Despite the adverse impact of the economic downturn, the global tourism industry has shown prominent signs of sustenance over the years.
Travel & tourism GDP registered a CAGR of 3.6 per cent during 2003-07, almost equal to the world GDP during the same period. Not surprisingly, the industry has contributed 7.6 per cent towards world employment during 2008. Even during the recessionary environment in the same year, the foreign tourist inflow into the emerging markets recorded a 2.3 per cent YoY growth. This was the mainly the result of the US dollar appreciation against emerging market currencies that transformed the latter into enticing tourist havens.
EMERGING DYNAMICSThe next decade is all set to usher in a new pattern on the tourism landscape. The developed countries, the primary drivers of growth, are expected to pass the baton to the emerging countries...According to WTTC estimates, US, Japan, China and West European countries will continue to generate the largest travel and tourism demand while industry growth would emanate from the coffers of Asia, Middle East and Africa. The “emerging” appeal is likely to drive growth to these countries at twice the rate in high-income countries.
The tourism industry will no longer hover around a few clichéd global destinations but will actively scout for greener pastures scattered across the length and breadth of the developing countries. In fact, this trend has gathered momentum gradually over the years. The top 15 destinations worldwide have seen a steep decline in their share of total tourist arrivals – from 98 per cent in 1950 to 75 per cent in 1970 to 57 per cent in 2007.
It would be prudent to scan the geography-wise emerging patterns in the emerging as well as developed worlds…
TOP EMERGING MARKETSINDIA
- Low penetration, strong support: The 5.6% FY08 Travel and tourism’s share of India’s GDP is quite low as compared to the world GDP share of 9.4% or even the GDP share in other emerging countries like Brazil and Mexico (8 – 8.5%). According to WTTC estimates, the adverse impact of economic downturn on India’s tourism will be far less than that on the global tourism industry. This makes the country’s long term growth potential intact with an estimated 8.2% CAGR growth during the decade beginning 2009.
- Bright Outbound prospects:The growing discretionary spending of India’s ever-strong middle class and the prevalent “onsite-visits” of IT and Outsourcing markets present an addressable market of 6.2 million households for outbound tourism. IIFL research reveals that households with income over US$ 12,000 p.a. form the addressable outbound travel market) not surprisingly, several countries like Malaysia, Singapore, Spain, Hong Kong, New Zealand and Sri Lanka have designed customized travel packages exclusively for Indian travelers – given the latter’s high spending patterns and valued status. The outbound buoyancy in the Flexible Individual traveler (FIT) segment will gain significant momentum owning to the following factors:
- Growing disposable incomes would motivate first-time international travelers to opt for tour packages that offer economies of scale and safety and comfort of travel.
- Growing tastes for personalized tours and offbeat and long-haul tours, thanks to more purchasing power in hand and internet-driven information proliferation
- Growing trend of business-cum-leisure trips as a key long-term growth driver. Though the Meeting, incentives, conferences and events (MICE) segment has suffered from recession, the long term prospects are strong – thanks to the sustained growth in industries such as cement, pharma and insurance.
- Latent Inbound prospects: Traditionally, India has been a poorly advertised tourist haven. As a consequence, much smaller Asian, South American and Middle east countries attract foreign tourists 3 to 10 times more than India – despite the latter’s 3.3m- sq-Km land mass, 7,500 km coastline, millennia-old history and above all, an unmatched cultural heritage. Conscious visibility and tailored products should help players tap the actual inbound market which can be as large as 3 times the current size. The inbound market’s growth will be led by the following factors:
- The 5 to 7 star segment has remained relatively resilient to the meltdown, having maintained decent growth rates. Some tour operators registered decent growth rates despite the 9.3 per cent decline in foreign tourist arrivals during Jan-Jun 2009 with respect to this segment.
- Ten states in India (Delhi, Maharashtra, Tamil Nadu, UP, Rajasthan, West Bengal, AP, Karnataka, Kerala and Goa) comprise over 90 per cent of the incoming tourist traffic into the country. Over half of all foreign tourists visit four primary destinations – Delhi, UP, Rajasthan and West Bengal. Tourism prospects for these states and routes would continue to be high.
According to World Tourism Organization (WTO) projections, tourist arrivals in Dubai are expected to grow at an annualized rate of 7.2 per cent during 2007-20 – among the fastest in the world. However, the outbound market is likely to remain muted, given the economic turbulence of the region. The popular destinations on this count will continue to be London, US, Egypt, Singapore, Turkey and Oman among others.
The key driver for this market will undoubtedly be the inbound business. The region witnessed the fastest in-bound traffic in the world at 10% CAGR during the past decade. WTO estimates the inbound to grow at 7.2% during 2007-20, second only to Africa.
DEVELOPED MARKETSThe developed markets have highly exclusive travel habits in line with the respective regions. In the UK, the compulsive tourists are affluent adults with an average age of 58, high disposable incomes and a fancy for offbeat places. The outbound is mainly focused on European destinations. Recently, the trend is shifting in favor of long-haul destinations which should support higher average spend per traveler.
For USA, a third of its outbound market is Europe and emerging markets like India and Middle East offer untapped potential waiting to be tapped.
Japan is the second largest market in the world terms of demand for travel and tourism. Though the market is on a decline phase (5% YoY), two segments within the FIT – single women and honeymooners and likely to drive growth. The business travel is expected to drop owing to the recessionary environment.
The Australian outbound is all about New Zealand and Europe again offering immense scope for travel solutions aimed at emerging and developing countries.
THE FLIP SIDEThe travel and tourism industry, being leisure-centric and discretionary in na