Indian travellers spent nearly $94 billion on transportation, lodging and consumption on about 2 billion domestic and international trips in 2018, according to a new report. The momentum in travel is expected to continue and the industry is seen growing at a CAGR of 13% to $136 billion by 2021.
The report—‘How Does India Travel’— by Google and Bain & Co. released on Tuesday, outlines how India spends on travel and the influence of online channels in their final purchase. It says nearly $24 billion in incremental bookings will be made online by 2021, while the share of online travel bookings will increase to 35% in 2021 from 25% in 2018 as, “more people come online, smartphone penetration improves and use of digital payments goes up”.
The report also found that digital is a significant source of research for Indian travellers, who go through five phases—interest, research, booking, experience and sharing—while planning a journey for both business and leisure.
According to the report, during the three research-heavy phases of interest, research and experience, digital plays a pivotal role with over 86% of consumers being influenced by online channels. During this phase, travellers spend their maximum time on search, tour-provider websites, price comparison websites, and travel articles.
“Online video too plays a significant role with 21% of travellers being influenced by this platform. In the booking and sharing phase, nearly 60% of customers book transport and lodging online, and over 50% share feedback online with social media being the dominant platform,” it says.
However, there is a perception amongst consumers that online channels are geared towards premium customers (frequent flyer and experience-oriented travellers) along with a marked distrust around payment and pricing terms, says Arpan Sheth, partner, Bain & Company. Also, mass cohorts, with $55 billion in spending, remain under-penetrated, according to the report.
“It is imperative for businesses to address these concerns in order to effectively tap into the growing base of users,” he says.
Penetrating existing users who exhibit a marked distrust in use of online channels to make bookings, especially around payment and pricing terms and booking experience, remains a challenge as well. The report says there are about 160 million non-transacting active Internet users in India with only 5% of online travellers from tier-2 or tier-3 cities.
Overall, the contribution of travel and tourism’s spend in India has reached developed market levels, from 6.7% of GDP in 2013 to 9.4 percent in 2018.
“This growth, combined with a rapidly growing internet user base and adoption of online bookings will lead to $24 billion in incremental revenues through online channels by 2021,” says Joydeep Bhattacharya, partner, Bain & Co.
“In order to benefit from this trend, businesses need to actively increase new user adoption and increase penetration in the existing user base across the purchase journey.”
Google and Bain also expect a 12% growth in travel-related transportation, 13% growth in lodging, while consumption—including shopping, recreation and food— is likely to grow at 13% over the next three years.