Tourism economy to see significant growth post Covid-19

The Indian travel and tourism sector, which is a $121.9 billion market, contributed 4.6 percent to  GDP in 2020. With swift recovery expected in 2022 owing to easing of restrictions, Indian travel and tourism industry is at the cusp of significant growth of 16 percent CAGR to $512 billion by 2029.

As per a recent report by Anand Rathi Investment Banking among the major attractions is that the Indian ecotourism which was valued at $2.2 billion in 2019 is expected to cross $11.6 billion by 2028, growing at a 20 percent CAGR.  Similarly the Indian Adventure Tourism which was valued at $0.3 billion in 2019 is expected to cross $2 billion by 2028, is growing at a 20 percent CAGR However the sector is faced with multiple challenges such as limited enforcement of safety guidelines, growing number of unregistered tour operators and lack of physical infrastructure in certain remote regions, which needs to be addressed to attract more foreign tourists.

As per the Anand Rathi report, while domestic tourism in India has steadily recovered with easing travel restrictions, international tourism has not yet recovered owing to curbs on international flights to India that have now resumed. The report finds that despite this India’s travel and tourism sector’s structural growth is intact and is projected to clock a 17.30 CAGR from $122 billion in 2020 to $512 billion by 2029. It is expected that in the long run, rising disposable incomes, greater inclination to travel and explore adventure tourism, the government’s sharper focus on promoting tourism and improving accessibility to remote areas will provide the much needed fillip to the Indian tourism sector. Another highlight of the report is that domestic travellers continue to be the biggest contributors to Indian tourism.

The Anand Rathi report points out that the lockdown to prevent the spread of the Covid-19 had led to a 74 percent drop in domestic tourism to 610 million in 2020. Of the states, Uttar Pradesh, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra attract 60 percent of domestic tourists. The report citing figures from the Department for Promotion of Industry and Internal Trade (DIPP), foreign direct investment in the tourism and hotel sector in India has registered a 39 percent CAGR, from Rs 30 billion in FY14 to Rs 211 billion in FY2020. The cumulative FDI in the tourism and hotel sector from April 2000 to March 2021 was Rs 945 billion. 

The report observes that the growing interest among foreign investors and companies can be attributed to more spending on travel, liberalization of the sector to allow 100 percent FDI under the automatic route and the government’s efforts to promote tourism through infrastructure development, and vigorous marketing. The central government recently introduced a five-year tax holiday for 2-, 3- and 4-star hotels located around UNESCO’s World Heritage sites (except Delhi and Mumbai). This could bring in further investments to this sector. At the same time the central government in its annual budget, has also been increasing allocation of funds for capex to the tourism sector as part of its revival efforts, post the Covid-19 pandemic, at a 7 percent CAGR from Rs 8 billion in FY20 to Rs 9 billion in FY28.

At the same time as per JLL’s Hotel Momentum India (HMI) Q1, 2022, the Indian hospitality sector witnessed a 39.1 percent YoY Revenue Per Available Room (RevPAR) growth in Q1, 2022. As per JLL’s report Mumbai witnessed the highest growth in RevPAR in Q1 2022 at 71.5 percent, over the same period  last year, primarily due to the India Premier League (IPL). The report observes that the domestic hotel operators dominated signings over international operators with a ratio of 75:25 in terms of inventory volume 

https://www.theweek.in/news/biz-tech/2022/05/17/tourism-economy-to-see-significant-growth-post-covid-19.html