India: Packaging the “Package-Tour” Tourism Opportunity

By: Sourajit Aiyer

The author is a finance professional in India. Views expressed are entirely personal. For other contributions of Sourajit Aiyer who lives in Mumbai/India, see the recent blog entries.

 

Ironically, India features high amongst the Must-See countries of the world, but Inbound and Domestic tourist flows are far less than the potential. Increasing ‘Package-Tours’ for niche tour experiences might be a potential solution to counter some of the challenges to grow Inbound and Domestic tourism in India (Inbound refers to foreign tourists visiting India, while Domestic refers to resident-Indians travelling within India).

Its advantages may counter the industry’s current challenges: The purpose is to stress the advantages of growing the package-tour business. Package-tours may give a more organized look to the industry, which is still largely unorganized and fragmented in India. It may address the opaqueness of practical information that often challenges prospective tourists while planning for Indian destinations. This difficulty in prior planning of an itinerary causes dilemma in the minds of prospects and delays their decision to travel. More often than not, this is a reason why prospects drop India and instead opt for other destinations which have ample planning resources, even if they have fewer sights to offer than India. A more organized industry might reduce harassment that individual travellers often face from local service-providers/touts. Package-tours may deepen the B2B business, which can create incentives for quality adherence and further investments. The potential pie for each service-provider can be bigger due to synergies that B2B business can give, unlike now when the market is too fragmented. Cash-based transactions are common at many Indian destinations and this limits the government’s taxation earnings. Not to mention that cash-based transactions increase the risk for individual travellers due to the need to carry cards/cash. Even the loss of travel cards or travellers’ cheques is a potential loss. Package-tours may increase the transparency and accountability of the earnings of the industry. That would benefit the governments’ earnings and its ability to invest back into developing tourism infrastructure. Investments into much-needed infrastructure like highways, transport and airports in Tier 2 towns would improve the connectivity and access to popular spots. Inbound tourism is a key source of foreign exchange, something which India’s government sorely needs for its current account deficit. Everyone knows tourism is a large employment generator and a more organized industry might make the employment (and related skilling/training) more sustainable and stable. That may also reduce the need of low-skilled temporary workers to constantly migrate in search of livelihood, a major reason for social unrest and crime in India today. As it is, local crime and national security issues are negative publicity. India’s Tourism Ministry has made several initiatives, including overseas promotion from its 14 overseas offices through brochures/collaterals, trade fairs/industry forums, outdoor advertising/TV commercials; E-Recognition facilitation systems for travel service-providers; Campaigns like Incredible India, Colors of India; and a comprehensive National Tourism Policy. However, it needs to ensure faster movement on regulatory issues and project approvals.

Main USP and target customers for this business: The USP of the package-tour business has to be the convenience factor, rather than costs. Target customers for package-tours are often the mid/high-end tourists, as they have a higher propensity to spend. That works well for the business since package-tours can end up being priced higher than an individual budget travel. Budget/backpacker tourists would prefer individual travel as their cost might be lower. But there may be a chunk in this segment too, who may prefer the convenience of a package-tour to visit India. It might open the market to an entire segment of prospects, who are currently undecided about visiting Indian spots. Many expats work in Corporate India today. But many are unable to visit as many Indian spots as they would want, due to the inconvenience of planning and travelling. These expats, and their families who visit them, form a significant chunk of target customers for package-tours. To put all this into the price multiplied by quantity formula, the objective of this article is to increase the quantity variable. Economies of scale might benefit operators in terms of their ROE, while travellers might benefit from competitive pricing in a larger B2B business landscape. One might also add that Services sector typically has higher operating leverage. This would maximize the throughput for the service-provider at lower-than-proportionate incremental cost and Investment.

Niche tours for experiential travel may create differentiation in a mass market: In a mass business like package-tours where customization might be limited, experiential travel might give a scope for more targeted travel plans as per what an individual customer may want. The objective would be that such niche plans provide some degree of customization in terms of what the tourist wants to see and experience in India. That would mean niche tours targeting specific customer groups, rather than a mass bucket of customers that a typical package-tour concept would entail.

Niche, experiential travel that might find favor in India are Ayurveda/Yoga tourism for healthcare addicts, Rural tourism for experiencing customary ways of life, traditional crafts and culture (it would also be alternative to agriculture earnings for the village communities), MICE tourism for trade fairs, events, conferences, sales incentive trips which combine the event with visiting attractive Indian spots, Sustainable Living/Wellness tourism for high-end customers who want an experience of alternate and stress-free living, Medical tourism for patients who prefer high-quality healthcare and facilities at prices more affordable than developed countries, Historical Sites tourism for those interested in history and culture, Buddhist Circuit to Buddhist sites like Sarnath, Bodh Gaya, Kushinagar, Sanchi, Dharamsala, Rumtek, Tawang and Leh for East Asian tourists from Japan, Thailand, Laos, Singapore, etc, and Extreme/Adventure tourism including treks, hikes, camps across extreme terrain which test human endurance.

Educational tourism to familiarize the aspirants to Indian universities/international schools with a first-hand look at the educational facilities India offers. This may require attracting educational consultants and agents from the target markets rather than the prospective students, due to the cost. Economic tourism is another area worth exploring, given that Corporate India is gaining importance amongst global business circles. The objective would be to facilitate first-hand interactions with the Indian industry which would create awareness amongst global businesses of Corporate India’s capabilities in a specific industry. This is something on lines of corporate roadshows/familiarization trips. Homestay tourism is a concept for tourists who seek a more personal and local experience. This is quite similar to a Bed & Breakfast concept, which is quite popular in the UK.

Marketing campaigns by leveraging on Word-of-mouth, Referral prizes, B2B networks, Digital initiatives and Bollywood locales: While trade fairs and industry forums would be conventional platforms for B2B businesses, utilizing word-of-mouth marketing from existing, satisfied travellers might be useful for targeted marketing within the travellers’ community, which would include several prospects. This presupposes that the quality of service standards and expectations of existing travellers were met, since dissatisfied customers can also cause severe negative publicity. A way to incentivize existing travellers towards word-of-mouth marketing might be prizes for referrals who do convert. Incentives for referrals might make word-of-mouth marketing more impactful.  The B2B aspect of this business means extending the reach of marketing by using the network of the various stakeholders, which might be a more targeted outreach. The job of marketing would be shared by more than one, which is always desirable. The stakeholders in a B2B relationship like this would typically be entrepreneurs working on the ground, and their commitment to grow their business would be a critical driver to deepen the industry. Opportunities for tie-ups between stakeholders to form a value-chain of offerings would firm up competition, make pricing and quality more transparent. Digital marketing would be emailers which include comprehensive information for planning, instead of just showing fancy pictures of the Taj Mahal and elephants. This also includes travel planning portals which help prospects explore options, listen to videos of experiences and actually take their final decision to travel. Bollywood shooting locales have been famous for promoting Indian Outbound tourism to Switzerland, New Zealand and Malaysia, and there is no reason to believe the same could not work for boosting Inbound tourism to attractive Indian destinations. Bollywood movies are being viewed globally, not just by the Indian diaspora, but also by a global audience as they are being dubbed in various languages. It can catch as much eyeballs as any other advertising campaign can.

Imperatives for the government and other stakeholders: The Government’s National Tourism Policy has stressed on speedy implementation of projects, developing integrated circuits, capacity building and new marketing strategies. The Reserve Bank of India has made suggestions regarding monitoring the end-usage of foreign receipts and completion of projects within a stipulated period. The Visa-on-Arrival and E-Visa scheme has also gained popularity. E-Visas issued grew from 9,328 in the Jan to Jun 2013 period to 11,953 in the Jan to Jun 2014 period. Other possible facilitations can include single-window clearance for projects to minimize the time taken for approvals, faster decision-making on existing proposals, investment into roads, airports and transport that improve connectivity between key tourism destinations, ensuring that land acquired for hotel projects is not diverted for resale as it can cause a real estate bubble, increasing the supply of hotel rooms across high-end and budget hotels, keeping the pricing of India tours competitive to Asian peers like Thailand, Malaysia, China, and building information channels that reduce opacity of relevant planning information. Last but not the least, a major social imperative that is required is a change in the attitude of local Indians towards foreign travellers (especially women travellers) so that they do not feel uncomfortable, as well as in maintaining the cleanliness of their own tourism destinations.

Investment opportunities abound for foreign investors and strategic partners: Growing the package-tour business would create investment opportunities into several segments. Investment would be useful from strategic partners in the global tourism business, who can bring in specialized knowledge and service platforms which would benefit this business in India. Opportunities can abound for hotel and resort chains, travel planning providers especially those using e-commerce platforms, event planning companies and experiential travel providers, restaurants chains across fine dining, QSR and coffee shops, hard and soft infrastructure like roads, transport and broadband networks, airport developers for smaller, lower cost airports and training centers for skill-creation and knowledge training in the catering and tour services.

In conclusion, the package-tour business can create opportunities for several more segments apart from those mentioned above. If the tourism footfalls grow, it would enhance income, earnings and employment for the industry, and promote further investments into the sector. Global providers might do well to explore this opportunity in India.