India: Tourism Market Scenario

Market Overview
Moving towards Luxury Tourism The outbound segment in India is growing rapidly and with the Indian economy booming and increasing standards of living, travel is also moving up the ladder to add an essence of luxury. While drawing up a list of the top ten luxury trends for 2011, Thomas Stanley, COO, Cox & Kings, USA declares that bucket list (term used for things one wants to do in ones lifespan) experiences will grow in popularity during the course of 2011. This trend will add a new perspective to high-end luxury travel globally with travellers opting for such extreme, unique and thrill seeking experiences. Another addition to this list of unique, out-of-the-box high-end indulgences will be the introduction of Space Tourism. However, how is luxury defined in the Indian context and how is the luxury market evolving? Indian perception of luxury Luxury is a highly subjective factor. While several Indians view luxury as an expensive and unaffordable factor, a research depicts that luxury is correlated with an experience. It is more about the emotional or intangible factor that makes one service luxury and not the other. One has to create unique experiences for guests. For example guests taken on a hang gliding trip at sunrise followed by breakfast on the mountain top or guests at resorts in Maldives being offered a private champagne breakfast on a sand bar in the lagoon to watch the sunrise. Luxury Tourism clients are looking beyond regular sightseeing, they want to do things differently and want highly personalized service to make their holiday memorable. Luxury travellers in India consist primarily of FITs, families and honeymooners. There is a significant amount of cash rich high net worth individuals in the country who form the primary clientele for Luxury Tourism segment in India. This clientele is an experienced traveller, knowledgeable and finicky about the choices he makes. While he does not mind splurging on a luxury holiday, he wants value for money spent, as well as a few add-ons that delight him. Besides, the growing economy has also offered lucrative packages to several young professionals often termed as yuppies who have the aspirations to travel in style, live in branded five-star deluxe properties or boutique hotels, indulge in wellness therapies at highend spa resorts as their first bite into the luxury pie. While the former looks at high-end, niche and innovative experiences; the latters idea of luxury is more aspirational and follows the current market trends. Quantifying the average ticket size of a luxury traveller, a luxury traveller is someone who spends more than 10,000 Euros in a single trip. This segment is still at a nascent stage in India and is an offshoot of business and MICE travel from the country. Most travel experts confirm that while the luxury segment in India is growing rapidly at about 10-12 per cent annually, innovative product development is taking place at a slower pace in the market. Often a luxury travel experience is associated with the property the client resides in. This is where high-end villas with private pools, butler and concierge services come in. Travel consultants ensure that a luxury clients experience begins from the decision-making process. This begins with providing pre-travel information about the destination, property and suggestions on the weather conditions etc; followed by fast track clearance at airports, highend car or helicopter transfers to hotels. The consultant also constantly interacts with the client during his travel to check on the service provided and scope for enhancement, as well as feedback on return. An edge in terms of services that ensures the guest is given preferential treatment is an important factor of this segment. This includes personalization by placing family pictures in their suite rooms, offering their preferred beverages in advance, designing special menus and gourmet dinners among others. Some operators also provide their clients with cellphone to use during their stay and take away gifts like iPods and Play station 3.

Market Trends

Luxury Tourism is driven by destination and product. Evolution of a destination takes place from mass to FIT and niche, which is where Luxury Tourism falls, asserts Mark Mendes, Country Director- India, Discover the World Marketing. Some of the popular and upcoming destinations for luxury travel include: Monaco, Namibia, Mauritius, Seychelles, Caribbean Islands, Greece, Cyprus, East Africa, New Zealand, Canada, Vietnam and Cambodia. Monaco located in the South of France is rising in popularity. It is still sold as a package with other regions like Nice, Monte Carlo etc. The place is known for its casinos, villas, Ferrari rides, spas and scenery. Self-drive experiences are currently a rage in the market and a lot of operators offer such products primarily for Europe and New Zealand. This comprises of travelling in high-end cars like Ferrari, Audi, Mercedes and Rolls Royce where the travel operator provides mapped out routes. Customization is to the level of providing concierge services to deliver the clients luggage, suggesting stay at high-end boutique hotels, reservations at Michelin star restaurants and offering vineyard visits and other sightseeing experiences en route. Such self-drive tours are offered by Premium Holidays packages. A Ferrari self-drive package in Italy from Florence to Rome starts from Euros 2,000 per day, per person. Besides these, spa holidays, adventure sports, high-end shopping trips, culinary tours, wine trails and Cruise Tourism is rapidly gaining acceptance in the market. For the high-end cruising segment in India, Avalon Waterways will soon launch Avalon Panorama an all-suite ship in Europe in April 2011. The vessel will offer two royal suites, 67 standard suites and 17 staterooms with itineraries on River Rhine and Danube for experienced travellers. While this segment of travellers does not cringe about spending money they still want best value for money, explains GauriJayaram, Regional Director - South Asia and Middle East, Globus Family of Brands. Ashley Monteiro, MD of Pathfinders Travel Co. Ltd, a major inbound tour operator in Thailand, dispels the popular notion that destinations in South East Asia are mass market and budget destinations. In his opinion, Thailand offers affordable luxury options thus catering to even upper-middle class segment in India. Contradictory to the popular notion of Far East being a budget or cheap value for money destination, the region offers number of choices for a luxury holiday, states Monteiro. According to him, in Thailand, high-end Indian travellers will opt for KohSamui, Krabi or Phuket with stay at private luxurious four-room pool villas. These villas can be booked starting from USD 350 per day. Choices for sea plane transfer to nearby island from Phuket, hiring a private speed boat to Racha, Coral Island or Phi Phi Island for snorkelling or a deserted beach picnic can also be experienced for half the price of the Caribbean. Resurgence of Travel Experts Right match (client) to right property is critical as each clientele will have a different idea of luxury. One fact that every professional of the travel trade agrees with is that luxury travel can seldom be sold online. While there is an insurmountable amount of information available online, most often this information is over saturated or non-relevant. This is where travel experts, researchers and consultants come on board. These challenging opportunities demand them to have wider and extensive product knowledge. The ability to innovate with products and customize existing ones is vital while dealing with a luxury clientele. Offering preferential treatment requires acquiring in-depth knowledge about the clients likes and dislikes without being intrusive. It is also critical to identify and tie-up with premium service providers and tour operators. Also agents have to constantly update their product knowledge and service portfolio. While the volume of business is small, the margins are large making it an attractive segment, states Pradhan, Manager Special Products & Support, Saltours International. Going Ahead Current trends and predictions of the future based on analysis of various factors all point to a boom in the Indian outbound luxury segment. Karan Anand, Head- Relationships and Supplier Management, Cox and Kings Ltd states, The outbound luxury market has been resilient and we have noticed a year on year growth of 25 per cent in this segment. There has been a surge in outbound travel with its total expected to touch 12 million by this year end.

Internationally, luxury travel to history-laden locations, along with meaningful interactions with artists, trendsetters and experts in their field of interest is developing rapidly among individuals, couples, families and small sized similar interest groups. Still in its infancy, Indian outbound luxury segment is expected to evolve rapidly to international trends. However, unique experiences and high degree of personalized services will remain key elements along with the Indian attitude of getting value for money. Future trends and technology in the travel industry will plant the seeds for profit in the coming months. Personalization and Growth of Mobile are key highlights for the future of travel technology as consumers no longer want something mediocre and demand products which are more personal and which they can relate to. Experts state that mobile search and commerce will be the next big wave for consumers to research and transact in the coming years. According to Google, the four Cs Customer Acquisition, Managing Costs without compromise, Collaborating with Customers and enhancing communication are essential elements that a company should adopt in the coming months for growth prospects. While technology is definitely the need of the hour, travel industry has witnessed trends like Closer Shorter, Cheaper (value for money) and Later (last minute bookings), as well as shift in spending power from Save SaveSave to Earn Save Borrow...Spend SpendSpend. While investing into technology is important, the industry should be equipped to cater to cash rich, time poor and time rich, cash poor clients. Knowledge will be a key driver to cater to this segment with a good mix of investing in technology, saysAshwiniKakkar, Executive Vice Chairman, Mercury Travels. According to expert analysts of the Indian online travel market, heavy traffic of consumers of travel sights are not only on Facebook and Orkut but also on sites like Sulekha.com and LinkedIn.com, however OTAs get maximum reach of all sectors present on e-commerce. Mobile is another segment which one should look at in order to increase consumer base. According to Internet and Mobile Association of India (IAMAI) net report, e-commerce business is Rs 27,518 crore with online travel at Rs 19, 535 crore contributing 71 per cent to e-commerce business with most B2C sites registering double digit growth. According to UrshilaKerkar, Executive Director, Cox & Kings, The key market drivers will be social media marketing, cross selling, leveraging niche opportunities, branding, loyalty programmes, affluent middle class, as well as price quality experience. All these factors are essential for travel companies to move forward. Advanced Online Travel Strategies A session on social media landscape addressed different aspects and behavioral patterns of users on social media platform. One of the most critical things to adhere while adopting social media as a marketing tool is to listen to what consumers are talking about. One can do a whole lot of activities on social media right from brand building, generating sales, customer service, information, competitor analysis etc. on the platform. While listening to consumers is important, monitoring the same is also critical for the company. At the end of the day, social media will force companies to be more honest and role of the brand manager will change drastically, explained HareeshTibrewala, CEO, Social Wavelength. Context and relevance are also issues that one needs to keep in mind while building the social media platform for a brand or product. Having delved upon the social media platform, the Summit addressed the power of mobile and harnessing it to the optimum level. With 500 million plus mobile phone users and further growing rapidly, the mobile is a device which will reach out fastest to the audience as compared to other mediums like radio, TV and Internet. The potential to engage customers on the mobile platform is tremendous; key to get the mobile strategy right will be investing in the right kind of technology to be able to offer a seamless mobile surfing experience to end user. A website which works online may not work seamlessly on the mobile platform, and hence building a mobile web platform and simplifying the user experience is critical. The session also addressed challenges faced by the mobile industry in terms of bandwidth and regulatory issues, adopting in small form factors (right product, usability and speed), seamless experience across offline, online mobile channels, turning lookers into bookers, managing last minute bookings, as well as security. While the mobile is more like a tool, channel should compliment your business profile. There is huge disparity between Internet

and mobile penetration which offers a wider scope for companies to attract consumers through the mobile. One could either offer supplementary services like notifications, SMS based information etc. and also engage in interactive mobile applications, stated HaranathLokhanadham, Head Travel, Ness Technologies. While leveraging on social media and mobile power is important, the industry also needs to look at using technology to boost business and reduce operating cost. This session highlighted the growing demand to keep pace with innovations in technology and use it to the optimum. Building the right infrastructure, using cloud computing, reporting fraud to cybercrime, getting the hardware and software in place are some of the key points that a company should keep in mind while investing in technology. Essential Online Travel Strategies The track on essential online travel strategies commenced by highlighting ways to build an effective online presence so as to ensure profitability in business. Initiating the discussion, Olaf Slater, Senior Product Manager, Travelport stated, Usability and content are two things that go hand in hand for online travel in India. Usability refers to the user experience on how the client feels while using your website which is critical. The four pillars in designing an effective online interface design are: utility depending on the effectiveness of the website; business value; websites usability and the experience which is important for customers to return to the website. Travelports research has found that merely removing one step from the information channel leads to an increase of 91 per cent in consumer searches. Travel websites often have a linear search approach which leads to a dead end further leading to confusion among customers. They should instead be allowed to follow the travel search process. Online travel engines should make their page share friendly, provide support for comparison shoppers and create value for customers which make them loyal, as well as provide alternate information. After evaluating the strategies to make an effective presence online, the Summit deliberated on what Venture Capitals (VCs) essentially look for funding projects. Typically, VCs look at funding in the pre-revenue, development or later stages of the project. The attributes that a VC would look at is, if a project would not be betting on trends but on people, project driven by a big idea and the team not being afraid of failure. VCs also look at 10X on ROI. While investor look at an exit period of five years, a project should not boast of big vision statements; should not be a long term research project; and should be well adequate with strong back-up plans. Execution is the key. A good leader knows his adequacies and hires people better than him. This will make a great team which can make even a simple idea a billion dollar one, said ShashaMirchandani, Co-Founder, Mumbai Angel Network. The track further moved on to evaluating challenges faced by e-commerce platform. Dinesh Pillai, CEO, Mahindra SSG highlighted some of the core challenges in e-business. They are: complexity of software to support e-commerce, value of assets purchased through insecure channels and diminishing margins. In 2001 when e-commerce came in, skills of people to manipulate traffic was negligible. However, now the ability to detect intrusion is low, there is easy availability of necessary tools to hack with no trace left behind. Most e-commerce frauds are people frauds and not tech frauds, hence difficult to track, added Pillai. Fraud also reduces customer visits to merchants website as it damages browser experience and hence should be looked in seriously. Jet Airways is constantly looking at enhancing its security standards, increasing use of blogs, social network and mobile platform. Alternate payments options are also critical in India, which are hardly delved upon which comprise of cash on delivery, EMI, convenience stores and e-commerce website. Companies also should define an effective payment security strategy as it is critical for brand protection and instilling customer confidence. Almost 90 per cent of frauds in India happen on Economy Class tickets, while 50 per cent of international transactions in India are rejected, said Gaurav Sharma, Country Manager (India), Retail Decisions Ltd. A round up on Egypts performance with its recent campaigns in India Its tempting to suggest that the Indian tourists sudden fascination for Egypt has, like his western counterpart, something to do with this years discovery that King Tuts parents were siblings. The truth, however, is rather more mundane: the effects of recession have begun

wearing off and consequently there are more flights that link India to Pyramid Country which, in turn, has made the destination attractive. But its not only about Egypt; the Indian travellers fascination extends to a host of other destinationsHong Kong, Singapore, Dubai, South Africa, Turkey, New Zealandall of which are expecting a revival in the coming tourist season. A total of 77,610 Indian tourists visited Egypt between January and September, an increase of 36.9% compared to 56,701 tourists hosted during the same period last year, says Samy Mahmoud, head of international tourism, Egypt Tourism Authority. Egypt saw 90,000 Indian visitors in 2009 and aims to cross the 100,000 mark this year. The other destinations South Africa has picked up recentlyas a tourist destination. Jet Airways launched daily flights to Johannesburg from Mumbai in 2010, and after the FIFA World Cup, the enquiries for South Africa have shot up, unlike last year, enquiries are pouring in daily. Destinations like New Zealand, Turkey and Jordan are also doing well. The latest trend is the mini-group concept, people travelling in groups of 10 to 15 with family and friends. Another sign that people are loosening their purse strings is the emergence of niche destinations like Argentina, which is the latest entrant on the Indian outbound niche tourist radar. We are already getting enquiries for our Antartica cruises, which start from Ushuaia in Argentina, says Motwani, pointing out that a 14-day cruise costs between $8,000 to $12,000 per person and interest in this expensive affair indicates that the penny-pinching trend of last year has gone for good. The sentiment is echoed by others as well. In the last few months there has been a 20 to 30% improvement in tourist bookings, says Vijay Kesavan, CEO, Akbartravels online. Occupancy, air fares go up Air passengers demand increase in self-service options: SITA Survey SITA plans to make life easier for passengers on the lookout for self service options like online, kiosk and mobile phone channels. This calls for a survey to study the attitudes and habits of passengers who use seven leading international airports. Passengers today demand more self-service options which are now acceptable to 70 per cent of respondents compared to 58 per cent in last years survey. Similarly, demand for automatic boarding gates is now at 70 per cent compared to 57 per cent last year. Two-thirds of survey respondents use kiosks for booking/changing a flight; purchasing additional services, printing bag tags; self-transfer; claiming delayed baggage. There has also been a shocking rise in the growth of passengers using online websites to book hotels. Mobile phone users grew from 14 percent to 23 percent. However out of 75 percent, one third passengers are willing to pay for an airport bag drop off. According to SITA, Online booking is the most important factor while arranging a trip. Since passengers have become so comfortable with self-service options, passengers opine that airlines should implement a multi-channel approach to direct customer service not only for flights but also for other ancillary services like hotel bookings and car hire.