A relatively negative economic and investment environment is providing further impetus to the downward spiral witnessed by the hospitality industry starting 2008. Just as the travel industry was beginning to witness a visible revival, thanks to the increased tourist arrivals and upturn in domestic commercial demand post the global financial crisis, dark clouds have gathered over the horizon once again.
The travel and tourism industry in India, despite being an important part of the economy and an attractive employment creation opportunity, contributes only about 2% to the national GDP. According to WTTC's long-range estimates, Indian tourism demand is expected to grow at about 8.8% over the next ten years. The growth compounded over existing several visitations should place India among the top 3 growing tourism markets in the world. This is expected to result in a growth range of 7.0% - 7.5% in total travel and tourism GDP and an annualized increase of approx. 1.0% in travel and tourism employment over the next 10 years.
In these times of uncertainty, it is important to analyze;
- What is a prudent market entry strategy for future hotel developments?
- Has India has reached its peak in terms of travel and tourism potential?
- What will be the impact of a negative economic and investment environment on leisure destinations?
My views on key factors that will drive future demand in travel and tourism in India and on niche markets that offer a unique potential for development over the next 5 years are as follows:
- Weekend Getaways and Integrated Travel Circuits
By 2030 it is estimated that about 600 million people will be urbanized and live in cities across India. While there has been much focus and activity in hospitality projects in metro cities, very little development activity has actually been done to tap the potential of leisure travel, which is now estimated at 250 million active travelers. According to our estimates, there will be sustained demand for weekend travel at major gateway destinations and these markets will grow in the range of 18.0% - 20.0% annually over the next ten years. If the US dollar continues to stay strong, the outbound travel market will shrink and will give further latent demand for domestic leisure destinations. In these uncertain times, Weekend Getaway destinations that are located within 4-5 hours driving distances from key Tier I and Tier II cities are uniquely positioned to benefit from the increased demand base and are ideal for development of boutique resorts and hotels.
- Spa and Wellness Destinations
Long range employment and age demographic trends show that India will add about 270 million new jobs and India's Per Capita Income will continue to witness robust growth. Significantly, higher disposable income rather than lower savings will continue to influence the consumption boom in India. This is good news for travel and tourism industry, as income induced spending is likely to sustain itself for a longer period. Higher disposable incomes and increased health awareness among the urban population is also expected to enhance the concept of traveling for rejuvenation and wellness. This trend is likely to give the necessary impetus to development of destination spas, wellness resorts and wilderness retreats.
- Destinations offering Unique Travel Experiences
From deserts to oceans, rainforests to mountains - India is a land offering extremely diverse travel experiences. Historically most leisure travel, both domestic as well as international, was highly concentrated within a few travel circuits centered around Delhi, Kerala, Goa and Rajasthan. Over the last decade there has been a remarkable improvement in both road and air connectivity to remote destinations and this has provided great stimulus to experiential travel. Further, most popular leisure destinations have been victims of unplanned urbanisation and hence regressed in the overall holiday experience being provided. In our estimate, over the next ten years, destinations providing unique travel experiences such as eco-tourism, forts and palaces, adventure tourism, desert and jungle safaris, pilgrimage and spirituality based travel lodges etc. will offer the next big growth opportunities and will see significant increase in tourist visitations. Niche markets such as culture tourism, the Great Indian Temple circuit, health tourism, weddings, etc. will also grow rapidly and will provide impressive returns to investors.
- MICE Destinations
The acute demand-supply imbalance scenario saw in India between 2004 and 2008 due to lack of quality hotels has had an adverse impact on MICE tourism. In most markets, insufficient room availability and high rates created conditions that were not conducive for large international conferences to be held. Logistical bottlenecks and lack of proper infrastructure in these markets also posed a problem. Various state governments in India have lately expressed keen interest in convention centre developments through the Public-Private Partnership model. Existence of a convention centre generally induces substantial room night demand and a strong growth opportunity exists for products that adopt an aggressive marketing strategy for the MICE segment, as within a few years, demand from this category is likely to rebound very strongly.
Once the uncertainty lifts and the economy's buoyancy returns, initiatives to improve infrastructure, easing of restrictions on foreign investment and, perhaps, most importantly, efforts to communicate the Brand India message - will fuel demand for travel and tourism. India's travel and tourism industry, while still at its infancy, is increasingly being viewed as investment-worthy, both within the country and outside. The long-term outlook for the travel and tourism sector in India is buoyant and will remain so, in our opinion. Over the next decade, India is all set to emerge as one of the world's fastest growing tourism markets and will be hard to ignore.