The green shoots of economic revival are becoming visible already. With travel resuming, it is helping to mitigate the impact on jobs and businesses in several countries. The PMI is consistently increasing at a decent pace and stood at 57.5 in February. But how is the travel and hospitality segment faring in the current scenario? In the last four months, we have seen India’s domestic tourism recover consistently to become the 2nd fastest market to recover. While this is great news for the industry, we cannot neglect the impact that the shutdown had on the industry. The argument against providing stimulus to the industry was that it is a non-essential service or a luxury. I do not question the choices our respected government had to make, however as we resume life and start travelling again, it is important for each of us to understand the impact every single trip has on the economy of the country and the potential it has to safeguard the economic interests of this country.
India is the fourth largest market in the world for travel and tourism after the US, China and Germany. In 2019, travel and tourism contributed 10.4% to the global GDP. In fact, it is going to further accelerate in the upcoming years. In India, the total contribution by the travel and tourism sector to its GDP is expected to increase to $492.21 billion in 2028. Moreover, in the same year (2028), International Tourists’ arrival is expected to reach 30.5 billion.
Why is travel set to boom in India?
The reason for the boom is three-fold or as I would like to say takes a 3D approach:
Diverse India: India as most travelers would say is in itself a continent with its rich geographical and cultural diversity, 37 World Heritage sites, and 10 bio-geographic zones.
Digital India: Right after China, India has the second-highest usage of mobile data and mobile phones. With really low data costs and abundant tech-talent, India has been able to accelerate digital solutions for exploring, booking and experiencing travel in the country from any corner of the world.
Diplomatic India: Over the last six years, India has entered into multiple agreements with countries worldwide to ease visa restrictions for their citizens, helping both Indians travel more easily as well as attract more international travelers.
Besides, another major factor adds to this development. The travel industry is directly tied to economic growth. It is the only industry that connects transportation, construction, consumer goods, payments, engineering, service, events, governments as well as international trade and diplomacy. For instance, when a traveler visits India, he/she adds to the value chain of the both travel and hospitality industry. How? Right from taking a flight, booking a cab to staying in a hotel and exploring restaurants as well as shops in the country is helping players in these spaces to earn monetary value. At the same time, connecting these services via technology will play a vital role in the travel and hospitality industry while providing a unique experience to the international traveler in a foreign land.
Now, India accounts for the highest number of domestic leisure travelers in the world. However, about 27% of the hospitality industry is dominated by smaller cities where the market is mostly unorganized and is primarily dominated by independent/unbranded hotels, these still form an important part of the hospitality business in India. In addition, the country is also strengthening its medical infrastructure, thereby leading to the growth of India’s medical tourism sector. In the years to come, the country is likely to emerge as one of the most popular destinations for medical tourism with better medical facilities. While these are contributing to the changing dynamics of the travel industry in the country, the pandemic is also playing an important role.
Pandemic has helped in creating a level playing field
Smaller resorts, niche apps, eco-tourism, work from mountains, DriVacations are the trends in 2021, as travel re-emerges, putting micro-markets at the center of travel’s recovery. This creates an opportunity for small enterprises as well as startups to create their own market and compete with large hotel chains and tech-companies for the traveler’s wallet share. The good news is that with a huge pent-up demand there is already room for many.
Having said that, the onus now falls onto the governments, tech companies, and travel operators to figure out how tourists can flow optimally and regularize these niche players to ensure fair play for everyone. This is where intermediary tech-players like RateGain are playing a vital role in boosting the growth of the travel industry.
Such tech-players will help to link the entire value chain, and work with both new-age startups as well as leading players in each segment. The Covid-19 outbreak has also shortened the digital adoption roadmap of market players and technology changes that would have taken five years are now being implemented within two years in the travel and hospitality space. As the pent-up demand is released over the next 6-12 months, there is an immense opportunity to drive the accelerated growth of the SaaS-based travel-tech ecosystem and hence, driving the creation of more unicorns in the next 5 years.
A level playing field is always ripe for disruption as all sides look at tilting the market in their favor and that is why innovators, entrepreneurs, investors, data scientists should look at investing in this sector as all the players look to drive efficiency and revenue. Travelers, as well as technology buyers both, are open to new experiences and this is where lies the opportunity for more and more players in the travel space to develop new solutions and create new business models that will further augment the growth of the travel industry.
Views expressed above are the author’s own.
