Indian tourism is riding high Due to its strong monetary and fiscal policies the Indian economy is recovering quickly, and the effect was visible in terms of strong growth witnessed by all forms of tourism in India in 2010. The emerging middle-class, rising purchasing power and increased awareness will continue to ensure the growth of tourism over the forecast period. The Ministry of Tourism s efforts to increase the influx of tourists to the country is likely to see positive results in the coming years. Its campaigns such as Safe and Honourable Tourism will increase the image of India as a safe destination, and thereby increase consumer confidence in choosing India for a holiday.
Threat to Entry
While entry and exit barriers are low, it is difficult to build scale because of lack of ready distribution channels
Government regulation of direct FDI in retail restricts entry of foreign retailers There is low level of proprietary travel knowledge and asset specificity. This makes it relatively easier for new players to enter industry and does not provoke very aggressive rivalry from existing players Low minimum efficient level allow entry of small start-ups, however significant scale is necessary to negotiate profitable deals Due to a fragmented market , travel agencies do not have access to ready distribution channels Online channel is growing at a rapid rate but is primarily selling air and rail
Power of Buyer
Buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power.
Diverse retail buyer and corporate buyer profiles Switching costs for buyers is not high as brand loyalty is low/diminishing Credible threat of backward integration i.e. buyers can directly buy from suppliers (hotels, airlines etc) Luxury segment is brand conscious to and willing to pay a premium for great experience and service quality
Power of Supplier
Suppliers usually sell commodity products. The ability to sell direct gives power to suppliers like airlines; other suppliers are fragmented
Forward integration by suppliers like airlines selling directly Attempts by suppliers to sell packages and complex itineraries not very successful While suppliers concentrated in some areas like domestic airlines, there is widespread fragmentation in hotels, tour operators, car rentals etc. There is no significant cost to switch suppliers Travel agency cannot typically buyout suppliers like airlines
Threat of Substitutes
Low Threat of Substitutes as travel moves up the list of household priorities
India is witnessing a growth of discretionary spend as % of income from 30% in 2005 to arou nd 70% by 2025. Travels, being a discretionary spend poised to gain. Travel has moved up the list of household spending priorities. It is unlikely to be substituted by a durable purchase or investments. Education & Recreation will occupy 9% share of wallet in 2025 as compared to 5% now. Travel Industry currently at $16 billion, is expected to touch $26 billion by 2010
Industry Rivalry
It is a highly fragmented industry with intense rivalry. Fragmentation:
Organized players would barely have 15-20% of the marketplace Most of organized players are present in metros & mini-metros
Intense Rivalry:
Rivalry Intense because of low switching costs, low levels of product differentiation, perishability of products diversity of rivals Rivalry is not cut throat since exit barriers are not high, fixed costs are not high, market growth is good
Conclusion
Companies that thrive will not just meet travellers needs, but also please their tastes and sensibilities and do it for less. The explosion of product offerings and channels continues to erode profit margins and fragment markets. Strategy to serve this segment