Indian Travel, Tourism

and Hospitality
Industry
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Travel and tourism is the largest service industry globally in terms of gross revenue and foreign exchange
earnings. It is also one of the largest employment generators in the world. It has been a major social
phenomenon and is driven by social, religious, recreational, knowledge seeking and business interests and
motivated by the human urge for new experience, adventure, education, and entertainment. Tourism is
both cause and consequence of economic development. It has the potential to stimulate other sectors in
the economy owing to cross-synergistic benefits and its backward and forward linkages.
Global scenario
Travel and tourism is one of the fastest-growing industries and a leader in many countries. It is expected to
have generated around 9.4% of world GDP and 8.2% of total employment in 2009. The contribution of the
industry to the global economy remains high despite a 4.38% decline in 2009. During the year, travel and
tourism investment too declined by more than 12%.
International tourist arrivals rose from 682 million in 2001 to 920 million in 2008. The global travel and
tourism industry experienced a downturn in 2009 due to the global economic and financial meltdown. The
industry was affected by low business volumes and consumer confidence, given the uncertainty about
factors such as availability of credit, exchange rates, employment, and the H1N1 virus. Consequently,
tourist arrivals fell 4% worldwide in 2009. Nevertheless, tourist arrivals increased 2% in the last quarter of
2009, led by recovery in the Asia Pacific and the Middle East.

The industry is expected to improve in 2010, as most of the leading economies are exiting the recession
since end-2009. However, it is expected to be gradual as corporations, households and governments slowly
recover. Given the improvement in global economic conditions, the UNWTO forecasts a 3-4% increase in
international tourist arrivals during 2010. Asia is expected to continue showing the strongest rebound,
while Europe and Americas are likely to recover at a more moderate pace.
The expected rebound in tourism materialised in the first four months of 2010. This is reflected in the 7%
increase in international tourist arrivals during January-April 2010. Tourist arrivals grew at a faster pace of
8% in emerging markets, while advanced economies reported a 5% increase.

In 2009, following the trend in tourist arrivals, international tourism receipts also recorded a decline. It is
estimated to have declined by 5.7% to US$ 852 bn. The decline in earnings is sharper than in arrivals, as
during periods of slowdown, tourists tend to stay closer to home and prefer to travel for a shorter duration
of time.
The travel and tourism industry can be divided into inbound and outbound tourism; inbound refers to
countries attracting the largest number of tourists and outbound refers to countries from where the largest
number of tourists originate.
World inbound tourism

International tourist arrivals were 880 million in 2009. The European region continues to attract the largest
number of tourists, accounting for around 52% of total traffic in 2009. The Asia Pacific and Americas follow
with shares of 21% and 16% respectively. France, USA and Spain were the top three tourist destinations in
2009; China and Italy rank fourth and fifth respectively in terms of tourist arrivals.

International tourist receipts were down 5.7% in 2009. Europe continues to draw the highest amount of
total receipts, accounting for 49%; the Asia Pacific and Americas formed around 24% and 19%
respectively. USA, Spain and France were the top three earners during 2009 in that order; Italy and China
ranked fourth and fifth respectively.

Germany, USA and the UK are the leaders in terms of international tourism spending. During 2009, China
overtook France to become the fourth-largest tourism spender.

Some trends in consumer spending intensified during the global slowdown. These include late booking,
preference for short haul trips compared with long haul ones (travelling closer and for shorter periods of
time), and demanding value for money. These changes in consumer preferences would require changes in
business models of players in the industry.
Air transport, which plays a significant role in the global travel and tourism industry for both business and
leisure travel, was also adversely affected during 2009.
Indian travel and tourism industry
Indian tourism offers most diverse products globally. The countrys rich history, cultural heritage, beauty,
diversity of religion and medicine fascinate budget and luxury travelers. Tourism in India has registered
significant growth over the years. This has been led by growth in both leisure and business tourism. Rising
incomes, increasing affordability, growing aspirations, increasing globalisation, and a growing airline
industry along with improvement in travel-related infrastructure have supported industry growth. Tourism
holds immense potential for the Indian economy. It can provide impetus to other industries through
backward and forward linkages and can contribute significantly to GDP.

Indias travel and tourism industry is expected to generate revenue of Rs. 1,970 bn (US$ 42 bn) in 2010,
according to the World Travel & Tourism Council (WTTC). This would be around 3.1% of total GDP. However,
since travel and tourism touches all sectors of the economy, its real impact is greater and the travel and
tourism economy directly and indirectly accounts for ` 5,533 bn (US$ 118 bn), equivalent to 8.6% of total
GDP.

Personal travel and tourism is the most significant contributor, accounting for 55% of the total market,
while business travel forms only 9%. Capital investment is also significant with a share of 24%. Hotels, air
transport, surface transport, basic infrastructure, and facilitation systems environment are some of the
related sectors.
The share of the Indian travel and tourism industry globally is very less. However the industry holds
immense potential. In fact, India has been ranked among the leaders by the WTTC for long-term (10-year)
growth prospects. Further, a globally renowned travel magazine, Conde Nast Traveler, ranked India among
the top 10 tourist destinations of the world. JBIC has also ranked India as the fifth most attractive
investment destination. India is probably the only country that offers various categories of tourism with its
geographical diversity and rich cultural heritage.
Structure of the tourism industry

Tourism comprises activities of people travelling to and staying in places outside their usual environment for
not more than one consecutive year for leisure, business and social, recreational, and knowledge seeking
purposes.
The tourism industry is primarily service and people oriented; it is made up of businesses and organisations
belonging to various other industries and sectors. It is an interplay among these businesses and
organisations/persons which offer travel experience to tourists. The tourism industry comprises hospitality
(related to accommodation and dining), travel (transportation services through different modes), and
various other businesses which offer services and products to tourists. The components of the tourism
industry are shown in Exhibit 1.1.

Most of the players in the tourism industry are SMEs. The unorganised sector dominates the industry in
India. Hotels, airline companies, and tour operators form the organised sector.
Specialist travel service providers assist tourists with travel arrangements. These providers include travel
agencies who are involved in retailing of travel products directly to the tourists (individuals or groups).
They provide information on different travel destinations and advise customers on travel plans. They also
sell associated products such as insurance, car hire, and currency exchange.
Business travel agencies specialise in making travel and accommodation arrangements for business
travelers and promoting conference trades. The tour operators provide packages for individuals while the
principals provide basic travel and tourism related services.
Tour operators offer holiday packages which comprise travel (road, rail, sea, air as well as to and from the
destination airport, car hire, excursions, etc) and accommodation (hotels, guesthouses, apartments, etc)
services.
Transport service providers could be airlines, cruise lines, car rentals, and rail companies. A tourists choice
of transport would depend on the travel budget, destination, time, purpose of the tour, and convenience to
the point of destination. Accommodation could be hotels and motels, apartments, camps, guest houses,
lodge, bed and breakfast establishments, house boats, resorts, cabins, and hostels. In addition, tourists
also require catering facilities, which a variety of outlets for food and refreshments offer. These include
hotels, local restaurants, roadside joints, cafeterias, and retail outlets serving food and beverages.

Another major component of the travel and tourism industry is attractions such as theme parks and
natural attractions including scenic locations, cultural and educational attractions, monuments, events, and
medical, social or professional causes.
The tourist information and guidance providers include a number of service providers such as those offering
insurance, recreational, communication, and banking services; government agencies; tour guides; industry
associations; packaging agents; ticketing agents; and holiday sellers.
Types of tourists
Tourists can also be classified based on their purpose of visit:
Business tourists
This segment typically comprises those travelling for meetings, incentives, conventions and exhibitions
(MICE); however, this definition is not conclusive and includes any tourist on a visit to India for business
purposes. Business tourism is viewed as an important market in the country and one of the high-yielding
sectors of the tourism industry.
Leisure tourists
Leisure tourism comprises trips for pleasure. It includes holidays within the country or abroad. Visiting
friends and relatives and travel for a variety of reasons such as health and fitness, sports, education, and
culture also come under the purview of leisure trips. In the past few years, opportunities in India for leisure
tourism have emerged strongly owing to the following factors: changing consumption pattern of Indian
customers, burgeoning Indian middle class population, and geographical diversity.
Tourists can also be classified into domestic and foreign tourists based on their nationality. Furthermore,
depending on the duration, tourism can be classified into picnic, excursion, holidays, weekend getaways,
etc.
Different forms of tourism
There are different types of tourism. The recent trend is moving toward niche segments of tourism:
Medical/healthcare tourism Adventure tourism Heritage tourism Ecotourism Rural tourism
Pilgrimage tourism
Medical tourism
Medical tourism also known as health tourism has emerged as one of the important segments of the
tourism industry. The term has been coined by travel agencies and the mass media to describe the rapidlygrowing practice of travelling across international borders to for healthcare. Travelers typically seek services
such as elective procedures as well as complex specialised surgeries such as joint replacement (knee/hip),
cardiac, dental, and cosmetic surgeries. Psychiatry, alternative treatments, and convalescent care are also
available.
Several factors have contributed to growth in medical tourism worldwide. These include:
Low travel costs
Significant reduction in travel costs worldwide has made travel to other countries for medical treatments
more affordable. This has also boosted industry growth.
High growth of world-class medical treatments in developing countries

Healthcare facilities in many developing countries have improved significantly in recent years and their
standards of healthcare are now on par with that in the US or Western Europe.
Medical tourism has done exceptionally well in India and the number of medical tourists coming into the
country is increasing. Rising healthcare costs in the developed economies, especially the US and the UK, is
forcing patients from the region to look for cost-effective and alternative forms of treatment. India, with its
pool of highly trained and specialised doctors, good healthcare infrastructure facilities, relatively lower cost
of treatment and availability of alternative forms of treatment such as Ayurveda, Yoga, Siddha, and
Naturopathy is seeing strong growth in medical tourism.
Medical tourism is promoted through suitable packaging of identified best hospitals and price banding as
per treatment requirements. The medical costs in India are much lower at around 25% of the costs in the
European and US markets. Medical tourism has grown swiftly despite the economic slowdown. The industry
is still at a nascent stage and holds immense potential.
The key benefits of medical treatment and medical tourism in India are:

World-class treatment at fraction of the cost in western countries

Patients from more than 55 countries availing treatment in India

Medical technology, equipment, facilities and healthcare infrastructure in India at par with
international standards
The Indian doctors recognised among the best globally.

Various medical treatments that can be availed in India include knee replacement, hip replacement,
cosmetic surgery, dental treatment, and cardiac care.
The government is also taking several measures to promote medical tourism in the country. This includes
issuance of Medical Visa for patients and their attendants coming to India for treatment. It has also
requested the state governments to promote healthcare packages. Under the Market Development
Assistance Scheme, financial assistance would be provided to medical tourism service providers (MTSP),
i.e. accredited hospitals and medical tourism facilitators (travel agents and tour operators approved by the
Ministry of Tourism and engaged in medical tourism).
Wellness tourism
Wellness tourism is regarded as a sub-segment of medical tourism. Here, the primary purpose is achieving,
promoting or maintaining good health and a sense of well-being. India with widespread presence of
Ayurveda, Yoga, Siddha, and Naturopathy, complemented by its spiritual philosophy, is a well-known
wellness destination. Wellness tourism includes ayurvedic therapies, spa visits, and yoga meditation. The
government is promoting this form of tourism with publicity and promotional activities.
Adventure tourism
Travel for the aim of exploration or travel to remote, exotic and possibly hostile areas is known as
adventure tourism. With tourists looking for different options, adventure tourism is recording healthy
growth. Adventure tourism refers to performance of acts, which require significant efforts and some degree
of risk or physical danger. The activities include mountaineering, trekking, bungee jumping, mountain
biking, river rafting, and rock climbing.
India with its diverse topography and climate offers tremendous scope for adventure tourism. The
mountain regions offer lot of scope for mountaineering, rock climbing, trekking, skiing, skating, mount
biking and safaris; rushing rivers provide opportunities for river rafting, canoeing and kayaking; and oceans
provide tremendous opportunity for diving and snorkeling.

The government is undertaking measures such as financial assistance to governments of states and union
territory for development of adventure tourism destinations. It has also provided financial assistance for
organising mountain biking expedition. The Ministry of Defense has given permission for opening of 104
additional peaks in Leh area of Jammu & Kashmir for adventure tourism, while customs duty on inflatable
rafts, snow-skis, sail boards and other water sports equipment has been exempted.
Heritage tourism
Heritage tourism is defined as travel undertaken to explore and experience places, activities, and artifacts
that authentically represent the stories and people of the past and present. It is oriented toward cultural
heritage of the tourist location. It involves visiting historical or industrial sites, religious travel or
pilgrimages. India is well known for its rich heritage and ancient culture. The countrys rich heritage is
amply reflected in the various temples, majestic forts, pleasure gardens, religious monuments, museums,
art galleries and urban and rural sites which are citadels of civilisation. All these structures form the
products of heritage tourism.
Ecotourism
Ecotourism, also known as ecological tourism, is travel to natural areas to appreciate the cultural and
natural history of the environment, while not disturbing the integrity of the ecosystem and creating
economic opportunities that make conservation and protection of natural resources advantageous to local
people. It involves travel to destinations where flora, fauna and cultural heritage are primary attractions.
Ecotourism also minimises wastage and the environmental impact through sensitised tourists. It can be one
of the medium to preserve local culture, flora and fauna and other natural resources.
India, with its great geographical diversity, offers several eco-tourism destinations. It is home to a wealth
of ecosystems which are well protected and preserved. These include:

Biosphere reserves

Mangroves

Coral reefs

Deserts

Mountains and forests

Flora and fauna

Seas, lakes and rivers

Caves

The basic principles to be followed in ecotourism are:

Minimise the impact

Build environmental and cultural awareness and respect

Provide positive experiences for both visitors and hosts

Provide direct financial benefits for conservation

Provide financial benefits and empowerment for local people

Raise sensitivity to political, environmental, and social climate of the host country

Support international human rights and labour agreements.

A few places for ecotourism include the Himalayan region, Kerala, North East India, Andaman & Nicobar
and Lakshadweep Islands. Thenmala in Kerala is the first planned ecotourism destination in India. Some
most popular ecotourism locations in the country are Rishikesh, Kerala and Puducherry.
Ecotourism consists of:

Eco parks

Eco places

Eco fauna

Eco flora

Eco destinations

Eco trivia

Eco treks

Eco adventures

Rural tourism
Rural tourism showcases rural life, art, culture and heritage of rural locations, benefitting the local
community economically and socially as well as enabling interaction between the tourists and locals for a
more enriching tourism experience. Rural tourism is multi-faceted and may entail farm/agricultural tourism,
cultural tourism, nature tourism, adventure tourism, and ecotourism. Rural tourism has certain
characteristics: it is experience oriented; locations are sparsely populated; it is predominantly in a natural
environment; it meshes with seasonality and local events; and it is based on preservation of culture,
heritage and traditions. Indias rural geographical and cultural diversity enables it to offer a wide range of
tourism products and experiences. Increasing levels of awareness, growing interest in heritage and culture,
improved accessibility to rural areas, and environmental consciousness are playing an important role in
promoting rural tourism. This form holds immense potential in India, where more than 70% of the
population resides in villages.
The Ministry of Tourism along with UNDP undertook the Explore Rural India Campaign, to give tourists a
chance to experience life in rural India. It is one of the most successful tourism campaigns so far. During
the Visit India Year 2009 campaign, 15 rural tourism sites were selected as rural eco-holiday sites.
Wildlife tourism
Wildlife tourism, one of the fastest segments of tourism, involves travel to different locations to experience
wild life in natural settings. Due to its varied topography and distinctive climatic conditions, India is
endowed with various forms of flora and fauna and it has numerous species of birds, mammals, reptiles,
amphibians and plants and animals.

To tap the potential of wildlife tourism, the government has launched some wildlife packages for travelers.
Wildlife Tourism in India includes wildlife photography, bird watching, jungle safari, elephant safari, jeep
safari, jungle camping, ecotourism etc.
The country offers immense opportunities for wildlife tourism. The strong heritage of wildlife in India
comprises more than 70 national parks and about 400 wildlife sanctuaries including bird sanctuaries.
However, concrete steps by both the government and the private sector need to be taken to promote
wildlife tourism. Taj Hotels & Resorts has a joint venture with Conservation Corporation Africa to provide
wildlife enthusiasts, circuit tourists and high-end domestic travelers with fascinating wildlife experiences
within India through an ecologically-sustainable model. In a bid to preserve the natural habitat, the Ministry
of Tourism has launched an initiative, Tigers: Our Natural Beauties.
MICE tourism
MICE (Meetings, Incentives, Conferences and Exhibitions) tourism is also one of the fastest growing in the
global tourism industry. It largely caters to business travelers, mostly corporates. It caters to various forms
of business meetings, international conferences and conventions, events and exhibitions. Hong Kong,
Malaysia and Dubai are the top destinations for MICE tourism. India is also present in this segment.
This form of tourism combines annual business meetings and conferences with pleasurable events for
delegates and attendants. India can be competitive with other MICE tourism destinations owing to its
natural beauty, rich heritage and geographical diversity. One of the requisites for this form of tourism is
world-class convention centres. The Ashok, New Delhi; Hyderabad International Convention Centre,
Hyderabad; and Le Meridian, Cochin are forerunners in the Indian MICE tourism industry, facilitating
domestic and International business meetings and conferences.
Some other forms of tourism include cruise tourism, beach tourism, pilgrimage tourism, monsoon magic,
luxury tourism.
Major tourist circuits of India
India has several tourist destinations spread across the length and breadth of the country. However, given
the distance between various destinations, tourist circuits have been created considering the needs, choices
of tourists as well as convenience. Some major tourist circuits are shown in the table 1.6:

Performance of the Indian travel and tourism industry

The tourism business in India can be broadly classified into: inbound tourism, domestic tourism, and
outbound tourism. Inbound tourism Foreign tourist arrivals in the country increased steadily from 2.4
million in 2002 to 5.3 million in 2008. It, however, fell to 5.1 million in 2009, recording a decline of 3.3%.
The slowdown in Indias core markets, the US, Europe and UK, travel advisories issued by countries against
travel to India following the terror attacks in Mumbai, and postponement of holidays by travelers affected
tourist inflow into the country in 2009; nevertheless, the impact on the Indian industry was much lesser
compared with other countries.
Foreign tourist arrivals are expected to increase in 2010. International events to be held in India and the
governments sincere efforts to promote the country as a tourist destination are likely to drive foreign
tourist arrivals. International events to be held during the year Commonwealth Games, ICC World Cup
Cricket and Formula 1 are expected to attract a number of sports fans across the world to India.
Improving infrastructure, low-cost airlines, and improved road connectivity are expected to aid the increase
in tourist inflow.

The top 10 countries accounted for around 64% of total tourist arrivals in the country during 2009. The US
and the UK together accounted for around 30% of tourist arrivals. Around 14% of the total tourist arrivals
in 2009 were from Indias neighboring countries, Bangladesh and Sri Lanka.

Foreign exchange earnings from tourism

The travel and tourism industry contributes significantly to the countrys foreign exchange earnings. Foreign
exchange earnings (FEE) from tourism increased steadily from US$ 3.1 bn in 2002 to US$ 11.7 bn in 2008.
In line with lower tourist arrivals, FEE fell 3.0% to US$ 11.39 bn in 2009. In rupee terms, earnings rose
8.3% to ` 549.6 bn. FEE in rupee terms had recorded double-digit growth in each of the years during
2003-08.
Domestic tourism
Domestic travelers recorded an all-time high of 650 million during 2009, 15.5% higher than the previous
year. After rising 18% and 14% respectively in 2006 and 2007, rise in domestic travel slowed down to
6.9% during 2008. The increase in 2009 reflects recovery in sentiment in the later part of the year and
preference for domestic visits over international visits. Although the Indian economy was not as severely
affected by the economic slowdown as other economies, Indian consumers are cautious and are either
postponing their travel plans or opting for shorter duration holidays and travelling within the country.
Indians travel within India mainly for pilgrimage/religious reasons, leisure, visiting families/friends and
business.

Three states, Andhra Pradesh, Uttar Pradesh and Tamil Nadu, accounted for almost 63% of domestic tourist
visits during 2009.

The domestic tourism is set to boom in the coming years along with emerging trends that will allow
travelers to indulge more in exploring India and the varied experiences it offers.
Outbound tourism
The trend observed in outbound tourism during 2009 was no different from that seen in inbound and
domestic tourism. Number of outbound visits grew a marginal 1.8% to 11.1 million during 2009. After
growing 15-17% during 2004-2007, outbound visits slowed down to 11.1% in 2008. A booming economy,
higher disposable incomes, higher aspirations, cheaper international travel, and better tourism products
boosted outbound tourist flow.

Emerging trends
With changing times and global business conditions, significant changes have been observed in the Indian
travel and tourism industry.
Demand for niche and customised tourism products
Lifestyle changes and higher disposable incomes have resulted in shifting travel preferences and travelers
are looking for out-of-the-box experiences. Consequently, travel service providers are offering niche,
customised tourism products. This has led to emergence of niche segments such as wine tourism, popculture tourism, cruise tourism, wellness tourism, monsoon tourism etc.
Tour companies are also willing to customise products as per travelers choices/preferences.
Rising online sales
Online travel sales have increased drastically in recent years. Greater proliferation of the Internet, growth
in low-cost air carriers, secure payment mechanisms, and coming-up of the Indian railways portal have led
to rise in online sales in the travel industry. A number of low-cost carriers operate on certain routes, and
hence online booking offers choice of air carriers to customers. Airline ticket booking constitutes more than
70% of online travel sales. However, a shift is being seen from air to non-air segments in the online travel
market. This shift is due to the non-air ticket booking segment growing swiftly with launch of the Indian
Railways online portal (www.irctc.co.in) and many online travel agencies providing bus tickets. Indian
Railway Catering and Tourism Corporation is the largest travel website in the APAC in terms of transaction
volumes. A number of hotels also use the Internet for booking of rooms.

Travel portals and hotel chains used to provide 360 degree virtual tours, audio tours and photographs, and
text reviews to the travelers. They are now marketing through video reviews and video blogs, either put up
by themselves or travelers on the travel agency portal or a social media video platform.
Online travel market sales are expected to grow in the coming years.
Spontaneous travel
Online travel booking has become simpler and easier. High pressure lifestyle coupled with simpler online
travel booking has led to travelers taking short, random trips during the year. This has given rise to the
concept of spontaneous travel. Realising the potential in this segment, travel companies also offer services
for last-minute bookings.
Finite travel
Another emerging concept in the travel industry is finite travel. A number of people see places and/or
species that are endangered or entail some form of time-related environmental risk or natural
phenomenon.
Need to diversify business model
Service providers are now offering attractive price ranges for services on their websites; this has led to
increase in online transactions. Consequently, the market size for travel agents has been narrowing. Given
this change, travel agents and tour operators now need to diversify their business models and adopt the
role of a travel advisor. Travel companies should also start offering valuable services to end-customers for
hassle-free travel.