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The value of India's corporate air travel market is expected to jump to $3.2 billion by 2009 from $2.2 billion last year, partly reflecting an influx of business activity by multinational companies, according to speakers at an October Association of Corporate Travel Executives conference. But such soaring demand is outpacing supply and straining the country's airport infrastructure. The challenges of that rapid growth, combined with cultural distinctions and other market-specific hurdles, should convince multinational companies to cautiously approach travel policy implementation.
For example, last-minute bookings by corporate travelers and high expectations for such personal services as airport pickups complicate efforts toward procurement-driven, cost-containing global travel policies, said Dinesh Chauhan, Philips head of travel management in Asia-Pacific.
"The biggest challenge for travel managers in India is how to balance the local expectations with a global policy," Chauhan said. "What will you do in terms of specifics so that you conform to the global policy and also meet the expectations of the local travelers?" Unless travel managers can answer that question, they "will spend a lot of time trying to convince the local traveler why or why not he or she should do something."
Therefore, corporate travel managers and their agency partners should take a more consultative approach to building compliance by clearly explaining to travelers the reasons behind policy specifics, Chauhan suggested. "The travel management companies could play a much bigger role than they do today," he said. "There's a great opportunity there for them in terms of reporting, in terms of being a consultant rather than just an order taker," and in providing risk management support services.
Meanwhile, demand for air travel in India--which is growing faster than in any other country, Chauhan said--is pressuring suppliers to add staff, planes and routes and prompting an official response.
India's government increased the budget for infrastructure projects, including a 69 percent year-over-year increase for the country's fiscal 2007-2008 airport authority. Budgetary support for road maintenance has also increased this fiscal year to $2.4 billion from $2.2 billion last year.
These efforts should aid in the development of business travel programs, said Parijaat Banerjee, head of travel in India for Accenture, but India's infrastructure still is considered "limited to fragile," and the market continues to be highly regionalized.
Though India officially has 243 airports, only 61 are actually used and only 11 can handle international flights, Banerjee explained. That has put tremendous pressure on the major airports in Delhi and Mumbai, both of which are operating above capacity. Between April and October of this year, total domestic air traffic jumped 45 percent, according to Banerjee's presentation.
To meet the growing demand, modernization projects are underway at those airports, as well as facilities in Kolkata (Calcutta) and Chennai. Meanwhile, 35 new airports will be built in secondary cities.
Currently, four full-service domestic airlines and six low-cost carriers serve the Indian market. Several other LCCs are expected to soon enter the transport sector. As a result, low-cost airlines would control up to 70 percent of the domestic market by 2010, according to the Center for Asia Pacific Aviation, a doubling of their 2007 market penetration.
"It's not like the markets in the U.S. or Europe," Banerjee said, referring to Indian LCCs. "The carriers really have to prove themselves as dependable ... These are key factors we see among India corporates, so they still prefer to fly on full-service airlines rather than on an LCC."
International air capacity has also shown rapid growth, with 46.5 million seats now available on international routes--an increase of well over 100 percent from 2003. International traffic increased another 15 percent between April and October 2007, Banerjee said.
Strong growth in air traffic likely will continue, he added, with 25 percent growth for domestic traffic and 20 percent growth in international traffic expected during the next two to three years.
Demand growth in the hotel sector has also been dramatic, far outpacing supply growth, Banerjee said. Occupancy rates increased 14 percent since 2001 and average daily rates leaped 53 percent since 2003. Most new hotel development has been in the five-star category, Banerjee continued, but other tiers are expected to catch up with new construction during the next few years. A total of 281 new properties are due over the next decade; however, the currently limited supply is expected to drive double-digit percentage annual rate increases for the foreseeable future. As a result, chains are increasingly reluctant to enter into corporate negotiations.
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