CAPA forecasts India to surpass 50 million outbound by FY2030
CAPA India has released a report on ‘India Outbound Travel in FY2030’ based on extensive market consultation and data analysis, building upon and updating its ground-breaking research originally conducted prior to the pandemic.
For this study and forecasts, CAPA India conducted in-depth research with 250 respondents, supported by 100 detailed, qualitative discussions, and rigorous analysis of tourism and traffic data.
The summary of key findings and forecasts include:
• The number of international outbound departures by Indian residents is expected to grow from 17.4 million in 2019 to over 50 million in 2030.
• As outbound leisure travel grows from 8.3 million to over 28.0 million trips during this period, expenditure on holidays (air and ground combined) is forecast to increase from USD16–18 billion to USD65–75 billion. By 2030, air travel will account for just over 20% of leisure spend.
• Destinations with the largest number of Indian leisure visitors – Dubai, Thailand, Singapore and Malaysia – are short-haul markets. However, the aspirational destinations are mostly long-haul. When asked which destinations they would most like to visit, respondents identified the US, the UK, Australia, Italy and New Zealand. Some of the destinations of emerging interest include Azerbaijan, Croatia, Egypt, Japan, Kenya and Vietnam.
• Indian travellers are increasingly interested in longer duration holidays. In 2018, only 45% said that their average vacation trip was more than 4 days; however, this has increased to 86%, with 5–7 days being the most common.
• Younger travellers are looking for greater immersion and engagement during their travel, with more event-, activity- and adventure-based itineraries, as opposed to relaxing and unwinding.
• All segments consider food and drink to be an important consideration on holiday. Gen Z and millennial travellers are more open to exploring new cuisines, but there is a preference for Indian or familiar food across all segments. Nevertheless, the increased availability of Indian and vegetarian options in many key destinations has resulted in greater ease of travel.
• While word of mouth remains arguably the key influence on choice of destination, social media and movies/TV shows play an extremely significant role.
“In FY2020 there were an estimated 17.4 million international departures by Indian residents, of which 8.3 million were for the purpose of leisure. We forecast the total international departures to grow to 50+ million by FY2030, making India the world’s fastest-growing outbound market and one of the most attractive source markets for global destinations”, stated Manvi Hooda, Practice Lead, CAPA India. India’s overall bidirectional international passenger traffic is expected to reach 140–160 million by then.
She added, “A key feature of the outbound market going forward will be the increasing share of discretionary leisure travel, which, over time, is likely to become the leading driver of traffic, accounting for more than 28 million international departures”.
Udit Agrawal, Team Lead, CAPA India, highlighted, “Demand for international travel is expected to surge because of a structural transformation of the key economic and consumption drivers. In fact, the projected increase in the prosperity of higher-income households will significantly outpace the national average, providing a further impetus to discretionary income available for travel”. He pointed out, “In addition to rising incomes, other key drivers will include increasing air capacity with more nonstop connectivity, liberalised visa requirements, a greater investment in marketing to Indian travellers by foreign tourist boards, and the growing influence of media and social media on the aspirations of Indian consumers, especially younger demographics”.
International travel to/from India has historically been constrained by structural issues, most notably limited air connectivity. But from FY2004, a very liberal market correction took place due to a strategic convergence of key elements for change. Several Indian carriers placed orders for widebodies, some private Indian airlines were permitted to launch overseas routes, bilateral entitlements for foreign carriers from key markets were increased almost threefold, and there was an extensive programme of airport privatisation and modernisation. As a result, in the five years to FY2008, international traffic increased at a CAGR of 15.0%, compared with 3.0% in the five years prior.
However, the decade from FY2010 saw a convergence of events that resulted in a reversal of conditions with a virtual freeze on bilateral liberalisation for foreign carriers, while financial losses in the domestic market impacted the ability of Indian carriers to expand overseas. During this decade, GDP almost doubled and the absolute increase in per capita GDP was 3x than that in the previous decade. But international traffic increased at a relatively anaemic CAGR of 6.8%.
The state of the international market in FY2020 was reflective of a missed opportunity. Tanuj Kapta, Team Lead, CAPA India, pointed out, “Whereas international traffic in FY2000 was actually slightly higher than domestic volumes, 20 years later it was less than half. And Indian carriers combined had a widebody fleet of just under 50 aircraft (and the operational fleet was even smaller), in contrast with more than 250 aircraft in Dubai alone. As a result, 75–90% of passengers on long- and ultra-long-haul routes had to fly indirect.”
However, going forward, CAPA India believes that favourable conditions are once again aligning, as they did during FY2003–FY2008. But this time, the airline industry is much stronger and the economy much larger. Indian carriers have strong balance sheets and a strategic determination to build world-class airlines. As they progressively take delivery of aircraft from their massive, combined order of around 1,500 aircraft, Indian carriers are expected to deploy an additional 325–350 aircraft on international routes over the next 5–7 years. Indian consumers will, for the first time, have a choice between world-class Indian FSCs, LCCs and leading global carriers.
Other factors that will contribute to the growth of international demand include strong economic growth (with GDP expected to double in the next 6–7 years); the development of airport capacity ahead of demand, for the very first time; a focus on hub development by airlines as well as airports; and an expected opening up of bilaterals from FY2025, perhaps modestly and gradually to begin with. Double-digit growth cannot be taken for granted – and there will be several risks, not least of which includes supply chain issues in the short-term – but the conditions are as favourable as they have ever been in the Indian aviation sector.
International outbound leisure travel from India has tremendous potential, but it still needs to be converted, and to be converted at sustainable yields. This will require a strong understanding of the consumer, including demographics and psychographics, supported by continuous investment in researching traveller behaviour and preferences, distribution, point of sale, pricing, marketing effectiveness, etc. to enable data-driven decision-making. Airports will similarly have to adapt their retail, duty-free and F&B formats to align with the rapid evolution of the customer.
‘Know your traveller’ should be a core strategic pillar for stakeholders involved in outbound travel from India.