Virendra Jain, Co-founder and CEO, VIDEC and Director, Business Development, APAC and Middle East, Phocuswright casts his eye over the India travel panorama and examines the components which are fuelling the Indian travel growth at present – from a humongous smartphone consumer base to UPI to the slew of OTAs all spurring growth, every doing issues otherwise.
Virendra Jain: “In the years of pandemic, the travel bucket list became the foremost aspiration as the notion of fickleness of life sank in.”
India is a land of contrasts. Steeped in custom, it’s the second most populous nation on the earth, at 1.3 billion. Here, actuality exhibits are scripted, whereas motion pictures are usually not. In 2015, I used to be assembly a widely known Indian travel entrepreneur primarily based in Singapore and he stated, “India is the elephant that never dances.”
Travel within the nation was marred by low incidence and a comparatively low travel spend as in contrast with the likes of China. An elephant dances when it anticipates meals and water. Cut to 2022, the trade is seeing a growth and the Indian elephant has began dancing.
During April-June 2022, India’s GDP grew by 13.5%. In December 2021, it surpassed the UK to grow to be the fifth largest economy on the earth. India continues to be an rising market and an under-explored market alternative. Among the highest three client markets on the earth, its growth story has solely simply begun.
At the center of the Indian on-line travel story lies its burgeoning middle-class. With practically 166 million middle-class households in 2018, it’s anticipated to rise to 330 million by 2030. Indian vacationers took roughly 1.8 billion home and 26 million worldwide journeys in 2018. In the previous couple of years, improved infrastructure enabled Tier-2, -3 and -4 markets to be a part of the web travel bandwagon.
In 2021, India had a humongous smartphone consumer base of 750 million and it’s anticipated to attain one billion by 2026. This, coupled with higher Internet connectivity, and a 17.8% improve in per capita GDP, units the stage for the fast growth of on-line travel.
The Indian on-line procuring and cost ecosystem leapfrogged within the years of pandemic. Launched in 2016, the Unified Payment Interface (UPI) democratised mobile-led transactions in India. In FY22, Indians revamped 46 billion transactions by means of UPI, price over $1 trillion. This yr, the federal government additionally introduced plans to permit bank cards to be linked to UPI. In 2021, solely 3% Indians owned a bank card, which elevated to 5.5% by 2022. In July 2022, there are 80 million bank card holders in India.
In the years of pandemic, the travel bucket checklist grew to become the foremost aspiration because the notion of fickleness of life sank in. The pandemic essentially altered some vital attributes of client conduct. Indians traditionally averaged two to three journeys a yr, which has grown many-fold, particularly within the city situation. Behavioral traits resembling revenge travel, FOMO and YOLO, pushed shoppers to profit from travel time. The typical weekend getaways at the moment are being prolonged to 4 or 5 days.
India’s home air passenger exercise has recovered to 85% of its pre-pandemic ranges. During January to August 2022, 78 million passengers flew on home routes as in contrast to 91 million throughout the identical interval in 2019. The full restoration on the worldwide sector continues to be distant—eight million passengers took outbound flights between January and March 2022, in contrast to 64 million in the course of the calendar yr 2019. According to the latest India Travel Market Report by Phocuswright, the entire Indian travel market stood at US$19.1 billion in 2021 and is anticipated to attain $40.4 billion in 2025, with on-line penetration reaching 58% in 2025.
Government insurance policies have additionally helped enhance the home travel sector. The Ude Desh ka Aam Nagrik (UDAN) scheme goals to enhance aviation infrastructure in Tier-2 and -3 cities. The variety of airports within the nation elevated from 74 in 2014 to 141 in August 2022. Over 400 new routes have been initiated beneath the scheme.
Bus and rail are the lifeline of mass transport in India.
There’s a major dynamism within the Indian air phase. Indigo continues to preserve its management within the home market, whilst Go First eyes an IPO. New airways (Akasa Air) and the return of outdated ones (Jet Airways), together with the privatization of Air India will doubtlessly reinvigorate the aviation sector in India. Furthermore, with manufacturers throughout the three totally different classes—Air India as a world full-service service (FSC), Vistara, one other FSC, catering to the home and regional demand and Air Asia India and Air India Express tapping into the LCC alternative—the TATA group is now actually aligned with the long run prospects of the India aviation sector.
Rail and bus are the lifeline of mass transport in India. Gross bookings for Indian Railways reached $5.8 billion in FY22, practically tripling in contrast to FY21. Thanks to the pandemic-induced DIY conduct, greater than 4 in 5 rail tickets at the moment are booked on-line.
The Indian lodge market is immensely fragmented. According to trade estimates, India has a provide of over 2.5 million keys, of which the share of branded /chain provide solely accounts for high-single digits. The on-line penetration in lodge phase is comparatively low due to this excessive fragmentation which creates a fertile floor for OTAs, enabling them to account for upwards of three-fourth of the web lodge market share in India.
E-commerce in India started with travel, and it continues to be symbiotic with the aspirational Indian shoppers. The OTAs have led the web travel class for the final 15-18 years and are primed to catapult the subsequent wave of on-line travel growth. Rail, resorts, and alternate lodging proceed to be rising segments for OTAs. There are 5 main full-service OTAs within the Indian travel ecosystem, and, every of their play and positioning needs to be understood to get a real image of the Indian OTA panorama.
In The Age of Consolidation, Leading from The Front
The final decade was outlined by business consolidation throughout classes and markets, with the main gamers widening their lead, and rising each vertically and horizontally. Globally, Booking Group, Expedia Group and Trip.com (previously Ctrip) are shining examples of this pattern. Joining them from India is MakeMyTrip (MMT).
The OTA story actually started in India with MMT. Founded by Deep Kalra in 2000, it began with operations within the US, catering to travel needs of the Indian diaspora. Five years later, it began operations in India and went onto grow to be the primary Indian travel firm to be listed on Nasdaq in 2011.
Goibibo, based by Ashish Kashyap, made its entrance in travel in 2009, turning into a significant participant inside just a few years. Goibibo acquired pinkBus in 2013 to improve its product providing. The 2016 merger of MMT and Goibibo gave MMT depth of content material and an entry to a much bigger client base.
The early days of OTA adoption have been predominantly an city phenomenon. During this time, it was widespread for OTAs to promote air tickets. The million-dollar query remained: “Indians buy air online. Why not hotels?”. The aggressive OTA dynamics did two issues—it took the OTA story to Tier-2 and -3 cities in India and helped develop resorts on-line.
Taking a leaf from the worldwide OTA playbook, MMT is now doubling down on merchandise alongside the traces of fintech, pioneered by Hopper, a US-based OTA. With TripCash, MMT goals to present its clients a “book now pay later” possibility for flights and resorts, and to cross-sell and upsell merchandise throughout client mortgage, bite-sized insurance, and foreign exchange playing cards.
MMT, leveraging its learnings from the rising market OTA playbook, is organising operations within the Middle East with a full-blown OTA proposition for Saudi Arabia. A big Indian expats pop within the area will definitely be to its benefit.
From Product Superiority to a Platform-led Play
Marketplace websites and main ecommerce gamers resembling Amazon, Flipkart and Paytm have been eyeing the Indian on-line travel alternative for years. With increased utilization frequency, engagement, stickiness and pockets connectivity, horizontal ecommerce platforms rating greater than any verticalized travel software. The travel class was thought-about a pure development for them.
Ergo, Flipkart, India’s homegrown market, acquired Cleartrip in 2021 to give a fillip to its travel vertical, and an entry to Cleartrip know-how and content material. With the brand new partnership, Cleartrip, which was identified for its clear interface and product-level innovation, might doubtlessly leapfrog its growth due to its entry to Flipkart’s assets and engineering. In 2021, Flipkart bought Cleartrip’s Middle East business to Wego.
The Underdog That Survived Major Competition, and Thrived
Started by three brothers—Nishant, Prashant and Rikant Pitti—in 2008, EaseMyTrip is a captivating story that withstood cutthroat competitors within the Indian OTA panorama. While it remained a self-funded firm, it will definitely managed to have a profitable public itemizing in March 2021 on NSE, within the thick of the pandemic, which once more was fairly outstanding.
While air brings in 90% of its GMV, EMT is embracing non-air alternatives as effectively.
EMT, which started as a B2B operation–and nonetheless retains its community of 42,000 brokers–has now transitioned right into a predominant B2C on-line business. EMT has additionally expanded operations to the UAE, UK, US, Philippines, Singapore, and Thailand.
A Pioneer That Persevered
Launched in 2006, Yatra was the second largest OTA in India at the moment. Yatra, which implies travel in Hindi, had a deep and fast join with the Indian viewers and excessive model recall.
In 2017, Yatra acquired company travel service Air Travel Bureau (ATB) to faucet the company travel alternative in India. The firm just lately launched a meta search device to improve the UX of their company travel platform. In June 2022, Yatra had a big base of 740 massive company shoppers and over 50,000 small and medium enterprise shoppers utilizing its company reserving instruments.
In its journey, Yatra has saved its eyes centered on the Indian market, sustaining that there’s sufficient room to develop right here and that they aren’t eager about worldwide enlargement. It received listed on Nasdaq in 2016 and is now eyeing the Indian bourses. It filed its DRHP in March 2022.
Pivot and Innovate – The Underpinning Elements in Entrepreneurship
ixigo is an ideal start-up case research, entailing each pivot and innovation. Initially, a metasearch engine, it quickly realized the limitation with the meta mannequin of their capacity to develop and to service the shopper end-to-end.
An epiphany in 2017 made them understand that despite the fact that rail has been the spine of transportation in India, it was largely an underpenetrated phase for the OTAs. In 2018, ixigo turned its lens on the air and rail phase. The pivot allowed ixigo to faucet right into a client market in India that had to this point remained uninitiated to flights. ixigo helped construct the class by penetrating the Tier-3 and -4 cities within the nation. According to their August 2021 DRHP, ixigo accounted for 42% of all practice bookings made by means of OTAs. With a mean 24 million folks touring by practice in India every single day, and eight million by bus, in pre-COVID occasions, the potential for growth stays substantial.
ixigo just lately acquired ConfirmTicket (which has a stronghold in practice bookings) and AbhiBus to bolster their market choices in rail and bus classes respectively.
What The Future Holds
India is within the midst of an amazing infrastructure growth drive. The nation is anticipated to spend $1.4 trillion in 2019-23, a large endeavor which is able to create new alternatives for channels throughout the board to broaden their footprint and improve income. As a end result, the rail, air, and lodge segments are all possible to witness quantum beneficial properties as a wide range of large-scale tasks are accomplished.
With travel set for a full restoration in India in 2023, the one method OTAs can go is up. A brand new dimension to the OTA growth is tremendous apps. A brilliant app is slated to be the one app that customers will use for all the things: services and products, ecommerce marketplaces, monetary companies, ticket reserving, gaming, ride-hailing, meals supply, utilities and extra. While that is already pervasive in China, markets resembling Singapore and Indonesia are quick catching up and have increased adoption as in contrast to the West. India has aspirants such because the Adani Group, Amazon India, Paytm, Reliance, Tata Group, and Walmart-owned Flipkart in constructing their very own tremendous app universe.
The recognition of staycations and workcations, coupled with the rise within the variety of a number of quick journeys has contributed to the altering panorama of an trade with nice promise. The pattern of mini holidays is likely to be right here to keep. Millennials are lapping up the gig economy for the possibility to reside the digital nomad life.
In addition, with the younger demographic taking a look at holidays and customarily their life-style decisions with a distinction, the panorama of travel in India is ready to grow to be various and layered. OTAs are preparing to play a bigger position within the growth of the entire and on-line travel alternatives in India, and their story forward is just going to be extra thrilling.
