Total Pageviews

Sunday 8 September 2013

Depreciating Indian rupee = 12% growth for domestic travel and tourism industry

My colleague Yuga Chaudhari co-authored this story appearing in DNA Money edition on Friday, Aug 30, 2013.

The past 10-15 days have turned out to be quite a surprise for Himmat Anand, founder, Tree of Life Resort and Spa in Jaipur. The 14 villas premium property has been receiving host of inquiries and bookings for the month of November and December, a phenomenon he’s not experienced in the past. “This never happened before because the domestic market usually reacts 2-3 weeks before the travel time,” said Anand.

The sentiment is pretty much the same among travel and tour operators in the country. In fact, experts are of the opinion that the domestic travel and tourism industry which has been growing exponentially in the past years despite economic slowdown is in for a big bounce this business season.

Ashwini Kakkar, executive vice chairman, Mercury Travels, attributed the impact of depreciating Indian rupee (INR) as a key reason for the increased optimism in the domestic travel market. “Domestic travel is set to benefit in a big way. The industry has been growing at 6% odd and it could certainly hit double digit this time around,” said Kakkar.

Anand agrees saying based on the current market scenario, growth in domestic tourism should be upwards of 12% if not more. He added, there is a shift in people’s mindset with a realisation that overseas travel will be challenging. As a result, they are planning and freezing their holidays across domestic destinations.

“In the near term I definitely see an increase in the of number of people choosing domestic travel over internatinal. In fact, a lot of bookings for our property have already come in for the first half of October. The increase in percentage terms this season will be anywhere between 8 and 10% year on year (yoy),” said Anand.

Echoing the sentiment are Regi Philip of travel company Cosmos Agencies and Jai Bhatia, chairman western region, Travel Agents Association of India (TAAI) who expect domestic travel to pick up this year during the holiday season.

In fact, Bhatia is of the opinion that people are also deferring their international travel plans as the INR continues to depreciate compared to euro and dollar. "Domestic travel is expected to get a boost this year as people may look at postponing their international travels," he said.

Industry experts are of the opinion that people are being very cautious and are generally scaling down all types of travel more so the international travel and are think twice before traveling abroad as everything has become expensive. According to Amrit Pandurangi, senior director, Deloitte in India, airlines are also not in a position to provide discounts as oil prices are going up. “International travel, in the absence of any serious airfare reduction, will see a reduction this year. Business travel overseas will also remain muted as companies are focusing on cutting costs," said Pandurangi.   

The general consensus this holiday season is that international travel will take a beating. Based on his interactions with the travel trade, Anand said, outbound tourism is seeing a drop in bookings to the rune of 20-30%. In fact, business to long-haul high-value (holiday packages ranging from Rs 80,000 to over Rs 1 lakh per person) destinations like US, UK and Europe has gone down probably more than 40% or so. Short-haul low-value destinations (holiday packages ranging between Rs 35,000 and Rs 50,000 per person) like Thailand and other Far East countries are seeing a drop of 10-15%.

However, outbound business to South Africa (SA) and Australia is still looking good as the Indian rupee (INR) hasn’t devalued so much (in these destinations) as compared to other currencies. In fact, just a few days back, SA started a very aggressive promotion for the Indian travellers highlighting the fact that the INR will still get them good value in SA.

As a result, bigger tour operators including the likes of Cox & Kings, Thomas Cook, Mercury Travels etc are proposing those destinations where the currency weakening has been of the similar order to the INR so that the impact is not felt by the traveller. “Destinations like Australia, South Africa, Brazil, Turkey, Mexico have seen almost similar devaluation in their currency when compared to the INR. So tourists are open to shifting preferences from say the US or Europe to South Africa or for that matter Australia,” said Kakkar.

With bookings for outbound travel are yet to happen coupled with the volatility in the exchange rate people are taking the wait and watch approach expecting the INR to stabilise and then take a call on their international plans.

No comments:

Post a Comment