Albert Pozo, President of Amadeus Asia Pacific and Ankur Bhatia, Managing Director, Amadeus India, spoke to BT about the emerging travel and tourism landscape. Excerpts from the interview:
BT: APAC travel & tourism is growing very well at this point. What are the factors that are contributing to this growth?
Pozo: I think the underlying factor is overall economic growth. Travel being a very big part of the GDP, it's growing with the (GDP) growth, and at the same time it is also fuelling the growth, because travel and tourism is one of the elements of the economy that helps develop jobs, services, with a low entry cost. The overall economic development of the region is underlying.
I think what has also happened in Asia is that some of the red tape has been lifted, making it easier for business travel and leisure. A very good example is India. With the visa and e-visa policies being implemented, it has vastly simplified travel, and has translated into very significant increase of international travellers into India. At the same time, conditions for business have also improved.
So, there is a concerted effort by Asian countries to lower barriers and this is translating into the growth that the travel sector has experienced. I think also that travel is aspirational, and when consumers have growing disposable income - as it is happening in India definitely and also in East Asian countries - this has also brought into the leisure travel space various sectors of the population that simply could not afford to travel before. And finally in the last year, due to the low oil prices, airlines have translated some of those savings into lower prices to the consumers.
BT: How much of your revenues would be coming from online and how much from offline?
Pozo: This has been changing quite significantly. Business travel used to be 60 per cent in the distribution business, and individual used to be 40 per cent. I think that's inverted in the last 10 years. We've seen faster growth of the leisure business, which has to do with the fact that economic development has enabled larger sections of the population to travel from a leisure perspective. Travel has become more affordable to large parts of the population. The accessibility through online for travel has also taken over. So, many smaller companies are implementing travel policies just by price - I don't think they require more than an online booking tool to be able to manage their business travel needs. Leisure has grown more than business travel, though business travel continues to be the higher contributor.
BT: Are you surprised by the increase in leisure travel, given the economic issues faced in recent times by Europe and the US?
Pozo: Actually, the overall growth has not been there in Europe in absolute terms in travel. The last few years have been pretty flat. We've seen some markets like France and certain parts of Europe really decreasing in the number of transactions. Now, there is more of stability than growth situation in Europe. The US is definitely in growth, but not very high growth. You see the 7-8-10 per cent growth really in Asia. And within Asia, India is leading the growth.
BT: The volumes in India would be lower compared to other APAC markets?
Bhatia: No, India is the largest market at this moment for us and the industry.
BT: Both in terms of volumes and growth?
Bhatia: Yes, both in terms of volumes and growth. If you look at China, there's a bit of restriction there in terms of the play of GDS (global distributions system) and who can actually go in. Also, in Europe, what has happened is that leisure growth has happened because of a lot of low-cost carriers that have come in.
In India particularly, online players have certainly put that growth there. The growth is from small and mid-size as well. So, in India, for us, there are 200 travel agents added every month across the country. The brick-and-mortar agencies still remain very important because the credit card penetration is not that high. So you would still have somebody sitting in Bhopal at a railway station who is taking cash from a consumer and probably going to a MakeMyTrip or a Yatra or somebody else like that and making a booking. And I think that will continue for a very long time, till the time we don't have seamless credit card payments….
You look at rail right now, there's 1.2 billion people travelling, the online play for that is less than 1 or 2 per cent even now.
Pozo: It's also worth keeping in mind that business travel is growing in Asia in general four times higher than in North America and 2.5 times higher than in Europe. A lot of the growth in travel is fuelled by business travel. Some of the barriers that you have - in payments and so on - they are not there in business travel terms. What makes it very interesting for us is that we are not only seeing high growth coming from Asia and very specifically from India, but we see that India is one of the markets with the highest adoption of digital travel. The Indian traveller is a really educated traveller, and the readiness to adopt new technologies is much more than in other parts of the world. Maybe also because the legacy is not there…
Bhatia: Also there are different genres of travellers. The new generation that's coming in, who's Net-savvy, who's got a credit card, who's working in a BPO, got a smartphone. But there is also a huge SME market in India - 60-70 per cent of Indian economy is SMEs, and those SMEs are traditionally run family businesses, 70-80 per cent of who deal in cash. These people who are in trading etc., and they continue to go to the nearest travel agency. There's huge potential there for the tools that we are working to get into the marketplace.
BT: Could you share some of your plans and strategies…
Bhatia: From an Indian point of view, it's a continuous process. I can't say this is the strategy for the next 12 months. The strategy for the past 25 years of the partnership has been to be an early innovator, put products in the marketplace which are required, sometimes even ahead of time. We launched WAP and mobile-based booking in 1997 with Ericsson. It was too early for us, but we did do that. So, we've got sets of technologies which are existing already, which were probably created earlier, and we are now creating technologies for the future. The technologies we created earlier are actually in the process of getting implemented. The market consumption of those technologies is a bit slow, because of the fact that it takes time.
And the innovation continues. When you talk about self booking, giving tools to online players to ensure they get the best pricing, these things are evolving.
Pozo: Definitely we position ourselves in future for growth. We are in a fast growing region and we think as a company, because of the technology and investments we have and we are making, we will continue to be on this path of growth. Everyone is realising that the voice of the consumer is stronger, the traveller is becoming more knowledgeable and demanding, the traveller is at the centre, and the airlines are looking for ways to fully customise and personalise their product in a more efficient way. We are moving from an era of a generic product to a very open, transparent world with experienced consumers. Airlines realise there's only one way, which is customisation and personalisation of their product. So there is a lot of investment going into such products at this moment. We are working very strongly with the airlines on this.