business travel segment. Additionally, the country has yet to attract foreign meetings, incentives, conferences and exhibitions (MICE) markets, due to restrictive visa regulations, high costs and stiff competition from established regional competitors.
“India has long proven too expensive for the international MICE market, when compared with neighbouring destinations with existing products,” Puneet Kashyap, managing director of Diethelm Travel, India, an international travel agency with headquarters in Zurich, told OBG. “However, with a proliferation of mid-tier hotels, urban decentralisation, infrastructure upgrades and the development of tier-two and -three cities, it is a growing segment, albeit currently fuelled by the domestic market.”
While enthusiasm for India’s inbound tourism potential abounds, its domestic market continues to dominate. The MoT has highlighted cruise, adventure, and medical and wellness tourism as niche market areas it is keen to develop, but domestic tourism will ultimately dictate the industry’s trends.
India’s burgeoning middle class, estimated to hit 250m after 2015, remains at the heart of the industry’s domestic and outbound success., Maturing consumer demands in this key demographic will continue to define the industry’s development over the next decade. International trends, such as booking air travel online, are already apparent, with the industry beginning to move away from traditional models.
“Consumer trends that have been there for decades in Europe are now coming to India, including early-bird discounts and add-ons. The buyers are there [in the domestic market], it is how you catch them and how quickly you do so – that is the game,” Kashyap said.
With India’s economic growth expected to continue its upward trajectory, its tourism industry will undoubtedly benefit. For the moment, however, FTAs will remain a tertiary player when compared with domestic and outbound revenues.