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April 22, 2022

India and luxury rail travel: a model for success

India has done an excellent job of following the growing premiumisation trend and made enormous improvement in this particular market segment.

By GlobalData

The development of luxury rail in India has attracted high spending international tourists from all over the world, providing a range of socio-economic benefits for India. As such, other developing countries looking to develop their tourism proposition should consider creating a similar product in order to reap the benefits, providing they have the appropriate rail infrastructure.

India has done an excellent job of following the growing premiumisation trend and made enormous improvement in this particular market segment. As a result of its continued investment, India has created a range of luxury holidays and tours centred around premium rail travel and India’s limitless culture, destinations, and tourist experiences.

Luxury rail tourism helps generate significant employment and tourism revenue

Luxury trains in India have helped generate more employment, as staff are needed to support the number of services that constitute a high-quality luxury guest experience. The product has benefited multiple facets of India’s tourism industry, including travel intermediaries. For example, India implemented a policy that all tickets must be booked by travel agents that are authorised by luxury train companies. The authorised travel agents earn a commission that can range between 18% and 25% of the total ticket price, providing substantial economic returns for both the intermediaries and luxury rail providers. 

Tickets for luxury trains, such as the Maharaja Express in India, starts from approximately $4000 for a deluxe cabin, including accommodations, all meals with soft beverages, butler service, porterage at stations, and off-train excursions. It also includes entrance costs, photography permission fees, transportation, and the services of a guide. This high price point makes it unaffordable for the middle class of developing countries, but also makes it a great option for foreigners coming from developed countries, for whom it is more affordable.

The products’ ability to attract high spending luxury tourists has a positive multiplier-effect on a range of sectors. With luxury train tours, there are multiple scheduled stops, allowing visitors to explore a range of destinations, generating additional revenue for local businesses. According to GlobalData’s 2021 Traveler Spending Patterns database, the average expenditure per outbound tourist on retail was $335, which was the second highest channel of expenditure after transportation, showing that high spending tourists play an important role in generating tourism revenue and in contributing to a country’s economy.

Targeting high spending and high-income countries is key to success

According to GlobalData’s Macroeconomic database, only 8.8% of India’s population falls into the $5000+ purchasing power parity (PPP) income bracket, which makes it less affordable for the remaining 91.2% of the population to access luxury trains for holidays. In order to be successful in generating tourism revenue, India needs to attract luxury tourists from countries like Australia, the United Kingdom, and the United States, with direct flights operating to each of these destinations throughout the year. These are some of world’s top source markets in terms of outbound tourism spending according to GlobalData’s Tourism Spending Patterns Database.

India’s luxury train product model has the potential to be highly successful in other developing countries, providing they have the infrastructure. Countries such as Thailand, Vietnam, and China could potentially replicate this model.

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