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Emerging markets leading global tourism growth

2_TPCI_India tourism

The world is fast becoming smaller and smaller with a rapid growth in global tourism. According to a UN World Tourism Organization report, international tourist arrivals increased by 6% in 2018, to 1.4 billion arrivals worldwide. Experts opine that there is a discernable trend visible in this rapid growth of world tourist arrivals. A sizeable portion of this growth has been driven by rising demand for travel destinations in emerging markets, with India and China leading the way.

Tourists are not only thronging in large numbers to the emerging markets but the trend shows that more and more people from these emerging markets are traveling, thereby contributing towards travel spending and investment.

These affluent travelers from emerging markets have changed the international trends in travel and tourism, altering the very dynamics of related industries. Companies in travel, tourism, hospitality and aviation are diverting their budgets to these new emerging economies which are home to nearly one third of affluent global households, with minimum income of US$100,000 or more. Significantly, the number of households earning a minimum of US$100,000 annually is expected to increase by 30 million, thereby meaning that the emerging markets will have about 10 million more potential tourists during the next decade.

As said, these travelers from emerging markets are having a significant impact on the shape of travel destinations and infrastructure investment. It is these markets who are boosting the air travel. Hotel chains are now diverting much of their investments in these emerging markets, like in many Asian countries, with properties being opened in all price tiers, in particular luxury brands. Looking at the IATA data, we find that while air traffic in the US is growing at an annual rate of 2%, growth in the emerging markets, like the countries in Asia-Pacific region and Africa, has been 6%-7%, and in the Middle East, it has been more than 10%. Most of the investments in airports too are now focused on emerging market cities, as the top 10 fastest growing airports in the world are in these countries.

Other than China and India, Saudi Arabia has shown great surge in tourism export with tourists from the royal kingdom being the top per capita spenders in all the G20 countries. To stop this outward movement of an increasingly large affluent class, the Saudi Crown Prince Mohammad bin Salman is now focusing on developing tourist destinations within the country. This includes opening of Saudi Arabia to films and other modes of entertainment. There are plans to develop an entire entertainment city viz. Qiddiya Entertainment City merely 40 km from Riyadh, the Saudi capital.

The trend is also visible in the United States. In 2014, more than half of all overseas travelers (excluding Canada and Mexico) to the US originated in emerging markets – versus the early 2000s when only a third of overseas travelers coming into the US came from these countries. Tourists from India and China who have visited the US and the Western Europe are now exploring new unexplored destinations like Vietnam, Sudan, Turkey and CIS countries.

It has been seen that the tourists from emerging markets are heavy spenders compared to their counterparts from traditionally affluent countries. They have been seen to spend chiefly on luxury goods, a trend which is disproportionately more than their counterparts from affluent country. Another remarkable trend is that the spending of travelers from emerging market show far less a fall than compared to that of travelers from the affluent countries.

The overall tourism market is expected to show rapid growths even in future, now more because of tourists from the emerging markets. This high growth of emerging affluent tourists is reshaping all the sectors including the travel and tourism, hospitality, aviation and other related service industries. Future is likely to see greater investments and infrastructural focus on new regions and new business models, very much like the emerging Qiddiya city that is seeing investments from across the world in this entertainment city, likely to be far bigger in size, grandeur and entertainment options than Disneyland.

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