Travel Distribution India Report (Edition 1)
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Travel Distribution India Report (Edition 1)

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Travel Distribution India Report (Edition 1) Travel Distribution India Report (Edition 1) Document Transcript

  • Part of EyeforTravel’s Emerging Online Travel Markets Series TRAVEL DISTRIBUTION INDIA REPORT Edition 1
  • EyeforTravel Research 7-9 Fashion Street London E1 6PX UK For queries contact: amy@eyefortravel.com www.eyefortravel.com EyeforTravel Ltd, January 2008
  • Table of Contents Travel Distribution India Report • Edition 1 Table of Contents Executive Summary & Trends 9 1. Country Overview 13 1.1 Macroeconomic Setting 13 1.2 Key Demographics 20 1.3 Government Policies 37 2. Tourism Overview 47 2.1 Indian tourism – A period of strong, resilient growth 47 2.2 Domestic tourism analysis 49 2.3 Outbound tourism analysis 54 3. Indian Travel Distribution & Trends 63 3.1 Size of Indian Travel Market 63 3.2 Domestic Travel Market 66 Time-series analysis by industry sector: travel sector trends; online vs. offline; direct vs. indirect; key players 3.2.1 Domestic Railways 69 3.2.2 Domestic Cruise Travel 70 3.2.3 Domestic car rental industry 71 3.2.4 Domestic Airlines 75 3.2.5 Domestic Hotel Industry 90 3.3 Outbound Travel Market 106 Time-series analysis by industry sector: travel sector trends; online vs. offline; direct vs. indirect; key players 3.3.1 Outbound airlines 108 3.3.2 Outbound hotels 113 3.3.3 Outbound cruise travel 116 3.3.4 Outbound car rental 117 3.3.5 Outbound railways 118 3.4 Online Travel Agent (OTAs) 119 3.5 Metasearch Engines 125 3.6 Traditional Intermediaries 126 3.7 Package Tours 129 4. Indian Traveller – Search and Buying Behaviour 131 4.1 Internet Users & E-commerce 131 4.2 Internet usage characteristics 136 4.3 Mobile phones 137 4.4 Payment solutions 140 4.5 Consumer travel buying cycle insights 142 3 © EyeforTravel Research. All rights reserved.
  • Table of Contents 5. Marketing, PR & Sales 155 5.1 Advertising Media and Online Marketing in Travel 155 5.2 Basis of competition in key travel segments 164 6. Case Study 179 6.1 Makemytrip: Leading through efficiency and aggression 179 7. Going about Business in India 189 7.1 One India, multiple languages 189 7.2 A cultural perspective 190 7.3 Regulatory framework 191 7.4 E-commerce 194 7.5 Entering India - Distribution, marketing and brand strategies 196 Useful Contacts 199 Research Methodology 209 4 © EyeforTravel Research. All rights reserved.
  • Travel Distribution India Report • Edition 1 List of Figures List of Figures Figure 1 India’s GPD at constant price (base year 1999) 13 Figure 2 India’s nominal GDP 13 Figure 3 GDP per capita of India at constant prices 14 Figure 4 Per capita GDP in nominal terms 14 Figure 5 Per capita GDP by state 15 Figure 6 Per capita travel and tourism consumption in INR (personal travel & tourism expenditure) (2006) 15 Figure 7 Travel & tourism expenditure as a percentage of per capita income (Personal travel & tourism) 16 Figure 8 Exchange rate against key currencies (average annual rates) 16 Figure 9 Foreign direct investments into India 17 Figure 10 Sector-wise foreign direct investments in India (INR billion) – year 2006-07 17 Figure 11 Employment growth by gender 18 Figure 12 Employment growth by gender & age group (per 1000 worker- population ratios – rural & urban areas) 18 Figure 13 Tax rates for corporates 19 Figure 14 India’s population growth 20 Figure 15 Share of households in each income bracket 21 Figure 16 Middle class households – number (mn) & average annual consumption per middleclass household (INR ‘000) 21 Figure 17 Average household size 22 Figure 18 Share of households vs. share of consumption (household income in ‘000 inr) 2005 23 Figure 19 Share of households vs. share of consumption (household income in ‘000 inr) 2025 23 Figure 20 Age-wise population distribution – India 24 Figure 21 Dependency ratio 24 Figure 22 Paid vacation days & paid public holidays 25 Figure 23 India’s consumption expenditure & share of urban 26 Figure 24 Urban population penetration (in %) 26 Figure 25 Education profile of Indians aged seven years and older, 2005 27 Figure 26 Internet subscribers (2002-07) 28 Figure 27 E-commerce revenues 28 Figure 28 Growth of credit cards issued 29 Figure 29 Growth in debit cards 29 Figure 30 Volume (in millions) and value (INR billions) of eletronic payment cards in India 30 Figure 31 Break-up of online bookings at IRCTC website by mode of payment (October 2007) 31 Figure 32 India tourism marketing budget (2005-06) 33 Figure 33 Segmentation of prepaid cards 34 Figure 34 Features of open loop prepaid cards 36 Figure 35 Features of prepaid cards 39 Figure 36 Telecom subscribers 44 Figure 37 Visa processing time for Indians 45 Figure 38 Growth in Indian travel & tourism (value & volume) 47 Figure 39 Domestic travel & tourism expenditure by segment 48 Figure 40 Domestic tourists 49 Figure 41 Domestic travel & tourism expenditure by objective, 2002 49 Figure 42 Top tourist places in India 50 Figure 43 Domestic travel figures, CAGR, market share 51 Figure 44 Average trip length by purpose of travel 52 Figure 45 Average length of stay for important tourism states (2005-06) 53 Figure 46 Growth in Indian outbound travellers (million) 54 5 © EyeforTravel Research. All rights reserved.
  • List of Figures Figure 47 Purpose of outbound travel, 2005 54 Figure 48 Destination selection criteria 55 Figure 49 Indian outbound tourists by destinations, 2005 55 Figure 50 Outbound Indians, segmented by destination 56 Figure 51 Dream outbound destinations by type of trip (India Consumer Snapshot 59 2007 survey data) 60 Figure 52 ‘Repeats’ as a percentage of total Indians visiting that country 60 Figure 53 Average trip length by Indians in major countries 60 Figure 54 Outbound traveller segmentation – FIT vs. group 61 Figure 55 Total Indian travel market size 63 Figure 56 Total Indian travel market - online vs. offline 64 Figure 57 Total Indian airline market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (USD million) 64 Figure 58 Total Indian railway market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (USD million) 64 Figure 59 Total Indian cruise market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (USD million) 65 Figure 60 Total Indian car rental market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (USD million) 65 Figure 61 Total Indian hotel market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (USD million) 65 Figure 62 Size of the Indian domestic travel market, break-up by online vs. offline, 2001-02 to 2011-12F (INR million) 66 Figure 63 Domestic travel market by segments 2007-08F 66 Figure 64 Domestic travel market by segments - 2001-02 to 2011-12F 67 Figure 65 Domestic online travel market by segments 2007-08F 68 Figure 66 Domestic online travel market by segments 2001-02 to 2011-12F 68 Figure 67 Online bookings by city 68 Figure 68 Domestic railways market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (INR million) 69 Figure 69 Rail - number of domestic reservation passengers carried 69 Figure 70 Growth in domestic online rail ticket bookings 70 Figure 71 Domestic cruise market size, online vs. offline market size (INR million), 2004-05 to 2007-08F 70 Figure 72 Growth in domestic cruise passengers 71 Figure 73 Domestic car rental market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (INR million) 71 Figure 74 Total number of cars registered as taxi (2002-12F) 72 Figure 75 Value of the domestic car rental market (2002-12F) 72 Figure 76 Domestic airline market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (INR million) 75 Figure 77 Domestic airline revenue & growth 76 Figure 78 Growth in total domestic airline passengers 76 Figure 79 Segmentation of domestic airline passengers by purpose of travel (2006) 77 Figure 80 Market share of airlines by revenue (value) and by number of passengers (volume) - (2006-07F) 78 Figure 81 Market share of domestic LCC vs. FSC 78 Figure 82 Air travellers as a percentage of total domestic travellers 79 Figure 83 India’s per capita air travel is well below other countries (2005-06) 79 Figure 84 Air traffic concentrated in the metros 80 Figure 85 Weekly seat capacity on major domestic routes (September 2006) 80 Figure 86 Air traffic growth at select Tier I & Tier II cities (Passengers handled, including inbound) 81 Figure 87 Fleet size of indian carriers – current & forecast 82 Figure 88 Online revenue from domestic air tickets 82 Figure 89 Revenue from domestic air tickets – online vs. offline 83 Figure 90 Online booking penetration, domestic FSC vs. LCC 84 Figure 91 Online direct vs. OTA air ticket revenue 84 6 © EyeforTravel Research. All rights reserved.
  • Travel Distribution India Report • Edition 1 List of Figures Figure 92 Available seat kilometres by all scheduled passenger airlines 90 Figure 93 Passenger load factor of all scheduled passenger airlines 90 Figure 94 Domestic hotel market size, online vs. offline market size, direct vs. indirect online market size (INR million), number of rooms, 2001-02 to 2011-12F 91 Figure 95 Size of domestic Indian hotel industry in INR billion 91 Figure 96 Hotel preference for domestic tourists (% of total tourists visiting the state – FY 2005-06) 92 Figure 97 Size of domestic organised Indian hotel industry 92 Figure 98 Break-up of hotel industry revenue by star category (2006-07) 93 Figure 99 Size of Indian hotel industry – no. of approved rooms (2001-02 to 2011-12F) 93 Figure 100 Number of approved hotel rooms by hotel category (2006-07) 94 Figure 101 Size of domestic Indian hotel industry (organised and unorganised) 94 Figure 102 Online and offline domestic bookings (2001-02 to 2011-12F) 96 Figure 103 Size of domestic online Indian hotel industry (2001-02 to 2011-12F) 96 Figure 104 Break-up of total domesticonline market between supplier website and OTAs (2001-02 to 2011-12F) 97 Figure 105 Guest profile by purpose for Indian hotels (2005-06) 100 Figure 106 Value of domestic business travel and leisure travel revenue in hotels 100 Figure 107 Revenue mix at Indian hotels (2006) 101 Figure 108 ARR and occupancy rates for different category of hotels (2005-06) 101 Figure 109 Monthly occupancy at Indian hotels (2005-06) 102 Figure 110 IHCL hotels – revenue in INR billion (2005-07) 104 Figure 111 ITC hotels – revenue in INR billion (2005-07) 104 Figure 112 Hotel Leelaventure limited – revenue in INR billion (2005-07) 105 Figure 113 Eih limited – revenue in INR billion (2005-07) 106 Figure 114 Size of the Indian outbound travel market, break-up by online vs. offline, 2001-02 to 2011-12F (INR million) 106 Figure 115 Indian outbound travel by segments 2007-08F 107 Figure 116 Indian outbound travel by segments 2001-02 to 2011-12F 107 Figure 117 Indian online outbound travel market by segments and supplier vs. OTA websites 2007-08F 108 Figure 118 Outbound airline market size, online vs. offline market size, direct vs. indirect online market size (INR million) 108 Figure 119 Outbound airlines market revenues (2001-02 to 2011-12F) 109 Figure 120 International traffic from India 110 Figure 121 International traffic to & from India by airport (2005-06) 110 Figure 122 International departures from India by airport (2003-04) 111 Figure 123 Online bookings in outbound air travel (INR billions) 113 Figure 124 Online bookings in outbound air travel by point of purchase (direct vs. indirect) 113 Figure 125 Outbound hotel market size, online vs. offline market size, direct vs. indirect online market size, 2001-02 to 2011-12F (INR million) 114 Figure 126 Growth in outbound hotel revenues 114 Figure 127 Nights spent by indian visitors in UK (2005) 115 Figure 128 Type of hotel (2005) 115 Figure 129 Online bookings in outbound hotel industry (INR billions) 116 Figure 130 Online bookings in outbound hotel industry by point of purchase (direct vs. indirect) 116 Figure 131 Growth in outbound cruise passengers 117 Figure 132 Growth in outbound car rental market revenues (INR millions) 118 Figure 133 Growth in outbound railways market revenues (INR billions) 118 Figure 134 Share of OTAs in Indian travel market 119 Figure 135 Online travel market share, supplier vs. OTA (2001-02 to 2011-12F) 120 Figure 136 Top of mind brand recall (Searched and Booked) 121 Figure 137 Comparative analysis of domestic OTAs 122 Figure 138 OTA market (overall) and its segments 123 Figure 139 Players in the domestic OTA segment 123 Figure 140 Metasearch engines in India 125 7 © EyeforTravel Research. All rights reserved.
  • List of Figures Figure 141 Number of approved travel agents by state 126 Figure 142 Package tours – percentage of domestic tourists with package trip for important tourist states (2005-06) 129 Figure 143 The internet user population (various estimates) 131 Figure 144 Average number of e-commerce transactions per month 132 Figure 145 Internet users & travel purchase 133 Figure 146 Urban internet users 133 Figure 147 The Internet user base across top 8 metros 134 Figure 148 Broadband subscribers in India 134 Figure 149 Broadband households & penetration in India by access technology, 2005-11F 135 Figure 150 Time spent online 135 Figure 151 PC penetration 135 Figure 152 Forecast of PC sales in India 136 Figure 153 Internet point of access 136 Figure 154 Main point of Internet access across segments 137 Figure 155 Mobile subscriber growth (2006-2012F) 137 Figure 156 GSM & CDMA subscriber base - historical (2000-2007) 138 Figure 157 Mobile content product/services used 139 Figure 158 Mobile content market 139 Figure 159 Website options for online bill payment 141 Figure 160 Travel planning and decision making 143 Figure 161 Factors influencing decision making 143 Figure 162 Goods and services bought online (2006-07) 145 Figure 163 Online shopping demographics 146 Figure 164 Wallet size - amount spent online in the last 6 months - demographics 147 Figure 165 Where did you hear about the destination for your last holiday? 148 Figure 166 Common themes & check points for Indian consumer concerns about booking travel online 149 Figure 167 Open question “Is there anything that concerns you about booking travel online?” 150 Figure 168 The most important features of travel related websites for Indian consumers 151 Figure 169 Brand ambassadors of travel companies 152 Figure 170 Advertisement expenditure by media type 155 Figure 171 Print media – readership, circulation, number 156 Figure 172 Distribution of newspaper circulation by language 156 Figure 173 Readership of dailies (all languages; readers in million) 157 Figure 174 Share of ad volumes of domestic airlines by channel genres in 2006 159 Figure 175 Radio listenership data – major stations 159 Figure 176 Online advertising market in India 160 Figure 177 Top Indian advertisers – estimated annualised spend for SEM (INR) 162 Figure 178 Keyword portfolio 162 Figure 179 Most popular websites for specific online activities 163 Figure 180 Advertising expenditure of airlines - 2007 165 Figure 181 Marketing expenditure per available room and as a % of revenues 171 Figure 182 Top tour operators - Franchise programme overview 173 Figure 183 Comparative analysis 176 Figure 184 Top advertisers on the travel & tourism category on print media in 2003 178 Figure 185 Makemytrip - Revenues and growth 180 Figure 186 Top of mind ad and brand recalls (Searched Only) 183 Figure 187 Technology response areas 184 Figure 188 Makemytrip - Chronology of events 187 Figure 189 Languages spoken in India 189 Figure 190 Diverse linguistic demography 190 Figure 191 Ministry of tourism guidelines 192 Figure 192 Barriers to online purchase 195 Figure 193 USD to INR exchange rates (2001-02 to 2011-12F) 211 8 © EyeforTravel Research. All rights reserved.
  • Executive Summary Travel Distribution India Report • Edition 1 Executive Summary & Trends Indian Travel Industry – Steady growth forecast on the back of strong fundamentals The Indian travel industry posted a strong growth for the fifth consecutive year in 2007. The industry has evolved from INR 431 billion market in 2001-02 to INR 861 billion in 2006-07, at a CAGR of 15%. This includes spending by Indians in India (called the domestic travel market, which excludes spending by foreign inbound tourists) as well as outside India (called the outbound travel market). The domestic travel market has prospered at 12% CAGR over the past five years, increasing from INR 303 billion in 2001-02 to INR 541 billion in 2006-07. The outbound travel market, though small in volumetric terms, accounted for 37% of the total travel market and was worth INR 321 billion in 2006-07. Airlines and Hotels, which together constituted approximately 75% of gross bookings in 2006-07, registered CAGR of 21% and 15% respectively, while Rail, Cruise and Car rental increased 6%, 21% and 15% respectively over the period 2001-02 to 2006-07. With a robust growth forecast for the economy as well as personal disposable income, the travel industry is expected to continue the momentum over the next five years at a growth rate of 18%. In value terms, the market is expected to grow from INR 861 billion in 2006-07 to INR 1,962 billon in 2011-12. The domestic travel industry is predicted to grow at 13% CAGR over the next five years to reach up to INR 987 billion level, thus the outbound market is set to outpace the domestic market growth rates by increasing by 25% CAGR over the next five years. Among the segments, Airlines is expected to post a strong growth and increase its share in the total market from 35% in 2006-07 to around 44% in 2011-12, while the Hotel segment’s share of the total market is expected to reduce to 39% in 2011-12 from 40% in 2006-07. Travel distribution – Online bookings taking off There are several factors that have driven the growth of the online travel segment in India. These include a growth in credit card usage due to a significant increase in the Internet population, as well as increasing confidence from Internet security initiatives & online awareness created by OTAs (Online Travel Agents) and suppliers. Online bookings in the Indian travel industry began early this decade and have grown quickly from INR 87 million in 2001-02 to INR 55 billion in 2006-07. This significant growth can be attributed to the emergence of online bookings in airlines, especially domestic LCC, (Low Cost Carriers) which constitute 23% of the total online market. The launch of the online booking facility by Indian Railways has also gained popularity as the segment claimed the third largest share of the total online travel market. Despite such high growth rates overall, in 2006-07, online booking has penetrated merely 6.4% of the market. But the level of penetration is expected to increase by up to 20% in the next five years. Online penetration in the domestic market is around 6% while in the outbound market it is around 7%. Bookings made via supplier websites account for a significant 78% share of total online travel bookings while OTAs account for the rest (in 2006-07). OTAs have emerged 9 © EyeforTravel Research. All rights reserved.
  • Executive Summary as an ‘online substitute’ to the traditional street agents, offering lower rates, better convenience, enhanced control, 24-hour access and up-to date content, and have thus enjoyed significant growth. Domestic Airlines – LCC dominates online penetration Passenger Load Factor in the domestic airline industry reached an all time high of 68% in 2006-07 due to better utilisation of the flights. Gross domestic bookings for the LCCs grew at a 45% CAGR in the period 2001-02 & 2006-07 vs. 21.2% CAGR for legacy carriers. Online bookings in the airline industry grew to INR 24.1 billion (USD 533 million) in 2006- 07 and by 2007-08 it is expected to account for more than 27% of the total bookings in airline segment. While the online penetration was high for LCCs at 42% in 2006-07, it was minimal for the legacy carriers or FSC (Full Service Carriers) at 12%. In terms of e-bookings, overall supplier website bookings accounted for 73% of the total online air bookings in 2006-07 and are expected to decrease by up to 65% by 2011-12, owing to the increase in the number of OTAs. Hotel & Lodging segment - Offline business dominates but with reduced market share The fragmented and disorganised domestic hotel industry is experiencing a significant supply constraint, but experienced higher occupancy rates and increased ARR(Average Room Rates), although this is expected to level out by 2008-09 due to supply of additional rooms. Gross bookings in the domestic hotel segment reached INR 221 billion revenue in 2006-07 and this is expected to rise to INR 393 billion by 2011-12. Internet bookings accounted for only 0.8% (3% in organised sector) of total domestic hotel bookings in 2006-07 and are expected to increase up to 3.5% (12% in organised sector) by 2011-12. Due to the fragmented nature of the industry, consolidation would further facilitate the growth of online bookings and online bookings made through supplier websites. The outbound hotel industry recorded a healthy growth, increasing from INR 44 billion in 2001-02 to INR 124 billion in 2006-07, a growth rate of 23% CAGR. The industry is expected to experience faster growth to reach at 367 billion level by 2011-12. Online penetration in the outbound hotel industry was around 9% in 2006-07 which is expected to increase up to 20% in the next five years. OTAs – On a growth trajectory OTAs are adopting various tools and strategies to combat supplier competition, such as improved search facilities for the best travel deal, best rate guarantee, assimilation of a broad range of products within a single place, targeting of niche segments, m-commerce and international expansion. They have also extended this through partnerships with retailers to leverage their loyal customer base to sell them various travel products offline. 10 © EyeforTravel Research. All rights reserved.
  • Executive Summary Travel Distribution India Report • Edition 1 The share of OTAs in the total online Indian travel market shows an increasing trend. In value terms, the OTA segment was valued at INR 12 billion in 2006-07 and is expected to reach INR 140 billion in 2011-12. Challenges of the online segment – How Suppliers and OTAs are dealing with the competition Though online travel bookings possess significant growth prospects, there are many blockers. These include - • Credit card security, fear of online identity theft, lack of human interaction, website performance issues, distrust and confusion • Lower credit card penetration and Internet awareness. • Lower broadband penetration. Poor performance of the websites combined with high response time. • Individual’s comfort factor in making a high-value deal face to face or through a known and trusted agent. Suppliers and OTAs are equipped to manage these challenges and are developing secured payment gateway, real-time online assistance and differentiated online services, all of which should be able to support the growth of the online travel industry. 11 © EyeforTravel Research. All rights reserved.