report of growth of tourism industry india 10th sep'11

8/3/2019 Report of Growth of Tourism Industry India 10th Sep'11

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GROWTH

OF

TOURISM INDUSTRY -INDIA

1 0 t h S e p t e m b e r 2 0 1 1

Submitted by:

Ashish Narula WMP7084

Ashish PahujaWMP7085

Astha Malik WMP7086Avneet Kaur WMP7087

Chandramouli K WMP7088

Deepak Arora WMP7089

Deepak Priya WMP7090

Dheeraj Gupta WMP7091


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Table of Contents

DEVELOPMENT OF TOURISM IN INDIA .............................................................................................................. 4Early Development ............................................................................................................................................. 4Types of tourism ................................................................................................................................................. 5Trends in Tourism Industry................................................................................................................................. 8

World trends .......................................................................................................................................... 8India Trends ........................................................................................................................................... 8

Businesses benefitting from Tourism................................................................................................................. 9IMPACT OF TOURISM IN INDIA ........................................................................................................................ 15

POSITIVE IMPACTS............................................................................................................................... 15NEGATIVE IMPACTS ............................................................................................................................. 15

Indian tourism industry in comparison to the world tourism industry .......................................................... 16Current Scenario in Tourism Industry of India: ................................................................................................ 16Indias Place in World Tourism: ........................................................................................................................ 17Demand & Supply Scenario: ............................................................................................................................. 19

Demand Scenario:................................................................................................................................ 19Supply scenario:................................................................................................................................... 19

Government Policies & Initiatives:................................................................................................................... 20Various factors affecting Tourism .................................................................................................................... 22Application of Micro Economic Concepts in Tourism industry ....................................................................... 23

Monopoly -Price Discrimination.......................................................................................................... 25Prospects of tourism firms .................................................................................................................. 26Effect of Income on Tourism (Engel Curve) .......................................................................................... 27

Future of Indian Tourism.................................................................................................................................. 31Incredible India !! ................................................................................................................................. 31India on the World Map ....................................................................................................................... 31

Government Policy Initiatives ........................................................................................................................... 32


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Going Forward- Destination India ..................................................................................................................... 32World Tourism Outlook .................................................................................................................................... 34

References.........................................................................................................................................................35


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Table of Figures

1. Facts about Tourism 2010 ............................................................................................................................... 72. Total contribution of Travel & Tourism to GDP ............................................................................................. 103. Breakdown of Travel & Tourisms to GDP .................................................................................................... 114. International tourist arrival ........................................................................................................................... 125. ITA by country of destination ........................................................................................................................ 126. India Domestic Tourist (millions) ................................................................................................................... 137. Foreign tourist arrival Vs Foreign exchange earnings (India) ........................................................................ 138. India - Other jobs Vs Tourism Jobs ................................................................................................................ 149. India - GDP Vs Tourism Industry .................................................................................................................... 1410. Relationship between Price of Hotel room vs Number of rooms demanded. ............................................ 2311. Positive and negative Market Shock ........................................................................................................... 2412. Economies and Diseconomies of Scale ........................................................................................................ 2413. Diminishing Marginal Utility Principle ......................................................................................................... 2514. Monopoly -Price Discrimination .................................................................................................................. 26

15. Effect of Income on Tourism (Engel Curve) ................................................................................................. 2716. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 ................................................ 2817. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 (Graph) ................................... 2818. Domestic Tourist (Million) ........................................................................................................................... 2919. WTO Tourism Vision (International Arrivals) ............................................................................................... 34


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Introduction

The concept of Travel and Tourism is as old as civilisation. The OECD glossary of statistical terms defined

tourism as the activities of persons travelling to and staying in places outside their usual environment for

not more than one consecutive year for leisure, business and other purposes not related to the exercise of

an activity remunerated from within the place visited.

DEVELOPMENT OF TOURISM IN INDIA

Early Development

Initial organised and conscious efforts to promote tourism in India were made in 1945 when a committee

was set up by the Government under the Chairmanship of Sir John Sargent, the then Educational Adviser to

the Government of India (Krishna, A.G., 1993). Thereafter, the development of tourism was taken up in a

planned manner in 1956 coinciding with the Second Five Year Plan. The Sixth Five year plan marked the

beginning of a new era when tourism began to be considered a major instrument for social integration and

economic development.

But it was only after the 80s that tourism activity gained momentum. The Government took several

significant steps. A National Policy on tourism was announced in 1982. Later in 1988, the National

Committee on Tourism formulated a comprehensive plan for achieving a sustainable growth in tourism. In

1992, a National Action Plan was prepared and in 1996 the National Strategy for Promotion of Tourism was

drafted. In 1997, the New Tourism Policy recognises the roles of Central and State governments, public

sector undertakings and the private sector in the development of tourism were. The need for involvement

of Panchayati Raj institutions, local bodies, non-governmental organisations and the local youth in the

creation of tourism facilities has also been recognised.

Tourism is not merely an activity for pastime and entertainment. It is an enriching and energizing activity.

Tourism has been a major social phenomenon of the societies all along. It is motivated by the natural urge of

every human being for new experience, adventure, education and entertainment. The motivations for

tourism also include social, religious and business interests. The spread of education has fostered a desire to

know more about different parts of the globe. The basic human thirst for new experience and knowledge

has become stronger, as technological advances are overcoming communication barriers. Progress in air

transport and development of tourist facilities has encouraged people to venture out to the foreign lands.

Tourisms importance, as an instrument for economic development and employment generation,

particularly in remote and backward areas, has been well recognized the world over. It is the largest service

industry globally in terms of gross revenue as well as foreign exchange earnings. Tourism can play an

important and effective role in achieving the growth with equity objectives, which we have set for ourselves.

Tourism is one economic sector in India that has the potential to grow at a high rate and can ensure

consequential development of the infrastructure at the destinations. It has the capacity to capitalize on the

countrys success in the services sector and provide sustainable models of growth.

Tourism has the potential to stimulate other economic sectors through its backward and forward linkages

and cross-sectoral synergies with sectors like agriculture, horticulture, poultry, handicrafts, transport,

construction, etc. Expenditure on tourism induces a chain of transactions requiring supply of goods and

services from these related sectors. The consumption demand, emanating from tourist expenditure, also

induces more employment and generates a multiplier effect on the economy. As a result, additional income

and employment opportunities are generated through such linkages. Thus, the expansion of the tourismsector can lead to large-scale employment generation and poverty alleviation. The economic benefits that


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flow into the economy through growth of tourism in the shape of increased national and State revenues,

business receipts, employment, wages and salary, buoyancy in Central, State and local tax receipts can

contribute towards overall socio-economic improvement and accelerated growth in the economy.

Tourism has also become an instrument for sustainable human development including:

Poverty elimination. Environmental regeneration. Job creation. Advancement of women and other disadvantaged groups

Tourism is overwhelmingly an industry of private sector service providers, although the public sector has a

significant role to play in infrastructure areas either directly or through Public Private Partnership (PPP)

mode. It is a multi-sectoral activity characterized by multiple services provided by a range of suppliers. It is

quite similar to manufacturing industry, where the supply chain is as important as the end product. The

related sectors include airlines, surface transport, hotels, basic infrastructure and facilitation systems, etc.

Thus, the growth of tourism cannot be attained unless the issues related to all the related sectors are

addressed simultaneously.

For a developing country like India which is on the path of modern economic growth through structural

transformation of the economy, tourism is the right vehicle. The value-added effect of tourism is increasing.

India has emerged as one among the top 40 tourism earners. Thanks to the vibrant tourism industry, there is

now an almost assured channel of financial flow to the country. With its forward and backward linkages with

a host of sectors like transport, hospitality, education, health, banking etc., India is all set to reap full

potential of this vibrant sector.

Types of tourism

Medical tourism

The medical tourism industry in India has been estimated to increase to around US$2 billion over the next

couple of years. Expenditure of key health care treatment is up to 30 percent low in comparison to the

United States and United Kingdom. Medial tourism in India emerges as a huge money generator. India has

been promoting its healthcare tourism by giving the tourists with personal healthcare services. It is

projected that the total marketplace for medical tourism will reach US$2 billion by 2012, representing a

CAGR of 60.69 percent.

Spiritual tourismIndia is spotted with a number of spiritual destinations. A visit to these places would help in spiritual self-

discovery. In fact, divine tours of India allow one to care for the spirituality within oneself by going deep into

the rich religious history of the country. Spiritual tours of India take one to quite a few spiritual destinations

in the country which are famous for their religious and spiritual significance. Spread all over India, these

spaces give tourists the delight and peace that may have eluded them for long and which may have

stimulated them to visit the piously and religiously rich India.

Rural tourism

Those in the urbanized world who have an enthusiasm for facts about customary ways of life, arts and craftswill be fascinated to visit rural India. Rural India has much to present to humanity. As a historic civilization


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rich in arts, crafts and culture, rural India can come forward with significant tourist spots. Thousands of

overseas tourists visit rural areas in Rajasthan, Gujarat and south India every year. The government has

realized what rural India can offer to the world. Rural tourism can also reduce absolute dependence on

agriculture. It has now revived traditional crafts, buildings, art etc.

Adventure tourismIndia has got varied geographical areas and climate which would aid in adventure tourism. India has land

mass, beaches, rivers, hill & mountains to enjoy whatever form of adventure one likes. The hilly regions

present many opportunities for mountaineering, rock climbing, trekking, skiing, skating, mountain biking and

safaris, while the flowing rivers from these mountains are ideal for river rafting, canoeing and kayaking.

Oceans have huge and profound area of water provides many chances for adventure sports in the form of

diving and snorkelling.

MICE tourism (Meetings, Incentives, Conventions and Exhibitions)The latest type of business tourism is the fastest growing part of the international tourism market. It caters

to a variety of forms of trade meetings, international conferences and conventions, events and exhibitions

and is gradually but progressively capturing the interests of every major hotel.

EcotourismThis is a responsible form of tourism which encourages going back to normal products in each part of life. It

is also the key to sustainable ecological development. Primarily, ecotourism means creating as small an

environmental impact as possible and serving to maintain the original nature, so encouraging the

conservation of wildlife and habitats when visiting a place. Ecotourism has measured the highest growing

market in the tourism industry, according to the World Tourism Organization, with a yearly growth rate of 5

percent worldwide and representing 6 percent of the world GDP and 1.4 percent of all consumers spending.


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1. Facts about Tourism 2010


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Trends in Tourism Industry

World trends

Global market trends indicate that long-haul travel, neighbouring country tourism, rural and ethnic tourism,

wellness and health holidays, cultural tourism, spiritualism, ecotourism, sports and adventure holidays, and

coastal tourism and cruises are a few emerging areas of tourist interest. From a geographic viewpoint, there

has been a remarkable rise in Asian tourists, particularly from China and East Asian countries. Further, the

average age of the international tourist has also been reducing representing a growing segment of young

tourists who would typically travel to take a break from increasingly stressful professional lives.

India Trends

Indian travel and tourism industry bounced back from the effects of global economic slowdown last year and

is optimistic of good business growth in 2011. 2010 was a recovery period for the Indian travel and tourismindustry. The focus clearly was to revive business hit by the economic downturn and restore trust among

travellers worldwide that India is a safe destination and has come out of the shadows of the 2008 Mumbai

terror attacks.

Innovation and reworking business models played key roles in revitalizing business reeling under the effect

of global economic slowdown. With corporate travel and inbound traffic hit badly, the huge potential of

domestic tourism was explored seriously for the first time by many travel and hospitality players. Companies

diversified their portfolios with niche product offerings and tested the water with new avenues of marketing

like social media.

The Ministry of Tourism, Government of India also decided to bring the industry under one platform byspearheading the idea to form the Confederation of Indian Travel & Tourism Industry (CITTI). This is a

landmark moment in the Indian tourism as all the travel, tourism and hospitality associations came together

for the first time to submit a common pre-budget memorandum.

Other important Trends

Cooperation and consolidation, technology and innovation are viewed as the key trends. Social media has become a mainstay of marketing and only those who are tech savvy to channelize

on technology will prosper.

Niche and event oriented tourism is increasingly gaining ground. Todays traveller is often wellinformed and in danger of information overload specialists will need to have genuine in-depth

knowledge of destinations, events and new concepts to create a satisfying experience for travellers.

The increase in number of hotel rooms expected in the country will help position India a s a valuefor money destination.

Major advertisement campaigns by Tourism Ministry, Govt of India like Incredible India. Burgeoning Indian middle class and propensity of spending.


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The online travel industry has observed a significant growth over the last year and internationalmovement is further expected to see an upsurge this year. This increase will be due to more

accountability, transparency and safer payment options offered by the online medium

Consolidation by way of mergers and acquisitions is becoming a dominant trend. The small tomedium travel agents are finding it very difficult to survive as today you need volume and hugefunds to sustain.

Aviation sector has seen phenomenal growth. Low Cost Carriers(LCCs) in the coming years will be preferred over legacy carriers. One

can see the growth of LCCs in the Indian market and it will take place

for both short and long haul travel. Numbers of airports are increasing

and this is connecting India much better.

Businesses benefitting from Tourism

o Proportion of income from tourism All of income from tourismo Eating and Drinking Accommodationo Restaurants Hotelso Pubs Holiday villageso Cafes Time-shareso Night-clubs Guest houseso Miscellaneous Self-cateringo Crafts Camps / Caravanso Supermarketo Garages Travel Agentso Sports Equipmento Other retail Transport

Airlineso Recreation Facilities Cruise shipso Cinemas/theatres Car Rentalso

Swimming Poools Visitor Attractionso Public Transport Theme Parkso Buses, Trains, etc Museums/Gallerieso Taxis Historic sites


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2. Total contribution of Travel & Tourism to GDP


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3. Breakdown of Travel & Tourisms to GDP


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4. International tourist arrival

5. ITA by country of destination


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6. India Domestic Tourist (millions)

7. Foreign tourist arrival Vs Foreign exchange earnings (India)


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8. India - Other jobs Vs Tourism Jobs

9. India - GDP Vs Tourism Industry


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IMPACT OF TOURISM IN INDIA

Tourism industry in India has several positive and negative impacts on the economy and society. These

impacts are highlighted below.

POSITIVE IMPACTS

1. Generating Income and Employment: Tourism in India has emerged as an instrument of income and

employment generation, poverty alleviation and sustainable human development. It contributes around

6.0% to the national GDP and 9.25% of the total employment in India. Almost 25 million people are now

working in the Indias tourism industry.

3. Source of Foreign Exchange Earnings: Tourism is an important source of foreign exchange earnings in

India. This has favourable impact on the balance of payment of the country. The tourism industry in India

generated about US$100 billion in 2008 and that is expected to increase to US$275.5 billion by 2018 at a

9.4% annual growth rate.

4. Preservation of National Heritage and Environment: Tourism helps preserve several places which are of

historical importance by declaring them as heritage sites. For instance, the Taj Mahal, the Qutab

Minar, Ajanta and Ellora temples, etc, would have been decayed and destroyed had it not been for the

efforts taken by Tourism Department to preserve them. Likewise, tourism also helps in conserving the

natural habitats of many endangered species.

5. Developing Infrastructure: Tourism tends to encourage the development of multiple-use infrastructure

that benefits the host community, including various means of transports, health care facilities, and sports

centers, in addition to the hotels and high-end restaurants that cater to foreign visitors. The development ofinfrastructure has in turn induced the development of other directly productive activities.

6. Promoting Peace and Stability: The tourism industry can also help in promoting peace and stability in

developing country like India by providing jobs, generating income, diversifying the economy, protecting the

environment, and promoting cross-cultural awareness. However, key challenges like adoption of regulatory

frameworks, mechanisms to reduce crime and corruption, etc, must be addressed if peace-enhancing

benefits from this industry are to be realized.

NEGATIVE IMPACTS

1. Undesirable Social and Cultural Change: Tourism sometimes led to the destruction of the social fabric ofa community. The more tourists coming into a place, the more the perceived risk of that place losing its

identity. A good example is Goa. Hippy culture lead to a rise in the use of drugs, prostitution and human

trafficking. This had a ripple effect on the country.

2. Increases Tension and Hostility: Tourism can increase tension, hostility, and suspicion between the

tourists and the local communities when there is no respect and understanding for each others culture and

way of life. This may further lead to violence and other crimes committed against the tourists. The recent

crime committed against Russian tourist in Goa highlights this concern.

3. Creating a Sense of Antipathy: Tourism brought little benefit to the local community. In most all-inclusive

package tours more than 80% oftravelers fees go to the airlines, hotels and other international companies,not to local businessmen and workers. Moreover, large hotel chain restaurants often import food to satisfy


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foreign visitors and rarely employ local staff for senior management positions, preventing local farmers and

workers from reaping the benefit of their presence. This has often created a sense of antipathy towards the

tourists and the government.

4. Adverse Effects on Environment and Ecology: One of the most important adverse effects of tourism on

the environment is increased pressure on the carrying capacity of the ecosystem in each tourist locality.Increased transport and construction activities led to large scale deforestation and destabilisation of natural

landforms, while increased tourist flow led to increase in solid waste dumping as well as depletion of water

and fuel resources. Flow of tourists to ecologically sensitive areas resulted in destruction of rare and

endangered species due to trampling, killing, disturbance of breeding habitats. Noise pollution from vehicles

and public address systems, water pollution, vehicular emissions, untreated sewage, etc. also have direct

effects on bio-diversity, ambient environment and general profile of tourist spots.

Indian tourism industry in comparison to the world tourism industry

Current Scenario in Tourism Industry of India:

Today tourism is the largest service industry in India, with a contribution of 6.0% to the national GDP and

providing 9.25% of the total employment. Commencing with the slow growth at the start of the millennium,

The Indian Tourism Industry has performed quite well in the last couple of years. The Indian Tourism

Industry has out performed the global tourism industry in terms of growth in the volume of international

tourist as well as in terms of revenue. The World Trade and Tourism Council (WTTC) have named India along

with China as one of the fastest growing tourism industries for the next 10 to 15 years.

The key driver of for this growth in the Indian Tourism Industry has been a fast growing economy for the last

3 - 4 years. Despite lagging in the basic infrastructure that supports the tourism industry; Indian tourism

industry has been showing an impressive double digit growth.

According to Global Hotel and Hospitality consulting firm, HVS International, the strong performance in

tourists arrivals from 2005 can be attributed to a strong sense of business and investment confidence in

India inspired by:

Indias strong GDP performance; Strengthening of ties with the developed world; and

Opening of sectors of the economy to private sector/foreign investors.

The efforts made by the Ministry of Tourism & culture in the last few years have had a salutary effect on the

Indian Tourism Industry.


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Indias Place in WorldTourism:

The World Tourism Organization forecast indicates an increasing tourism preference towards East Asia, the

Pacific, West Asia and South Asia, although Europe and America still remain the worlds foremost tourism

destinations commanding 77 per cent of the global market. East Asia/Pacific achieved the highest rate ofgrowth of 14.5 percent in tourism and travel in 2000 followed by West Asia and South Asia. With this

gradual shift in focus, the outlook for the growth of tourism in the region is promising. In Asia, China has

emerged as a leading tourist destination and is poised to become the worlds top tourist destination by

2020. The WTTC has identified India as one of the worlds foremost tourist growth centers in the coming

decade. After Turkey, India is expected to achieve the fastest rate of growth of the total amount of

economic activity likely to be generated by travel and tourism, at 9.7 per cent over the next 10 years. Also,

the largest employment creation after China is expected to take place in India over the same period. The

growth in visitor exports or spending by international tourists is likely to be the fastest in India at 14.3 per

cent per annum over the next decade. On the whole, the WTTC forecast for India is promising, subject to key

policy issues that affect the growth of the sector being addressed. If India is to realise its enormous potential

in tourism it must provide exclusive world-class tourism products and destinations to compete successfullyfor a larger share of the Asian tourism market. Today, outbound tourism from India far exceeds visitor

traffic to the country partly because there is a lack of world-class destinations within the country and partly

because the domestic tourism policy has been largely directed towards those in the lower end of the

spending spectrum. The high spender from India prefers to visit neighbouring countries as he gets better

value for money. Indias international arrival figures have not been able to keep pace with neighbouring

countries and have been exceeded by Thailand, Malaysia, Indonesia, Dubai and the Maldives. Since 1995,

Indias share of the world market has remained virtually stagnant at 0.38 per cent, while domestic tourism

has grown at a phenomenal rate and India now accounts for 4.6 per cent share of domestic tourism

worldwide. In terms of tourism receipts, India has shown relative buoyancy because of the interest shown

by visitors in traditional handicraft items and particularly in diamonds.


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Contibution of Travel and Tourism to Exports and Receipts

World Average India World Rank

Total tourism exports as percentage of totalexports 12.15 9.5 31

Tourist Receipts 5.2 11.8 29

Contibution of Travel and Tourism to Employment

World India Rank

Number of Employed 207.1 million 25 million 2nd

Indias Tourist Profile:

India receives the largest number of overseas tourists from the United Kingdom, which is its largest source

market, followed by the United States, Sri Lanka, France, Germany, Canada, Japan, Australia and Singapore.

Of the tourists coming to India, 27.5 per cent are in the age group India receives the largest number of

overseas tourists from the United Kingdom, which is its largest source market, followed by the United

States, Sri Lanka, France, Germany, Canada, Japan, Australia and Singapore. Of the tourists coming to India,

27.5 per cent are in the age group of 35-44 years, 23.4 per cent in the age group of 25-35 years and 20.8 percent in the age group of 45-54 years. Women constitute only 30.5 per cent of Indias total international

arrivals. Repeat visitors account for 44.9 per cent of the overseas visitors. A substantial number of these

may be non-resident Indians, as hotel reservations do not correspond to the number of international arrivals

in the country. The average length of stay of foreign tourists in the country in 1998 was 31.2 days. Domestic

tourism, on the other hand, is largely pilgrimage-oriented and requires improvement in travel facilities and

pilgrim destinations.

India's Tourist Profile : Domestic & International

World ($) India ($)

Percentage Share

of India

International Arrivals 698 million 2.64 million 0.38%

Tourism Receipts 595 billion 3.2 billion 0.69%

Domestic Tourism Worldwide 6980 million 210 million 4.60%


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Demand & Supply Scenario:

Demand Scenario:

Main reason for this increase in business traffic to India has been following fundamental factors:

Indias strong GDP performance; Strengthening of ties with the developed world; and Opening of sectors of the economy to private sector/foreign investors. Reforms in aviation sector which led to better connectivity with many countries such as ASEAN and

created additional capacity on existing routes.

Development of infrastructure by the government. Indias emergence as outsourcing hub. Success of Incredible India campaign and other tourism promotion measures. Indias growing recognition as an exciting place to visit has helped to boost its image as a leisure

destination.

Supply scenario:

According to estimates by HVS International, around 10856 rooms in Delhi, 9318 in Mumbai, 7794 in

Bangalore and 7408 rooms in Hyderabad are to be expected to be added in by 2011.


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Government Policies & Initiatives:

A)Tourism Policy: In order to develop tourism in India in a systematic manner, position it as amajor engine of the economic growth and to harness its direct and multiplier effects for

employment and poverty eradication in an environmentally sustainable manner, the National

Tourism Policy was formulated in the year 2002. Broadly the policy attempts to:

Position tourism as the major engine of economic growth;

Harness its direct and multiplier effects for employment and poverty eradication in anenvironmentally sustainable manner

Focus on domestic tourism as major driver of growth

Acknowledges the critical role of private sector with government working as a pro activefacilitator and catalyst;

Create and develop integrated tourism circuits based on Indias unique civilization, heritage,and culture in partnership with states, private sector and other agencies.

Ensure that the tourist to India gets physically invigorated, mentally rejuvenated, culturallyenriched and spiritually elevated and feel India from within

B)Governments Open Skies Policy:The Governments Open Skies Policy, permission for domestic airlines to commence international

flights, start up of various low cost carriers, and fleet expansion by domestic players has created

a huge incentive for domestic travellers to explore far off destinations within and outside India.

C)Foreign Trade Policy:The Foreign Trade Policy announced in April 2006 offered following incentives to hospitality

Industry:

Hotels and restaurants are allowed to import duty free equipment and other items including liquor,

against foreign exchange earnings under the Served from India scheme.

Service exports in Indian Rupees, which were otherwise considered as having been paid for in

foreign exchange by RBI, will now qualify for benefits under the Served from India scheme.


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Benefits of the scheme earned by one service provider of a Group company can now be utilized by

other service providers of the same Group Company including managed hotels.

D)FDI in Hotel and Tourism Sector:100 percent FDI is permissible in the sector on the automatic route.

E)Other Government Initiatives: Government has undertaken following initiatives to attract inbound and outbound tourists:

Incredible India Under this program government promotes India through variousintegrated marketing programs

Atithie devo Bhava ( Gusets are equal to God) Under this program the Government createawareness among Indian people who come in contact with the tourist.

Various Infrastructure building initiatives

Encourage religious tourism to promote various places in India as Buddhist abodes.

Other projects include development of National Highways.


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Various factors affecting Tourism

o Economic Factors Increased Income levels &Propensity of spending GDP of India

o Social Factors Healthy lifestyles are being encourages Young population ( Demographics)

o Cultural Factors Festivals Maintenance of historical monuments, Museums, Galleries(India ranks No 7 in world heritage sites)

Exhibitions and Trade fairso Political factors

Terrorism & Security, Infrastructure, International politics etc.. Worlds largest democracy Religious tolerance Relations with neighbouring countries

oGovernmental factors

Aggressive campaign Incredible India Tax exemptions and price competitiveness( 6th overall in this category)

Upto 100% NRI investments are allowed

Tax exemptions for travel operators


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Application of Micro Economic Concepts in Tourism industry

1. Relationship between Price of Hotel room vs Number of rooms demanded.

10. Relationship between Price of Hotel room vs Number of rooms demanded.

The demand curve and the supply curve are drawn above for the price of the room and the number of

rooms demanded. An equilibrium point is reached when the number of rooms supplied is equal to the

number of rooms demanded at a certain price.

Also, the demand curve and the supply curve could be shifted due to many economic factors and

accordingly the equilibrium point would be shifted.

Below is a table showing positive and negative Market Shock for the various economic factors


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11. Positive and negative Market Shock

2. Economies and Diseconomies of Scale

12. Economies and Diseconomies of Scale

The above picture represents the concept of economies and diseconomies of scale for the motel industry.


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3. Diminishing Marginal Utility Principle

13. Diminishing Marginal Utility Principle

In the above picture, S is the satisfaction level, d is the number of days tourist stay at the destination and d*

is Optimal duration of tourist stay.

According to the theory of diminishing marginal utility, the utility of any good decreases as the quantity

consumed increases. The satisfaction (S) a tourist may benefit from a destination is linked to the duration of

the stay (d). After staying for d* number of days, satisfaction level of tourist starts decreasing.

Monopoly -Price Discrimination

When a monopolist discriminates between consumers the practice is called Price Discrimination. He is

sometimes able to charge different prices to different consumers of the same commodity. In the Tourism

Industry the consumers are categorized into different classes and accordingly the prices are charged .


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14. Monopoly -Price Discrimination

In the above graph, we measure quantity along the x-axis and price(P), average cost(AC), marginal cost(MC),

average revenue(AR), marginal revenue(MR) along the y-axis. The monopolist faces a downward sloping

demand curve and as such his MR curve is also downward sloping. The monopolist will produce at the profit

maximizing level which is the point where

1. MR=MC and2. MC cuts MR from below.This happens at the point E and accordingly the quantity supplied would be Q* and the price charged is P*.

The AC curve intersects Q at the point F. As such his TC =C*FQ*0.

His TR= P*GQ*0 and the profit earned is denoted by the area P*GFC*.

The monopolist earns profit in the long run also as there is no competitor to enter the industry and take

away his share of profits. The above graph applies to the SOTC , Thomas cook and cox and kings when they

were enjoying monopoly status in the industry.

When a monopolist discriminates between consumers the practice is called Price Discrimination. He is

sometimes able to charge different prices to different consumers of the same commodity. In the Tourism

Industry the consumers are categorized into different classes and accordingly the prices are charged .

Prospects of tourism firms


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Most of the tourism and travel firms would have constant returns to scale, as the output of the firm doubles

when the input doubles. Inputs could be identified as the drivers, tourist cabs, seats for staff, computers etc.

But there could be economics of scale as well when the cost of inputs could be reduced by using a better

technology (early information through internet, faster ticket booking etc.).

For most of the tourism firms, demand curve will be determined by the market demand curve & individual

agencies will have horizontal demand curve as they are working in a competitive environment.

Also, there can be monopolistic behaviour for few firms who are able to differentiate in terms of their

service & reputation (Thomas cook etc.)

Their demand curve will have downward slope & will be earning profit in short run, but in the long run their

economical profit will be zero as more firms might enter the industry to share the profit.

Effect of Income on Tourism (Engel Curve)

15. Effect of Income on Tourism (Engel Curve)

As shown in the above chart, GDP per capita of India is increasing over the last few years.


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16. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010

17. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 (Graph)


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As shown in the above table and graph, number of domestic tourist visits are also increasing over the last

few years.

In the above table, GDP per capita and the domestic tourist visits are shown together for the years 1997 to

2010.

18. Domestic Tourist (Million)

Domestic tourist visits are plotted against the GDP per capita in the above chart.

The above table and the chart represent the income effect (Engel Curve) for different years for the domestic

tourism industry.

Below table shows the Elasticity of income. Note that % change in tourism with respect to % change in

income is positive.

Elasticity = %change in tourism/% change in income Increasing tourism with income increase so Tourism has positive elasticity with income


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Reasons for growth of India Tourism

Burgeoning Indian Middle class Growth in high spending foreign tourists Disposable Income (During 2001 -2006 income has grown by 10.15 %) Booming IT and Outsourcing Industry has resulted in increased business trips. Tourists add a

weekend break or longer holiday during the trip.

Foreign tourist spends more in India than any other country leading to exchange earnings. New baby Medical tourism is growing at 30% . More and more people are visiting India for

cosmetic surgeries

Diversity of India's natural and cultural richness provides the basis of a wide rangeoftourist products and experiences, which embrace business, leisure, culture, adventure,

spirituality, eco-tourism and many other pursuits.

The important initiatives taken by the Government to improve the flow of foreign tourists into the countryand thereby increasing the country's share in the world tourism included the following:-

Beginning ofcruise tourism by an international shipping firm. Direct approach to the consumers through electronic and print media through the "Incredible India"

Campaign called "Colours of India".

Creation of World Class Collaterals. Centralized Electronic Media Campaign. An integrated campaign in South East Asia to promote Buddhist sites in India. Direct co-operative marketing with tour operators and wholesalers overseas. Greater focus in the emerging markets particularly in the region of China, South Korea, Japan and

South East Asia.

Participation in over 185 Trade Fairs & Exhibitions all over the world. Optizmizing Editorial PR and Publicity. Wide spread use of Internet and Web marketing. Generating Tourist Publications. Re-enforcing hospitality programmes including grant of air passages to invite media personnel and

tour operators on familiarization tours to India to get first hand knowledge on various tourism

products.

Launching of Road Shows in key source markets of Europe, America, South East Asia and the MiddleEast.

Focusing on growth of hotel infrastructure particularly budget hotels. Enhancing connectivity through augmentation of air capacity and improving road infrastructure to

major tourist attractions.

Introduction of the Medical Visa.

Indias governmental bodies have also made a significant impact in tourism by requiring that each and every

state of India have a corporation to administer support issues related to tourism.
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.

Future of Indian Tourism

Conde Nast ranked her amongst the top 10 tourist destinations. JBIC ranked her as the fifth most attractive

investment destination.

By 2020, Tourism in India could contribute Rs.8,50,000 crores to the GDP. (Source- WTTC).The Travel and

Tourism industry holds tremendous potential for India's economy. It can provide impetus to other

industries, create millions of new jobs and generate enough wealth to help pay off the international debt.

That is why we have included Tourism amongst the Core Sectors of the Indian Economy.

According to the latest Tourism Satellite Accounting (TSA) research, released by the World Travel and

Tourism Council (WTTC) and its strategic partner Oxford Economics in March 2009:

The demand for travel and tourism in India is expected to grow by 8.2 per cent between 2010 and2019 and will place India at the third position in the world.

India's travel and tourism sector is expected to be the second largest employer in the world,employing 40,037,000 by 2019.

Capital investment in India's travel and tourism sector is expected to grow at 8.8 per cent between2010 and 2019.

The report forecasts India to get capital investment worth US$ 94.5 billion in the travel and tourismsector in 2019.

India is projected to become the fifth fastest growing business travel destination from 2010-2019with an estimated real growth rate of 7.6 per cent.

Incredible India !!

India is probably the only country that offers various categories of tourism. These include History tourism,

Adventure tourism, Medical tourism (ayurveda and other forms of Indian medications), Spiritual tourism,

Beach tourism (India has the longest coastline in the East) etc.

Explore India One can choose the locales of your choice, and see what each state has to offer and can lose

oneself in the wonder that is India. Tourists have the options of exploring modern cities that have grown

organically from the roots of a multi-coloured past,make a pilgrimage to holy shrines that echo with tales ofantiquity, fun and frolic on a vast array of golden beaches that dot an enviable coastline, washed by two

seas and an ocean. Sport with adventure in style. Jungles lure the tourists to a fascinating world at a diverse

array of wildlife sanctuaries and national parks....... this is the wonder that is India.

India on the World Map

The Indian tourism industry is in good shape since 1990s. Though the Indian economy had slowed, it was still

growing faster than the rest of the world. With Indian economy growing at around 8-9% per annum and rise

in disposable incomes of Indians, an increasing number of people are going on holiday trips within the

country and abroad resulting in the tourism industry growing wings.


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It is fast turning into a volume game where an ever-burgeoning number of participants are pushing up

revenues of industry players (hotels, tour operators, airlines, shipping lines, etc). Thus, the tourism sector is

expected to perform very well in future and the industry offers an interesting investment opportunity for

long-term investors.

The Indian tourism sector is seen generating $42.8 billion by 2017, a 42 percent surge from 2007, accordingto an industry research note by auditing and consulting firm Deloitte Touche. Despite the challenges being

faced in terms of a slowing economy, sluggish demand and security concerns, the country was fighting back

and tourism developments were taking place, it said." Although there will inevitably be some short- to

medium-term set backs, the long-term outlook remains positive," it said." Despite the deepening world

economic crisis, India's economy remains in decent shape and is still experiencing some of the strongest

growth rates in the world," the Deloitte report said.

Despite the numerous problems, tourism industry was the second-largest foreign exchange earner for India.

This is resulting foreign hospitality groups rushing towards India. International tourists account for a little

over 5 million visitors, while domestic market is seen at more than 700 million. Limited infrastructure poses

a constraint to the free flow of tourists, but the Indian government is addressing the issue through

upgradation of existing airports and building new ones.

It is also considering other incentives such as offering air travel and accommodation for foreign tourists who

visit India for the third time. It may also pick up the bill for tour operators promoting domestic and medical

tourism and is mulling income tax exemption for hoteliers if they invest 50 percent of profits into

infrastructure.

Government Policy Initiatives

Keenly aware of the unfolding boom in the tourism industry, the government is lending a hand to the

growth of the industry. In the Union Budget for 2003-04, government has extended infrastructure status to

tourism, thus opening the doors to cheap, long-term funds to help finance tourism infrastructure.

Outlay for tourism for the Tenth Five Year Plan is Rs. 2900 Crore. For the financial year 2003-04 the outlay is

Rs 325 crore. This is up sharply from Rs 150 crore allocated in the previous financial year. State governments

such as Kerala lay a lot of stress on boosting tourism. The state has an outlay of Rs. 74.25 crore for the

financial year 2003-04.

The Government of India has extended the benefits of Section 10(23G) of the Income Tax Act, 1961 to

institutions financing hotels of three-star category and above. A top level executive of Travel Finance

Corporation of India (TFCI) is all smiles as he says, "This has benefited TFCI as the company has a major part

of its portfolio in the exempted category." And this smile is now strongly percolating down to all tourism

industry players in the country.

The divestment of governments stake in government run hotels is another step in the right direction.

Professionals are increasingly stepping in to take over this service-oriented industry. Global best practices,

cost cuts and service with a smile are fast turning a norm.

Going Forward- Destination India

India is now chalking up one of its strongest growth charts in a long time. As the Indian economy continues

to open up in an effort to integrate with the world economy, benefits of doing business with and in India are

increasing. With the results, hundreds of thousands of jobs are moving to the Indian shores from the West.

This brings in its wake transit travelers, business travelers, business meets and holiday seekers.


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This is resulting in greater room occupancies and average room revenues (ARRs) in the country. ARRs have

moved up from Rs. 3200-3400 last year to Rs 4000-4200 this year. Room occupancy rates have shot up from

75-80% in 2002 to over 90% now. Infact, in Bangalore it is now estimated at 100%.

Constraints: The major constraint in the development of tourism in India is the non-availability of adequate

infrastructure including adequate air seat capacity, accessibility to tourist destinations, accommodation and

trained manpower in sufficient number.

Poor visitor experience, particularly, due to inadequate infrastructural facilities, poor hygienic conditions

and incidents of touting and harassment of tourists in some places are factors that contribute to poor visitor

experience.

Hotel room rents in India are still expensive compared to counties like Thialand and China. This hurt Indian

tourism. Though this discrepancy has come down, still there is some gap. Some of the reasons for this are

high luxury and entertainment taxes and high landing charges applicable in Indian airports.

Tourism in India is a state subject. Each state separately spends on tourism and tourism related activities,whereas if these funds were spent in a cohesive manner by a central agency to showcase the entire country

as one destination, the results would probably have been far more spectacular.


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World Tourism Outlook

International Tourism receipts would jump from $500 billion in 2000 to $2000 trillion in 2020.Vulnerable to currency fluctuations.

One size fits for all ( mass market tourism) is still dominating and would continue to dominate Specific / highly focused/ event based tourism is gaining prominence Accelerating technological advances would boost tourism Increased security and safety concerns (cctv, body scans, finger prints, eye scans etc.) Increased size and speed of aircrafts Smart highways ( better infrastructure) are being constructed to improve the infrastructure High speed internet is going to make life simpler Business traveller gives a mixed outlook

o Virtual conferencing, improved communications would result in reduced tourismo More companies have global presence. Require frequent face to face meetings and increase

the prospects of the industry.

Travellers are seeking memories and experience

19. WTO Tourism Vision (International Arrivals)


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References

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