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Wednesday, 16 January, 2019, 12 : 08 PM [IST]

Industry Forecast 2019 - Global Overview

According to a report by BCD Travel, domestic market recorded double-digit annual growth in air traffic with demand increasing by 21% during the first six months of 2018. Forward bookings are extremely postive on the backdrop of India’s strong economic situation TravelBiz Monitor presents excerpts of the report
Air travel is growing faster in India than in any other major market. In June 2018, the domestic market recorded its 46th consecutive month of double-digit annual growth in air traffic, with demand increasing by 21% during the first six months of the year. Even expanding as rapidly as 18% over the same period, supply is struggling to keep pace.

Low-cost carrier (LCC) IndiGo continues to expand, matching the market with a 22% increase in passengers during the first half of 2018. Jet Airways is losing ground, posting growth of less than 10%, as new entrants, including full-service Vistara (+43%) and LCC AirAsia India (+84%), continue their rapid growth and slowly increase market share. The relentless expansion by India’s airlines has driven fares down by 7-10% so far this year.

India’s two main international gateway airports, Delhi and Mumbai, are full. Some airlines have responded by operating larger aircraft, or diverting international route expansion to other cities, including Bangalore, Chennai and Hyderabad. Even so, long-haul fares have jumped 5-6%, largely driven by higher costs.

India’s economic prospects are encouraging. Forward bookings are extremely positive. This trend should continue in 2019 if Prime Minister’s business-friendly government stays in power after April’s general election. Expect business travel demand to slow in the run up to the vote.

More UDAN routes will open to smaller regional airports and flights will increase to secondary cities. But the massive capacity shortage at Mumbai and Delhi will remain a major problem. Mumbai’s new airport opens in 2020, and Delhi could have more capacity from 2021. Vistara and GoAir will qualify to launch their first international routes by the end of 2018, with AirAsia India following close behind.

IndiGo also plans to expand internationally. Most new flights will be to destinations elsewhere in Asia and the Middle East. However, intense competition means they are unlikely to be able to raise domestic fares by more than 2% to 3%.

Hotel
Demand is surging not only for business travelers but also for leisure and the vast pilgrimage market. Hotels are opening fast to meet this burgeoning demand, especially budget brands like Lemon Tree Hotels.

In July 2017, India introduced a Goods & Services Tax (GST), applied to all but the very cheapest accommodation. At the upper end, 18% GST applies to daily rates between INR 5,000 (roughly US$73) and INR 7,500, with 28% applied to rates above INR 7,500.Coming on top of normal rate increases, GST has made Indian hotels, especially luxury ones, noticeably more expensive. Indian companies are also finding it complex to reclaim GST. Some hotels have reduced their daily rates below INR 7,500 to avoid the top rate GST. At the same time, some Indian companies have shifted policy to include mid-range hotels, priced in a lower GST band.

Foreign investment in India’s thriving economy means demand from both domestic and foreign travelers will continue to grow in 2019. Rates will soar by 6% to 8%, and maybe by as much as 10% in major business hubs New Delhi, Mumbai and Bangalore. Other cities with strong demand potential include Pune, Ahmedabad, Vijayawada and Hyderabad

India’s booming meetings market
Meeting numbers have shot up by around 25% to 30% in India in 2018, as companies invest heavily in promoting products and bringing employees together.

Chennai, Hyderabad and Gujarat are all popular destinations.

Rates have risen by 5% to 7% and a similar increase is likely in 2019, because the market looks set to remain buoyant.

Ground Transporation
Rail is not used by business people in India, where air is regarded as a much more aspirational way to travel. India is looking at introducing high-speed rail, but until then the government is upgrading rail connections from its three main business hubs to secondary cities.

 
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