The year 2013 was a rocky road for Indian tourism. The Rupee dipped, and took a bit of the outbound travel numbers. Moreover, inbound also did not perform well on expected lines despite weakening of Rupee. Assembly election in some of the states and the Uttarakhand floods also hindered the growth of the tourism industry. News that leaked about the probability of a change in UK visa policies for threat countries including India caused an outrage. Last but not least, negative media reporting about sensational crimes in India deemed the destination unsafe.
Undeterred by these roadblocks, the Indian government and travel industry have taken measures to bring tourism numbers back up. Tourist Visa on Arrival is now available at additional gateway airports such as Goa, Trivandrum, Bengaluru, Hyderabad and Kochi. Uproar by the industry led to a rollback in the UK visa charges being mooted. Opening up FDI in aviation led to viable partnerships in the sector. Furthermore, revision of ATF costs and airport charges continued to be a point of discussion as the major focus for the growth of the industry. The Ministry also hosted the India Travel Mart, and through it promoted the North East region of the country as a tourist destination. For the first time, India started promoting Himalayas in 2013 to make itself a 365-day destination.
These measures have had some impact on FTAs. As per a recent report by United Nation World Tourism Organization (UNWTO), International tourist arrivals to India grew by 13 per cent during the first nine months of 2013, up by 5 per cent over the same period of 2012.
Last but not the least, the government is mulling over extending the VoA scheme to an additional 40 countries to further facilitate inbound tourist footfall, a move that has been welcomed by the Indian tourism industry. This may bring the industry some reprieve as a growth of 26.5 percent has been recorded in the number of tourists availing of the tourist VoA Scheme during the period January to November, 2013. A total number of 17,594 VoAs have been issued in this period as compared to 13,903 VoAs during the corresponding period of 2012 registering a growth of 26.5 per cent.
Overall, the Ministry of Tourism and the industry have done all they can to keep the tourism numbers up through the year, marking strong trends for 2014.
Hotels hope for a brighter 2014
The hotel industry has been faring well in India, with Indian hospitality brands growing leaps and bounds, and international chains setting up shop and expanding across India at rapid pace, most of them aiming 100 properties in five years or less. For instance, Starwood currently operates 34 hotels in India with 26 hotels in the pipeline. It aims to have 100 hotels under operation, development and management contracts signed by 2015 with eight out of nine Starwood brands flying their flag in India. Similarly, Accor, Marriott and Carlson, among others, are also set to dot India’s hospitality industry in the next three to four years. These chains have, however, faced the challenge of oversupply in most cities.
Sarovar Hotels has opened hotels as planned in 2013, but felt the rates were under stress in most destinations. They have, however, managed good occupancies all across at average ARRs, and also plan to add more hotels to their portfolio in 2014 with an additional capacity of around 700 rooms, revealed Ajay Bakaya, Executive Director, Sarovar Hotels.
“Overall the industry has grown but profitability has been under stress due to increase in capacity. The main challenge that we are facing is of increased supply in most cities. This widens the gap between demand and supply thus putting pressure on prices and profitability. We believe that this is a momentary issue that will level out soon,” Bakaya opined.
According to Rajeev Kaul, President, Leela Hotels & Resorts, hotel business will gather steam in 2014, and after the election it should take off. Sharing his views on the year gone by, Kaul said, “On a macro level there has been a small growth in occupancies but no growth in ARR in 2013 for the hotel industry. The year 2013 has largely been flat like the previous year. However, the trend has lately been positive. Despite such large supply, demand has kept up with supply.”
Speaking with T3 in an earlier interview, Rajeev Menon, Area Vice President (South Asia), Marriott International opined that the industry RevPar is down by 4 per cent owing to the slowdown and supply. However, he added that Marriott’s RevPar has seen close to 5 per cent growth, and predicted that 2013 would end with 70 per cent occupancy.
“We are expecting that there will be a mismatch of supply and demand in certain cities particularly Delhi – NCR with hotels opening in Aerocity Delhi, Hyderabad, Bengaluru, smaller towns like Ludhiana where supply will outstrip demand and will result in excessive competition pushing down the rates further. On the contrary, operating costs continue to escalate due to increased cost of manpower, heat, light & power,” Bakaya said.
S N Srivastava, President, Clarks Inn Group of Hotels called the year 2013 a mixed year for the industry. “Year 2013, like the year before, saw the continuation of weak economic sentiments. This, we expect, will continue for a while, at least until the country goes for election later this year. And therefore, we don’t expect much to happen in 2014. Although it looks like, in overall economic sentiment as well as business for our hotels, 2014 will slightly better,” he opined.
Berggruen Hotels, which forayed into the franchise model and launched its first premier Keys Klub property this year, has enjoyed significant growth this year. Sanjay Sethi, MD and CEO, Berggruen Hotels revealed that the first three quarters have been good and the company will significantly increase overall numbers – performance of existing hotels, signing of new hotels and opening of new hotels. “We have also taken up our expected numbers to 75 hotels signed end of 2015 – 16 from 54 hotels when we began the year,” he added.
Aman Aditya Sachdev, Senior Vice President- India, Rotana has chronicled five major hospitality trends for the year 2014 – Rationalisation of projects and operating assets; Focus on CSR; Consumer access through online channels and platforms; Hotel development in tier II and tier III cities; and Focus on enhancing India as a destination for the international leisure tourist outside of the traditional tourist hubs.
Sethi opined that the sector needs to get infrastructure status for smaller projects which is the future for the country and will get hoteliers access to cheaper funds for development. Inflation and taxation continue to be the major deterrents, he stated.
“The good news is that India continues to be one of the fastest growing economies. Besides there are plenty of new inventory ready to enter the market. One of the biggest challenges in 2014 will be to remain in healthy business amidst the growing oversupply,” added Srivastava.
2013: A tepid year for inbound
According to Sarab Jit Singh, Vice President, Indian Association of Tour Operators (IATO) and Vice Chairman, Federation of Association in Indian Tourism & Hospitality (FAITH), the year 2013 was neither good nor bad for inbound tourism to India. He called the year an average one for business, opining that the sector could have performed better despite the economic slowdown. The industry notched minimal growth through the year, barring the Visa on Arrival (VoA) numbers, which grew in double digits every month.
Arup Sen, Director, Special Projects, Cox & Kings, stated that the inbound market has seen modest growth for the first 11 months of 2013. According to the Ministry of Tourism, India received 6.04 million foreign tourists during January to November 2013, which in percentage terms is a growth of 3.8 per cent. “There can be a slight improvement in December but it will not be substantial,” he opined.
Contrary to this, Surinder Singh Sodhi, Senior Vice President & Head, Leisure Travel (Inbound), Thomas Cook (India) believes that the economic slowdown was a boon for India’s inbound tourism. “The depreciation of the Indian Rupee served to boost inbound tourism in 2013. The decline of the Indian Rupee meant that India had transformed into a destination that offered immense value for money to the foreign traveller. As a result, inbound tourism witnessed a boom, and our traditional source markets such as the UK & France did exceptionally well,” he said.
When asked about the industry’s expectations for the year 2014, ‘hopeful’ was a unanimous opinion. Singh believes that the industry coming together to form the FAITH is a silver lining, giving the industry a single, stronger voice. Furthermore, a written submission has been sent to the Department of Commerce with suggestions from the tourism and hospitality industry for the foreign trade policy. The Ministry of Commerce is helping us now to improve tourism services. They are mooting a comprehensive economic partnership with ASEAN countries, Australia, China, Japan, Korea and New Zealand,” he added.
When asked about what makes him optimistic about the new year, Sodhi shared that 2014 is expected to be a good year for the industry, especially due to the emergence of new traveller segments such as last minute travellers, Gen S (senior citizens) and the youth, apart from newer source markets.
According to Sen, experience shows that VoA introduced so far have yielded results. “There has been a 26.5 per cent growth in VoAs in the first 11 months of this year which translates into more than 17,000 arrivals. This gives us hope that this will remove one more bottleneck. We are seeing the emergence of “green shoots’’ in the US and European economies and we believe that these are key markets for Indian inbound tourism. In the last one year, inbound tourism has not grown to our expectations due to sluggish economic climate. We believe this will change,” he added.
However, Singh believes that the extension of the VoA scheme is not the answer to India’s inbound footfall woes. “The Ministry of Foreign Affairs has heard us out, understood the issues with a cumbersome visa process, and are keen on working out a solution. VoA extension is not the solution, an e-visa is. We are trying to get online visas in place,” he revealed.
States up their ante
While Incredible India continues to work its magic both within India and beyond its borders, individual efforts by each state in the country is also visible and commendable. Gujarat, for one, has put in tremendous effort via broadcast advertising to promote a vibrant Gujarat, in addition to participation in roadshows, major international and Indian expos, and also hosting its own trade show in the state. Jammu & Kashmir put in their efforts to promote the Sufi circuit last year.
Kerala, despite its established reputation as the home of Ayurveda, has been attracting trying to tap new markets such as Japan and USA by participating in JATA Travel Showcase in September. They also organised roadshows in New York, Chicago and Los Angeles for the first time last year. “We’re confident of achieving further growth in 2014. Steps like extending the list of VoA countries, most of the countries in the new list being our major source markets; participating in trade fairs and organising roadshows in new markets like Japan, USA, Finland etc… are expected to positively impact arrivals in the coming years. Kerala Tourism and its partners in the private sector are looking forward to participating in MATKA Nordic Travel Fair – Finland, FITUR – Madrid in January. It will be followed by BIT Milan, ITB Berlin and MITT- Moscow. A series of roadshows have also been planned in the coming months,” said S Harikishore, Director, Kerala Tourism.
And all these efforts have borne fruit. Gujarat for instance, welcomed 254.09 lakh tourists in 2012-13, an increase of 12 per cent over 2011-12. In 2012 as many as 1.07 crore domestic tourists and 7.93 lakh foreign tourists visited Kerala. Compared to the previous year, growth in terms of foreign tourist arrivals in 2012 was 8.28 per cent and in case of domestic tourist arrivals, it was 7.41 per cent. With varying percentages of growth, the success story has been the same across India.
The growth in numbers has only encouraged these states to increase their efforts to woo tourists. Vipul Mittra, Principal Secretary, Tourism, Civil Aviation and Pilgrimage, Government of Gujarat shared that the last phase of the Bachchan campaign will be shot early this year. “This will cover some new destinations in Gujarat and give a major boost to them. From a tourist point of view, Gujarat will witness improved and better infrastructure at existing tourist destinations, leading to a substantial growth in footfalls. Also, we plan to initiate some new projects which include new religious circuits, caravan tourism, beach tourism and adventure tourism,” he opined.
Kerala is moving further west to tap newer markets. Harikishore revealed that, after targeting markets such as Middle East and countries such as Germany and UK, we’re planning to target the East European markets like Poland and even focus on the VoA countries such as Japan and Finland apart from aggressive marketing in USA.
Other states have taken different routes to woo travellers. Addressing the rising issue of safety in India following criminal incidents in the country, Dilip Parulekar, Minister of Tourism, Government of Goa recently announced a zero tolerance on drugs in a bid to portray Goa as a safer destination for tourism. Maharashtra and the Japanese state of Wakayama signed a Memorandum of Understanding to facilitate trade and tourism exchange between the states.
West Bengal promoted its largest festival Durga Puja last year as the ideal time to visit, and also launched its ‘Chalo Bengal’ campaign. Madhya Pradesh most recently launched its Chhindwara Circuit with Central Financial Assistance from the Government of India.
