An analysis of the Indian outbound travel market with special insight in the situation in Brussels.

1. A general snaphot:

India is one of the fastest-growing outbound travel markets in the world. International tourism departures from India have grown from 3.7 million in 1997 to 11.8 million in 2010 and international tourism expenditures have increased from $ 1.3 billion in 1997 to $ 10.6 billion in 2010. With currently more than 28 million passport holders, the potential is still huge. The World Tourism Organisation (UNWTO) predicts that India will account for 50 million outbound tourists by 2020 and the total outbound spending will exceed $ 28 billion.

Economic growth

With more than 1.1 billion inhabitants and GDP increasing by more than 8% every year, India offers enormous potential for future growth in outbound travel.

This economic progress has helped to create a proportionately small but absolutely quite large “middle class”. Estimates suggest that those whose incomes permit them, within India, to have a purchasing power sufficient to be so categorised may well number between 60 and 100 million people in 2000. Of these, research suggests that around 25 million have incomes which are sufficient for them to travel abroad should they wish to do so, and it also appears that this group is increasing quite rapidly.

Economic liberalisation

An important driving force has been the steady move towards economic liberalisation in India. The decade of the 1990s has seen dramatic changes in the nature of the Indian economy and its interface with the rest of the world. Considerable foreign investment has been attracted, and some high technology industries have made substantial inroads into India’s employment scene, especially in the area of information technology but also in areas such as communications and pharmaceuticals. Perhaps the most obvious group to have emerged as a result of such developments has been the well-educated and well-remunerated young “technocrats” of the IT industry, but there has also been an upsurge in prosperity on the part of other groups such as small, self-employed businessmen and traders who have benefited directly from economic liberalisation. This latter category has emerged as a key element in Indian outbound travel, both to short- and long-haul destinations.

Foreign exchange

Illustrative of the more liberal approach to economic management in India has been the progressive easing of restrictions on the allocation of foreign exchange to Indian nationals during the 1990s. The “Basic Travel Quota" (BTQ as it is known) allowed Indians only US$500 a year until 1996 for leisure travel purposes. Although many travelers up to that date were reported as having private access to offshore funds which allowed some travelers to call at intermediate countries to collect their funds before travelling on to their final destination, these restrictions nonetheless constrained international travel demand for obvious reasons. Between 1996 and June 2000 the allocation was raised to US$3,000 per person, a sum which was raised in 2000 to $ 5,000 a year and now is at $ 10,000 a year. For business travellers and those going abroad for other non-leisure reasons, such as for medical treatment, attending conferences etc., the allocation stands at $ 25,000 per person per year. In effect, these changes have removed virtually all constraints on international travel resulting from foreign exchange allocation policies.

Furthermore, the process by which the system is administered has been greatly simplified, with the central bank – the Reserve Bank of India – delegating the administration of the system to authorized foreign exchange dealers in the commercial banks.

Indians can pay for international transport services in rupees, but are required to meet all other costs of travel, such as accommodation, in foreign currency. The Indian travel trade believes that the reforms to the system which are now in place have been a major source of stimulus to India’s outbound travel market.

Airport and airline capacity

Until recently, only five airports – Mumbai, Delhi, Chennai, Kolkata and Trivandrum – were considered as international gateways. However, with the rapid development of direct flights from other airports to foreign destinations, the government conferred international status on Ahmedabad, Amritsar, Bangalore, Calicut, Cochin, Goa, Guwahati, Hyderabad, Indore, Nagpur, Pune and Srinagar.

The Indian Government has a programme underway to invest around US$10 bn over ten years to upgrade India’s main airports and to modernise air traffic services. The two principal international airports, Mumbai and Delhi, have been partially privatised and are being modernised. Seven new greenfield airports are to be built under 'BOOT' (build, own, operate and transfer) contracts – the first two, in Bangalore and Hyderabad, opened in 2008.

A recent phenomenon has been the development of point-to-point international services to cities outside India’s traditional gateways. In 2000, Mumbai, Delhi and Chennai had a combined market share of outbound passenger traffic of 73.4%; in 2008, this had fallen to 57.3%. Airports which showed the biggest gains over this period were Bangalore, Calicut, Cochin and Hyderabad.

In March 2010 10 airports in India provided direct scheduled flights to Europe: Delhi, Mumbai, Ahmedabad, Amritsar, Bangalore, Calicut, Chennai, Goa, Hyderabad and Pune.

At that time 12 airports in Europe were served by direct scheduled flights from India: London (LHR),Amsterdam, Brussels, Frankfurt, Helsinki, Istanbul, Rome (FCO), Moscow (SVO), Munich, Paris (CDG), Vienna and Zurich. (In addition, there are a few flights from Frankfurt, Derby, Manchester, Gatwick, Moscow DMO and Leningrad catering for European holidaymakers bound for Goa).

Since 2003 India has very largely liberated its air transport regime, signing many open-skies (or more limited) agreements with other countries. However, only very limited rights to fly charter services have been granted.

The liberalisation of air services was followed by a massive expansion in services – perhaps an overexpansion, since some were subsequently withdrawn, even before the economic crisis hit air travel in 2008-09. Weekly non-stop scheduled flight capacity between India and Europe, according to data from SRS Analyser, fell from 85,000 seats in March 2007 to 82,000 in March 2009 and 79,000 in March 2010. Inspite of the expected recovery in air travel out of India, programmed capacity in September 2010 shows a further reduction, to 75,000 seats.

Weekly scheduled flight/seat capacity from India to Europe (westbound only):March 2010 September 2010

Airline Alliance Flights Seats Flights Seats

Air India — 45 13,622 45 13,622Lufthansa Star 53 13,495 49 13,073British Airways OneWorld 42 12,998 45 10,625Jet Airways — 42 11,384 42 11,126Air France Sky Team 19 4,980 19 4,802Turkish Star 14 4,201 14 4,312KLM Sky Team 7 2,982 7 2,058Swiss Star 11 2,596 11 2,596Virgin Atlantic — 7 1,785 7 1,785Delta Sky Team 7 1,701 7 1,701Finnair OneWorld 6 1,626 6 1,626Aeroflot Sky Team 7 1,526 7 1,526Kingfisher — 7 1,519 14 3,038Transaero — 4 1,407 0 0Austrian Star 5 1,086 6 1,284China Airlines — 3 867 3 867Thomson Fly — 3 648 0 0Thomas Cook — 2 502 2 502Aerosvit — 0 0 2 460

Total 284 78,925 286 75,003

Air India's routes include Delhi-London (10 flights a week, 7 of which originate in Calicut), Ahmedabad-Mumbai-London (7), Amritsar-London (4), Delhi-Frankfurt (7), Hyderabad-Mumbai-Frankfurt (7), Ahmedabad-Frankfurt (7) and Mumbai-Delhi-Paris (30). Following Air India's merger with Indian Airlinesin 2007, it withdrew from many unprofitable routes, including Amsterdam, Birmingham, Brussels,Düsseldorf, Geneva, Istanbul, Manchester, Moscow and Prague, but in 2009 it boosted capacity on its core routes. Many Air India flights to Europe fly on to destinations in North America.

Lufthansa's weekly flights to Frankfurt include 7 from Delhi, 7 from Mumbai, 6 from Bangalore, 3 from Calicut, 7 from Chennai, 5 from Hyderabad and 6 from Pune. To Munich there are 7 from Delhi, 5 from Mumbai and 7 from Chennai. It seems that 2 of the flights to Hyderabad and 3 to Pune will not be flying in September, but there will be an additional flight to Bangalore.

British Airways has 12 flights a week from Delhi, 14 from Mumbai, 7 from Bangalore, 4 from Chennai, and 5 from Hyderabad, all to London (LHR).Jet Airways has 14 flights to London (LHR) from Mumbai and 7 from Delhi. Since 2007 it has also stablished services to Brussels (now 7 from Mumbai, 7 from Delhi and 7 from hennai), which it is eveloping as its European hub for transatlantic operations.

Kingfisher has 7 flights a week from Mumbai to London (LHR). This summer it will also be running flights a week from Delhi to the same destination.

Air France has 7 flights a week from Delhi, 6 from Mumbai and 6 from Bangalore, all to Paris (CDG).

Turkish Airlines has 7 flights from Delhi and 7 from Mumbai to Istanbul.

KLM has 7 flights from Delhi to Amsterdam.

Swiss has 6 flights from Delhi and 5 from Mumbai to Zurich. It has cut 2 flights since March 2009.

Virgin Atlantic has 7 flights from Delhi to London (LHR), but has withdrawn a second daily flight.

Finnair has 6 flights from Delhi to Helsinki.

Austrian has 5 flights from Delhi to Vienna.

Aeroflot has 7 flights a week from Delhi to Moscow (SVO).

Aerosvit is flying twice a week from Delhi to Kiev.

2. The Indian tourist

The Importance of HolidaysThe Nations Brand Index Survey provides an insight into what residents of India consider to be important in their life. Asked to rate a number of statements on a scale of 1 = not at all important to 5 = extremely important it can be seen that those in India tended to agree more strongly with all the statements than did the typical respondent. This is a common trait of market research undertaken in India so it is more insightful to look at the relative level of agreement with each statement than the absolute levels. Doing this reveals that ‘career’ and ‘keeping fit and healthy’ are definitely the top priorities for Indians, a little ahead of spending time with family and friends.Having good quality food and drink and ‘Self-development’ are important too, while taking holidays within India is seen as rather more important a priority than taking foreign holidays, with the latter considered a rather lower priority than having fashionable clothes or listening to music.

Tabel invoegen

Attitudes to TravelAnother question asked on the Nations Brand Index Survey looks at attitudes towards holidays, with respondents asked to state their agreement with a number of statements on a scale of 1 = strongly disagree to 7 = strongly agree. It suggests that ‘natural scenic beauty’ is a key consideration, as is the opportunity to see ‘famous and well known locations’. However, somewhat at odds with this is the fact that ‘exploring new places awayh from the crowds’ is also highly valued. It is interesting to see that vacations being ‘exciting’ is more important than their being ‘relaxing’, while respondents tended not to agree strongly with the statement ‘I a man experienced international traveller’.

Tabel invoegen

Attitudes to Destinations

Many Indian travellers are looking beyond conventional destinations and are going to out of the ordinary locations because of the stature attached to going somewhere new and different. In Thailand, for example, Indians are going to places such as Koh Samui or Chiang Mai instead of Bangkok. Cruising is also emerging as a popular holiday option among Indians. There is an increased demand for offbeat and far-flung places, adventure tourism, theme holidays and spa and wellness getaways in destinations such as Africa, Alaska, Bali, Morocco, Greece, Egypt and Turkey, Japan and New Zealand (India Brand Equity Foundation). In Asia, Indian visitors to Malaysia are exploring cave adventures, jungle treks and various water-based activities aside from the regular shopping fare.

Indian visitors to Switzerland are exploring other areas of the country aside from the regular route, which includes Zurich, Interlaken, Lucerne and the Lake Geneva region. According to Switzerland Tourism, Indians are starting to visit the country in winter as well for ski resorts such as St. Moritz.Indian travellers to Austria are starting to explore other areas beyond Vienna, Salzburg and Innsbruck. Lower Austria is a draw for those interested in cruises along the Danube and looking at the vineyards.

In Britain longish stays are getting popular in Scotland, Windsor, the Shakespeare belt, Cornwall and Devon, many of which are familiar to many Indians educated in English through textual references.

Wine trails in the south of France are also evoking interest among Indian travellers.

Some high-end Indians are also spending a lot of money in Tarragona, in the south of Spain, as well as in the areas around Barcelona and Malaga.

Indians are visiting entirely new destinations too such as Jordan, Cambodia and Vietnam, the numbers for which are expected to go up if direct flights become operational.

Going abroad on honeymoon is becoming increasingly fashionable in India. Among Indian newly-weds, although they may be first-time travellers, the tendency is to opt for a single destination; Mauritius, for example, is especially popular. Among the wealthier couples,there is a small, but growing segment that is choosing Europe for their honeymoon.

Sources of Holiday Inspiration

A 2007 Nations Brand Index Survey asked respondents about the ways in which they mightbe influenced or inspired to choose places for a holiday. Respondents could tick as many influences as they wished and it can be seen that once again the Indian panel wereconsistently more likely to cite each option than was the typical respondent, with this not the case for only ‘A previous visit to that country’.

Things seen on television about travel and material read in books were key sources of influence, as was things that had been discovered while at school, all three of these getting more mentions than did ‘Something a friend or relative told you’.

Those in India were much less likely to say they had been influenced in their choice of destination by music from a country, celebrities, or products/brands from a country.

Planning and BookingGenerally Indians prefer word of mouth and personal recommendations, including from travel agents, to detailed reading when making their travel decisions. Although they may value literature for browsing, this literature may not be that pertinent to their actual travel decision according to research conducted by the European Travel Commission.

Travel agents and tour operators are relied upon, especially for First-timevisits to a destination. They are seen to be very experienced and knowledgeable about travel and can provide brochures containing essential information and itinerary possibilities.

Food is an important consideration for Indians planning to travel abroad, most acutely for those who are vegetarian. Occasionally those planning a group tour will request that the travel agent or tour operator provides a detailed daily menu for the entire trip. Independent travellers will try to find out about the type and quality of restaurant available in the destination by speaking to past visitors, friends or relatives who live in the destination or by conductingInternet searches.

The more seasoned Indian traveller may be less reliant on travel agents for planning a trip, especially if they are returning to a destination that they have visited previously, or are going to be visiting friends or relatives.

Booking MethodsWhen buying travel there are a number of distribution channels available to consumers. They may research and book their trip using a combination of traditional partners and online options. It is estimated that more than 90% of outbound travel bookings are channelled through travel agents or tour operators. Customers rely on agents for an extremely high level of servicing, often making multiple and last minute changes to their travel plans.

Booking lead-timeIndian consumers have a short lead-time for booking their holidays, but tend not to book in haste, preferring to compare prices and allow sufficient time to negotiate with travel agents.

From a question asked on the International Passenger Survey (Chart 5.3) it is evident that 36% of those in India decide on their trip between one and three months ahead of travel, while 18% decide between 3 months and 6 months ahead of making the trip. This can be due to Visa requirements in many abroad destinations.

Tabel invoegen (p23)

Age of travellingIndians are travelling at a younger life stage than before.

Life stage 2008

30

13

7

Carefree: Young and single, no responsibility

Spending years: Married, divorced, widowed with no children

Responsible years: Middle aged with depended children

Settled years: Married, divorced, widowed with independent children

50

Life stage 2011

36

18

38

7

Carefree years

Spending years

Responsible years

Settled years

A more diverse traveler todayLooking at the socio economic class spread, we see that there is an increase in travelers from the ‘mid-affluent’ base. This is the typical middle class group. Their numbers in India are growing and they have the money and the interest to spend it on traveling nowadays.

Socio Economic Class Spread (SEC) 2008

72

4

22

2

SEC B1: Smaller business owners < 10p

SEC A2: Junior level corporate sector or large businessmen

SEC B2: Smaller business owners >10p

SEC 2011

62

4

25

9

SEC A1: Typically affluent, Mid to senior level corporate sector

A1B2A2B1

Indians enjoy a wide range of activities, but social and cultural factors may limit these in individual destinations. In Europe, they are reported to place a strong emphasis on enjoying the landscape and the weather, and on historical and cultural sightseeing. Shopping is an important component in all destinations, but in Europe it seems to be concentrated on souvenirs and presents for family and friends rather than on branded products for themselves. This can be explained by the fact that most brands are opening stores in India and that prices are lower in their own country.

Travel motives

77

64

23

53

43

42

0 10 20 30 40 50 60 70 80 90

20102008

Primary travel motives

28

20

11

9

8

4

3

33

11

Visiting friends/ relatives

Good leisure activities

Scenic natural beauty

Romantic destination

Tourist friendly

Affordable flight fares

Kid friendly

Good entertainment

Culture/ heritage

Others

Good leisure activities

Scenic and natural beauty

My friends, relatives stay there

At first sight it might be somewhat surprising that visiting friends and relatives has become more and more the main motive to travel. An explanation we find in the changing Indian Diaspora:An estimated 27 million Indians live abroad scattered across 190 countries. This large group can be split up in different groups with different characteristics. The first group is the old diaspora. As part of the British Empire many Indians were used as labor forces in countries like South-Africa, Fiji, Mauritius, Guyana,… Many Indians also fought for the empire in several wars as the Boer war and the two World Wars. This were poor and unskilled people, who started a new life in this countries.The following group is the group that in recent years went to the Middle East. Most of these Indians come from the state of Kerala. They are unskilled laborers, responsible for the physical transformation of the Gulf states the last years.Another important group of emigrants is the so-called new diaspora group. These are highly educated Indians moving with their families to developed countries as Canada, Australia, New Zealand and the United States. They mainly work in the IT-sector or as an engineer. The last group of emigrants is the group of students doing their higher education abroad. There are an estimated 450,000 Indian students abroad, mainly in Canada, United States, United Kingdom and Australia. Every year 150,000 new students go abroad to study. They come from rich families, who are willing to pay the costs of an education abroad.

These last two groups, the new diaspora and the students, are responsible for the growing importance of visiting friends and relatives as a travel motive. They come from high-end classes and have the money to visit someone abroad with the entire family. From a tourist perspective this can be a lucrative business.

It is interesting to see that the segment of customized tours is growing. This is the segment where travelers on average have the highest spend. This makes them off course an interesting target and a lucrative segment.

33

15

51

Group packaged tours

Customised tours

Self organised travel

31 in 2008

10 in 2008

58 in 2008

Type of tour

Booking with a local travel agent and with an online travel agent have risen remarkably the last years. On the other site we see that booking trips through friends and relatives in destination and with tour operators has gone down spectacularly. The importance of local agents and online agents as link between a destination and the travelers has evidently increased with these numbers.

The Indian travel trade is fragmented and highly competitive. There are over 20,000 retail travel agents spread across the country, but most are simply ticketing agents focusing largely on the domestic travel market and on selling tickets and pre-packaged tours. Few are able to cater to the demands of independent travellers going overseas.

The top 10 agents of most airlines are consolidators, operating on high volumes and low margins through a network of sub-agents. Competition between them is fierce, with aggressive marketing and extensive use of tactical promotions. Most create their own brochures and market their own programmes, and some have developed (or are developing) their own distribution networks of smaller independent agents.

We can categorise the trade as follows:– The three big tour operators;– Medium sized operators: wholesalers or retailers, catering for FIT or group travel, operating regionally with moderate marketing budgets, and specialising in perhaps 8-10 destinations;– Small operators: retailers, operating in a single city with miniscule marketing budgets, and catering largely for FIT customers, although they are usually not very good product planners and copy the itineraries of the Big Three in the four or five destinations in which they specialise;– Niche operators: retailers providing detailed itineraries in a single destination for the more sophisticated travellers (FIT or business);– Ticketing agents supporting the small and niche operators.

Travel booking medium

33

27

12

5

22

42

15

28

14

10

0 5 10 15 20 25 30 35 40 45

2010 2008

Local travel agents

Tour operator

Online travel agent

Through transportation booking office

Through friends/ relatives in destination

The three biggest outbound tour operators in India are Cox & Kings, Thomas Cook and SOTC/Kuoni.Other important outbound operators include Travel Corporation India (TCI), Kesari, Club 7, Dewan Travels, Holiday Representations/Narula Travels, International Travel House, JTB Travel, Le Passage to India, Mercury Travels, Orbit, Raj Travels, Sahara Global and Xpress Holidays.

The most popular travel sites are MakeMyTrip and Yatra. Other important sites include IndiaTimesTravel, Travelguru, TripMela, Cleartrip, (Cox & King's) Ezeego1, (Tulip Travel's) Xplorz, Arzoo, Desiya, iXiGo, Expedia and Travelocity.

In the MICE sector the main specialists are Abercrombie & Kent, Alpcord Network, Creative Travels and TCI. The leading travel management companies (TMCs) looking after corporate and leisure travel business for large corporate clients are BTI, Amex, FCM and Carlson Wagonlit.

Per person trip expenditure

1608

1645

1580

1590

1600

1610

1620

1630

1640

1650

2008 2010

USD

All of the main destinations for Indian tourists have gone down (in percentage). This means that Indian tourists are more open for new destinations and are going beyond the beaten tracks. A growing group of people have the luxury to travel yearly. This is the main group that is looking for newer destinations. Another explanation can be that Indian travelers have more confidence in traveling and are less fearsome to explore new, more adventurous or prestigious destinations.

Total trip expenditure 2010

46

23

31

Travel & stay

Shopping

Other activities

Top destinations

23

12

10

10

9

4

4

32

17

15

12

10

3

5

0 5 10 15 20 25 30 35

Singapore

2008 2010

Malaysia

Dubai

Thailand

Nepal

USA

Australia

Indian tourists in Brussels

Trend of Indian overnights 2006-2010

0

20000

40000

60000

80000

100000

120000

2006 2007 2008 2009 2010

Brussels

Antwerp

Total

Arrivals 2005 - 2010

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

2005 2006 2007 2008 2009 2010

Nederland

Vlaanderen

Overnights 2008 -2010

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

2008 2009 2010

Nederland

Vlaanderen

Overnights BRIC countries 2007-2011

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

2007 2008 2009 2010 2011

India

China

Brazil

Russia

According to Pacific Asia Travel Association (PATA), 40% of all outbound trips by Indians are for business purposes, while leisure, visiting friends and relatives (VFR) and other reasons each account for 20% of outbound trips from India. As we can see, this does not apply to Brussels. The business part counts for far more than 40% of the trips. Visiting friends and relatives is almost non-existing in Belgium. Brussels is a very popular MICE destination. This is a possible explanation for the high level of business tourists. Another reason can be the successful economic relations between Belgium and India. Belgium is the second largest EU-exporter to India, responsible for 20% of the total amount. We are also the third largest importer of the EU. Accounting for 14% of the total EU-import volume. It is reasonable to assume that these close economic contacts induce many business trips.

The Indian market in Brussels by motive of stay (2010)

42%

44%

14%

Leisure

Congress, conferences and seminars

Other business

International tourist arrivals and overnights in European destinations, 2009-10(Volumes in ‘000 and % change on previous year)

Arrivals NightsVolume % change Volume % change2009 2009 2010 2009 2009 2010

UK 29,899 -6.3 -1.0 na na naSwitzerland 8,294 -3.7 4.0 20,164 -6.2 1.4Germany 24,220 -2.7 11.3 54,824 -3.0 10.0Turkey 27,077 2.8 5.7 na na naNetherlands 9,921 -1.8 11.0 25,014 -1.0 8.7Austria 21,355 -2.6 3.0 89,864 -3.2 0.0Belgium 6,814 -4.9 5.9 15,451 -5.6 4.8Greece 14,915 na 5.4 53,399 -6.4 naItaly 41,125 -1.6 0.9 na na naPoland 3,862 -4.6 7.1 9,609 -5.5 4.7

International tourist arrivals and overnights from India in European destinations 2009-10 (Volumes in ‘000 and % change on previous year)

Arrivals NightsVolume % change Volume % change2009 2009 2010 2009 2009 2010

UK 273 -24.1 34.0 na na naSwitzerland 136 3.2 21.8 324 -0.9 21.1Germany 110 -15.4 28.8 359 -14.9 26.2Turkey 55 -1.2 15.1 na na naNetherlands 50 -2.2 29.6 100 -3.4 32.9Austria 48 1.3 25.6 97 -1.9 14.0Belgium 36 -34.9 18.2 73 -33.4 18.5Greece 25 -32.0 na na na naItaly 15.8 -1.5 28.6 395 1.3 29.3Poland 9 18.3 12.0 34 32.1 5.6