Industry Analysis of Travel and Tourism Industry

Introduction

Tourism is an industry that operates on a large scale and India being one of the biggest
developing economy gains a lot from this industry. India is a flourishing hub for the
travel and tourism industry. One can find here activities ranging from small sea-side
hotel to major multinational hotel chains and international tour operators. The tourism
industry is now one of the largest sectors earning foreign exchange for the country.
Now countries have started assigning due weightage to the tourism industry by
keeping a separate place for them in their national development agenda.

Some facts about the tourism industry of India and globally:

 Tourism is one of the world's fastest growing industries at present and holds the
status of the world's no. 1 industry.
 The tourism industry as a whole is presently estimated to earn over US$ 3.5
trillion worldwide.
 The industry creates a job every 2.4 seconds with every one of those direct jobs
creating another 11 indirect ones.
 Spending on tourism amounts to 5%-10% of total consumer, spending in a year
worldwide.
 India's share of the total market is a pittance at 0.51%. The non-tourist countries
like Malaysia and Indonesia get much more tourists than India.
 However, the average duration of stay of foreign tourist in India is one of the
highest in the world. On an average, it exceeds 27 days in the case of non-
package tourists and is 14 days in the case of package tourists.
 The Tourism industry's foreign exchange earnings in India are around $3.2
billion. Tourism is the highest foreign exchange earner if we consider the fact
that net value addition in Gems and jewellery is less than 30% whereas, in
tourism it is more than 90 %.

India’s tourist and travel industry was booming due to a rush of foreign tourists and
increased travel by Indians to domestic and overseas destinations. But recently due to
global recession the travel and tourism industry was badly hit. But slowly, its gaining
back its original position as it was in 2009.
History

The tourism industry in India is governed by ITDC (India Tourism Development

Corporation), which came into existence in October 1966. It is solely responsible for
development, promotion and expansion of the travel and tourism industry in India. The
corporation is running various hotels, restaurants at various places for tourists, besides
providing transport facilities. In addition to all this the corporation is engaged in
production, distribution and sale of tourist publicity literature and providing
entertainment and duty free shopping facilities to the tourists. The corporation has
diversified itself into various sectors. It also provides services like money changer
services, consultancy services etc.

Tourism is the largest service industry in India, with a contribution of 6.23% to the
national GDP and 8.78% of the total employment in India. India witnesses’ more than 5
million annual foreign tourist arrivals and 562 million domestic tourism visits. The
tourism industry in India generated about US$100 billion in 2008 and it is expected to
increase up to US$ 275.5 billion by 2018 at a 9.4% annual growth rate. The Ministry of
Tourism is the nodal agency for the development and promotion of tourism in India
and maintains the "Incredible India" campaign.

According to World Travel and Tourism Council, India will be a tourism hotspot from
2009–2018, having the highest 10-year growth potential. The Travel & Tourism
Competitiveness Report 2007 ranked tourism in India 6th in terms of price
competitiveness and 39th in terms of safety and security. Despite short- and medium-
term setbacks, such as shortage of hotel rooms, tourism revenues are expected to surge
by 42% from 2007 to 2017.

As per the travel and tourism competitiveness report 2009 by world economic forum,
India is ranked 11th in Asia pacific region and 62nd overall. It has eventually moved up
three places on the list of world’s attractive destinations. It is ranked 14 th best tourist
destination for its natural resources and 24th for its cultural resources. According to the
reports India has also made it to the list of “rising stars” i.e. the countries that are likely
to become major tourist destinations in the next three years.

The government is also taking new initiatives to make India as a hot tourist destination.
The “campaign visit India 2009” was launched at the international tourism exchange in
Berlin. The government came in collaboration with major airlines, hoteliers, holiday
resorts and tour operators. The government offered them huge bonuses and incentives
so as to project India as an attractive destination for holidaymakers. The Indian travel
Agents’ Association (IATO) offered holidaymakers a free sightseeing tour in a city of
their choice.

The government has increased its spending on advertising campaigns mainly

“Incredible India” and “Ahithi Devo Bhava” to reinforce the rich variety of tourism in
India. The ministry has recently also stepped up its vigilance in key cities and at
historically important tourist destinations for ensuring security of the visitors. Other
than all these initiatives at the central level, many state level initiatives are also taken up
by various states.

Present

The tourism in India is very vibrant and substantial. With this, India is becoming a
major global destination. It is observed that the Indian tourism contributes a good
amount for foreign exchange. The tourism industry has not only helped the economy as
a whole but also other sectors like horticulture, handicrafts, agriculture and
construction.

Tourism in India has seen exponential growth in the recent years. India is one of the
most preferred destinations for both overseas and domestic travelers. Tourism enables
the international traveler to understand and experience India's cultural diversity first
hand. According to official estimates the Indian tourism industry has outperformed the
global tourism industry in terms of growth in the volume of foreign tourists as well as
in the terms of revenue.

The main reason for the growth in tourism in India is the tremendous progress made by
the Indian economy. Though it must be said that infrastructure is still a constraint. To
sustain the current growth the government should invest in infrastructure like
transport, accommodation, better roads, health and hygiene etc. To propel growth, the
industry has invested in new technology like CRM tools and state of the art security
systems. Tourism is one of the main foreign exchange earners and contributes to the
economy indirectly through its linkages with other sectors like horticulture, agriculture,
poultry, handicrafts and construction. Tourism industry also provides employment to
millions of people in India both directly and indirectly through its linkage with other
sectors of the economy. According to an estimate total direct employment in the
tourism sector is around 20 million. Travel & tourism industry in India is marked by
considerable government presence. Each state has a tourism corporation, which runs a
chain of hotels/ rest houses and operates package tours, while the central government
runs the India Tourism Development Corporation. Tourism industry in India is on a
great boom at the moment. India has tremendous potential to become a major global
tourist destination and Indian tourism industry is exploiting this potential to the hilt.
Travel and tourism industry is the second highest foreign exchange earner for India,
and the government has given travel & tourism organizations export house status.

Right now, the major attractions for the tourists will be the Common Wealth Games,
2010. It is assumed to have a great impact over the Indian tourism industry. As this
mega event will attract thousands of sport lovers to India, all key stakeholders of
tourism sectors are geared up for CWG.

It is assumed that around 2 million foreign tourists and 3.5 million tourists from
different parts of India are likely to arrive in Delhi for Common Wealth Games 2010. So,
various states of our country are planning their best to utilize this wonderful event in
their favor.

Future

The future of the Travel and tourism industry seems very bright seeking in mind the
coming Common Wealth Games being hosted at Delhi. Here are some of the future
trends:

 The real GDP growth for travel and tourism economy is expected to be 0.25% in
2010 and is expected to grow at an average of 7.7% per annum in the coming
decade.
 Earning through exports from international visitors and tourism goods are
expected to generate 6.0% of total exports (nearly $16.9 billion) in 2010 and
expected to increase to US$ 51.4 billion in 2019.
 According to the Ministry of Tourism, Foreign Tourist Arrivals (FTAs) for the
period from January to March in 2009 was 1.461 million. For the month of March
2009 the FTAs was 472000. The reason given for the decline was attributed to the
economic crisis. But now as the whole scenario is over, the industry again seems
to regain its lost presence with Common Wealth Games round the corner.
In spite of the short term and medium term impediment due to the global meltdown the
revenues from tourism is expected to increase by 42% from 2007 to 2017.

Below are some of the factors that would have an impact on tourism in India in near
future:

•Fluctuating global economies and variable exchange

ECONOMIC rates will continue to influence travel demand.
TRENDS •Variable fuel prices will influence transport supply and
demand.

NATURAL •Environmental and social awareness will increase.

ENVIRONMENT •Natural disasters and geo-political events affect travel
behaviour.
TRENDS
•Increasing market fragmentation, and growth in
special interest/niche markets.
MARKET TRENDS •More frequent, shorter holidays.
•Travellers will have higher service expectations.
•Increased price sensitivity

•Competition among countries will be more intense.

COMPETITVE •Regional Economic Agreements.
TRENDS •Substitutes for Travel.

INDUSTRY •Low cost air transport.

•Remote and Long haul destinations accessible and
TRENDS affordable.

•Rapid change in technology.

TECHNOLOGY •Use of mobile phones to plan travel.
TRENDS •Innovations in transportation.

•Terrorism will be a key factor in deciding the

POLITICAL destination.
TRENDS •Secrity measures will be standardized around the
world.
Seeking to all these measures, India would have to undergo major changes in order to
seek increasing footfall. India has the potential to be the number one tourist destination
but it needs to do lot of work to protect its diverse culture. The above mentioned
considerations state that India has to work in tandem to keep it safe from terrorists.
Tourism in the near future will depend a lot on the level of safety tourist would be
having in that particular country.

Porter’s five force model in Travel and Tourism Industry

Threat of
new
entrants

Bargaining Industry Bargaining

power of power of
suppliers Rivalry buyers

Threst of
substitutes
Threat of new entrants: The threat of new entrants is basically from other countries to
India. Other countries like United Arab Emirates, China and Vietnam are estimated to
be the major tourist destination in next five years. As such there is no barrier to entry
but still the major consideration for any country would be its Infrastructure, Language,
security and ease of access. The major barrier to entry is put by the government itself.

Threat of substitutes: On an average it is seen that a family spends 10% of its total
annual income on its travel. Seeing this in mind it can be easily found out that there are
various substitutes available for Travel and Tourism. Starting right from generic
competition to specific competition. The biggest competitor would be theme parks,
entertainment cities. This is the greatest threat to the Travel and Tourism Industry.
People now avoid going outside rather spend time at such places with the family. Other
substitutes can be internet and video games for the children.

Bargaining power of Buyers: Customers play an important role in this industry as they
only make or break such industry. The tourists have a greater say in such industry in
terms of the facilities they demand from the country. Tourists are more informed and
are more knowledgeable. The information is easily available to them from anywhere
and they can be good bargainers. Countries also give incentives to the customers as well
as the tour operators for attracting tourists in the country. The tourist can bargain easily
over the infrastructural factors and safety-security factors in a country like India.

Bargaining power of Suppliers: The efficiency and attractiveness totally depends upon
the performance of the supplier of the service. Suppliers can have a greater amount of
bargaining power, if they are providing a good and satisfying service to the customers.
In such an industry, the bargaining power of suppliers is more than that of the
customers. Here the providers of the Travel and Tourism industry are:

1. Airlines Industry
2. Railways
3. Travel Agents
4. Hotel Industry
5. Government
All of these industries have their own bargaining power in their hands and they can
bargain to the extent of quality of service provided by them to the customers.

Industry Rivalry: In India within the travel and tourism industry itself a good and
healthy competition can be seen. Countries like India not only have international
competitors but it is also competing locally. There is always a stiff competition within
the hill stations, coastal areas, religious destinations and cultural centers. Not only has
this but stated like Himachal Pradesh, Gujrat, MP, Kerala, Rajasthan and AP take
initiatives with the locals and try to provide a flavor of their culture and tradition. They
have their own campaigns to attract local as well as international tourists. The industry
also seeks stiff competition within the tour operators; this has also benefitted the end
customers as now better services are provided at competitive price.

Bibliography

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http://www.iloveindia.com/economy-of-india/tourism-industry.html

Mind Tools. (n.d.). Core Competence Analysis. Retrieved from www.mindtools.com:

http://www.mindtools.com/pages/article/newTMC_08.htm

Trade Chakra corp. (n.d.). Tourism Industry in India. Retrieved from

www.tradechakra.com: http://www.tradechakra.com/indian-economy/service-
sector/tourism-industry.html

Tribe, J. (n.d.). Strategy for Tourism. Goodfellow Publishers Limited.