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Travellers travails

Parul Gupta | January 11, 2003

 

First the good news: the Indian middle class is on the move. Indian travellers have been filling up the hotels and there's been a 25 per cent rise in bookings during 2002. Now the bad news: international tourists are staying at home and there's been a 11 per cent fall in arrivals since 2000.

 

Can the domestic tourist fill the coffers for hoteliers and tour operators? Definitely not. Indian tourists are extraordinarily tight-fisted and they were lured into spending during 2002 by special cut-price deals being offered by hotels in a bid to fill rooms. So the hotel and other tourism related industries aren't out of the woods yet -- not by a long shot. International tourist arrivals fell by 4 per cent in 2001 and dropped precipitously by another 7 per cent in 2002.

 

It isn't always easy to calculate how much domestic tourists are spending. But the impact of the fall in international tourists, is more tangible. Foreign exchange earnings have fallen to $2.8 billion from $3.17 billion in 2000. That's a dip of 11 per cent. "Hotels have, by no means, attained the 2000 levels," says Uttam Dave, chief executive officer, Panell Kerr Forster a hotel and tourism consultancy firm.

 

Don't get it wrong. Domestic tourists do fill rooms but they aren't about to pay the sky high rates that foreigners are willing to fork out. The top five stars are used to getting anywhere around $250-$300 (Rs 12,500-Rs 15,000) from foreigners for their rooms. Even at the top end Indian travellers don't like paying more than Rs 7,500 to Rs 8,000. So, average room rates, a key indicator for hotels are extremely low.

 

Nevertheless, there have been signs of a pick up during recent months. But industry executives differ about the reasons and whether it will last. The revenues per available room (Revpar) have climbed in cities like Bangalore, Mumbai and, to a lesser extent, Delhi. Some executives say that rooms are filling up because of a spate of conferences and seminars like Pravasi Bharatiya Divas and Petrotech in Delhi.

 

Other factors have also come into play in the last one or two months. There's no question that there's a sudden improvement in business sentiment and that has played a part in getting executives on the move once again. Occupancy rates in the metros have climbed as a result and hotels in cities like Delhi and Bangalore are suddenly filling up once again after a long period when they were having an extremely tough time. Says Ritu Dhawan, manager, corporate communications, The Grand in Delhi: "There is improved business sentiment on account of disinvestment, launches in consumer goods and automobiles."

 

The picture in the smaller towns and leisure destinations is entirely different. This is where the domestic tourist has kicked in with full force. And Indians, while they are still stingy, are spending more than ever before. Says an  top official at the Clarks, a four-star hotel chain with hotels in various leisure destinations including Goa, said: "We've had the best year in the last four-five years." Even an Oberoi group spokesperson says: "All our vilas were full during Christmas and New Year's Eve period and the bookings were more than the 2000 levels."

 

By no stretch of imagination, however, can the increase in domestic tourism be expected to make up for a fall in international traffic. A paper presented by PKF worked out that domestic tourists outnumber international travellers by 67 to one over the last decade. Nevertheless, they account for only about 3.7 times as much earnings.

 

This is reflected in the earnings at the leisure destinations. Though hotels have done fairly well their earnings still haven't caught up with levels touched in 2000. Hotel executives say that the earnings of the leisure destination hotels have still not reached the 2000 levels. Says an Oberoi Group executive: "While the bookings were full during the last week of 2002, they haven't yet reached 2000 levels."

 

Even travel operators support this viewpoint. The operators' business is still down by about 10 per cent to 15 per cent compared to the 2000 levels. according to Subhash Goyal, chairman, Assocham expert committee on aviation and tourism. Goyal says that the metro hotels are suddenly doing well because of the spate of conferences. In Delhi, he says an additional factor has come into play. The ban on farmhouse weddings has forced many families to shift to the city's five star hotels.

 

Another tour operator, Himmat Anand who heads Sita's inbound division also says that business is down by about 40 per cent compared to the 2000 levels. He added that though an increase in domestic business has meant a filler business for a lot of tour operators, the value from the segment is nothing compared to that from the foreign business.

 

This fact, however, has not stopped the travel industry wooing the domestic tourist heavily. "Most of the big travel companies are now changing focus towards domestic tourism and in 2003-04, domestic tourism would be an important part of the business for most of the travel operators," says Anand.  

To begin with, Sita Inbound is launching 101 itineraries exclusively for the domestic traveller in February. It aims to further increase the number of itineraries to 1001 within the next six months under '1001 Tours of Sita' brand name.

"This will have everything and anything for the domestic traveller since we can't afford to ignore the domestic traveller," he says. But it will take a lot of domestic tourists to fill that gap left by the international traveller who is staying at home.

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