Mint Explainer: How India is leading a shakeup of the global travel industry

India, Eastern Europe and Southeast Asia are emerging as formidable sources of outbound holidaymakers, challenging the dominance of the established markets. India stands out among these, with a rapidly growing middle class that’s spending more on travel. 

This is not a fleeting trend but a fundamental shift that could transform global travel. Southeast Asia’s travel spending is projected to grow roughly 7% a year, with pockets of higher growth in Cambodia, Malaysia and the Philippines. India’s spending on outbound travel is expected to grow even faster – from $176 billion in 2023 to $319 billion in 2030, at a compound annual growth rate (CAGR) of 9%, according to data from Oxford Economics.

Which countries are the mainstays of international travel?

The US, Germany, the UK, China and France remain the world’s five largest sources of travellers, in that order. These countries accounted for 38% of international travel spending in 2023 and are expected to remain the top five source markets through to 2030. 

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However, interest in travel is flourishing in other regions, leading to a shift in the balance of outbound travel, according to a report by McKinsey & Co titled 'The state of tourism and hospitality 2024'. The report said new groups of travellers are emerging in Eastern Europe, India and Southeast Asia, which have fast-growing pools of first-time tourists. Notably, around 27 million Indians travelled abroad in 2019, before the pandemic. In 2022, about 20 million Indians travelled overseas and the UAE, Saudi Arabia and the US were the top destinations that year.

How much are Southeast Asians spending on travel?

While the number of travellers from these new markets is increasing, their purchasing power remains comparatively low. According to the McKinsey report, South Asians spend 20% less than Western European travellers, who average $159 a night in total travel spending. Eastern Europeans spend 40% less, and Southeast Asians spend 55% less, averaging $87.5 a night.

Where does India rank on domestic travel growth?

Currently the sixth-largest domestic travel market by spending, India is experiencing rapid growth fueled by an expanding middle class. Driven by a robust 6% annual GDP growth, Indians’ travel spending is set to grow 9% a year until 2030, the McKinsey report said. India’s domestic air passenger traffic is expected to double by 2030, it added, supported by a government initiative to connect underserved airports. 

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Indian airlines and hospitality companies are making substantial investments to accommodate this growing demand. In 2023, budget airline IndiGo ordered 500 Airbus A320 aircraft, while Air India placed orders for 250 Airbus and 220 Boeing jets. IndiGo also expanded its order book to include 30 Airbus A350 planes, suitable for both domestic and international routes. The world’s top 10 destination countries — the US, Spain, China, France, Saudi Arabia, Türkiye, Italy, Thailand, Japan, and India — currently receive 45% of all travel spending, including domestic travel.

Meanwhile, China's domestic travel market has surged to $744 billion because of restrictions on outbound travel, making it the world's second-largest, according to the McKinsey report. This market is expected to grow 12% a year and is projected to surpass the US as the largest domestic travel market by 2030.

Reflecting this anticipated growth, 30% of the global hotel construction pipeline is concentrated in China, with a significant focus on luxury properties. China has more than twice as many luxury hotels under construction as the US, according to the same report.

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Which countries offer Indians visa-free entry for short holidays?

Thailand and Malaysia have implemented visa-free entry to attract more tourists. Thailand started this trend last November by waiving visa requirements for Indians until May 2024 for visits up to 30 days, before extending it for another six months to November 2024. 

Sri Lanka followed suit, granting visa-free access to Indian visitors from March 2024 until the end of May. Malaysia announced visa-free entry for both Indian and Chinese citizens from December 2023. Vietnam has also eased its visa processes for Indians, and improved connectivity has significantly boosted travel on this route. 

Unconventional destinations such as South Korea, South Africa, Japan, Brazil, Egypt, and Turkey are also becoming increasingly popular among Indians of late as they offer minimal wait times of zero to three days for visa appointments. Mint reported recently that countries such as Azerbaijan, Kazakhstan, Uzbekistan and Georgia, which provide visas without much fuss, have seen increased inflows from India this summer.

What does the data say about the future of global travel?

Global travel is expected to recover to pre-covid levels by the end of 2024. By 2030, international travel is projected to return to its historical average of nine billion lodging nights a year, while domestic travel is expected to exceed this figure and hit 19 billion lodging nights a year. 

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Travel spending is forecast to rise to $8.6 trillion in 2024, accounting for about 9% of global GDP. India's outbound travel market is poised to grow to $44.8 billion by 2032, at a CAGR of 11.4% from 2023 to 2032, according to a report titled ‘Outbound Tourism in India’ by business advisory Nangia Andersen LLP. In 2022 the market was valued at $15.16 billion.

What is Thailand doing right?

Thailand waived visa requirements for Chinese tourists in 2023 and extended this policy to Indian tourists from 2024. It has launched more than 50 marketing campaigns specifically targeting Indians over the past decade to attract the rapidly growing number of Indian travellers. 

This investment appears to be bearing fruit, with Bangkok surpassing Dubai as the most popular city destination for Indian tourists, according to Agoda. Thailand is also looking at creating a "joint visa" to facilitate travel among Cambodia, Laos, Malaysia, Myanmar, Thailand and Vietnam.