Indian hospitality sector’s quarter of reckoning

First off in terms of intent were the six Indian airlines that are allowed to fly abroad. The schedules they submitted to the Indian aviation regulator projected them operating 72% of the number of flights they were doing in 2020 when covid-19 first came looking.

That 72% figure, or thereabouts, has come to define the Indian travel and tourism industry where it stands today. Key data metrics relating to different segments that make up this industry show similar current operating levels, in relation to pre-pandemic levels. For example, the number of domestic flights in February amounted to 66% of February 2020 levels. Similarly, the number of nights booked in 16 key Airbnb destinations in India in 2021-22 was 77% of 2019-20 levels. The Naukri.com jobs index for the hospitality sector—comprising hotels, restaurants, airlines and travel—for February 2022 was around 69% of its February 2020 level. The gross booking value that leading travel portal MakeMyTrip compiled in the December 2021 quarter was 68% of its December 2019 quarter.

That, in a sense, is the next barrier for the Indian travel and tourism industry to cross. And the June quarter is one of reckoning, as the ground is laid for the industry to further bridge the gap between operating levels now and pre-pandemic levels. Covid-19 cases are next to nothing and movement restrictions have been eased considerably.

Countries are opening for tourists and international travel has resumed. Summer holidays are around the corner, the first time in two years without the long shadow of covid-19 and lockdowns. About 94% of Indians surveyed were planning to travel more with family than they did in 2021, according to the 2022 Global Travel Trends Report by American Express, and this quarter is the first opportunity to do so. “The travel sentiment is looking very positive," says Himank Tripathi, president-external affairs, EaseMyTrip, a travel portal.

Open Borders

For airlines operating in India, the distance to normalcy in the international segment is considerable. For the 11-month period to February 2022, international passenger traffic amounted to just 30% of the corresponding period to February 2020. The six Indian airlines that fly abroad are looking to step that up to 70% levels.

Twice a year, each airline submits a flight schedule to the regulator: summer schedule (for flying between March and October) and winter schedule (October to March). This document basically lists the destinations the airline plans to fly to, the weekly frequency and timing of its flights, and the make of the aircraft. The latest international summer schedules released by the six Indian airlines flying abroad are a declaration of intent and a window into how the pandemic affected their financial health and operating dynamics.

In the quarter to March 2020, these six airlines accounted for 41% of international passengers flying in and out of India. Other than Air India, they were mostly servicing short-haul routes to the middle-east and southeast Asia. For the winter of 2019-20, these airlines listed 2,003 international flights per week. For the summer of 2022, they have planned 1,436 international flights per week—or 72%. Of the 44 international destinations serviced by them, they have increased flights to 12.

Three things stand out in these plans. The first is how they have doubled down on the middle-east. Of the 14 airports they are flying to in the middle-east, they have increased weekly flights to six. Notable increases include Dammam (14 to 46), Muscat (69 to 86), and Sharjah (91 to 100). For Dubai, the number of flights has declined marginally (from 342 to 326). In contrast, these six airlines have halved the weekly flights to popular south-east Asia destinations like Bangkok and Singapore.

The second dimension is how the pandemic has affected airlines and their ability to fly. Among the six airlines, only Vistara, a marginal player in the international segment, has increased weekly flights (from 35 to 45). Among those with significant international operations, Air India Express and IndiGo are standing strong, with weekly flight levels of 94% and 85%, respectively, of pre-pandemic levels.

However, Air India and SpiceJet have cut back significantly on international plans. In terms of weekly flights, Air India plans to operate at 49% of pre-pandemic levels and SpiceJet at 59%. Against 45 international destinations serviced before the pandemic, Air India—recently acquired by the Tata Group, which also runs Vistara—plans to service 34, with Kabul, Milan and Copenhagen being notable exclusions.

The third dimension in the international frame is foreign airlines. In the January to March 2020 quarter, they had a 59% passenger share. Their exact flight plans are not yet public. How they unlock their international operations will unravel another key to recovery. The expectation is a rising trajectory. For example, in a press release last month, Air France-KLM said it would operate 20 flights per week from India in April and increase it to 30 in May. “We are seeing a month-on-month jump of around 30% for international travel bookings," says Tripathi.

Besides the re-emergence of covid, an emerging factor in travel plans is soaring flight prices due to the Russia-Ukraine war. In India, the price of aviation fuel for domestic airlines flying international flights has shot up 37% in the last four months. “The rise in ticket prices has led to a 10-15% drop in international bookings over the last few weeks," says Tripathi.

Pandemic Shifts

For now, the pent-up demand is finding its way on to travel platforms and visa processing centres. Homestay platform Airbnb is seeing an increase in searches from India for properties in the US, UK, middle-east countries, Canada, France, Germany, Italy, Australia, Thailand and Switzerland, according to Amanpreet Bajaj, the company’s general manager for India, Southeast Asia, Taiwan and Hong Kong.

“We are seeing a lot of enthusiasm for cross-border travel," he says. “After being unable to travel abroad for so long, many people are excited to take that long-awaited overseas trip—something we have seen reflected in searches on Airbnb following a number of border reopening announcements."

Bajaj expects some behavioural patterns that were shaped by the pandemic to carry forward into upcoming travel choices. Notable among these is the setting up of a base away from home for a significant period of time, thus combining the wanderlust of travel and the demands of everyday life.

On Airbnb, this is reflected in different ways, says Bajaj. One pattern is people going to new places. Over the past year, 100,000 towns and cities across the world saw an Airbnb booking. About 6,000 registered their first-ever booking during the pandemic. Another pattern is people staying longer. Bajaj says the average trip length on Airbnb has increased by about 15% in the past couple of years and stays of at least 28 nights was the fastest-growing category by trip length in the fourth quarter of 2021. On Airbnb, farm-stays were the most ‘wish-listed’ unique accommodation type, followed by cottages, earth houses and tree houses.

Likewise, in the hotels segment, relatively lower prices and the promise of better services are enticing consumers to trade up. “Before the pandemic, Indian travellers looked for affordable plans and discount coupons," says Tripathi. “Now, 4-star and 5-star hotels are most searched and booked on our portal."

In India, 2021-22 has been a year of clawing back for travel entities like Airbnb. For a quantitative assessment, we took a set of 16 popular destinations on Airbnb, each of which was within touching distance of the six main metros, and compiled the number of nights for which private rooms there were booked.

In 2020-21, which included the first wave of covid-19 and a hard lockdown, these 16 destinations saw combined bookings halve over 2019-20 levels. In 2021-22, this had recovered to 86% of 2019-20 levels.

Among these 16, destinations in north India rebounded the best. Further, Lonavala, Kullu, Shimla, Kangra and Chikkamagaluru crossed pre-pandemic levels, while places in the south like Ooty, Kodaikanal and Kannur were languishing.

Domestic Choices

In 2019, about 27 million Indians travelled abroad, according to government data. This dropped to 7.3 million in 2020. Similarly, about 11 million tourists came to India in 2019, but only 2.7 million in 2020. The 11 million who came in 2019 resulted in $30 billion of foreign exchange earnings for India. The expectation is that more international flights will bring more foreign travellers to India—and turn the many cogs in the travel and tourism chain, which broke down during the pandemic.

Of the 14 sectors tracked by jobs portal Naukri.com, based on job listings on it, hotels, restaurants, airlines and travel lost the most when the pandemic broke. Even in February 2021, the hiring index for the sector was only at 49% of its February 2020 levels. Cut to February 2022. Even as nine of the 14 sectors have crossed their pre-pandemic levels, the index for the hospitality sector is still only at 69% of its February 2020 levels. That said, it is at its highest since the pandemic broke and is trending up.

For the 11-month period (April to February) of 2021-22, the number of domestic flights amounted to 68% of 2019-20 levels. With international borders closed during the pandemic, airlines primarily had the domestic segment to build on. During this period, airlines have put 15 airports on the aviation map for the first time, including in Bareilly, Kota, Solapur, Kurnool, Bidar and Junagarh, according to data from the Airports Authority of India (AAI).

AAI data further shows that of the 121 cities to which there were flights, 27 have shown higher flight movement in 2021-22 as compared to pre-pandemic 2019-20. These include popular tourist destinations such as Agra, Leh, Srinagar and Chandigarh, as well as smaller cities such as Pasighat and Pantnagar. Eastern airports such as Pakyong, Barapani, and Tezpur have also seen a significant increase in flight movement.

Some of this is being spurred by tourism, wherein the reasons for travelling, and thus destination choices, have changed. The focus has shifted to taking the road less travelled, or finding interesting homestay experiences at or around key tourism destinations such as Goa, Lonavala and Delhi, according to a September 2021 AirBnB report. If covid-19 stays away, the ongoing quarter could end up defining it in new ways.

(The writer is with howindialives.com, a search engine for public data.)