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Travel & Tourism in India to growth to US$ 450B by 2028

The tourism sector is expected to grow at an annual rate of 6.9% to US$ 450 billion by 2028. The government of India is working to achieve 1 per cent share in world's international tourist arrivals by 2020 and 2 per cent share by 2025.

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Definition / Scope

Tourism is the activity of traveling to a place for pleasure. It also refers to the business or industry of providing information, accommodation, transportation, and other services to tourists. There are different types of tourism based on the level of interest of tourist.

Religious Tourism – It is a form of tourism, where people travel individual or in groups for pilgrimage.

Adventure Tourism – It is a type of tourism that involves travelling for the purpose of engaging in physically challenging outdoor activities.

MICE - It is a type of tourism in which large groups, usually planned well in advance are brought together for a particular purpose. MICE events are usually centered on a theme topic and are aimed at a professional, academic or trade organization or other special interest group.

Eco Tourism – It is a form of tourism involving visiting fragile, pristine, and relatively undisturbed natural areas, intended as a low-impact and often small scale alternative to standard commercial tourism.

Medical Tourism - It is type of tourism where people travel from one country to another to obtain medical treatment.

Wellness Tourism - It is type of tourism where people travel for well being of their physical, mental, spiritual, emotional, psychological dimensions.

Market Overview

Tourism, one of the high contributing sectors to GDP is rapidly growing in India. India is a preferred destination for both domestic and overseas travelers. The tourism in India has outperformed the global tourism industry in terms of growth, volume of tourist and revenue. Tourists mainly come to India to understand and experience the cultural diversity of the country.

India offers a diverse portfolio of tourism products like adventure, medical, religious, cruises, sports, MICE, eco-tourism, etc. Ministry of Tourism has been actively engaged in designing national policies for promotion and development of travel and tourism sector in the country.

India had the second highest total tourism GDP contribution in Asia-Pacific in 2016. In 2017, tourism contributed to 9.4% of India’s GDP. Tourism has a substantial effect on employment in India. Tourism created around 8% of total employment in 2017. Destinations in India won awards by Lonely Planet for their immense contribution to tourism. The following awards were given to different places inside India - [1]

Karnataka - Best destination for culture

Maharashtra - Best destination for adventure

Madhya Prasdesh - Best destination for wildlife

Himachal Pradesh - Best destination for family

Goa - Best destination for relaxation

Tamil Nadu - Best destination for value

Lucknow / Uttar Pradesh - Best destination for food and drink

New Delhi - Best destination for shopping

Munnar / Kerala - Best destination for romance

Rajasthan - Best destination for indulgence

Meghalaya - Best emerging destination

The emerging tourism and hospitality segment in India are described below -

Spiritual Tourism - India has been recognized as a destination for spiritual tourism for domestic and international tourists. It is one of the biggest contributor to tourism industry as India is a religious hub for different culture.

Eco Tourism - India has a variety of flora and fauna that attracts large number of tourists every year. Thenmala in Kerala is the first planned eco tourism destination in India.

Medical Tourism - Medical Tourism is growing rapidly in India in account of cheaper medical treatment costs, M-visa issued by the government and robust medical infrastructure development.

Luxury Tourism - The luxury travel market in India registered a growth rate of 12.8 per cent in 2015, the highest in comparison with any other BRIC country.

Heritage Tourism - Tourist visit India for its cultural heritage in various cities. The country's heritage is reflected in forts, temples, arts, museums, monuments, etc.

The table below shows the top 10 source countries for foreign tourist arrivals in India in the year 2017. Bangladesh has the highest shares followed by United States and United Kingdom.

Source country pic.PNG

Key Metrics

Metrics Value Explanation
Base Year 2017 Researched through internet


Market Risks

  • Regional border tensions, particularly in Kashmir are high. The border regions are more dangerous. The 2008 Mumbai terrorist attacks demonstrated that even mainstream tourist areas are not risk free.
  • The market is at risk from extreme weather events like floods, rain and summers.
  • According to the World Economic Forum’s Travel and Tourism Competitiveness Report 2015, India ranked 97 among 141 global economies on safety and security parameters.
  • Extensive poverty, presence of beggars, theft becomes annoying for the tourists and discourages them to come back to India.[2]

Top Market Opportunities

  • The tourism industry provides employment opportunities in various fields. There is substantial requirement in travel agencies for the position of tour operators, reservation and counter staff, tour escorts, sales and marketing staff, etc.[3] There is prospect of employment opportunity in airlines for the position of ground staff, traffic assistants, air hostess, pilots, client servicing staff, etc.
  • With the inflow of more tourists in the country, there is opportunity for government to collect more taxes. As per the Economic Survey 2018, Foreign Exchange Earnings from tourism grew 20.8 per cent to US$ 27.7 billion in 2017.[4]
  • Medical tourism has a huge opportunity in India due to the low cost of important medical procedures, typically up to 30 per cent cheaper than in US or UK. The medical tourism market accounted for US$ 3 billion in 2017 and is expected to double in 2018 due to easier norms for medical visas.
  • India is fast gaining its pace in the competition to become an ideal MICE destination. India earns about US$ 4.8 billion yearly through this tourism.[5] According to ICCA, India is 27th in the global meetings market.
  • Government of India has estimated[6] that India would emerge with a market size of 1.2 million cruise visitors by 2030-31.
  • India has set up state wise incentives, tax holidays, exemption from luxury tax, concession on electricity tariffs and easier license renewals to attract investors to set up in certain regions of the country.

Market Drivers

Policy Support - The initiatives and steps taken by the government has been the major driving force for growth in tourism. 100 percent FDI is allowed in tourism construction projects, including development of hotels, resorts and recreational facilities. Campaigns such as "Incredible India" and "Athithi Devo Bhava" also encouraged tourism in the country.

Robust medical infrastructure development - Medical tourism is growing in India. The reason that attracts medical tourism to India is cost effectiveness, medical infrastructure, and world class treatment at much lower cost. This sector is expected to grow to US$ 7 to 8 billion by 2020.

Growing demand -Domestic expenditure on tourism is expected to rise due to the growing middle class, growing income of households increasing disposable income. The middle class people has doubled from the year 2004 to 2012. By 2025-26 the number of middle class households is likely to more than double and reach to 547 million individuals from 267 million in 2016.

Increase in internet penetration - Internet penetration in urban India was 64.84 per cent in December 2017. Over 70 per cent of air tickets are being booked online in the country. A number of online travel and tour operators which allows better options and price to consumers are growing.

Increase in inventory across airlines and hotels - India is a popular tourist destination and this sector is growing rapidly, leading to higher demand for hotels and airlines. Many global hotel chains are seeking to expand their presence in India and more than 100,000 hotels will be added in the next five years. This will result in high penetration in Tier II cities.

Geography and Diversity of India - Bounded by the Himalayan ranges in the north and surrounded on three sides by water, India offers a wide array of places to see and things to do. Historical monuments, culture, forts, hills a station, landscapes make India a beautiful country and attracts tourists.

Industry Challenges

Human Resource – There is shortage of skilled manpower in travel and tourism sector in India. To sustain growth in this industry, skilled and trained workforce is essential. Also, the salary paid in tourism and hospitality sector is quite low compared with other fields like IT, insurance, retail, banking, finance, call centers, etc. Also, in tourism sector HR practices are not standardized, lack professional approach, vision, growth opportunities and development.

Lack of Infrastructure – Tourism related infrastructures like road, hotels, health facilities, hygiene, are under developed in India. The poor quality of infrastructure is reflected in India’s 112nd rank in ICT readiness component. Other facilities like air, road connectivity, and hospitality services are inadequate at major tourist destinations, becoming hurdle in the growth of tourism.

Safety and Security – Safety and security is major concern for any tourists willing to travel India. Attacks on foreign nationals, riots, terrorists’ attacks raise concerns for tourists. India was placed at the 114th position in terms of safety and security aspect in the WEF Index 2017.

Technology Trends

  • As travelling people want to stay connected with their family member by the medium of social media, most of hotels and airports are providing free internet facility.
  • Artificial Intelligence is helping travel companies to provide highly-tailored offers based on travelers' needs and expectations. Deep learning algorithms can help travel companies make the most out of travelers' online activities. Also, the huge amount of customer data at the disposal of travel companies is allowing for more accurate predictions and behavioral analytics.
  • The travelers no longer have to undergo hassle of calling up various travel agents to get a quote that fit the budget, negotiating the price, and collecting the physical booking confirmation from the agencies. The growing online travel and tours companies are helping customers to make better and easy choice in their travel. Now customers can compare the prices online and choose lowest price deals in airline tickets and hotels. Also, they can book everything from flight tickets to hotels rooms with just few taps on mobile screen.
  • Integration of chatbots with WhatsApp and Facebook Messenger helps customer to search flights and hotels. Online travel agencies are replacing manned call centers with chatbots programmed with Natural Language Processing abilities.These chatbots can respond to human queries and perform task like booking tickets and making reservations.

Regulatory Trends

  • The Government of India is working to achieve 1 per cent share in world’s international tourists’ arrival by 2020 and 2 per cent share by 2025.
  • The government has allocated US$ 183.89 million for integrated development of tourist circuits under Swadesh Darshan and Pilgrimage Rejuvenation and Spiritual Augmentation Drive. This was done to develop tourist circuits on specific themes to attract the tourists having special interest in visiting places with different themes like beaches, culture, heritage, wildlife, etc. These theme based tourist circuits will support communities, provide employment and foster social integration without compromising the environment.[7]
  • E-Tourist Visa launched by the government of India have resulted in increase in the number of tourist visa issued in the country. During January-April 2018 arrivals through e-visa increased 57.9 per cent year-on-year to 918,792.
  • The launch of several branding and marketing initiatives by the government of India such as "Incredible India", "Athithi Devo Bhava", "Clean India" provides a focused impetus to growth.
  • Government of India has released Medical Visa to encourage medical tourism in India. This sector is expected to reach US$ 8 billion by 2020.
  • National Tourism Policy 2015 was formulated to encourage the citizens of India to explore their own country.

Market Size and Forecast

As per the estimation of World Travel and Tourism Council, tourism generated US$ 210 billion in 2017. The GDP contribution of tourism to GDP was 9.4% of the GDP. Around 41,622 million jobs or 8% of the total employment was created. The visitor export generated 5.8% of the total exports in 2017. The travel and tourism investment was US$ 85.2 billion, 6.3% of total investment.[8] In 2017, foreign tourist arrival in India stood at 10.177 million and reached 2.21 million up to February, 2018. Foreign Tourist Arrivals increased to 5.97 million in January-July 2018. In other words, there was growth rate of 7.3 per cent year-on-year. [9]

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Market Outlook

The tourism sector is expected to grow at an annual rate of 6.9% to US$ 450 billion by 2028. The medical tourism sector is predicted to grow to US$ 7 to 8 billion by 2020. The government of India is working to achieve 1 per cent share in world's international tourist arrivals by 2020 and 2 per cent share by 2025.

Key Market Players

Make My Trip is India's leading online travel company which offers great offers, some of the lowest airfares, exclusive discounts and seamless online booking experience. It started its operation in India in 2005 and has been providing Indian traveler with instant bookings and comprehensive choices.[10]

Taj Hotels is subsidiary of Indian Hotels Company Limited (IHCL). The IHCL was incorporated in 1903 with its first ever hotel- The Taj Mahal Palace, Mumbai. Taj is one of the award winning brand functioning under the group.

Thomas Cook India is a Tours and Travel Agency which sells holiday packages and other essential travel services. They have products like international tour packages, India tour packages, honeymoon packages, cruise holidays, foreign exchange service, etc.[11]

Major companies.PNG

Strategic Conclusion

Travel and tourism creates jobs, drives exports, bring foreign currency and generates prosperity across the country. Travel and Tourism industry in India has emerged as a key driver for the growth of the services sector in India. Increasing disposable income along with rising middle class has continued to support growth of domestic and outbound tourism in the country. India’s travel and tourism industry has huge growth potential.

References

  1. https://www.indiatoday.in/travel/travel-buzz/story/lonely-planet-magazine-awards-2017-best-destinations-travel-lieftr-979389-2017-05-26
  2. https://www.omicsonline.org/open-access/a-review-of-indian-tourism-industry-with-swot-analysis-2167-0269-1000196.php?aid=69120
  3. http://content.timesjobs.com/fresher-in-travel-tourism-drawing-rs-1-5-3-lakh-per-annum/articleshow/57909323.cms
  4. https://www.financialexpress.com/budget/economic-survey-2018-forex-revenue-from-tourism-touches-27-7-billion/1034836/
  5. https://www.india-briefing.com/news/indias-tourism-sector-investment-opportunities-fast-growing-market-16720.html/
  6. http://www.travelinmyway.com/10-best-places-to-visit-in-india/
  7. http://tourism.gov.in/sites/default/files/Other/Guidelines%20final.pdf
  8. https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/india2018.pdf
  9. https://www.ibef.org/industry/indian-tourism-and-hospitality-industry-analysis-presentation
  10. https://www.makemytrip.com/
  11. https://www.thomascook.in/

Appendix

BRIC- Brazil, Russia, India, China

FDI - Foreign Direct Investment

GDP – Gross Domestic Product

ICCA - International Congress and Convention Center

MICE – Meetings, Incentives, Conferences and Events

US – United States

WEF – World Economic Forum


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