Tarandeep Singh’s Blog

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The Great Economic Downturn & The Great Indian Tourism Industry

Let’s go back to the year 2001, the year wherein we witnessed the crash of tourism for once owing to 9/11 attacks. The personal tourism activity recorded for that year stood at USD 645.06 Billion. The business travel & tourism was aggregated at USD 110.71 Billion. These figures for the following year went up to USD 662.76 billion and USD 134.49 billion. And did we say at that time that tourism has come to an end? The entire world was suffering from the fear of terrorism and hence was reconsidering their travel plans. Our country that depends heavily on the western world for its incoming business traffic was wondering on how to tackle the depleting numbers. The message was loud and clear. It was then that the country took some steps that marked the beginning of a new source market, a new trend. The domestic tourism was by now far forgotten. A few good campaigns, launch of Incredible India over a period of time and an active interest by the local state tourism bodies ensured that we are marketing our products to our internal customers who are cautious but at the same time have that risk taking ability. These are the people who stand by roadside and eat those pani purris, these are the ones who will stand in a local Mumbai train early in the morning with half of their body almost hanging outside. So with a healthy appetite and a spirit of adventure, our great Indian tourist was ready for a new beginning. Something that he never anticipated but always strived for. The results were astonishing. The year 2002 saw the corresponding Personal and Business T&T grew to USD 662 billion and USD 134 Billion. Something similar was seen in countries like Singapore that got affected by SARS in 2003 and remember this was also the year of the Gulf War. Tourism at time generated over USD 10 billion in revenue annually or about 5% of the country’s GDP. The numbers were down but not the spirit and the belief. While 2002 saw a total of 7.6 million visitors, the first half of year 2003 saw these numbers down to 2.5 million. But in order to boost the city state’s travel industry, the Singapore Tourism Board set for promotional tourism campaign on two sections, healthcare and education services. It also set up more overseas offices to tap fast-growing markets like China, India and ASEAN countries. The Singapore ROARS and Step Put Singapore campaigns not only minimized the impact of SARS on businesses but also staged a rapid recovery for the tourism industry. When the STB and International Advisory Council for Tourism met for to discuss and explore key issues and trends facing the city tourism industry, the key agenda was not short term. The agenda was to position Singapore as a destination for the next 10 years to ensure tourism remains sustainable engine of economic growth. And we all are witness to the growth and comeback that this nation has recorded. I see no harm when our Finance Minister talk about cutting down on hotel and airline fares. Our industry works on volumes and that helps in a big way to bring down our overall costs. This is true for any industry and for long we have been asking to give tourism an industry status. The month of November 2008 saw a steep 10% decline in occupancies in NCR. While the ARR hike was able to boost a higher REVPAR over last year, it’s definitely not a very positive trend. Companies are looking at budget hotels, guest houses and day trips to cut costs. If its recession, its’ for everyone and the first thing that gets the cut is travel & boarding. And you do not need any Revenue Managers today to guide you on how to cut costs. Travel planners are keenly looking out on the best fares available across various airlines and hotels to ensure that they are able to save each and every penny. And why not, my personal belief is that this should be done throughout the year. You don’t need an economic downturn to teach you the basics of business. The economic downturn is in fact proving to be a mixed blessing for online travel companies, with budget travel and cruise lines benefiting from the current environment. According to Hitwise, UK online traffic to budget travel companies increased by 5.3 percent in September compared with the previous year. The websites of cruise companies experienced an 8.2 percent increase in traffic over the same period. Each of the top three budget travel websites in the UK – easyJet, Ryanair and Travelodge – has experienced at least a 20 percent increase in UK Internet traffic over the last 12 months. Almost 60 percent of visitors to cruise websites are aged 55+, with a further 16 percent coming from the 45-54 age-group. If these figures are any indicators of the global trend, I think we have a great opportunity at hand. Demographics will play a role in the growth of the various sectors online, but the economic downturn will also have an impact. Customers are now looking for all inclusive deals as a way of saving money, and online channels offers travelers with one way of achieving this. India is seen as a growing market for international airline traffic and the current market size is nearly $5 billion (Rs21,000 crore) a year. India, with its huge middle-class population of over 250 million, is like Airways, untapped gold mine. With its present international travel market not even covering 2% of the population, the country offers large opportunities for airlines. Deutsche Lufthansa AG, Singapore Airlines Ltd, Cathay Pacific Airways Ltd, British Airways Plc. (BA) and Emirates are in the process of increasing the frequency of their flights and connecting new destinations here. Everything that goes down has to come up and vice versa. So, when a rebound happens there (in global markets) these carriers will have an advantage as they would have already built capacities in India. Hong Kong Dragon Airlines Ltd (an affiliate of Cathay Pacific), Saudi Arabia’s Sama LelTayaran Co. Ltd (popularly known as Sama), and AirAsia Berhad are also launching operations in the country As for hotels, investment in the right city and right segment is always important and more so in the current times. Good location will be the criteria for the future development. Having a good mix of investments in premium, mid and budget segments will give the group a better robustness to weather the challenge ahead. The fact of the matter is that there is still a mismatch between supply and demand of rooms in India. Bad times, like the good ones, don’t last forever. Yet again a time will come when companies and people will resume their usual spending when the rooms are in short supply. While the next twelve to eighteen months will be challenging, things will be back to normal if we stand up to this challenge. The demand-supply mismatch will again come into the picture with continued shortage of rooms, which will again drive companies to develop hotels Tough times don’t last, only tough people do!!

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April 12, 2009 - Posted by | Hospitality & Tourism | , , , , , , ,

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