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 nonpackage 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 mediumterm 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:
ECONOMIC TRENDS
•Fluctuating global economies and variable exchange rates will continue to influence travel demand. •Variable fuel prices will influence transport supply and demand.
NATURAL ENVIRONMENT TRENDS
•Environmental and social awareness will increase. •Natural disasters and geo-political events affect travel behaviour.
MARKET TRENDS
•Increasing market fragmentation, and growth in special interest/niche markets. •More frequent, shorter holidays. •Travellers will have higher service expectations. •Increased price sensitivity
COMPETITVE TRENDS INDUSTRY TRENDS TECHNOLOGY TRENDS POLITICAL TRENDS
•Competition among countries will be more intense. •Regional Economic Agreements. •Substitutes for Travel.
•Low cost air transport. •Remote and Long haul destinations accessible and affordable.
•Rapid change in technology. •Use of mobile phones to plan travel. •Innovations in transportation.
•Terrorism will be a key factor in deciding the destination. •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 power of suppliers
Industry Rivalry
Threst of substitutes
Bargaining power of buyers
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.
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