In an insightful report, CAPA has outlined that despite the noteworthy growth in FTAs in the recent years, pure tourism numbers have been abysmal. What is of further concern is the consistent loss in market share in major source markets in the past five years. CAPA suggests a multi-pronged strategy, involving tapping short and medium-haul markets, making inroads in gaining stopover traffic and focussing on a handful of high potential markets – which includes China, Russia and Singapore, among a few others. Here are excerpts from the CAPA Inbound Tourism Report. The lack of effective leisure tourism outcomes has been a structural issue for more than a decade and is not specific to any administration.
Source market’s outbound share abysmal for India
Even amongst the top 10 source markets for leisure travel, India’s share of their outbound traffic remains relatively small, at between 0.3% (Germany) and 3.7% (US). These are far from mature source markets and should be developed much further before thinking about spreading scarce resources towards ‘emerging’ markets. Thailand, for example, attracts at least 3x the number of leisure tourists from India’s leading source markets than India does.
Of further concern is the fact that in 5 of those 10 markets, India actually lost market share over the last three years, particularly in the UK, France and Sri Lanka.
India missed the China outbound phenomenon
India has not fully participated in the phenomenon of Chinese outbound travel, one of the most defining trends in global tourism in recent years.
Total outbound travel from China to a basket of competing destinations grew at a CAGR of 25.1% between 2007 and 2016, but Chinese arrivals into India grew at only 12.4%. India receives fewer Chinese visitors than even the much smaller destinations of Sri Lanka and Maldives, despite being a similar length of haul.
FTAs not truly reflective of numbers
From a tourism industry perspective, the recent growth in foreign visitor arrivals has not been as strong as the headline numbers indicate. For example, total foreign visitor arrivals increased by 15.9% y-o-y in 2017. However, if visitors from Bangladesh are excluded (the vast majority of whom do not come for leisure), the growth was only 8.2%.
Domestic carriers could drive inbound
International expansion by Indian carriers over the next couple of years should stimulate inbound traffic as a result of increased capacity and competition. Air India and Jet Airways are the two largest international operators at present, but IndiGo and SpiceJet are both planning to expand their international networks over the next 12-18 months. The re-engined narrowbodies that are being inducted into their fleets deliver longer range and lower costs, significantly expanding the number of viable routes on sectors up to 6 hours or more. GoAir and Vistara are also expected to venture overseas for the first time in the next few months.
The market was expected to see the launch of long-haul low-cost services by IndiGo and SpiceJet in 2019, with widebody equipment deployed to destinations in Europe and Asia, and in the next phase even to Australia and Africa. Due to current market conditions, these plans may be deferred, although they remain a strategic priority. In the meantime, some long-haul destinations may be served on a 1-stop basis with narrowbodies.
India could be better poised to attract stopover traffic
International expansion by Indian carriers should also create an opportunity to develop stopover traffic. The primary focus of home-based airlines will be to develop point-to-point traffic. However, as their networks increase, they will as a consequence be able to carry more connecting traffic, for example, between Sydney and London or between Beijing and Nairobi via India. Special packages for such travellers to stopover should be actively developed and promoted. Not only does this create incremental visits, but it also provides visitors with a taste of what India has to offer and hopefully encourages them to return in the future for a longer visit.
Time to cultivate short and medium-haul traffic
Even among its top 10 source markets, India’s share of their total outbound traffic remains relatively small, in the range of 0.77% to 0.88% during 2007–2016.
In 2016, of India’s top 10 source markets excluding Bangladesh, six were long haul, representing 75.6% of the total FTAs from these 10 markets. Greater creativity needs to be applied to develop short and medium-haul leisure markets, given that India’s immediate neighbours do not represent significant potential in terms of inbound leisure tourism.
However, there may be an opportunity to stimulate short-haul traffic from the community of Western expatriates residing in the Gulf, of whom there are over 1 million with high disposable incomes. Being located just 3-4 hours away, with significant low-cost capacity, often direct to secondary cities, there is an opportunity to position India as a short break destination for wellness, culture or luxury. A resident of Dubai can fly direct to Jaipur for example, for a long weekend in a palace resort, or to Cochin for an ayurvedic spa retreat.
Potential markets for growth
According to the CAPA priority model, China, South Korea, Russia and Singapore are the key countries to target in the medium-haul segment, as these countries have reported strong growth in outbound travel, with relatively high tourism spends, and have performed well on economic metrics.
Similarly, Australia, the US, Germany, Japan, Canada and the UK emerged as the priority markets in the long-haul segment owing to their performance across the evaluated parameters.