How To Bounce Back?

By Amitabh Kant

The tourism industry could convert crisis into opportunity

The economic downturn and the terror attacks in Mumbai have adversely impacted tourism. But in many ways tourism is an antidote to terrorism; tourism is a catalyst for employment creation, income redistribution and poverty alleviation. One of the best ways to fight the terrorists is to support India’s beleaguered tourism industry.

The Indian tourism industry will be resilient and bounce back as it did post-September 2001. The present crisis presents an opportunity. There was an even bigger crisis in Indian tourism in 2001-02. The attacks on the World Trade Center in New York, war in Afghanistan, withdrawal of flights, attack on Parliament House in New Delhi and troop mobilisation on the India-Pakistan border meant that Indian hotels had just 20-25 per cent occupancy. International tour operators had removed India from their sale brochures and inbound Indian tour operators had switched to outbound operations.

Then tourism was positioned as a major driver of India’s economic growth and its direct and multiplier effects were harnessed for employment generation, economic development and providing impetus to infrastructure development. At a time, when the national tourism boards of Thailand, Singapore and Malaysia had stopped their advertising, promotion and marketing budgets, the ‘Incredible India’ campaign was launched to bring back consumer demand, generate momentum and enhance growth in the tourism industry. This was also a period when the tourist infrastructure around Ajanta Ellora, Mahabalipuram, Kumbalgarh, Chittorgarh, the Buddhist circuit and at Humayun’s Tomb was improved.

The Indian tourism sector had been crippled by the limited air services, seat capacity and high ticket prices. Changes were ushered in this sector. It started with the permission to ASEAN carriers to operate to seven Indian metros, permitting low-cost carriers to launch operations, liberalisation of charter policy, the opening up of the UK bilaterals, granting approvals to new airlines and permitting private airlines to operate on international routes. One of the most closed sectors of the Indian economy was suddenly opened up and it unleashed huge growth in both India’s GDP and higher tourism flows.

This was also the time when young entrepreneurs launched travel portals. These changed the way Indians booked their travel. It is now projected that online channels would continue to outpace the total travel market and online penetration would be nearly one-fourth of the travel market by 2010. New products like medical tourism, value, cruise and rural tourism were conceptualised and implemented in partnership with the private sector and the community.

The 2008 economic slowdown and terror attacks require another such response. The terror attacks were restricted to Mumbai. Other regions and states such as Kerala, Rajasthan, Karnataka, Tamil Nadu, Madhya Pradesh, Himachal and UP remain safe, calm and normal.

Long haul markets still make for 95 per cent of India’s international traffic. There is a need to focus on China and Japan, which will emerge as the biggest source of tourists in the coming years. Kerala as a tourism destination was unheard of almost a decade back. Its emergence was largely on account of travel diversion from terror-prone Jammu & Kashmir. Kerala, of course, had developed new products like backwaters and Ayurveda, its entrepreneurs had created experiential boutique resorts and infrastructure had been spruced up. There is a need for new states to emerge as tourism destinations by enhancing the quality of experience and improving infrastructure. In fact, the next year should see focused attention on infrastructure deficiencies which have threatened to derail India’s aim to become a world-class global destination.

The imbalance in demand and supply of hotel rooms and a near-total absence of the two- to four-star category of hotels have led to escalating prices thereby reducing India’s price competitiveness. India needs to create an additional 1,50,000 rooms in the next three years to penetrate large volume markets like China. Domestic tourism can help balance both the present adversity and the seasonality of inbound tourism. The strategy necessitates creating awareness among the rising Indian middle classes about new experiences (chasing the monsoons), new attractions (plantation holidays) as well as pilgrim circuits, heritage and monuments.

To drive growth, we need to push five critical C’s: civic governance (improving the quality of tourism infrastructure),capacity building of service providers (taxi drivers, guides and immigration staff), communication strategy (constant innovation of the ‘Incredible India’ campaign and penetration in new markets), convergence of tourism with other sectors of the Indian economy, and civil aviation (continued opening of the skies, improved airport infrastructure and rationalisation of taxes).

In the context of India, the vast potential of tourism as an employment creator and wealth distributor still remains untapped. The size of the tourism industry worldwide is $4.6 trillion whereas the software industry globally is a mere $500 billion. The tourism industry globally generates over 250 million jobs whereas the software industry generates only 20 million jobs. In India, in 2007, revenue from foreign tourists was $10.7 billion and 53 million people were employed in the tourism sector.As India grows and expands its base in travel and tourism, it will generate many more jobs and the sector will become a major catalyst for India’s growth with employment creation.