Is the World Ready to Meet the Indian Middle Class? (2024)

Set aside for a moment that India’s population — at 1.4 billion — has surpassed China’s. The real driver of growth for the global travel industry is its surging middle class:

• This group in India grew 6.3% per year between 1995 and 2021, according to a report by the People Research on India’s Consumer Economy (PRICE).
• The middle class now represents 31% of India’s population.
• It is projected to hit 38% by 2031 and 60% by 2047.

Plus, India’s middle class is young — and they have money: 65% of the population is under 35 years old.

By the middle of this century, India is projected to have a middle class population of around 1 billion, making it the economy with the ideal age group as well as income levels to grow the travel industry, according to a recent report by researchers at Bernstein.

India’s gross domestic product (GDP) per capita is growing close to 10%. Bernstein expects travel spending to increase 3% for each additional dollar of GDP per capita.

Spending Power of the Middle Class

Defining the “middle class” has consistently posed challenges for both scholars and marketers. There is no universally accepted definition.

According to a recent survey, the People Research on India’s Consumer Economy (PRICE) characterizes a middle-class individual as someone earning an annual income between INR 500,000 – 3 million ($6,000 – $36,000). They contribute about 50% of the nation’s total income.

The projection for 2023 anticipates India’s household disposable income reached nearly $3 trillion. Online travel companies like Yatra see opportunity.

“The growing middle class population in India signifies an expanding market for travel services,” said Dhruv Shringi, CEO and director of online travel company Yatra Online. “With an increase in disposable income, the middle class is looking for diverse travel experiences.”

Ayyappan Rajagopal, CEO of online travel company Cleartrip, said India’s middle class helped drive travel demand post-pandemic: “The increasing spending power of the middle class, combined with accessible and affordable travel, is poised to exert a significant influence on the growth of the global travel industry.”

The Cultural Touchpoints

What are these and other travel companies doing to capitalize on this rising young middle class?

For one thing, they are shifting strategies to focus on cultural touchpoints. In India, the influence of movies extends beyond entertainment into travel aspirations. This has led major tourism boards, hotel companies, and airlines to strategically enlist Indian movie celebrities as brand ambassadors, leveraging their star power to promote various destinations. Notable examples include Ranveer Singh being signed on as a brand ambassador of Switzerland and now Abu Dhabi; Shah Rukh Khan endorsing Dubai; Deepika Padukone as the face of Qatar Airways; and Katrina Kaif collaborating with Accor.

They are also pursuing budget-friendly and flexible payment options, such as “travel now, pay later” schemes. This financial flexibility enables a broader segment of the population to embark on international journeys, aligning with the evolving travel aspirations of the Indian middle class.

“Not only does the travel now pay later option allow travelers to break down the cost into affordable monthly installments, it also helps them to improve the overall travel experience by opting for upgraded services and better destinations,” said Abhilasha Negi, co-founder of SanKash, which collaborates with travel companies to offer this service.

SanKash said it has seen an upward trend in 26% travelers opting for upgraded travel destinations. For example, those with a budget for Goa, travel to Thailand instead, while some upgrade from economy to business-class tickets.

Catering to Middle Class Travelers

While a significant portion (61%) of travel bookings in India still occurs offline, technology is seen as a key enabler. Platforms like Ixigo aim to tap into the next billion travelers, especially those in smaller cities, by expanding services beyond flights and trains.

Effective online travel solutions are growing in popularity with the evolving middle class.

Online travel companies like Cleartrip have been addressing needs such as personalized customer service, 24/7 support, competitive pricing, flexible policies, and affordability instruments like no-cost EMI (equated monthly installment) and pay later options.

“Around 45% of outbound travel from India is for leisure purposes, with over 60% traveling internationally for the first time. Meeting the needs of middle-class travelers is crucial,” said Cleartrip’s Rajagopal.

Acknowledging that India is a value-conscious market, Cleartrip’s goal is to make travel affordable for Indian middle-class travelers.

“EMI options are prominently displayed early in the user journey (not just on the payment page). Recognizing flexibility as a key need for middle-class travelers, we launched offerings like Cancel For No Reason,” said Rajagopal.

Cleartrip also showcases weekend airline deals, all possible destinations (from the user’s home location) with the cheapest prices, airline-exclusive deals, and destinations where price drops have been observed.

The Focus on Experiences

Consumer expectations are also shifting towards valuing experiences as much as products or services, noted global end-to-end travel experiences company, Collinson.

Collinson’s latest Asia Pacific consumer insights report — “The New Rules of Engagement: Customer Expectations Revealed” — says that 86% of Indian consumers perceive the experiences that brands provide to be as important as their products and services.

“Consumers in India rate airport lounge access as one of the most appealing travel-related rewards, this in turn has a positive effect on the emotional connection to the brand providing access,” said Sumit Prakash, country director, India and South Asia, Collinson.

Collinson said that its investment in airport lounges and travel experiences in India reflects the growing demand for elevated travel experiences.

All this is indication enough that India’s middle-class numbers — expected to soar to 550 million by 2025 — will significantly impact the travel industry.

It’s no wonder that CAPA’s projections predict a substantial increase in international outbound departures, reaching over 50 million by 2030.

The evolving preferences, changing habits, and increased spending power of India’s rising middle class are reshaping the travel landscape, creating opportunities and challenges that the industry is actively addressing. The future promises not only a surge in outbound travel from India but also significant, transformative technology innovations that will make travel more accessible and curated for a segment that is learning to flex and loving it.