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Travel Industry: USD 36 bn , 7.5% expected CAGR over next 10 years. Travel Industry* is playing an increasingly important role in India’s economy : 1.9% is the direct contribution of total Travel industry to India’s GDP 5% contribution to total employment
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Travel Industry: USD 36 bn, 7.5% expected CAGR over next 10 years • Travel Industry* is playing an increasingly important role in India’s economy : • 1.9% is the direct contribution of total Travel industry to India’s GDP • 5% contribution to total employment • 3.8% of total exports was from Inbound tourism (~USD 14.5 bn ) • 5.1% of total investment was in Travel(~USD 23 bn) • Domestic Travel to be the primary growth driver: ~82% of Total Travel • 74% of Travel is Leisure travel, expected to grow by 8.6% in 2012 • 26% of Travel is Business Travel, expected to grow by 4.1% in 2012 CAGR: 7.8% *WTCC definition of Travel includes: Domestic expenditure +Inbound tourism + restaurant& leisure industries+ govt. spending+ capital investment Source: India 2012 WTTC, IBEF
India is the second largest Travel Market globally after China, largest contributor to employment Source: India 2012 WTTC, IBEF
Travel: Poised to Sustain Growth Momentum 1 2 3 DemandGrowth Increasing Investment Policy Support • Increasing per capita income and a rapidly growing middle class: • 160 mn people expected to grow to over 267 mn by 2016 • Favorable demographics: Over 50% of the population under 25 years • Domestic as well as outbound travel to increase due to: • Increased affordability as a result of increasing disposable income • Availability of attractive tour packages • Increased affinity towards leisure travel • Innovative campaigns launched to attract tourists: Incredible India and Athithi Devo Bhavah • 100 % FDI allowed in hotel and tourism sector • USD 648.5 mn sanctioned during the 11th Five Year Plan for 991 tourism infrastructure projects • CAGR of 15.4% over 2005-11 in Govt. spending on T&T (USD 1.6 bn in 2011) • T&T attracted capital investment of INR1,253.9bn in 2011 (~USD 23 bn) • Expected to rise by 12.3% in 2012 (~USD 26 bn); ~5.3% of GDP • Rise of 7.5% pa is projected over the next ten years to INR2,903.9bn in 2022 (~USD 53 bn) Source: India 2012 WTTC, IBEF Favorable demand, improving infrastructure and investments to drive T&T growth
Retail Travel : 33% of Travel is Online, Online growing much faster than offline • Online travel share has been steadily increasing: 23% in 2009 to ~33%** in 2012 • Online travel penetration (33%) is ahead of China and Japan; comparable to US (38%) • Online Travel market grew 3x compared to the overall market in 2011 viz. 23% vs 8% • 23% growth projected during 2012-13 – USD 7.3 bn (‘12) to USD 9 bn (‘13) • Online travel drives >85% of e-commerce in India
Online Travel Future Growth Engine: Hotels, Bus, Car rentals 2012 Retail Travel Industry Split • Air ticketing continues to be the largest segment (54%) followed by rail ( 35%) • Newer categories like hotels, tour packages, bus and cars have higher margins, low online penetration and are going to be the drivers for the next phase of growth • Supplier branded sites accounted for 64% of the total market led by Indian railways and low cost carriers • However, OTAs to grow fast by focusing on the new high growth verticals Source: Phocuswright; Internal intelligence
Turbulence in Travel Market: Driven by issues facing the domestic airline industry • Air continues to be the largest travel category – both online and offline • 2011-12 has been a challenging year for air growth: • Passenger traffic declined by 0.9% from Jan - Sept 2011 to Jan - Sept 2012 • Gross margin under pressure for travel companies because of increase in monopoly of airlines • However online air growth has remained robust at 25% in 2011 and expected to be 22% in 2012 to USD 3.9 bn • Steady increase in online air penetration : from 38% in 2011 to 42% in 2012 end Air Market: Total & Online Domestic Air Passenger Traffic Challenges facing the airline industry (0.9%) • Supply constraint: Grounding of majority of Kingfisher’s fleet, long duration strikes by the National carrier • Spiraling jet fuel prices and consequently hike in fares resulting in stagnant /decline in passenger traffic growth • Rupee depreciation slowing outbound travel • High debt burden and operating losses for majority of the Indian carriers Source : Phocuswright, DGCA
Turbulence to be Overcome by policy changes and shifting focus to new growth verticals Revival of Domestic Air New Verticals Growth • Incumbents to increase supply: from 385 to 522 aircrafts over the next few years; will ease out the demand supply mismatch • 49% FDI by foreign carriers approved, potential funding for cash strapped airlines • Increased supply and competition from new players will reduce monopoly of existing suppliers • ATF imports allowed, airline operating costs to reduce • Opening of bilateral rights to all domestic carriers, will lead to better seats utilization • Investments for up gradation / creation of new airports • Key Verticals to drive future growth • Hotels • Holidays / Packages • Bus • New verticals: Car rentals • Higher margin categories, focus area for all OTAs • Characterized by low online penetration, increasing trend to move online: enough headroom for growth • Categories like bus and hotels are highly scalable and huge standalone verticals for growth Source : Phocuswirght; KPMG Background Paper on Indian Aviation, news articles
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