Tourism Industry Industry Analysis Abhishek Baranwal Amit Kumar Vishwakarma
IntroductionTourism is travel for recreational,leisure or business purposes. TheWorld Tourism Organization definestourists as people "traveling to andstaying in places outside their usualenvironment for not more than oneconsecutive year for leisure, businessand other purposes".
1. Tourism brings in large amounts of income inpayment for goods and services available,accounting for 30% of the worlds exports ofservices, and 6% of overall exports of goods andservices.2. According to World Tourism Organizationestimates, India will lead in South Asia with 8.9million arrivals by 2020.3. India is poised to emerge as the 2nd fastestgrowing (8.8%) tourism economy in the world over2005-14 according to the World Travel & Tourism
Porter’s Five Forces: Tourism Industry Industry Rivalry : Highly Fragmented Industry with Intense Rivalry – Highly Fragmented Industry. • Organized players would barely have 15-20% of the marketplace • Most of organized players are present in metros & mini- metros • Large disposable incomes in towns like Lucknow, Jaipur, Coimbatore etc. serviced by family run unorganized players – Industry rivalry is intense but not cut throat • Rivalry Intense because of low switching costs, low levels of product differentiation, perishability of products diversity of rivals • Rivalry is not cut throat since exit barriers are not high, fixed costs are not high, market growth is good
Threat of Substitutes: Low Threat of Substitutes, as travel moves up the list of household priorities Lot of Possible Substitutes , Threat of Substitution low ◦ India is witnessing a growth of discretionary spend as % of income from 30% in 2005 to around 70% by 2025. Travel , being a discretionary spend poised to gain. ◦ Travel has moved up the list of household spending priorities Unlikely to be substituted by a durable purchase or investments Education & Recreation will occupy 9% share of wallet in 2025 as compared to 5% now.
Buyer Power: While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power Buyers are fragmented ◦ Diverse retail buyer and corporate buyer profiles Switching costs for buyers is not high as brand loyalty is low/diminishing Credible threat of backward integration ◦ Buyers can directly buy from suppliers (hotels, airlines etc) Luxury segment is brand conscious to and willing to pay a premium for great experience and service quality
Supplier Power: Supplier usually sell commodity products . Concentration & ability to sell direct gives power to suppliers like airlines. Other suppliers are fragmented Forward integration by suppliers like airlines selling direct Attempts by suppliers to sell packages and complex itineraries not very successful While suppliers concentrated in some areas like domestic airlines, there is widespread fragmentation in hotels, tour operators, car rentals etc. There is no significant cost to switch suppliers and products like airlines, car etc. are fairly commoditized Travel agency cannot typically buyout suppliers like airlines
Barriers to Entry & Exit : While entry and exit barriers are low, difficult to build scale because of lack of ready distribution channels ◦ Government regulation of direct FDI in retail restricts entry of foreign retailers ◦ There are low level of proprietary travel knowledge and asset specificity. This makes it relatively easier for new players to enter industry and does not provoke very aggressive rivalry from existing players ◦ Low minimum efficient level allow entry of small startups, however significant scale is necessary to negotiate profitable deals ◦ Due to a fragmented market , travel agencies do not have access to ready distribution channels ◦ Online channel is growing at a rapid rate but is primarily selling air and rail
Implications of Analysis on DistributionImplications of Porter Analysis for Distribution While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power Companies that thrive will not just meet travellers’ needs, but also please their tastes and sensibilities – and do it for less Supplier usually sell commodity products . Most suppliers are fragmented. Multi-linked channels and product offerings continue to proliferate The explosion of product offerings and channels continues to erode profit margins and fragment markets
Distribution Strategy Imperative Strategic Imperative : To serve this segment, Travel Agencies must drive out costs and build efficiencies ◦ Build on products that fit well with core competencies and create customer delight ◦ To out source low-cost, off-the-shelf packages for frequent destinations ◦ Improving technology and sharing routine functions with other players ◦ Leveraging data to increase accuracy, build volume or purchase bulk inventory at discount
PEST AnalysisPoliticalEconomical Foreign Exchange Rate Elasticity of Demand Efficiency of Economy Business Cycle
Social Different languages, cultures, traditions, cuisines Respect & entertaiment of guests embedded in culture itselfTechnological Increasing role of web & internet Facilitates Online Booking Efficiency of Economy Providing customers with easy payment facility via online and use of credit cards and wi-fi facility on the go, easy recharge of mobile phones etc.
Top Countries (Revenue from Tourism) International tourismRan UNWTO Country receipts k Region (2011) North1 United States $116.3 billion America2 Spain Europe $59.9 billion3 France Europe $53.8 billion4 China Asia $48.5 billion5 Italy Europe $43.0 billion6 Germany Europe $38.8 billion7 United Kingdom Europe $35.9 billion8 Australia Oceania $31.4 billion9 Macao (China) Asia $27.8 billion Hong10 Asia $27.2 billion
Top countries in international touristRank Country UNWTO arrivals I’national I’national Change Region tourist Arrival tourist Arrival 2010 (2011) (2010) to2011 1 France Europe 79.5 million 77.1 million +3.0% 2 United North 62.3 million 59.8 million +4.2% States America 3 China Asia 57.6 million 55.7 million +3.4% 4 Spain Europe 56.7 million 52.7 million +7.6% 5 Italy Europe 46.1 million 43.6 million +5.7% 6 Turkey Europe 29.3 million 27.0 million +8.7% 7 United Europe 29.2 million 28.3 million +3.2% Kingdom 8 Germany Europe 28.4 million 26.9 million +5.5% 9 Malaysia Asia 24.7 million 24.6 million +0.6% 10 Mexico North 23.4 million 23.3 million +0.5% America
International tourism expenditureRank Country UNWTO Region Internationaltourism expenditure(2011)1 Germany Europe $84.3billion2 United States North America $79.1billion3 China Asia $72.6billion4 United Kingdom Europe $50.6billion5 France Europe $41.7billion
Most-visited cities by international tourist arrivalsRank City Country Internationa l Visitors (mn)1 Paris France (EU) 15.62 London United Kingdom 15.2 (EU)3 Antalya Turkey 10.54 New York USA 10.3 City5 Singapore Singapore 9.26 Kuala Indonesia 9.0 Lumpur7 Hong Kong Hong Kong 8.78 Dubai UAE 8.19 Istanbul Turkey 8.110 Bangkok Thailand 7.2
About 5.92% of the country’s GDP comes from tourism and it provides employment to over 9.24% of the country’s workforce. For every INR 1 million of investment, the number of jobs created is as follows:• Industry – 18• Agriculture – 45• Travel & Tourism – 78100 percent FDI in developing tourism infrastructurein India: According to a WTTC report, India’s travel andtourism industry will directly contribute INR 3,345 billion(USD 61 billion) tothe GDP by 2019, allowing 100% foreign directinvestment in hotel infrastructure development. This willprove to be a major growth driver for the industry.
Comparative tax rates between India and neighboring countries
Emerging new products in Tourism1. Golf tourism2. Education Tourism3. Domestic Tourism4. Luxury Trains5. Wedding6. Eco-Tourism7. Tea Tourism8. Sports Tourism9. Medical Tourism
Challenge s1. Lack of proper infrastructure2. Human resources3. Service levels4. Lack of adequate marketing and promotion5. Taxation6. Security7. Regulatory issues
Strategies•Product development- Customised services Specific location oriented packages. Low cost packages.•Web and E-commerce Rising users of internet•Establish, attract and facilitate sporting,recreational, cultural and other major events