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In which segment do you foresee the most notable price hike / change in the India market?
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Darren Waite
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Indian aviation has always been price sensitive and thus the boundaries between Full Service Airlines (FSCs) and Low Cost Carriers (LCCs) have always been blurred. Airlines such as TATA SIA and Jet Airways are trying to create a niche for themselves and are looking to target the upper middle class through their superior FSC product. This change could be great for business travellers as it will give them different price points; but also poses a risk that the Average Ticket Prices (ATPs) might increase if the travellers chose to take the superior FSC product instead of the LCC product. This change could be massive for the travel industry because Indian aviation has always been dominated by the LCC model with over 60 per cent of the domestic capacity currently on LCCs. In the hotel market, we expect the price hike to be more in the upscale segment rather than mid-scale. This is in line with the higher need of the upscale/luxury segment to address profitability concerns and with being more price sensitive than the mid-scale.
Is the changing dynamics of the airline sector in India reflective in your report?
Yes, changes such as the Foreign Direct Investment (FDI) policy relaxation, general policy outlook due to change of leadership in the country as well as positioning of new entrants such as TATA SIA and Air Asia have been duly considered while making our assessment. 2014 was not a great year for the Indian airlines who were constantly marred by setbacks such as Federal Aviation Administration (FAA) downgrade as well as regular price wars. This was good for business travellers who could enjoy highly competitive market fares on domestic as well as continental travel.
2015 is the year when many airlines would try to come back to profitability by improving their bottom lines. Indian aviation industry as we know is very dynamic and recent changes such as disbanding of JetLite and JetKonnect could not be considered.
This change, however, is directionally similar to our assessment of moderate inflation in the market.
Which factors will lead to increase in hotel room rates in the country?
Increased business confidence following the election results and an expectation of more inbound and domestic demand are factors expected to cause an upsurge in the room rates. Relaxation in FDI policies, and the government initiatives to attract more investors are usually followed by an increased business travel to Indian destinations and within. At the same time, the prices have been quite suppressed in the past two years because of new openings and over-supply. Hotels would perceive 2015 as a period of recovery in line with economic changes.
Any interesting MICE industry trends – outbound from India / inbound / domestic?
We have observed that in the MICE industry in India, the overall volume of events had reduced in the first half of the year. The clients have become more price conscious with regards to incentive travel. The current practice is to call for multiple providers to submit bids for a single incentive group and the lowest bidder wins.
However, post the elections and with the new government in place, we believe that this will change. The market is opening up and there should be an increase in the number of events per client. They will also start looking at ideas and new and offbeat destinations to explore in contrast to the usual destinations like Singapore, Thailand or Europe.
How can your report benefit the Indian travel trade community (from big tour operators to small town travel agents)?
The report is focused on the travel managers and procurement managers who are looking to better understand the risks and opportunities as they begin to budget for 2015. While the report is focused on corporate travel market, it might be a useful guide for trade players and travel agents involved in pricing, revenue management, forecasting and budgeting functions.
Your views / any other significant factor.
There is an increased focus on tourism in the new government policies. In his recent speech on 15th August Independence Day, the Indian PM specifically mentioned the need for tourism focus and keeping the country clean. This is because increased tourism provides employment to a lot of people. The demand from tourists can also fulfill some of the inventory in key cities and help improve the occupancy rates.
