Ewan Thompson, manager of the Liontrust India Fund, provides his first update from a week-long research trip to India.
A day of meetings in New Delhi with companies across the travel and hospitality sectors was a great opportunity to check in on a number of key, intersecting themes driving the rapidly modernising Indian economy – namely the ongoing transport infrastructure build out, the premiumisation of consumption alongside rising incomes, and the increasingly sophisticated digital economy.
Taking the raw infrastructure first, India has seen an aggressive increase in investment over the past decade, a signature policy of the Modi government since his historic election victory in 2014. Over this timeframe, the number of airports in India has doubled from 74 to 148, providing a significant increase in supply and unlocking numerous new internal and external routes. For their part, air carriers have also been heavily investing − for example, IndiGo (India's largest airline by market share) placed an order for 500 A320 aircraft from Airbus, the largest single purchase in the history of commercial aviation. A further order for 30 Airbus 350-900 aircraft this summer will help expand IndiGo's international network to long-haul destinations. A tour of the operations at Delhi International Airport was a fascinating insight into the behind-the-scenes work at one of the world's busiest airports, including live social media feed monitoring to flag any complaints so they could be dealt with quickly.
The increase in both airport and airline capacity is going a long way to addressing the demand-supply imbalance in the Indian travel industry, where rising incomes have seen a dramatic increase in appetite for foreign travel. A meeting with leading OTA (Online Travel Agent) MakeMy Trip, underscored the extent to which growth is returning to domestic air travel. Unlike many global peers, MakeMy Trip surpassed its pre-pandemic peak two years ago, but the real opportunity remains in the expansion of international travel. It highlighted the growth of Delhi airport footfall from 25 million a few years ago to close to 100 million today, while a new airport in Noida (a satellite city of Delhi) further increases capacity. In air ticketing, all sectors are recovering strongly, from business and tourism to pilgrimage and family visits.
We also had a fascinating meeting with Ixigo, the fastest growing online travel company in India, and self-styled travel ecosystem for the 'next billion users'. Ixigo emphasised the degree to which technology is transforming daily life in India, with heavy use of data and analytics to increase comfort for travellers. Having initially focused more on trains and buses − where the majority of Indian journeys take place − Ixigo has set up services that enable users to track train locations in real time, an extremely valuable offering when train services can often be hours late. Tracking works by using user mobile phone locations, and, when reception is poor, by pegging phones' connections to data towers, which the company has mapped. Ixigo also uses proprietary data to accurately forecast delays and refunds, enabling it to reimburse customers for late or cancelled trains in seconds, and 89% of customer interactions are fully automated, including the recent addition of voice AI. Management reiterated the degree to which Indian consumers are value sensitive not price sensitive and that its business model is centred around delivery customer experience rather than a race to the bottom on pricing.
In the hotel sector, Samhi − one of the leading hotel owners in India − highlighted its strategy of focusing on large Tier I cities where the much larger base of room inventory makes it hard for incremental supply to quickly move the dial and drive down pricing. Cities such as Hyderabad and Bangalore are especially strong in the current cycle − with its Hyderabad properties recording as much as 44% of days completely sold out. Samhi also highlighted the degree to which the easing of supply constraints on the airlines is helping demand, which is currently twice supply in its core markets. Moreover, a meeting with Lemon Tree Hotels demonstrated a focus on upgrading room quality for the new design-conscious consumer, allowing a steady increase in room rates for the company.
Finally, a fitting end to the day was a visit to the under-development Aerocity, adjoining the Delhi Airport, revealing a lively picture of the modern India − ambitious in scale and design-centred. Aerocity is effectively a response to major urban developments such as Canary Wharf. Using the 230-acre land parcel surrounding the airport, operator GMR is building out an attractive mixed-use complex for hotels, conference centres, retail units and office blocks, all within minutes of the airport.
Ultimately, the day of company interactions and site visits reiterated the speed at which India is evolving and modernising, the extent to which digital culture is embedded in corporate strategy and the rapid premiumisation of India's consumption profile − all of which is enabled by the aggressive and proactive physical and digital infrastructure investment driven by the government in recent years.
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