Skift Take

Despite being excluded from any government Covid relief to date, tourism stakeholders remain resilient and hopeful, with a future closer to vaccines plus promising backyard tourism trends.

While governments around the world have come to recognize the need for additional Covid relief for their tourism industries, India has done the opposite: It slashed the country’s tourism budget for 2021-2022 by 19 percent. Or so it appears at first glance.

Under the mantra “Atmanirbhar Bharat” or “a self sufficient India,” Finance Minister Nirmala Sitharaman released a 2021-2022 financial plan that essentially ignores India’s tourism and hospitality industry as a main pillar of recovery. Even her budget release speech is devoid of the word “tourism.”

Instead, the year’s funding allocations focus primarily on healthcare and infrastructure, to the tune of a 137 percent increase for the healthcare and wellbeing sector to $10.1 billion, particularly focusing on vaccines and health facility support, plus $31.3 billion for infrastructure and transportation.

No state relief in sight, despite numerous appeals, is a staggering outcome for India’s tourism industry, which expressed its disappointment as it continues to struggle from the halt of global travel as India remains mostly closed to most international leisure travelers.

“Lack of immediate direct support in budget has disappointed the Indian travel and tourism industry,” Nakul Anand, chairman of the Federation of Associations in Indian Tourism and Hospitality (FAITH), said in a news article.

“The pandemic has led to mass unemployment estimated and closure of many businesses targeting almost at 70 per cent,” Tejbir Anand, FAITH vice chairman, told Skift. “We were expecting some relief such as liquidity support, immediate rationalization of the GST Structure, restoration of Input Tax Credit. A policy roadmap on e-commerce policy for this service sector, which is the very key to the survival and revival of the industry is urgently needed.”

But it comes as no surprise for those who are on the ground and have followed India’s tourism scene for decades.

“The tourism industry has always come out disappointed,” Chetan Kapoor, co-founder and chief strategy officer of VIDEC, a tourism-focused boutique advisory and analytics firm, told Skift. “Definitely the headline news that it’s shrunk by a fifth sent shockwaves, because not only do we all know that the industry is on its knees, but also when you look beyond that headline and try to understand where even that allocated budget is going, it’s so far from reality.”

Manav Thadani, founder of Hotelivate, a hospitality consulting firm based in India and serving the Asia Pacific region, agreed that tourism in India has never really been a priority for the government, and that most efforts are from the private sector. “Part of that is possibly that tourism or hotel owners are seen as elitist and that they don’t need money, that they already have money and therefore they don’t need support from the government.”

Thadani’s best interpretation of the  tourism budget cut, however, is that it might have been simple as the reallocation of unused tourism funds from 2020 due to Covid, adding that he wished governments would go into detail on their decisions.

Looking closely at the annual tourism budget allocations from March 2019 to date reveals that this is the more plausible theory, but also gives a bigger picture of what is a major pullback from boosting tourism funds after a devastating year like Covid.

The tourism budget numbers for the past three years shows that a near double increase for tourism from $190.8 million in 2019 had been approved for fiscal year March 2020-2021or $349.8 million. That was later slashed in half that same year, no doubt due to Covid. For March 2021-2022, the total tourism budget was brought back up to $283.6 million, which is still a $93 million increase from 2019.

Nevertheless, tourism not appearing as a priority industry in the nation’s annual budget and not receiving specific Covid related relief is devastating to the sector.

“What this industry needed was benefits today, influence today, strategy today,” Kapoor said.

Pre-Covid Was “Rainbows and Butterflies” for Indian Tourism

In 2019, India’s tourism sector contributed nearly $194 billion, according to the World Tourism & Travel Council, or around 6.8 percent of gross domestic product. Tourism also accounted for 39 million jobs or 8 percent of total employment in India.

“Pre Covid: double digit growth, everything’s rainbows and butterflies, but again the way Indian tourism works is institutions fending for themselves,” Kapoor said. “It’s never been the government working very cohesively with the entire industry. While the intent is there, ultimately it falls short.”

In its first term in 2014, India’s current government had stated that tourism would be one of its main mandates, with a slogan known as the “five T’s”: talent, tradition, tourism, trade and technology.

“That had gotten the industry all excited, and then, year after year we’re seeing that initiators towards tourism if anything were either lip service or just pretty on the surface and it didn’t truly come down to the grassroots,” Kapoor said, adding that at a macro level is the constant desire of the tourism sector to be given industry status.

Not being treated as an influential sector of the economy has left hospitality stakeholders in a lurch. Even the long tail end of the sector, from travel agencies to tour operators and travel technology companies, have received any official government relief, Kapoor noted.

“Out of 28 states and 8 union territories, only 16 states and 3 Union Territories have declared tourism as an Industry,” Tejbir Anand said.

Tourism Budget Reallocations Reveal Disconnect

Allocation shifts within the tourism ministry’s budget for 2021-2022 show an increase for overseas marketing funds of up to $72 million. It’s a puzzling outcome at a time when India has remained shut to most international travelers since Covid, and is likely to remain shut for a good part of this year.

“If you’re [on] a tourist visa, you’re not going to enter this country; you’re not definitely going to attract new travelers, and let alone in the country which has been the second most affected in the world, at least on paper,” Kapoor said.

Combined with the Indian government’s decisions in the past couple of years to shut down a number of its tourism offices overseas and restructure its operations as a cost saving measure, it’s even more of a tailspin in figuring out the government’s rationale in boosting overseas promotion while slashing tourism’s budget when it needs it the most to prepare for Covid protocols and to stay afloat until vaccinations are widespread and global tourism restarts.

Infrastructure Focus is Positive, but benefits are Long-Term

India’s major infrastructure plans point to an ambitious list of road and highway construction, as well as a plan for a modern railway system by 2030, the expansion of the metro rail network for peripheral cities and a significant increase in city bus service.

Privatization of up to ten domestic airports is also in the plans, a decision which is seen as improving access to regional circuits and to off the beaten track Indian sights and cities, while making air travel affordable.

The transportation sector, as expected, has lauded the massive push to revamp transportation. In a news statement, Manish Rathi, CEO and co-founder, IntrCity RailYatri, praised the focus on highway expansion, rail networks, and private sector bus operations, which “will boost intercity mobility in India,” adding that the finance minister’s “National Rail Plan to create a ‘future-ready’ Railway system by 2030 is unprecedented.”

Long term, boosting infrastructure could be seen as helping the tourism sector, particularly on the domestic side, but it’s certainly not an immediate relief, if not an outcome that is years down the road.

“It doesn’t hurt; new airports, they’re privatizing the railway stations, will certainly have a positive impact on tourism in India,” Thadani said, noting that while India receives just 10 million annual international visitors, it also boasts 350 million domestic travelers every year. “So for us domestic travelers are far more important than foreign travelers.”

Consumer Shifts Post-Covid Point to Leisure and Manufacturing Hubs

Like many parts of the world the pandemic has tilted India’s tourism trends towards leisure and backyard travel being on a new pedestal — as Skift Megatrends 2025 predicted would last and strengthen.

According to Hotelivate data, as of mid-February, Indian hotels were running around 40-45 percent occupancy and room rates are down by 20-25 percent, with budget hotels doing better, while upscale hotels worse off generally. Leisure locations such as Goa and Jaipur are also doing reasonably well, while the opposite is true of industrial cities.

“Cities like Bangalore, Pune and Hyderabad that used to be the market leaders are performing the poorest because they were so dependent on foreign business travelers as well as information technology and information technology enabled services,” Thadani said, pointing to multinational companies’ decisions to work from home rather than travel. “Those hotels that are in the IT corridors are suffering.”

By contrast, outlying cities where manufacturing plants are located are now doing reasonably well, such as outside Chennai and outside of Pune, as India’s manufacturing sector has made a strong comeback. “Those places are doing relatively well with occupancy running at 70-80 percent in those markets.”

An Untapped Domestic Tourism Potential

Just a couple of years ago, India Prime Minister Narendra Modi had encouraged Indians to visit at least 15 tourist destinations within India by 2022. This sentiment of seeing your own backyard was repeated during the 2020 lockdown.

Most of the efforts in promoting or providing incentives for domestic tourism, however, have come from the private sector, as stakeholders recognize India’s massive potential in embracing the current staycation trend that is taking over in other parts of the world, while borders continue remaining shut. Brands such as Radisson and destinations like Goa have been behind the domestic tourism push, offering a variety of incentives and campaigns to lure Indian customers.

“I’ve always emphasized that there’s too much focus given on foreign travelers coming into India,” Thadani said. “The real focus should be on domestic travelers, the numbers are just so huge. We have a domestic travel population that is the same size as the United States of America. We need to do everything possible to make sure that more of those people travel and that more of those people stay in hotels.”

Thadani traces the start of the leisure domestic tourism’s popularity in India to 2001, a year during which Indians couldn’t travel west because of the Iraq war nor travel east because of SARS. “It changed the fortune of Goa which became an all year round destination for Indians. And I think that Covid in many ways will have a similar impact where a lot of the people who used to travel abroad were forced to travel within India, and then you kind of get into a habit.”

That’s why allocating a bigger budget for overseas promotion this year makes little sense for Indian tourism at this time.

“You should have had [a] dramatic amount of more promotion coverage for your domestic destinations and distribute it through the federal system to those destinations which rely on tourism,” Kapoor said. “And that is not happening in a way at the republic level right; from that perspective [ ] I believe the domestic was about [$19.6 million] tied for marketing and promotion of the domestic market. In a time like this, it needed to be flipped over.”

Even Thadani admits that since Covid, he has increasingly relied on drive to destinations for leisure. “Earlier, if I had to travel within India, I would take a flight to go somewhere. Or if I had to drive I would not drive for more than four or five hours. What Covid did for me was that it forced me to drive and now I’ve taken a few holidays where I’ve driven up to 10 hours,” Thadani said, noting that he was surprised at how much better the roads in India were than he’d expected. “So you know, I think for a lot of people it was an eye opener. I think domestic travel in India is going to grow, a lot of people drove around and saw new places.”

Even the business sector is paying attention to the Covid-induced leisure shift.

“As a consulting firm am seeing a lot more [firms] coming to me to do resort feasibility studies in newer locations which are within drivable distance to major cities,” Thadani said, adding that while these are longer-term hotel developments, the opportunity is there.

“We continue to move forward”

In spite of the huge disappointment, the sector remains optimistic. In a tweet earlier this week, FAITH indicated that it would not let this defeat its efforts to continue advocating for India’s tourism and hospitality industry.

Thadani agrees. “My understanding is that at some stage in the coming months, the government may still come up with something but I don’t know. We all live in hope that the government will do something for tourism. But right now, we in the private sector feel that listen, you need to clean up your own house and you need to watch out for yourself.”

This story was updated to include statements received from FAITH vice chairman Tejbir Anand.


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Tags: asia, coronavirus, coronavirus recovery, india

Photo credit: India's battered tourism and hospitality industry has yet to receive any government Covid relief. Tuul & Bruno Morandi / Getty Images

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