The Impact of Covid-19 on Travel & Tourism Industry in India and it’s Future

Posted: Apr 30, 2020, By Sonali Halder

In this blog, we briefly discuss the impact of the Covid-19 on Travel and tourism industry in India, an issue that we cannot and should not ignore.

I will be honest with you, it was difficult for me to remain calm while investigating this topic, since it directly affects me and the business I am part of. But, as a company, we feel the need to discuss this topic with you, since it is better to have a known demon than an unknown angel.

The travel and tourism industry in India has contributed significantly to the country’s GDP. The sector even generates a large employment base. So when in mid-March popular tourist attractions in India began to close, and news of stopping the flight began to circulate, we all began to predict the bleak future of the travel industry in the country. In fact, the closure of the iconic Taj Mahal on March 17, 2020, which attracts millions of visitors each year, was a sufficient signal to assess the hard blow this pandemic was throwing at us.

In this blog, we will try to understand the importance of the tourism sector in the Indian economy; the present and future impacts of the pandemic; and the proposed measures and recovery plans.

Let’s first discuss the role of travel and tourism in India

• In 2018, travel and tourism contributed 9.2% to India’s GDP and generated 26.7 million jobs in that year. This industry not only employs workers in cities but also provides an income base for the rural population.
• The tourism sector represents 12.75% of employment in India, 5.56% is direct and 7.19% is indirect.
• More than 87 million people worked in the travel sector in 2018-19 in India, according to the annual report from the Ministry of Tourism (MOT) for 2019-20.
• Annual revenue for branded and organized hotels in India is estimated to be ₹ 38 billion rupees ($ 5 billion).
• The restaurant industry in India has an annual turnover of approximately ₹ 4 lakh crore ($ 53 billion). This industry provides direct employment to more than 7 million people.
• The Indian air transport industry employs more than 400,000 people directly and 940,000 work in related supply chains.

Effects of coronavirus on travel and tourism in India

• Due to Coronavirus, the Indian tourism and hospitality industry expects a possible job loss of around 38 million.
• In the third week of March 2020, the hotel sector experienced a decrease of more than 65% in occupancy levels compared to the same period in 2019.
• With domestic and international travel stopped, demand for turbine fuel has decreased substantially.
• The Indian Association of Tour Operators (IATO) estimates that the hotel, aviation and travel sector as a whole may suffer a loss of around Rs 85 billion considering the travel restrictions imposed on foreign tourists.
• The impact of Covid-19 would be felt in white and blue-collar jobs.
• Round trips from India will witness a record low.
• The restaurant industry in India expects almost zero revenue in the immediate term and a drop of 50% in the coming months.
• At least 30 percent of hotel and hospitality industry revenue could be affected if the situation does not improve by the end of June 2020.
• There is a threat of nearly 15% job loss in the hotel and restaurant industry once the blockade is lifted, as they will not see an immediate increase in demand.
• The aviation industry in India could incur losses of ₹ 27 billion rupees ($ 3.3-3.6 billion) in the first quarter of 2020-21.
• Airline passenger growth is likely to drop sharply to negative 20-25% growth for 2020-21.

Things to know

• The tourism sector was already facing some problems before the emergence of the Covid-19 pandemic due to the impact of the global economic slowdown.
• Economic growth in the world slowed in 2019-20, resulting in weaker growth in foreign tourist arrivals and foreign exchange earnings from tourism in India.
• With over 60% of organized hotels in India closed, a gradual recovery should be expected.

Recovery plans

According to the previous point, we are facing a gradual or, indeed, slow recovery scenario for the tourism industry in India, however, the important thing is to focus on the hope of recovery after all. For the recovery of the sector, industry leaders have proposed a few things.

• Experts have emphasized the need to focus on the potential of domestic tourism and try to make a profit through it.
• ICC suggests the creation of a “Travel and Tourism Stabilization Fund” with direct transfer of benefits to each unit to avoid financial and labor losses.
• Experts also recommend cost optimization at all operational levels.
• It is also recommended to use FF&E Reserves with caution. Operators would have to support the hotel owners.
• Any dry powder available on the market should be used more to buy operating assets rather than build new ones.

The coronavirus may have completely stopped the pace of the travel and tourism industry in India, but it has not yet defeated the spirit of the people involved in this sector. The blow may seem hard, but there is still hope. We believe that if we persevere and stay together in this, you as travelers and we as operators, we will overcome this, which right now feels like a nightmare. Our request to you is not to give up your national travel plans this year. Once things are in place, we will return with our unmatched travel services. Remember like everything else in our lives, this step too.