A recent report by Oxford Economics showcases how a vacation rental company can spur India’s tourism economy and in turn, its recovery post-COVID-19
India’s economy has been one of the largest in APAC (Asia-Pacific Economic Cooperation) in terms of tourism spending, with its growth having accelerated significantly during pre-COVID-19 years. Who knew a pandemic would just turn travelling into an unattainable dream? The tourism sector was never expected to face such a setback. So is there a way out to bring it back on track?
A recent report by Oxford Economics titled The Economic Impact of Airbnb in India shows how Airbnb, vacation rental company, can help India’s tourism recovery. The report explores the economic impact of the company on India between 2015 and 2019. It also found out that within this time frame, Airbnb’s contribution to the economy grew more than ten-folds. It highlights how the company is spreading the benefits of tourism to local communities and supporting micro-entrepreneurship and small businesses.
In 2019 alone, its customers spent more than Rs 18 billion in India, including more than seven billion in local shops and restaurants. Out of every Rs 10,000 spent outside accommodation by the guests, Rs 6,500 were spent on shopping or food.
Ashish Kumar, co-chairman of FICCI Travel Technology Committee, said, “We are in an ever-changing situation due to the COVID-19 pandemic, which is re-orienting and re-defining our relationship with the outside world, resulting in a new definition of social togetherness. This report mirrors and reflects that travel has progressively resonated with more consumers each year, as well as benefiting the local economies and communities. Tourism spending have continued to go up in the past few years and understanding this pattern is key to maintaining business interest, especially during the current, critical times of recovery.”
As per the report, the company plays an important role in bringing tourists, particularly those who seek for a substitute for international travel with a domestic location and discover new spots in their own country.
Amanpreet Bajaj, general manager — Airbnb India, Southeast Asia, Hong Kong and Taiwan, said, “The recovery of tourism and that of the Indian economy are inextricably linked. The report shows how the authentic, affordable and sustainable travel experiences offered by the company can help accelerate recovery and create value for local micro-entrepreneurs, businesses and local communities.”
Tourism flows
About 83 per cent of the company’s guests staying in more than 55,000 Airbnb listings in 2019 were domestic visitors, seeking options for overnight stays in Indian destinations. This represented rapid growth in the domestic share, which accounted for only 49 per cent of the total in 2015.
Guest spending
In 2019, the company’s guest spent 249 million in India. Based on a detailed analysis of their activities, spending patterns and transportation costs, it was estimated that guest spending totalled around USD 610 million between 2015 and 2019. It increased eleven-folds in that timeframe, representing an annualised growth rate of 83.4 per cent.
Guest spending growth slowed somewhat in 2019 but still expanded by 36 per cent. This by far outweighed the 4.7 per cent growth in total tourism spending that year, according to WTTC (World Travel & Tourism Council) and represented continued growth in Airbnb’s share of the tourism market. The analysis of guest spending consists of two parts. First, the amount spent by guests on accommodations booked with Airbnb hosts through the platform. The second component is the wider ancillary spending guests engage in during their stay. Guest spending patterns were analysed to understand the spending ratios specific to India.
A significant majority of guest spending was on goods and services other than accommodation. In 2019, around USD 37 of every USD 100 of non-accommodation spending by guests went on shopping, activities and other related items. Transport to and from the tourism destination and local transportation accounted for USD 20 and USD 15 of every USD 100, respectively, with a further USD 28 spent on restaurants.
The typical Airbnb guest spent USD 195 during their trip in 2019, which included spending on the Airbnb rental as well as purchases from local businesses, such as restaurants, retail stores and transportation. Based on the analysis of the distance travelled by international Airbnb guests, it was estimated that the typical international guest spent around USD 262 during their trip as compared with USD 181 spent by the typical domestic guests.
International and domestic guest patterns
International visitor growth looked strong in India, with spending increasing at an annualised rate of 44.7 per cent between 2015 and 2019. However, it was the domestic market that resulted in most of the recent growth. Spending by domestic guests increased at a 115.8 per cent annualised real rate between 2015 and 2019, expanding from less than USD 10 million of spending at the start of the period to USD 191 million in 2019. As a result, spending by domestic guests grew to account for 77 per cent of total guest spending in 2019, up from 40 per cent in 2015. In India, it was estimated that international guests accounted for 23 per cent of total guest spending last year, based on analysis of guest activity by origin, compared with a 17 per cent international share of total visitor spending, according to WTTC19.
Company’s host spending
Guest spending accounted for most of the business activity associated with the company in 2019 but the hosts providing Airbnb’s 55,000 listings across India also leave a considerable economic footprint.
As a reminder of the modelling approach, it is assumed that the hosts save a portion of their earnings and spend the remaining amount in three ways — 20 capital investments to improve or enhance their rental units; operational costs on such expenses as unit cleaning services, utilities and discretionary spent in the local economy.
The combined spending of guests and hosts flowing from the Airbnb rental stimulated a large and complex chain of additional activity in the Indian economy.
Economic footprint
The company made a contribution to the Indian economy worth USD 320 million in 2019. This was driven by guest spending during their stay, hosts investment in their properties, the supply chain activity and the spending of wages and earnings supported in the wider economy.
This contribution grew rapidly, with the 2019 contribution 10 times that of 2015 in real terms, with 40 per cent growth between 2018 and 2019 alone.
Employment footprint
The economic activity supported by the company’s presence sustained 49,900 jobs in 2019. This footprint has grown rapidly in recent years, with an average increase of 75 per cent per year since 2015. Furthermore, these jobs paid a total of USD 58 million in wages and salaries to their employees.
The sector with the most jobs supported by the company was agriculture, forestry and fishing sector. Around 17,500 workers were engaged in this sector to sustain the guests’ consumption of food and beverages. The additional consumption induced in the wider labour market, derived from the earnings of hosts and other employees, were supported by its economic footprint. Sectors more directly related to tourism activity were also big job beneficiaries from the company; 10,200 jobs were supported in the transportation and storage sector, a further 5,500 in restaurants and accommodation. An additional 5,200 jobs were sustained in the distribution sectors and 4,100 in providing arts, entertainment and recreation services.
Impact in Indian states and regions
The state with the most significant Airbnb presence was Goa, where guest spending totalled around USD 64.2 million in 2019, making its guests an important contributor to Goa’s tourism economy and demonstrating consistent growth between 2015 and 2019.
Uttarakhand showed the figure of spending of around USD 7.6 million, which is about three per cent of the total. While guests in Puducherry spent USD 7.2 million (2.9 per cent), those in North East India spent USD 3.4 million (1.3 per cent). All these regions have seen their shares of total guest spending within India increase in the years preceding 2019.
While these regions account for a significant share of Airbnb’s contribution, 74 per cent of the company’s impact was felt outside these areas, showcasing how the supply chain has risen due to the guest spending.
