Indians’ wanderlust to fuel spending

The average daily rate and the number of room nights booking in alternative accommodations is nearly twice. (AFP)
The average daily rate and the number of room nights booking in alternative accommodations is nearly twice. (AFP)

Summary

Indians are keen on non-traditional accommodation such as hostels, campsites, vacation rentals and chalets

NEW DELHI : Indians will spend $410 billion on travel and accommodation by the end of the decade aided by a growing economy, swelling incomes and youthful population, a new study said. This is about three times the amount ($150 billion) spent in 2019, the last pre-covid year of normal consumption.

Indians are keen on non-traditional accommodation such as hostels, campsites, vacation rentals and chalets, the study by Booking.com with knowledge partner McKinsey & Company said. The average daily rate and the number of room nights booking in alternative accommodations is nearly twice that of hotels and managed chains, with the highest increase in average daily rates for niche alternative accommodation such as country houses and boats. But the figure is higher since alternative accommodations at present have a much smaller base.

Graphic: Mint
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Graphic: Mint

“A large part of the growth in travel will come in the form of alternative accommodations and the shift in the way people book from offline travel bookings to online will continue. Today, we are very bullish on the ‘India opportunity’, largely because the country has one of the youngest populations around the world and the country’s GDP is one of the fastest growing," said Santosh Kumar, country head, Indian subcontinent and Indonesia of Booking.com, owned by the Netherlands-based Booking Holdings.

One of the prime drivers is India’s growing middle-income population. The number of households earning $35,000 annually is expected to increase fivefold over the next 10 years, driving a boom in discretionary spending, the report said. Unsurprisingly, the number of lodging units in India may also double to 290,000 units during the same period.

The number of aggregate trips is expected to rise from 2.3 billion to about 5 billion during the period. Demand will be catered to by the 1,600 aircraft the country will have by then, compared with just 659 in 2019.

India is the fastest growing aviation market in the world with a projected growth in air trips by 7-8% between 2023 and 2030. To match the growing demand, Indian airlines have placed record orders for over 1,000 aircraft.

India saw the strongest post-covid rebound in domestic and foreign travel among Asian countries, with traveller spends reaching approximately 80% of pre-covid levels in 2022. This was followed by even stronger growth in 2023. the country will also rise in the list from the sixth highest global spender on travel to the fourth largest by 2030.

While big metropolises like Delhi and Mumbai continue to be key destinations, tier-II and -III cities such as Varanasi, Coimbatore and Kochi, are seeing remarkable growth in travel.

The business of online travel agents (OTAs) is also growing four times faster than online direct ordering and offline intermediaries. The spends will be projected to double from $2 million–$3 million on OTAs to $6 billion–$7 billion by 2030 as well.

Pre-covid, the hospitality industry experienced 8% growth in revenue 2016-19, but the pandemic led to a reduction in occupancy rates from 65% in 2019 to 35% in 2020. In 2022, there was a rebound, with occupancy rates soaring back to nearly 90% of pre-covid levels.

In 2023, for every night booked at a camp, three nights were booked at villas and 14 nights at guest houses. In 2019, group travellers were mostly the ones booking alternative accommodation. The growth in weekend bookings for alternative accommodation in top leisure and business cities is four to five times higher in 2023 than 2022.

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