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Near term outlook for tourism sector looks gloomy due to COVID-19 impact

Nidhi Jani
·3-min read

Since India went into a stringent COVID-19 lockdown in March 2020, the tourism sector has been hit the hardest due to the resulting travel restrictions as well as a slump in the demand among travellers.

The current consumer sentiment is dominant by uncertainty, financial instability and fear of safety. Given various travel restrictions imposed by the Indian government as well as governments across the globe, forward bookings for various conferences and leisure travel bookings to foreign destinations have already been cancelled. In India, most of the summer holiday bookings (for the states of Kerala, Rajasthan and Goa) have also been cancelled (about 40-50 per cent) thereby, impacting domestic tourism.

Despite being given the go-ahead to welcome tourists after restrictions were lifted, many big tourism destinations had to shut their doors again, following a spike in Coronavirus cases. The travel sentiment too took a back seat with the number of COVID-19 cases quickly spiralling out of control within a month. This has left the sector, which includes hospitality, tour operators, transport, restaurants, guides and other related jobs, gasping for air. The sector is now estimating that the scenario is unlikely to change much until a vaccine is found, which may not be launched until next year. India’s tourism revenue loss is projected to be 10 lakh crore, with an estimated four-five crore people losing their jobs.

The government is making serious efforts to boost investment in the tourism sector. In the hotel and tourism sector, 100 per cent foreign direct investment (FDI) is allowed through the automatic route. The hotel & tourism sector has attracted foreign direct investment (FDI) worth $862.78 million or Rs 6,390.06 crore during the January-March quarter of FY20, as compared to $1,216.10 million or Rs 8,666.87 crore in October-December quarter of FY20. 

The near term outlook of Indian tourism sector looks gloomy due to the outbreak of Coronavirus disease pandemic with many prospective domestic and foreign tourists cancelling their travel plans. With the nationwide lockdown that started on March 24, the country witnessed a whopping 65 per cent fall in foreign tourists’ arrival in March, both in the yearly and monthly term.

The Indian travel and tourism sector and the entire value chain linked to the sector are likely to lose around Rs 5 lakh crore or $65.57 billion. The sector’s recovery might be slow but once the situation created by COVID-19 gets normal, the tourism sector will be the first one to see major growth. Indians who were earlier planning to visit foreign destinations will visit only domestic destinations and this will give strength to the sector.

The sector’s recovery is key for the economic revival as it is one of the major employment generators and has a multiplier effect on the economy. Meanwhile, the government is encouraging domestic travel through initiatives like Dekho Apna Desh and ‘Incredible India’, which in turn, will provide some respite to the sector. Besides, the government has identified 17 sites across the country to develop them as iconic tourist sites, which will serve as a model for other tourist destinations. Improvement in India’s ranking in travel & tourism competitiveness index is also an encouragement for the tourism sector in the country. 

Source: (ACE Equity)