Wanderlust! Nothing perhaps better describes the state of mind of the Indian traveller today. A few years ago tourism was identified with attracting the outside world to come visiting but today that has changed. The economic strides we have made over the last few decades have led domestic travel markets to blossom in an unprecedented fashion. World-class airports, regional aviation infrastructure, improved road and railways infrastructure backed by better internet penetration have together catalysed the explosive growth in India’s travel sector.
However, with every opportunity come challenges. And managing this explosive growth has also mandated the need for more than just physical, infrastructural development. The entire supply chain at the back-end have shifted gears to match pace with the growth in the travel industry with digital infrastructure, private operators and content aggregators coming together to solve the unique complexities in this space. Yet, much is still left to be done.
Here’s a look at the three vectors around which travel revolves and how they can evolve further to ensure more growth and better streamlining of services:
In the mid-80’s, air carriers came together to form Global Distribution Systems aimed at eliminating the complexities around capacity, pricing and inventory. Coupled with the internet infrastructure, the Systems expanded to become the supply chain hub of many airlines and gave access to travel agents worldwide to service their customers better.
Digitalization of the supply chain, especially in airlines, given the complex use cases around routes, distribution, capacity sharing and dynamic pricing happened in the mature travel markets. India too, from the early days, took advantage of this global foray in making distribution available on a common platform.
Before 2004, the sector was heavily intermediated with travel agents or airport counters controlling the distribution, albeit through a backend digitized supply chain. The Open Travel Alliances (OTAs), came as a breath of fresh air in 2004, on the back of the opening up of the Indian aviation industry. They took out the pricing opacity and lack of choice and made air travel transparent to consumers.
By 2007-08, the number of airlines and available choices increased exponentially, further urging OTAs to establish direct connect with the low-cost carriers (LCC) distribution systems and led to technology investments that would tackle the scaling and consumer experience challenges that came with the complexity and constantly improve the complex technology challenges which large volumes throw up. At the same time, the backbone of India’s travel industry, the Indian Railways also launched an ambitious digitization program and eliminated the long queues or manual processes that had plagued its operations hitherto.
Disintermediation contributed heavily to the exponential growth in passenger traffic that we are witnessing today. This was further propelled by the offline to online shift and a robust supply chain which now takes the “power of choice” to the consumer.
Consumers today demand convenience. Though the supply chain automation for air travel is more advanced when compared to the other constituents of the travel industry, it’s just the beginning of the journey. The booking flow has been solved well but there exist massive opportunities in digitizing the post-booking experience. Starting from simple things such as seat selection, transport to and from airports, all the way through stitching together complex itineraries, there’s lots to do and OTAs such as Cleartrip are busy trying to make the experience more evolved. Solving the post-booking experience is the next big challenge facing the travel industry.
The Indian tax regime witnessed landmark reforms last year with the implementation of the GST. Much work has happened on digitizing the payments space and this has provided a natural fillip to the travel industry. The opening up of the digital payment systems and the UPI payment gateways are all making commerce easier but the back-end needs more advanced technology systems for their true potential to be unlocked. There are unique challenges that present themselves on the way. On one hand, the two-factor authentication mandated by RBI has reduced fraud to a great extent, but at the same time, the percentage of failures on the gateways have gone up. One of the significant projects that the travel industry is mulling over is how to make the booking flow simpler for consumers and several players are therefore experimenting with one-touch payments and consumer profile algorithms which allow individual consumers a certain credit threshold based on their travel behaviours and credit profile.
The Indian accommodation industry is extremely fragmented even today as a direct consequence of the late adoption of supply chain digitization. In comparison to the airlines, the supply side for accommodation is much more diverse and complex since consumers today seek a choice ranging from category to locations. The industry in India has been largely insulated from global chains and only in recent times have we witnessed significant global players making aggressive forays for the discerning Indian domestic traveller.
The average leisure traveller historically sought a much more “try and buy” approach since the basic tenets of supply weren’t digitized. Essentials like confirmed reservation, availability of inventory, quality and confirmation of payments could not be done with convenience and this spawned a more walk-in oriented sales channel. The advent of OTAs has thrown open flexibility of booking hotels at differing price points for consumers, helping them make more conscious choices.
The accommodation industry has also traditionally been subject to multi-layer taxes. While there was some degree of normalization with the GST regime, there exist anomalies in rate definitions and differential tax rates even today and these are subject to interpretation and therefore ambiguity. It would be beneficial if the government and the industry forums worked on a comprehensive approach paper could bring clarity on the matter.
The Indian online hotels industry is growing at 20% CAGR and this growth can get further accelerated if the back-end digitization takes place at the desired pace. Today, hardly 15% of the hotel buying happens online and we are just so far behind on automating the supply chain that it will be a welcome move if the industry came together in a similar initiative like the airline industry did when it formed the Global Distribution Systems.
There is romance in discovery and getting lost. But most travellers, especially family-oriented ones prefer a discovery platform which allows them to engage, explore and plan their in destination activities and local experiences in advance. Most travel enthusiasts have often faced the dilemma of choosing what to do and what not to do in their holiday destination.
In fact, as a country that offers so many diverse experiences and beautiful nuggets of heritage and history, India hasn’t really done a great job of making the options of immersive experiences easily discoverable, leave alone bookable. This is once again a result of the minimal digitalization of the supply chain. Even world-renowned monuments like the Taj Mahal don’t have a global API that one can connect to and purchase tickets online.
Cleartrip is making efforts to digitize the heritage of India. It has now formed alliances with many Tourism Boards to digitize access to the multitude of beautiful experiences available in the country. India’s pride is in its architecture; it has so much to be in awe of, yet sadly we don’t have the mechanics of discovery in place yet. Digital India is hungry for content, for ease of transaction and it is time that the suppliers, the government and the front-end aggregators came together on a global platform with the sole objective of making ‘Incredible India’, ‘Discoverable India’ as well!
As the travel and hospitality industry winds its way through exciting times of natural passenger growth, it is also going through a transformation every day and adapting rapidly to the demanding consumers. The sheer scale of operations and the pace of growth is forcing the industry to innovate and redefine the supply chain. This welcome change reminds me of a quote which I hold close to my heart - “Some journeys don't have endings, they lead to new beginnings. These are the journeys that lead to great adventures!”
In that spirit, let’s move ahead together!
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