New Delhi/Mumbai: About three weeks ago, Expedia India Inc. offered a discount deal on domestic air tickets of Rs 600 on all destinations, leading to a surge in bookings—by 350% over the previous month. Trade and industry say domestic tourism has been a collateral beneficiary of the slide in the rupee.
Enthused by the response, Expedia is now offering a discount of Rs 1,000 on an air ticket if tagged with a hotel booking.
It’s not the only one offering such deals. Many travel agencies have begun to do so to tap the surge in demand as Indian tourists shift their focus to domestic travel this summer.
“The leisure outbound travel has taken a double hit with the depreciating rupee and rising air fares. There has been a combined hit to the pocket of anywhere between 18% and 40% when compared with last year,” said Raja Natesan, chief operating officer, TUI India.
Natesan said some established agents reported 30% fewer enquiries this summer for international holidays compared with last year.
Favoured destination: A file photo of tourists in Srinagar. Destinations such as Kashmir, Leh, Ladakh and Sikkim, which thrive on foreign tourists in a normal year, are seeing a spurt in Indian travellers. Photo: Waseem Andrabi/HT
“My wife and I planned to go to the US this summer, but then we changed our plans because as compared with last year we would have to pay around 40% more,” said a senior banker with a public bank, who did not want to be identified. The rupee’s slump “has a real impact on short-term decisions like these”.
The Indian currency crossed Rs 56 per dollar on Wednesday’s close, compared with Rs 45 per dollar a year ago.
The number of Indians travelling abroad during 1991 was 1.9 million, which rose to 12.99 million in 2010 with a compound annual growth rate of 10.5%, according to the tourism ministry. In 2010, the number of Indians travelling abroad registered a growth of 9% as compared with 1.8% growth in 2009. Data for 2011 wasn’t available.
International tourism expenditure by Indians has increased to $14 billion in 2010 from $1.3 billion in 1997, according to a report on the Indian outbound market by European Travel Commission and the World Tourism Organization.
Those who might have holidayed abroad are now thinking local.
“There are many people who wanted to graduate from domestic travel to international travel this year, but now have postponed their plans till next year. This has fuelled domestic travel demand,” said Manmeet Ahluwalia, marketing head of Expedia India.
Destinations such as Kashmir, Leh, Ladakh and Sikkim, which thrive on foreign tourists in a normal year, are seeing a spurt in Indian travellers.
This is borne out anecdotally. Ron Feemster, a US expatriate who visited Kashmir last week with one of his friends, said there were many more Indian travellers than they expected. “We were on a houseboat, which is popular with foreign travellers. People over there told us that we came in at the right time because suddenly there were lots of Indian travellers and houseboats weren’t available.”
Travel agencies say they have observed a huge demand for domestic packages even though rising domestic airfares continue to be a challenge.
“With prices increasing for outbound, people are taking breaks where price is controllable,” said Rajiv Duggal, managing director, Kuoni Travel India Ltd. “The trend is that international clients are opting for domestic holidays or short-haul holidays. We are also seeing a huge demand for our weekend packages for destinations at drivable distances and box packages that include typical two nights, three days stays, with breakfast. They cost around Rs 5,000. We already had such packages, but we never presumed this much demand.”
Domestic airfares, which are around 30% more expensive this summer, still pose a challenge, Duggal said.
“Many travel agencies including ours are in the process of re-contracting on airfares with airlines, but it’s not easy,” said Duggal.
Yatra Online Pvt. Ltd. is also focusing on localized packages, such as holidays to destinations that are a four-five hour drive away from major cities for weekend breaks.
Destinations in Kashmir and the North-East “are in huge demand, because we have sold out on all these packages for this summer”, said Pratik Mazumder, head of marketing and strategic alliances at Yatra .
Other destinations in demand are in Rajasthan and Kerala, which usually see lean demand in summer.
That’s partly “because many luxury resorts are cutting down their rates by 30-40%,” said Expedia’s Alhuwalia. “Normally, for a plush, luxurious resort in cities like Jaipur, Udaipur and Bikaner, it costs around Rs 9,000-17,000 a night.”
Kuoni’s Duggal said that by June-end the company expects growth in domestic travel revenue of around 20% over the year earlier period. The industry needs that growth.
“This summer we will have to do more volume, because our margins are going to be low,” said Duggal. “The margins and profitability are going to be 20-30% lower than what we have thought of earlier, so based on the volume, by June end, we expect 18-22% increase in our domestic travel business.”
Thomas Cook said that it has seen an upward trend of over 30% in the domestic business this season.
Other than domestic destinations, short-haul destinations such as South-East Asia have seen growth, travel agents said.
“There has been a 30-35% increase in Indian travellers going to South-East Asia, as compared with last year,” said Expedia’s Alhuwalia. “However, they are downgrading their accommodation from a five-star category to four-star or three-star and also cutting short on holidays from eight-nine days to five-six days.”
With the rupee having slumped, many US travellers are showing interest in coming to India, but there hasn’t been any significant momentum, yet. “On inbound from the US, we could have made some money, but we are in a period where outbound is drying up,” said Kuoni’s Duggal. “So, we are stuck from both sides.”
This is the second in a five-part series on living with a week rupee.
Next: Education loans.