By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
I first visited India in 1990. At the time, the tourism marketplace was constrained and travel was primarily limited to the very wealthy. Over the next two decades, the hotel development opportunities I pursued on Marriott International’s behalf were slow and arduous with numerous fits and starts. A number of factors contributed to this “slow-go,” but the prime one came under the general heading of government regulations. Since then, conditions have changed dramatically and India has burst onto the global tourism landscape in a big way.
Encouraged by its pace-setting 7% GDP global growth rate, rising personal income levels and changing lifestyles, huge middle class as well as the availability of low-cost air fares and diverse travel packages, India is rapidly becoming one of the fastest growing outbound travel markets in the world, second only to China. If expectations are realized, the UNWTO predicts today’s 20 million outbound Indian travelers will more than double to 50 million over the next three years.
Every year, more than 5.4 million Indians go abroad to conduct business, attend meetings, study, sight-see, shop, honeymoon and especially to visit friends and relatives (VFR). With more than 20 million Indian nationals now living throughout the world (3.4 million in the US), the volume of outbound travel is increasing about 25% a year.
There’s every reason to believe that this upward surge will continue for decades to come because concurrent with its rising GDP rate, India’s population (currently 1.1 billion) is expected to overtake China’s as the world’s largest in the next five years, and its young, tech-savvy, educated middle class will double in size to 547 million shortly thereafter. Within five years, India will also rank as the world’s youngest country demographically.
If nothing else, the sheer size of its rapidly expanding middle class practically guarantees success for India’s travel consumer story for the next 20 years. Bigger than the entire US population, India’s middle-class today numbers 350 million people. A sizable number of Indians have a net worth of more than $1 million and 180 million Indians – three times the population of the UK – speaks English, and many of these folks own cars, cell phones and carry credit cards.
Indian Travelers are High Spenders
When traveling abroad, Indian tourists are among the world’s highest-spending globetrotters. Their spending power has been estimated to be four times that of the Chinese and Japanese. In fact, most Indian business and VFR trips include leisure and shopping components, and nearly half of all Indians who venture abroad do so to shop with almost 75% buying branded duty-free goods.
The average Indian traveler spends $1,200 per visit as compared with Americans who spend about $700, and Brits who spend $500. Traditionally, globetrotting Indians tended to come from Tier 1 cities such as New Delhi, Mumbai, Chennai and Bangalore, but lately smaller cities like Jaipur, Ahmedabad and Amritsar are emerging as important source markets for outbound travel as well.
Although business, holiday and VFR remain the staples of Indian outbound tourism, people are also now opting for sports vacations, luxury travel, MICE trips, honeymoons and cruises. Thailand, Singapore, the U.S. and Malaysia remain the preferred destinations, but European countries and nearby Sri Lanka, Nepal, China and Japan are also drawing attention.
When venturing abroad, the average Indian traveler generally stays 12-15 days. A trip to a nearby southeast Asian country lasts about five days; a VFR trip to Australia usually extends 5-6 weeks; business trips can run up to three weeks, while holiday travel comes in at two weeks.
Here in the US, at the turn of the Millennium, just over 250,000 Indians visited our country. This volume reached 1.1 million in 2015. They spent $11.8 billion during their visit making India our 7th largest offshore source market for tourism. This year, 1.36 million visitors from India are expected and, within the next five years, the number will rise to 2 million.
To serve this growing market, virtually all the world’s largest airlines operate flights into and out of India. Although the US is readily accessible via connecting service through European, Asian and Middle Eastern air hubs, Air India and United offer the only nonstop flights to New York and San Francisco from India.
This lack of significant airlift, coupled with long flight times has hindered the growth of Indian tourism volume to the US. However, plans for increased service are promising. Air India has announced plans to add a tri-weekly nonstop from Bangalore to San Francisco and a daily nonstop between New Delhi and Washington Dulles. American Airlines, meanwhile, reportedly is planning to re-launch nonstop service to Chicago in the near future and many international tourism boards have opened offices in key major Indian cities.
Prime Minister Modi Has Awakened a Sleeping Giant
All this is good news for India’s Prime Minister Narendra Modi who will complete his third year in office in May and faces re-election two years from now. At his inauguration, Modi told his citizens that he needed just ten years to modernize the country. Since then he has been on a tear – streamlining the Indian bureaucracy, easing anti-business regulations, creating a consumer market deeply tied into mobility and connectivity, and selling his vision of India’s future place in the world.
Among his most recent actions was last November’s demonetization initiative. Overnight, holders of high-value banknotes were required to exchange their large notes for smaller, newly-issued bills which the government believes are easier to keep track of for tax purposes – all in a bid to crack down on undeclared income and corruption. As a result, about 86% of India’s currency was pulled out of circulation, forcing the country’s once cash-based economy to embrace digital payments that, in turn, is expected to have a positive effect on seamless and easy online travel bookings and other benefits.
Earlier this year, the citizens of India had a chance to grade their Prime Minister’s performance and on March 10, the results were in: Modi and his Bharatiya Janata Party (BNP) had won a landslide victory. Their victory is seen as a bell-weather for the 2019 national election. It is also seen as an endorsement of Prime Minister Modi’s stewardship of the economy and leadership.
When he took office in 2014, skeptics doubted Prime Minister Modi’s ability to harness India’s potential. With each passing day, those doubts are being put to rest. India’s dynamic future is unfolding before our eyes.
For my earlier thoughts on India, please read my blog, “India: Asia’s Next Economic Dynamo?”