Improved telecom and banking infrastructure, growing acceptance of the online medium for transactions and new entrants vying for mobile-first interface would push the Indian travel spend at a rate faster than the expected GDP growth in the coming years, shared Tony D’Astalfo, Research Analyst, Phocuswright Inc. We bring you experts of his keynote address at the conclave on Online Travel+ Technology.
Indian travel spend to outpace the GDP growth rate
Let us see how travel in India is faring compared to its GDP. The Indian GDP is poised to grow between 6-8%, but the travel spend is actually going to grow at a much larger pace. It is good news if you are in the travel industry in India; you are actually going to grow at a much faster pace, as people are going to be spending at a higher rate the GDP growth rate. So, overall prospects are bright.
India leads the online penetration in Asia PAC, but China may overtake soon
What we also wanted to look at was online travel. It is a growing sector for the community. So when we look at the total money spend on online travel bookings in the Asian PAC region, it is less than a third of the overall global booking at 105 billion USD, compared to the overall sum of 246 billion USD. When you look at the overall penetration of the online travel in the Asia PAC environment, it is in fact one of the leading online players, accounting for almost 37% of the total bookings that are being done online today. India is a lead market, but China is growing at such a rapid rate that we think China will surpass India as the leading online market in the very near future.
Aggressive OTAs, better banking and telecom infra to boost online segment
By 2020, over 40% of the total travel booked from the Indian market will actually be done online. The reason why we see it increasing is three-faced. Firstly, it will because of improved telecom and banking infrastructure that will allow people to move online and transact their businesses; there will be a lot more of OTA activity. They are getting more aggressive in going after Indian travellers. And, finally, when people get more comfortable transacting online, they would be more likely to do that. So, we think that online penetrations are likely to continue to grow.
Air and rail were first segments where it came to the travel industry here in India. The fastest online sector growing online was the air category, but it is followed pretty closely by the hotel segment, and also by rail. So, we actually see all 4 spending categories going up. We will see more people booking online as time goes by.
Increased supply on the air-side, LCCs to jettison the aviation sector’s reach
The supply on the air side will actually increase. Over a thousand aircrafts under order by various carriers for their operations, we will see at least a 4% increase in the level of online booking in the air category. In the heart of this development is the funding by LCCs. They are the fastest growing segment in the airline industry worldwide; I am sure it is the same. India is actually the second fastest growing low cost carrier market after Indonesia, in the Asia Pac. LCCs are one of the fastest growing sector in the online space, worldwide; it has always been a very big sector.
Mobile-first interface critical
Hotel penetration in the online space is actually smaller than the air and the rail segment, but growing very quickly. There are a number of reasons what that is happening. We expect that is going to jump significantly. So, we see the air penetration to jump by about 4% and the hotel segment to jump by about 7%. So there will be more people booking their hotels online over the next period of time. There are a lot of independent hotels who are pushing people to book online, which is having a huge impact based on the mobile technology. A lot of companies are actually interested in a mobile-first booking platform that works particularly well for the hotel side of the industry.
Budget aggregators pushing hotel bookings online
In the old days, unaffiliated hotels in India were pretty wide spread and have seen a massive transformation. There are a number of independent properties are now branded. This will also be a significant driver for hotel bookings in the online world. The networks of independent and budget hotels have grown significantly over the Indian market – and they are also capturing a lot of investments; over 177 million USD have been pumped towards these initiatives. It is something very interesting that traditional players will have to keep an eye on and it will have a significant impact on the Indian market in the times to come.
OTAs changing the rule of the game, forcing traditional players to take stock
One of the things that online travel companies are doing today to raise the bar against suppliers. When Indian online players started against traditional players, all of them established their presence on the web. New entrants have come into the market with a mobile-first strategy and they are causing traditional players to take a look at investing more heavily on mobile platforms. Mobile platform will fuel growth in the hotel sector and every other sector. It is the biggest investment area across the globe, related to the travel industry. Online travel agencies are trying to move consumers very aggressively from the desktop to the mobile-based interface. Today their mobile booking share, post booking, is 37%. It is a little bit more than a third of the total bookings. We project that by the year 2020, almost two-thirds of the entire business will move to mobile-based applications. We see, now, that all of the traditional players have jumped into the fray with apps and mobile applications of their own.
