September 18, 2015 TnH Global 0

Strong USD may affect choice of destination, not decision to travel

For the forthcoming festive-winter season, travelers are giving preference to short-haul and value destinations over long-haul destinations.

Although the rupee keeps fluctuating time to time, it had not seen such a fall in its value as deep as the recent one in its value since 2007. With in- creasing income and aspiration of people, out- bound travel from India has seen a phenomenal growth over the years. Even a tepid economic sit- uation in recent years could not dampen outbound travelers’ spirit to travel. It is also a fact that Indians who can afford overseas travel prefer to travel overseas rather visiting domestic destinations.

However, the latest devaluation of rupee against USD due to external factors has increased the cost of overseas travel exponentially; dampening the mood of those travelers who were planning to travel oversees in the forthcoming festive season. This decrease in value of rupee is unexpected and untimely, as the festive season is around the corner which is an important occasion for people to travel abroad. Exchange ratesof currency always influence a traveler decision to travel outside his country. Value of US dollar is a factor that influences the Indian outbound travel demand. This story explores the extent to which the appreciation of US dollar against rupee will affect the Indian outbound travel.

In 2014 Indian outbound travel saw a growth of about 10% as compared to the year 2013. Indian outbound travel had recorded 9% growth in 2013 in terms of the number of trips, compared with 8% growth in 2012.

In the backdrop of devaluation of rupee, experts feel that increased cost of travel does not always lead to cancelation or postponement of travel plans; rather travelers like to revise their choice of destinations.

“Increased cost of travel does impact some travellers’ decisions to travel, but it necessarily doesn’t translate into cancellations. There is at best a shift of destination – perhaps from long haul to short haul,” said Vishal Sinha, COO, TUIIndia, adding, “Some extreme shifts might mean that customers amend travel plans from outbound to domestic but for peak dates over the next over quarters, Indian destinations are also not cheap, especially during Durga puja, Christmas, New year, etc.”

Sinha doesn’t see any impact on honeymoon plans also; however, some might amend their plans to change their category of hotels or do split stays to get best of both the worlds. Sinha advises prospective travellers worried over increased travel budget caused by appreciation of USD to book early. “We have already blocked inventories for many short haul and long haul destinations including Europe departures for the winter season,” said Sinha.

Manmeet Ahluwalia, Marketing Head, Expedia India believes that the devaluation of rupee against dollar will have little impact on Indians’ plans to travel overseas. “The crash of rupee against dollar will not have much impact on over Navaratri and goes up-to Diwali, wherein most In-dians prefer short haul vacations around Southeast Asia or Middle East, thus it is least likely to impact travel. Given the fact that there are still 5- 6 weeks before the onset of the festive season, we can hope for rupee to recover in the meantime,” said Ahluwalia.

According to a recent Expedia Holiday Activity Report, if the dollar got expensive, Indian travelers wouldn’t cancel their bookings completely. Instead they would adopt different measures to keep within their holiday budget like- 63% would cut down on shopping, 38% would look at shifting to a more affordable destination, 32% would avoid places of interest that are ticketed, 32% would downgrade hotel star category while 25% would reduce vacation days.

According to Jatinder Paul Singh, Senior Vice President & Head – Sales & Distribution Leisure Travel (Outbound), Thomas Cook (India) Ltd, the rupee movement is not a new phenomenon, and with travel now a must-do in the Indian calendar, consumers will merely reassess their choice of destination, not their decision to travel. “For the upcoming festive-winter season, short haul and value destinations will be the order of the day- and clearly we’re seeing encouraging uptake,” Singh added. “Despite prophesies of doom and gloom, our Summer 2015 numbers were indeed robust with growth upward 27% for Europe and FIT segment saw highs of over 32%,” said Singh. TCI’s forward bookings for winter 2015 are looking very strong- upwards of 25%. Thomas Cook (India) had a good outbound business in the summer this year.

Irrespective of strengthening dollar, there has been no stopping the Indian travelers, says Singh, adding, “Our trend data indicates that even the most price-sensitive will continue to travel, albeit with a shift to short haul on the radar over and above traditional favorites.” For instance, while Europe has always been an attractive and aspirational holiday destination, the last few years has seen a strong Euro playing spoilsport for the ‘value seeker’ Indian consumer. This summer, the fluctuating Euro created a unique trend- an up- take for emerging “value” destinations in East Eu- rope like, the Czech Republic, Hungary, Croatia, equally our traditional favorites France, Germany, Austria; also Spain-Portugal and Turkey. Our Product Teams have witnessed an uptake of 33% versus 2014, for such destinations.

Indian travelers do not seem too worried of devaluation of rupee. Indians have a remarkable way of adapting to limitations and challenges; from repeated hikes in airfares, fuel surcharges to movement in the rupee, says Jatinder Paul Singh, adding, anticipated stabilization of the rupee, with certain sources even indicating the potential of an upswing, is certainly good news for Indian consumers. Singh said that Thomas Cook India recommends travellers to plan holidays early, giving them an opportunity to conduct their own research well in advance, in terms of different pricing and package options available; also helps them benefit from attractive early bird offers or group discounts, variety of accommodation options as also availability etc.

The impressive growth in outbound Indian travellers has made India one of the largest outbound travel markets globally- WTTC’s Travel & Tourism Economic Impact 2014 highlights that the total expenditure on outbound travel in India was INR 750 bn in 2013, INR 835bn in 2014 (estimated) and INR 1,605bn in 2024 (forecast).

Thomas Cook India has an impressive growth of over 33% for short holidays to eternal short haul favorites like Dubai, Abu Dhabi, Hong Kong, Thailand, Singapore and Malaysia. Island breaks too are seeing strong uptake – Maldives, Fiji, Sri Lanka, and Seychelles. “For today’s corporate workaholic, weekend breaks offer a welcome relief to refresh-recharge, and at Thomas Cook India, weekend holidays and short breaks are strategic focus area given the strong potential,” said Singh. Thomas Cook (India) had a good outbound business in summer this year. “Despite prophesies of doom and gloom, our Summer 2015 numbers were indeed robust with growth upward 27% for Europe and FIT segment saw highs of over 32%,” said Singh. TCI’s forward bookings for winter 2015 are looking very strongupwards of 25%,” said Singh.

India’s share in the international travel market is increasing fast, and the country will soon emerge as one of the largest outbound travel markets in the word. That is reason the national tourism boards of various countries are increasing their presence and promotional efforts in India to get a share of the increasing pie of Indian outbound travel.

Sharing his outlook for Indian outbound travel, Sinha said that India is expected to emerge as one of the key sources of outbound traffic in the coming years. There are many positive factors influencing Indian demand for outbound travel, according to Sinha. “The national economy has been strong and middle-class disposable incomes have been rising very fast. Airline capacity has risen sharply. India’s large Diaspora and growing openness to the outside world has also stimulated foreign travel, especially among the younger generations,” said Sinha, adding, “It is nevertheless difficult to generalize about the Indian travel market, as individual destinations tend to cater for different segments.”

Gone are the days when Indian consumers used to view travel as luxury. Now travel in India and across the world is increasingly viewed as a necessity that must be met. “Indian consumers have increasingly started viewing travel as a necessity, often opting for 2-3 short breaks along with a long leisurely vacation per year. The Indian consumer is evolving rapidly- increasingly confident in a cosmopolitan environment and clearly hungry for travel experiences,” said Jatinder Paul Singh, adding that Media exposure and marcom courtesy tour operators and tourism boards has created an undeniable allure by showcasing exotic locales and engaging experiences. “With the opportunity of India’s multitude of public holidays (bank, festival and more!), the Indian consumer is getting increasingly savvy in converting long/extended weekends into quick holiday getaways, resulting in a boom in the short holiday trend,” added Singh.

Strengthening of USD to have little impact on the Indian outbound travelers.
Indians will continue to travel, albeit with a shift to short haul destinations.
Experts are of the opinion that travelers should do early bookings to avoid higher cost of travel
If the dollar becomes expensive, Indian travelers wouldn’t cancel their bookings completely, says a recent report.