For the last two years, tourism the world over has been closed to inbound tourism, except for a few small nations such as UAE, Sri Lanka, Maldives etc. India is no exception and this has taken its toll on the tourism economy.
The DefExpo 2022 scheduled to be held in Gandhinagar has been postponed as the government cited the Russia-Ukraine war as the reason. It may be but it points to a larger picture of the Indian hospitality industry losing out due to such postponement.
So, let’s put a perspective to this thinking. In 2019, which was a normal year for tourism arrivals, India received over 10.9 million foreign tourists as per the Govt. of India statistics. On average, foreign tourists spend seven nights in India and this means at least fifty million room nights that was consumed in India, at a conservative level, the bulk of this spend is in star-rated hotels in India.
Second, foreign tourists are bigger spenders in tourist destinations and they consume services of local guides, dine in the hotels and on average pay a higher room rent compared to domestic tourists.
The year 2020 was a washout for inbound into India, there was a slight recovery in 2021 but not economically significant. This leads to another point, is domestic tourism the panacea of the tourism economy in India. To the best of our knowledge, it’s not the case. At the most, it can act as a band-aid to the tourism economy. Let’s explain why?
In the last two years, many hotels have closed shop. According to the Federation of Hotels and Restaurants Association of India (FHRAI), around 40 per cent of the hotels and restaurants had shut shop by early 2021 and the situation has not improved but only worsened.
Second, Indian domestic tourists are not huge spenders, for the last two years, all hotels—be it five stars to three-star have slashed their rates and offered domestic tourists rates that were available as far back in 2017-18. Only, the deep-pocketed hotels is going to survive. City hotels in metros now charge rates seen in 2017-18 and they have restructured loans or come up with Rights issues to beef up their bottom lines.
Indian domestic tourists do not spend much on destination shopping and prefer to just skip that activity entirely as even they are on a tight budget, what with inflation eating into their savings.
Third, Indian domestic tourists have the leverage to book last-minute and manage a better deal compared to foreign counterparts who lock their rates at least six months in advance.
As a result, one can come to the conclusion that it’s the foreign tourists that drive the tourism economy as they consume all forms of services when visiting India and no amount of domestic numbers can make up for the shortfall in terms of value. This is the best time for the government to open its doors fully to international tourism.
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