Indian Luxury Travel Market: High Hopes from High End

2023-11-06
/
/ New Delhi
Indian Luxury Travel Market: High Hopes from High End

Luxury travel market growth would come in part come from the expansion of the market in emerging economies like India

One of the niches of outbound travel from India that has blossomed smartly, even during the Covid-19 pandemic, is the luxury travel market. Destinations, hotels, airlines and all other stakeholders of travel and tourism from around the world are closely watching the elite Indian travellers and laying down the red carpet to tap this highly promising segment.
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The figures can be mouth-watering for anyone. Over 1 million millionaires. The fastest growing large economy in the world. Three-fold rise in purchase of luxury goods by 2030. Fastest growth in sale of high-end homes, cars as well as luxury goods, ranging from the latest Hermès bag to a Lamborghini. Paying upwards of USD 100,000 just to spend a night in a penthouse in an ultra-luxury hotel.

It is a good time to be rich in India. But it is even better to be a vendor of something luxurious, a product or service. And this is what destinations, as well as all the other stakeholders in the entire supply chain of travel and tourism sector are gleefully discovering, as almost every day, a new report comes about the growth registered in the number of extremely well-heeled Indian visitors, who seemed to be hopping into their private jets and flying off to almost any corner of the world.

Endless growth potential

Luxury travel

Size of the global middle class population is expected to increase to 4.9 billion by 2030

For many destinations, the relatively large number of Indian visitors has become even more significant in the total absence of yet another very promising market, China, which had remained under a total travel ban until February 2023 and which is yet to return anywhere near to its pre-pandemic performance.

This sharpened contrast has drawn a wide variety of players, ranging from destinations and experiences around the world to travel agents, transportation firms as well as shopping centres, travel curators and others to not only observe the growth in the Indian luxury travel market, but also to take a piece of this delicious and rapidly growing pie.

According to a report by Coherent Market Insights, a consultancy, the global luxury travel market was valued at USD 241 billion in 2022 and it is expected to grow at a fast clip of 7.8 pc CAGR to over USD 440 billion by the end of this decade.

The report says that this growth would in part come from the expansion of the market in emerging economies like India, where there has been a significant rise in disposable income and as a result, the demand for luxury travel is increasing, which in turn is expected to boost growth of the global market.

As per the Organisation for Economic Cooperation and Development, a club of rich countries, the size of the global middle class population is expected to increase to 4.9 billion by 2030 from 1.8 billion in 2009.

Of this, a significant contribution would come from India, which is not only the most populous nation, but has also been the fastest growing large economy in the world for the past many years. “India showed over USD 270 billion spending on travel in the end of 2022. Thus, the rise in disposable income is likely to augment growth of the global luxury travel market over the forecast period,’’ says Coherent Market Insights.

Rahim Aslam

According to a survey by Agoda, Indian travellers are searching for international trips faster than travellers in any other market in the world. While outbound travel searches from most Asia-Pacific countries increased between 30-60 pc from 2019, searches from travellers in India jumped by 225 pc. And what is perhaps most encouraging for the segment is that the growth is now no longer restricted to the metros in India, but is spreading to smaller cities as well, boosted by better air connectivity as well as growing incomes.

The travel trade professionals in India also underline the significant growth potential of the luxury travel market. Rahim Aslam is Founder and Consultant of One Above Destination Management Services, one of the leading DMCs in India. Aslam says that he expects the market to continue its rapid growth, with a forecast of 10-12 pc per year.

Destinations eye India

This growth at a fast clip and for a seemingly endless period has enticed a number of destinations, from Saudi Arabia and San Francisco to Switzerland and Singapore, to focus on the Indian luxury travel market extensively. Today, practically every destination and every hotel is eyeing the Indian market, especially the high-end market.

Alhassan Aldabbagh

Alhassan Aldabbagh

Saudi Arabia is one of the destinations keen to expand its Indian share rapidly. “Last year, in 2022, Saudi Arabia welcomed over 1 million visitors from India, and we have since expanded our strategy to attract more Indian tourists to experience the country’s picturesque destinations. This year we have already welcomed 900,000 Indian travellers and by 2030, our goal is to make India the number one source market for Saudi as we aim to welcome over 7 million Indian visitors,’’ Alhassan Aldabbagh, President of Asia Pacific Markets at Saudi Tourism Authority, tells India Outbound.

 

“I have no doubt that Saudi will become one of the leading destinations globally and we are committed to the Indian travellers. We want them to come to Saudi and be welcomed with open hearts and arms, experience our Hafawa culture, the truest form of Arabian hospitality,’’ he adds.

While Saudi Arabia is a relatively new player in the luxury segment in India, one of the traditional favourites for many Indians is Singapore, which is keen to retain its market share in the country. It is helped by the fact of its proximity and excellent connectivity from various cities in India as well as a high level of awareness in the Indian market.

‘‘Between January and September 2023, Singapore warmly welcomed 792,940 visitors from India, establishing India as the fourth-largest source market for Singapore. This surge in Indian visitors can be attributed to a combination of factors, including the deep cultural connection between the two nations, Singapore’s geographical proximity to the Indian subcontinent, and the allure of exceptional experiences that Singapore offers. In terms of Per Capita Expenditure by Indian travellers, we witnessed a healthy increase, signalling their higher propensity to spend on hotel accommodation, shopping, sightseeing, attractions, and dining,’’ Kean Bon Lim, Area Director, India, South Asia and Africa (New Delhi), International Group, Singapore Tourism Board (STB) tells India Outbound.

‘‘Singapore has been at the forefront of quality tourism, attracting travellers with major events and programming. For instance, the city hosts key events like UltraLuxe, a luxury craftsmanship festival, JeweLuxe, which centers on fine jewellery & luxury lifestyle brands, and the annual Singapore Art Week, making it a magnet for those seeking the best in craftsmanship, art, and luxury living. These initiatives have provided fresh impetus to visitor arrivals and spending, accompanied by a surge in lifestyle offerings in dining, entertainment, retail, and hospitality,’’ adds Lim.

Saudi Arabia is a relatively new player in the luxury segment in India

Halfway across the globe, the Luzern, or Lucerne, region in Switzerland, is especially popular in India for its mountain destinations like Mount Titlis, Lake Lucerne or Mount Pilatus, all of which attract thousands of visitors from India each year.

“The Indian luxury market in the city of Lucerne still has a lot of potential. While we registered between 75,000 (2018) and 60,000 (2019) overnight stays from the Indian market in the city of Lucerne before the Covid-19 pandemic, last year the figure was just under 38,000. We will probably be able to reach the former level of overnight stays again next year. In 2022, guests from India rank as the fifth largest single source market behind Switzerland (390,000), the USA (218,000), Germany (84,000), the UK (43,000),’’ Damian Süess, Project Manager, Communications & PR of Luzern Tourismus AG, the tourism promotion board of the region, tells India Outbound.

Leisure leader of luxury travel

In large parts, leisure travel is the main driver of luxury travel in India as most of the well-heeled Indians head to exotic destinations with their families or friends. The growth is being propelled as a rising number of affluent Indians are seeking unique and high-end travel experiences, including luxury accommodations, cruises, private tours and personalised services.

The growth of leisure in luxury travel is being propelled as a rising number of affluent Indians

Harjit Singh

‘‘Leisure travel still accounts for a significant share of outbound luxury travel from India. Leisure travellers seeking luxury experiences, relaxation, and exploration of new destinations are a dominant segment in the Indian outbound luxury travel market. This trend is driven by affluent individuals and families looking for high-end vacation experiences,’’ Harjit Singh, Vice President of Away&Co, a luxury travel agent based in Delhi, tells India Outbound.

For destinations like Luzern or Lucerne in Switzerland, Indian leisure travellers have long been the top segment as the region receives hundreds of thousands of leisure travellers from India each year. ‘‘Our main segment among the guests from India is clearly leisure tourism, and we see the potential here to win back a large part of the lost overnight stays and to even inspire new guests to visit our region. The MICE and weddings segments also have potential, but are not prioritised by Lucerne Tourism,’’ Süess of Luzern Tourist Board, tells India Outbound.

Aldabbagh of STA also emphasises the importance of leisure travel from India for his country. ‘‘At the Saudi Tourism Authority, leisure remains a key focus and priority. Our aim is to unveil the treasures of unexplored destinations and breathtaking views to the world, while also providing travellers with truly luxe experiences. One such destination is the Red Sea, a luxury escape on Saudi Arabia’s western coastline.

Luxury travel

For destinations like Luzern or Lucerne in Switzerland, Indian leisure travellers have long been the top segment

It spans over 28,000 sq km with an archipelago of more than 90 untouched islands. It offers a captivating blend of natural beauty, including beaches, rugged canyons, mountains, and mangroves. What sets it apart is the opportunity for visitors to explore the world’s fourth largest barrier reef system, which houses untouched coral reefs and serves as a sanctuary to witness endangered species in their natural habitats,’’ he says.

Priyanka Nijhawan

Priyanka Nijhawan

While leisure is certainly the leader, the size of the market and the number of travellers itself means that other segments are also fairly meaty for destinations to look at.

‘‘Leisure travel dominates the charts, making up for 45 pc of the trips, while business, MICE and wedding travel accounted for 25 pc. Family reunions, special occasion travel, milestone events, sports tourism, adventure getaways, and religious pilgrimages account for the remaining 30 pc,’’ Priyanka Nijhawan, Director – Representations of Nijhawan Group, tells India Outbound.

Arvind Bundhun

Destinations like Mauritius have spread their net broader and are targetting several segments of the Indian outbound travel. “The most significant segments for us are leisure, MICE, and weddings. These segments have shown substantial growth over time as the destination keeps perfectioning itself in this league through its quality of experiences, accommodations and logistics. Within the leisure segment, we have seen a steady increase in demand for vacation packages and personalised travel experiences. The MICE segment has also witnessed significant growth, primarily driven by corporate events and conferences. Lastly, the wedding segment has shown remarkable growth, with more couples opting for destination weddings and unique tailor-made wedding experiences. We believe that further potential for growth lies in the MICE segment, as Indian corporates continue to prioritise team-building activities and industry-specific conferences. Mauritius offers an attractive incentive for groups starting from 50 passengers. They are exempted of 15 pc VAT on accommodation,’’ Arvind Bundhun, Director, Mauritius Tourism Promotion Authority (MTPA) tells India Outbound.

Nice potential in MICE

One of the fastest growing sub-segments within the luxury travel has been Meetings, Incentives, Conferences and Exhibitions (MICE) as companies, especially the large consumer brands, take their best performing dealers and vendors overseas as a reward or to convey their appreciation. MICE has been one of the best performing sub-segments for several destinations and the trade professionals also.

‘‘While leisure travel continues to shine as the leading star in our constellation of services, we also appreciate the increasing significance of weddings and MICE events. These segments are growing for a reason, they offer moments that transcend the ordinary and provide lifelong memories. Our commitment to excellence is unwavering, whether we are crafting a fairytale wedding in an exotic locale or orchestrating a seamless corporate event that leaves a lasting impact. We believe that travel is more than just a journey; it’s an opportunity to create exceptional moments, and we are honored to be a part of these extraordinary experiences,’’ says Aslam of One Above Global.

Luxury travel

Corporate and MICE travel emerging as important segments for luxury travel segment

Indeed, if the events are well-curated, they leave lasting memories that stay for months if not years, for those who live these experiences.

“I remember our visit to Kazakhstan organised by Hero Motors. They really spared no efforts to give us the best experiences. I can still vividly recall our beautiful hotel in Almaty, a Rixos, which was effused with luxury. I also particularly remember our gala dinner organised at the top of a mountain. The company and its personnel really took good care of all of us on this visit,’’ recounts a major dealer of India’s leading two-wheeler manufacturing company, Hero Motors, who visited Almaty in August.

Akbar Holidays is the holidays division of Mumbai-based travel company Akbar Travels that has been in the business of travel since 1978. With over half of Indian corporate headquarters located in Mumbai, it is not a surprise that corporate and MICE travel are important segments for the company.

Benazir Nazar

‘‘MICE tourism has been booming as well post the pandemic, we did more than 10,000 MICE passengers just last month to Thailand, Australia and Qatar! If we talk volumes, definitely MICE tourism holds the biggest piece of the pie, but if we look at individual ticket size then leisure holds the largest share. We have also done weddings in Oman, Ras-al Khaimah and Bali so there is a decent sized portion for weddings as well,’’ Benazir Nazar, CEO of Akbar Holidays tells India Outbound.

Just like Thailand, even Singapore has been a favoured destination for Indian MICE groups. ‘‘Over the years, Singapore has established itself as a preferred destination for leisure and MICE travel. Indian tourists are enticed by Singapore’s immersive travel experiences, tropical climate, and cultural exploration, making it an attractive leisure destination. Singapore’s year-round festivities add vibrancy and dynamic appeal, appealing to both MICE participants and leisure travellers. STB leverages these factors to attract a diverse range of visitors,’’ says Lim, adding that the board is also looking closely at destination wedding segment, which holds tremendous potential.

Catering to Millennial & GenZ travellers

The last few years, notably since the Covid-19 pandemic, there has been a significant shift in the behaviour of the outbound travellers from India. Earlier, the market was dominated by group travellers, with 30-50 persons in each, most of them first-timers headed to a whirlwind tour of at least half a dozen countries in under 15 days, spending most of the time travelling between various destinations.

Over the past three years, there has been a near-total reversal in the preferences of the Indian travellers. First, the large groups have taken a backseat and now the market is dominated by FITs or small groups of an extended family or 2-3 nuclear families travelling together. And gone are the whirlwind tours of the past and now the travellers prefer to visit one country and at times just one location or area in order to be able to enjoy the destination and its experiences, rather than be rushing around.

The travel industry stakeholders say they have noticed a significant change in customer preferences.

‘‘Experiential travel has taken the centre stage where travellers are looking for unique and immersive experiences, such as cultural tours, culinary classes, and adventure activities. Young couples travelling together with families look for experiences that cater to different age groups. Moreover, there is a growing demand for exclusive and private travel experiences. Affluent travellers are willing to pay a premium for customised travel itineraries that cater to their specific interests and preferences. This has led to the rise of luxury travel companies that specialise in personalised travel experiences, such as private jet charters and luxury yacht rentals,’’ says Nijhawan.

The average age of the Indian traveller has declined sharply as a large number of Millennials and GenZ have begun to hit the travel circuits.

‘‘The greater participation of Millennials and Gen Z in travel has begun to influence the Indian luxury travel market in several ways. There is a very large digital influence. Millennials and Gen Z travellers are more tech-savvy and connected, and their travel decisions are often influenced by digital platforms, social media, and online reviews. Luxury travel providers have started to focus more on their online presence and social media marketing to reach and engage with these younger travelers effectively,’’ says Singh of Away&Co.

With the arrival of the younger travellers, there has been a huge shift in mindset. It has also led to a growing interest in unique and immersive luxury travel experiences and many travel firms are now highlighting customised experiences such as adventure or culinary travel and cultural immersion to appeal to them.

Most travel companies have been quick to adapt to the changes in the market and are now promoting destinations and experiences that are sought by the new-age travellers.

‘‘They have become an influential source of travel inspiration. We had come out with ‘50 shades of adventure’ on Welgrow website as Millennials and GenZ love adventure, food lovers and baby boomers. They eat out more and emphasise on experiential dining. They are more enthusiastic and can spend any amount to meet a Michelin star chef and do live cooking with him. They take more vacations and different types of vacations in one year in comparison to earlier generation who believed in one vacation in one year. It is not just Wifi and technology that has changed their desire to quick booking tools, access to more options in travel but also their influence and impact on social media is a big game changer. Social media influencers with peer to peer visual content, travel trends are forever taking a different shape,’’ Radhika Khanijo, Private Travel Designer, Founder & Managing Director of Welgrow Travels, a Delhi-based luxury travel company, tells India Outbound.

Radhika Khanijo

“Short international getaways on long weekends to destinations like Abu Dhabi, Thailand, Dubai have become very common. There are two major segments when it comes to Gen Z and Millennials, backpackers and luxury travellers and it is an even split down the middle, there are groups who like to have lavish experiences like partying in Turkey or living in a 10-bedroom private villa in Thailand while some like to visit hostels and have budget friendly trips, we cater to both segments though,’’ says Nazar of Akbar Holidays.

Aware of the new preferences, many destinations, too, have stepped up with offers and activities that they think would appeal to the travellers today.

‘‘I think luxury is a big, big potential here in India. We have a lot to offer for people who are looking for those experiences. And luxury comes in different shapes and sizes. So you can certainly have those classic luxury experiences from five star hotels, Michelin star restaurants, everything is available in San Francisco. But we also often talk about the the California luxury, which means that you can be in an urban environment in the morning and you can be in the national park in the afternoon or the other way around. So, I think there’s a lot to do and a lot that is very appealing to visitors who are looking for these very unique experiences. So whether you are again, looking for those classic luxury experiences or for those more laid back types of things that are uniquely San Francisco, I think there’s something to do for everybody,’’ Hubertus Funke, Executive Vice President and Chief Tourism Officer of San Francisco Travel Association, tells India Outbound.

Numerous destinations are stepping up with offers and activities that they think would appeal to the travellers today

For its part, MTPA is pushing its own ‘special and distinctive experiences’. Bundhun of MTPA says among luxury travellers, staying in private villas or opulent resorts that provide individualised services,wellness and spa retreats are also popular.

‘‘In addition, adventure sports like private yacht trips and scuba diving, as well as gastronomy options like private beachfront dinners and gourmet meals, are all highly desired. They are looking for authentic local meals made by renowned chefs using Mauritian flavours and ingredients, in addition to high-end international dining,’’ says Bundhun.

“The luxury segment for us has been growing exponentially and we have more than doubled our previous numbers! With destinations offering multiple new experiences, this trend of luxury travel is only going to further increase in the years to come!” says Nazar.

With the benefit of hindsight, many destinations may find that the Covid-19 pandemic has proven to be a boon in disguise as it paved the way to fundamental changes in travel and whose benefits they all, and not just Maldives or a handful of other destinations, can continue to reap for years to come.


Profiles of various outbound travellers

The average spend from India for outbound luxury travel varied significantly depending on the destination, type of travel, and the level of luxury desired. On average, Indian travelers who were seeking luxury experiences abroad typically spent a substantial amount on their trips. On average, here’s a rough estimate of what Indian travelers might spend (without airfare) on outbound luxury travel:

Short-Haul Luxury Destinations:

For luxury vacations to destinations within Asia, such as Dubai, Singapore, Thailand, and Bali, Indian travelers might spend anywhere from USD 400 – 800 or more per person per day depending on the level of luxury and the specific experiences included.

Medium-Haul Luxury Destinations:

Destinations: Travelers heading to medium-haul destinations like Europe, or Australia for luxury vacations could spend between USD 1,000 – 1,500 or more per person per day. This cost would encompass luxury accommodation, fine dining, private tours, and exclusive experiences.

Long-Haul Luxury Destinations:

For long- haul luxury destinations like the United States, Canada, or South America, Indian travelers could spend upwards of USD 1,500 – 2,000 per person per day.

Exclusive Luxury Travel:

Travel: For ultra-luxury travelexperiences, such as private yacht charters,safaris in Africa, or luxury train journeys,Indian travelers may spend well over USD3000 per person per day.

-By Harjit Singh

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