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Consumer Engagement: Growing use of new technologies and social media in the travel and hospitality sector

August 14, 2015
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India’s travel and hospitality industry is often called a “sunrise industry”. It is an employment generator and a significant source of foreign exchange, and has emerged as one of the biggest growth drivers of the economy among the service sectors. At present, it is among the top 15 sectors in India attracting the highest amounts of foreign direct investment (FDI). According to data released by the Department of Industrial Policy and Promotion, it witnessed FDI inflows worth $7,862.08 million between April 2000 and February 2015. It has also created more jobs per million rupees of investment than any other sector due to its capacity to provide employment to a wide spectrum of job seekers, from unskilled to specialised workers, even in remote areas. The employment generation potential of India’s travel and tourism industry has also been highlighted by the World Travel and Tourism Council, which says it is expected to become the second largest source of employment in the world by 2019, directly or indirectly providing jobs to about 5 million people.

The main factors driving the growth of India’s travel and hospitality industry are the country’s rich cultural history, diverse geography, increasing disposable income and robust transport infrastructure. In addition, the policy support, tax incentives and infrastructural support from the central government and the Ministry of Tourism are significant contributors. The government’s main incentives for the travel and tourism industry include:

  • Medical visas for tourists coming to the country for medical treatment.
  • Visa on arrival for tourists from select countries such as Finland, Japan and New Zealand.
  • Capital subsidies for budget hotels.
  • 100 per cent FDI in the hotel and tourism sector through the automatic route.
  • Elimination of customs duty on imports of raw materials, equipment, liquor, etc.
  • Five-year income tax holidays for two- to four-star hotels in specified districts identified as World Heritage Sites by the United Nations Educational, Scientific and Cultural Organization.

In addition to these initiatives, the Government of India has earmarked $79.17 million for the first phase of the National Heritage City Development and Augmentation Yojana with the aim of supporting infrastructural developments in travel and tourism. The planned investments will be utilised to develop and promote 12 cities – Varanasi, Amritsar, Ajmer, Mathura, Gaya, Kanchipuram, Vellankani, Badami, Amaravati, Warangal, Puri and Dwarka – as tourist hubs. Meanwhile, under Project Mausam, the government has proposed the establishment of cross-cultural linkages and the revival of historic maritime cultural and economic ties with 39 Indian Ocean countries.

As a result, tourist inflow into the country has grown steadily. The number of foreign tourist arrivals grew steadily over the past few years to stand at 7.46 million during 2014. In addition, foreign exchange earnings (FEE) from tourism in terms of the US dollar grew by 7.1 per cent during 2014 as compared to 5.9 per cent in 2013. FEE during December 2014 stood at $2.03 billion as compared to $1.9 billion in December 2013 and $1.67 billion in December 2012. The FEE growth rate in rupee terms in December 2014 over December 2013 was 7.3 per cent. At the same time, the Tourist Visa on Arrival (TVoA) scheme, enabled by Electronic Travel Authorisation and launched by the Government of India on November 27, 2014 for 43 countries, has led to a growth of 1,214.9 per cent in recent overall tourist arrivals. For example, during the month of January 2015, a total of 25,023 tourists arrived by availing TVoA as compared to 1,903 during the corresponding period in 2014.

With the increasing number of global tourists, strong policy support, and the growing opportunities presented by the travel and hospitality industry, a number of Indian and global companies have committed significant investments towards the hospitality sector. The major investments announced over the past few months include:

  • US-based Vantage Hospitality Group has signed a franchise agreement with Indian firm Miraya Hotel Management to establish its mid-market brands in the country.
  • The Lalit Suri Hospitality Group has announced plans to open its first international hotel in London. The company has acquired a heritage building called St Olave’s near Tower Bridge in central London, which is now being restored and converted into a five-star hotel.
  • Thailand-based Onyx Hospitality Group and Kingsbridge India will be setting up a joint venture to open seven hotels in the country by 2018, for which $100 million will be raised.
  • ITC plans to invest about $1.42 billion in the next three to four years to expand its hotel portfolio to 150 hotels. By 2018, ITC will launch five hotels – in Mahabalipuram, Kolkata, Ahmedabad, Hyderabad and Colombo.
  • New-York-based multinational investment banking fund Goldman Sachs is investing $40.37 million in Vatika Hotels.

According to a joint report by the Federation of Indian Chambers of Commerce and Industry and KPMG, India’s travel and tourism market has massive growth potential. The medical tourism market in India, which has had a compound annual growth rate of 27 per cent over the past three years, is projected to reach the $3.9 billion mark in 2015. The inflow of medical tourists is expected to cross 320 million by 2015, compared to 85 million in 2012. Like the hospitality sector, India’s travel industry has also grown significantly with its ever-expanding infrastructure facilities. For example, India was the ninth largest civil aviation market in the world in 2014, and projected to be the third-largest globally by 2020. It catered to 117 million domestic and 43 million international passengers in 2014, and its carriers could support 337 million domestic and 84 million international passengers over the next decade.

Worldwide as well as in India, the travel and hospitality industry is being greatly affected by growing consumer awareness and the increasing usage of technology, particularly by young travellers who have a penchant for mobility and are digitally connected 24x7. As per EY’s report “Global Hospitality Insights: Top Thoughts for 2015”, technological advances continue to alter the relationship between hotels and guests. User-friendly and powerful smartphones and tablets are changing online preferences and habits of travellers and redefining how they research, plan and book trips. Empowered with more knowledge and social media, hotel guests are now pushing hotels for improved products and services.

The report further states that the advances in data analytics are transforming the hospitality industry and can be used to enhance a hotel’s financial performance by providing managers with detailed and actionable insights into customer preferences. With the proliferation of mobile devices, social media and advanced analytics, and the increased accessibility of online distribution channels, technology can help managers identify new growth opportunities in the hospitality business to drive their operating efficiencies and engage with guests, from the booking point right up to their check-out dates.

A global survey conducted by TripAdvisor in 2013 indicates the growing use of mobile devices by customers. About 87 per cent of travellers use smartphones and 44 per cent use tablets while on the move. Taking a cue from these trends, hotels around the world and in India are relooking at all aspects of the hotel experience, with a focus on accommodating mobile devices in guest rooms, meeting spaces, lobbies and front desks. For example, a leading global hospitality brand has taken a proactive approach by partnering with a top engineering and technology university to redesign future hotel experiences and find innovative ways of making public areas more exciting, user-friendly and relevant to the technology needs of new-age and mobile-friendly travellers.

Most importantly, technological evolution is also redefining the ways in which travel and hospitality players identify and acquire new customers. According to 2014 research by eTrack, eMarketer and Alexa.com, 57 per cent of all travel reservations are taking place online, with internet travel booking revenues growing by more than 73 per cent over the past five years. The race to gain control of the distribution channel has intensified with the changing industry landscape. Through the acquisition of property management and digital marketing platforms, online travel agents are providing additional services to encourage hoteliers and travel companies to distribute rooms and book seats on their websites. Meanwhile, hotel brands are aiming to drive bookings to their own proprietary websites by leveraging the power of loyalty programmes and streamlining the booking experience. Travel and hospitality firms are making their websites and mobile applications more interactive to allow customers to browse inventory, book amenities, and complete reservations through mobile devices, thus driving engagement and increasing revenue generating opportunities.

With the rise in the popularity of social media platforms, it has become critical to track third-party websites and social networking platforms for ensuring positive consumer reviews and brand value management. Various studies have established a strong correlation between the relative quality of reviews and the demand for a particular property or service. The reliance of consumers on third-party sites appears to be continuously increasing, which has made it imperative for the travel and hospitality industry to holistically embrace social media, mobile and analytics to drive business improvements, enhance guest experience and deliver results. Going forward, the ability of industry players to adopt new-age technology and accordingly realign their business goals will be the key factors in determining their success in a highly competitive and dynamic industry.

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