Moving In For The Kill

Indian Tourism Targets New Frontiers

As we move in to the new year, and look ahead at the future of the travel and tourism industry in India, we get a clear indication that the industry certainly is on a growth trail. Express Travel & Tourism presents what lies ahead...

It is all about strategy, marketing and action for the tourism industry. As we move in to the new year and look ahead at the future of travel and tourism industry in India, we get clear indications that the industry is on a growth trail. International tourist arrivals grew by about 24 per cent and for the first time crossed the three million mark. Resultantly, the foreign exchange earnings have also shot up by about 36.1per cent in 2004. Domestic tourism, the most resilient segment, also soared to 320 million. India's earnings from tourism were US$ 4.3 billion between January and November 2004, compared to US$ 3.1 billion for the same period in the previous year. International arrival figures touched 2.84 million in September 2004 compared to 2.35 million during the same period in the previous year. After the Tsunami tragedy large-scale cancellations of tourist visits were being apprehended, but so far no such cancellations have been reported. India is slowly and steadily on its way to achieve the age-old target of five million tourists.

The policymakers of the country, have at last realised that tourism is not an elitist activity, that it has the potential of ameliorating several faceless Indians living in obscure villages in remote corners of the country, which has been reflected in their decision making. Donning the role of facilitator, the government is making life easier for the private sector. Skies are opening up, domestic carriers have been awarded designated carrier status, plots to build budget hotels are being made available, viability gap funding is on offer and private-public partnership is the buzz word of the day.

Most importantly, marketing the country is in top gear. The Incredible India campaign has helped India to make its voice heard in foreign shores. And suddenly, the country is a chartbuster on most tourism destination lists.

Trends clearly show that cost conscious and low budget business/leisure travel is likely to be the norm. As a result, mid-market and budget hotel accommodation will see a steep growth. Experiential, activity-oriented holidays and exploring new destinations are high on cards. Naturally, more countries are making a foray into India to grab a piece of its swelling outbound market pie. Egypt, Poland, Spain and you name it - they are all here promising the most exotic holiday. However, innovative packaging of products and competitive pricing will hold the key to wooing tourists.

All in all, the tourism sector is rejuvenated, ready to take a quantum leap. Express Travel & Tourism offers a sneak preview of Tourism - 2005.

Indian Inbound And Outbound: Sky Is The Limit

Neeti Chopra - New Delhi

The year 2004 has witnessed India emerge as both an inbound and outbound destination. But it is difficult to predict if the scenario will remain the same five years hence. This is because the growth of tourism depends on several factors, some of which are beyond control like the ever-changing political and economic conditions, outbreak of epidemics or natural calamities, for instance, the tsunami that swept through parts of Asia recently. Judging by the current trend, one can say that we should cross the five million mark within next one or two years and ultimately touch the 10 million mark by 2010. Let us take a glimpse of what the future holds for both the Indian inbound and outbound segments.

Indian Tourists In Demand

The rapidly growing Indian economy has created a more affluent population with greater resources for outbound travel, making this country one of the strongest emerging inbound markets for other countries. Most countries are going all out to attract the Indian tourist.

Foreign tourism boards are competing directly with Indian STB's. With countries like Thailand and Malaysia offering holiday packages comparable with a trip to Kerala or other destinations in India, foreign tourism boards have been successful in making their presence felt.

The FIT segment in India, dominated by high-end travellers, chose foreign destinations frequently, and have given the Indian outbound tourism segment an additional fillip. Surveys have shown that almost 40 per cent of Indians travelling overseas (approx 2.15 million) prefer to try out new destinations, at least as part of a package and this is what is keeping the market on the consistent upswing.

Some of the new kids on the block that are set to tap the Indian outbound are Ireland, Cyprus and Egypt, that are focussing on creating greater awareness among Indians about their respective destinations. India is now rated as an important market for incentive traffic. Indian incentive tours are increasing at the rate of 15 per cent annually, and projected figures indicate this growth rate will continue till 2006.

On an average, Indian incentive visitors spend approximately 10 per cent more than others. The great strength of the incentive market lies in the healthy growth of several Indian and multinational companies. Honeymoon traffic is another burgeoning segment and the national tourism boards are most likely to gain the most out of this segment.

Inbound: Phenomenal Growth

Indian inbound tourism that has recorded dismal figures for many years has experienced immense growth in 2004. Some of the credit for this could be attributed to the liberalised aviation policy with added flights to India, the Incredible India campaign, which led to better marketing and promotion of India as a destination, promotion of medical, adventure and other forms of tourism, etc. With India's healthcare facilities improving, the country is becoming a major destination for medical tourism. Cashing in on the trend are leading travel agencies like Thomas Cook, Cox & Kings and Kuoni, which have drawn up a slew of healthcare packages.

Although this is the case there are certain factors that can deteriorate the growth of tourist arrivals to India in future. Explains Subhash Goyal, president, IATO, "The biggest bottleneck being faced by tour operators is lack of accommodation in the hotels. It is unfortunate that some of the hotels are failing to honour the bookings even if made in advance by us. Some of them are even going to the extent of over charging. This is certainly giving the country a bad reputation and we have already sought the government's intervention to take stringent action against the defaulting hotels. Besides, there has also been difficulty for some visitors from China and Pakistan to get visas to visit India. We have received several complaints from our clients that even with the improved relations between these two countries and India our embassies abroad are putting up all sorts of obstacles in issuing of visas. This is another bottleneck which is causing great concern to us and we are already in touch with the government to liberalise visa policies particularly vis-à-vis neighbouring and friendly countries."

Moreover, Indian infrastructure is distinctively inferior compared to other countries. While the government has taken steps to upgrade and modernise airports and has also improved railways and roads, it will be some time before improvement is visible. "While we have been in talks in favour of the open sky policy, we also expected the government to improve the infrastructure, which has not happened," points out Goyal.

In addition to this the government has not done anything concrete to rationalise the taxes. It is estimated that 30 per cent of the tourists spending in the country goes towards various taxes being imposed by the centre and the state governments. Something positive needs to be done to make India more attractive and cheap compared to neighbouring countries.

If current forms and projection are any indication, more tourists will visit India in 2005 that ever before. In 2004, tourist traffic increased more than 25 per cent from last year, and revenues went up by 40 per cent. Between January 2004 and August 2004, the inbound travel market grew by 26 per cent over the same period last year. While there has been a steady growth in tourist traffic from Europe and the United States of America, travellers from newer markets like Russia, Iran and Hungary are flocking to India this year.

A global comparison shows that India is now the fastest growing market, preceded by China. India is expected to receive nine million tourists in 2020, the same year that China is expected to breach 130 million. The disparity between the two neighbours is staggering but the bullish undertone for India's inbound is to be found in an attitudinal change and an emergence of a set of conditions in which the country can highlight its strengths. Keeping this in mind it only promises to get better as India's booming economy is poised to attract more business travellers.

Hospitality Infrastructure: Future Perfect

Anindita Chattopadhyay - New Delhi

Forget room crunch and bouncing off. In 2005, hospitality industry seems all set to be on a fast-track growth route. No we do not have a crystal ball to predict the future, but going by the way things are shaping up it is definitely quote 'hospitality time'.

It may be recalled that the accommodation infrastructure has witnessed the slowest growth from 8,000 rooms to 80,000 rooms in 30 years. But suddenly things have taken a 180-degree turn. Investments have started flowing in from domestic players. International players are eyeing partnerships and acquisitions. India needs at least 100,000 more rooms by 2010 to sustain the tourism upsurge experienced in 2004 and around 40,000 rooms would be ready by the next five years.

The buoyancy in the market, say industry captains, is here to stay as inbound and domestic tourism is on a steep upward curve. Domestic tourism alone in India accounts for more than 300 million holidaymakers per year. Graduating from pilgrimage, the culture of holidaying for leisure has already caught on. In addition business tourism has witnessed tremendous growth consistently for the last two years. It is expected to grow further by around 20 per cent in 2005. And every hotelier worth his salt is out to cash in on the opportunity. "India is moving towards market segmentation with each segment having its own price point for the market based on what services they offer," observed Sandeep Gupta, MD Edenpark Hotels.

Small, Smart, Basic

Smart basic and value-for-money is now the driving mantra in the market. India's hotel inventory, which has always been tilted towards the top tier of the market, is finally expected to see some semblance with budget and mid-market segments being the focus area. In fact, budget, mid-market and service apartment segments will see maximum investment inflow.

The budget segments so far received a step-motherly treatment from the organised sector that were busy wooing the international travellers. Since it was a domain of stand-alone properties, quality and consistency in service standards were too much to ask for. However, things are about to change, as major brands are looking at their own backyards realising the potential of the resilient, yet price-sensitive domestic travellers.

The mid-market segment witnessed the maximum growth last year with business travel swelling. Major brands like Choice Hotels, Fortune Park and Sarovar Park Plaza have jumped on an expansion spree. Gupta perceives a lot more high growth in the mid-market segment. "It is still in its infancy, but the market will mature with more international players like Accor, Courtyard coming in," said he.

However, there is no reason to think opulence and luxury is out or market development has stopped in the top-end tier. ITC has just opened its second property in Mumbai, the Grand Central. Asian Hotels is looking at investing around Rs 300-400 crore over the next two years to set up three new properties in Pune, Bangalore and Chennai, according to Sandip Ganguli, VP sales and marketing, Asian Hotels. It is significant to note that many international hotel chains like Ritz Carlton, Raffels, Mandarin, Starwood International for brands other than Sheraton are waiting in the wings to forge a strategic partnership to find a foothold in either Delhi or Mumbai, the gateway cities. Since they can bring in 100 per cent FDI, investment is not really an issue.

Even the extended stay concept is picking up as expats and corporates on short visits find the service apartment option more lucrative as it offers comfortable stay at a reasonable price. The segment is gradually hotting up. Choice is introducing the Comfort Suites brand in Delhi and Bombay. Oakwood Worldiwde, arguably the world's largest corporate apartment company, has three properties in the pipeline. It plans to launch its first apartment in Hyderabad in 2005, followed by Mumbai and Bangalore in 2006. Singapore based UE group is eager to introduce its Park Avenue Suites either in Delhi, Chennai or Bangalore.

Good Times Ahead

Yes, things are changing drastically, for sure. However, if this phenomenon is viewed against the general performance of the hotels in 2004 it seems to be a logical extension. Further, it is heartening to note that the Ministry of Tourism (MoT) is going all out to ensure adequate hotel infrastructure in the country. Realising that high land price is a stumbling block, the MoT has come up with financial assistance scheme for hoteliers, apart from writing letters to the Urban Development ministry and Railways ministry to make lands available to interested investors on long lease and at subsidised rates. According to G Shanker Dhar, joint director general, MoT, the ministry will now provide a capital subsidy to investors not exceeding 10 per cent of the loan amount. The one- and two-star hotels will get Rs 25 lakh and Rs 50 lakh as subsidy, while for three-star and heritage hotels it is Rs 75 lakh. The second scheme, a viability gap funding proposal, is in the process of finalisation. The budget hotel projects under public-private joint venture can get funding not exceeding 20 per cent of the total project cost to help them in plugging in the viability gap.

A growing market for tourism, it is imperative for India to have quality service standard and facilities. Now with organised sector making a foray in the lower end of the market, one can be sure service standard and facilities will improve across the board. Further, the boom in budget and mid-market segment would in reality mean boom in hospitality business in the B and C category cities. So, happy times are here again!

Marketing - The Crux Of Incredible India

Jyoti Koul - New Delhi

Thanks to Incredible India campaign launched by former tourism minister, Jagmohan, India is on the way to achieve its age-old target of five million tourists. While the year 2004 can be considered one of the best years so far with respect to growth, the credit goes to the former minister for creating an ever so powerful advertising and promotional campaign.

Renuka Chowdhury, India's present tourism minister is pushing the drive with equal zest. So far the "Incredible India" campaign had a focus on the product rather than the 'target'. It was promoting scores of small, largely unexplored tourist spots as well as India's traditional arts and crafts. Right now the ministry is also promoting many forms of health tourism that include wellness, medical and spiritual tourism.

After carrying the campaign successfully, the government is now shifting focus of the campaign. According to Choudhury, " The second phase of the campaign will focus on thinking intelligent India." Supposedly, NRI's is also a major target segment as she mentioned that 32 per cent doctors in UK and USA are Indians and it is time to tap them. Rightly so, the minister is intending to turn the country from a poor man's paradise to thinking intellectual segment. Therefore, tailor-made packages are on the anvil for specific source markets. Which means that the focus now is on the 'target' whereas, the marketing earlier was being done universally. May be the ministry, received inspiration from its very own states that have been successful in marketing themselves separately. Citing an example, Kerala that created a rage in the international market was an effort of the state, where all the stakeholders came together to push the product. Today, Kerala is established and on its own.

Intelligent India: The Way Ahead

The focus on intelligent India will surely produce results. But the growth watchers believe that any campaign has to be sustainable as much as the product. "Just because ministry has been allocated funds for marketing India overseas, it can go ahead create a film or produce a brochure, marketing has to be a planned, co-ordinated and well produced effort. You have to identify the markets and target them as per their interests," said a tourism analyst. The ministry should keep the return on the investment (ROI) in mind before charting out its budget and investment plans. While the new Incredible India Campaign (Colours of India) is yet to be launched, it should hit the nail on the head, as the first phase of the campaign has already created a foothold for Incredible India.

Charting A New Course

What needs to be done now is to develop customised campaigns for different markets, meaning a campaign that does not promote sea beaches to Seychelles or Mauritius. Besides, a product mix and competitive package are what will open doors for Incredible India. Apparently, both time and venue is also set perfect as Indian Diaspora (to be held soon) can serve as an apt platform to get the message across. Indian Diaspora can not only be utilised to attract tourist but also investments." Provided, it is well thought of and well played," warns an industry expert.

"What could be the better option than having to launch the campaign to the target audience in the country itself. The NRI community is the most significant segment in terms of propensity to respond to stimuli. Focus on this segment as the key global segment in the 25/40-age bracket. Consolidate on overseas offices to create India Centres following a public-private partnership model similar to the British Visitor Centre in London or Paris. Strategic promotions with non-tourism partners are a good option to leverage inadequate budgets. In fact, India should go for celebrity endorsements involving friends of India like Richard Gere, Steve Waugh and others," suggests Prem Subramaniam, head, tourism infrastructure, IDFC and former country head of VisitBritain.

Further, if India wants to capture a larger slice of the cake, the focus needs to move from product to customer, from built heritage to creating visitor experiences, from sightseeing-based tourism to activity-based tourism and from transactions to building relationships. Today's visitor prefers some recreational activities to spice up his vacation. It has to be an experiential holiday. With shorter and more activity-packed holidays on the cards, specialisation and niche product segmenting will play an important role, while hotels and travel service providers will have to innovate specific products in order to be relevant.

Product diversification should be the other area of focus as select destinations have started showing signs of fatigue. "India has been milking the same cow for long. We should rest the product, enhance it or change it altogether. The aim should be to reduce over dependence on these products," points out Harsh Varma, regional representative for the WTO in the Asia-Pacific region.

Future Perfect: What Lies Ahead

It's time to look beyond the golden triangle and market new attractions and innovative packages, agrees tour operators, but the infrastructure is often lacking. While the products and packages are under scrutiny- products being altered, tailored and modified, pricing is one crucial aspect that demands immediate attention. It is a strange phenomenon that on the one hand India is one of the least expensive destinations but on the other it is being considered a highly expensive destination. Reason? Taxes!

The implications of this new marketing campaign can only be positive if there are concerted -promotional and marketing efforts of the government, state tourism boards and the private players. An industry which is so fragmented, what is actually required is not just the infrastructure but better co-ordination and understanding combined with long term planning and a growth -oriented vision- a vision that is combined with venture.

Industry captains do agree that the present times offers the best opportunity to set corrective measures in place to ensure that the industry never finds its back to the wall again. Partnership within the trade and between government and trade is an essential requirement. The private sector must realise that its ability to complement the government's effort by assisting in product diversification, marketing and promotion, and maximising the opportunities that information technology offers hold the key to success.

Perhaps the most important market characteristic that India should understand is that the industry has become extremely price sensitive. As Varma, "Everybody connected to tourism and hospitality should understand that price sensitivity will lie at the heart of every marketing operation. Educated travellers will demand complete information and will have a greater understanding of the value for money concept. His strong knowledge and options available may mean that a few dollars can make the difference in a sale."