The Impact of Covid-19 on Travel & Tourism Industry in India and its Future

Published: 30 Apr, 2020By Nidhi Singh

In this blog, we’re discussing in brief the impact of Coronovirus/Covid-19 outbreak on the travel & tourism industry in India, a topic that we can’t and must not ignore.

I will be honest with you, I did find it difficult to keep my calm while researching this topic, since it directly affects me and the business I am part of. But, as a company, we felt the need to discuss this topic with you, for it’s better to have a known devil than an unknown angel.

Travel & tourism industry in India has been a significant contributor to the country’s GDP. The sector even generates a large employment base. So when by mid-March, the popular tourist attractions in India started to close down, and the news on putting a halt on flying began to make rounds, we all started to predict the grim future of the travel industry in the country already. In fact the shutting down of the iconic Taj Mahal on March 17, 2020, which attracts millions of visitors every year, was a sign enough to assess the hard blow this pandemic was launching at us.

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

Let us first discuss the role of travel & tourism in India

• In 2018, travel & tourism contributed 9.2% in India’s GDP and generated 26.7 million jobs in that year. This industry not only employs workers in cities but also provides an earning base for the rural population.
• The tourism sector accounts for 12.75% of employment in India, 5.56% of it is direct and 7.19% is indirect.
• Over 87 million people were employed in the travel sector in 2018-19 in India, according to the Ministry of Tourism (MOT) annual report for 2019-20.
• It is estimated that in India, branded and organised hotels annual revenue is ₹38,000 crore ($5 billion).
• The restaurant industry in India, has an annual turnover of approx ₹4 lakh crore ($53 billion). This industry provides direct employment to more than 7 million people.
• India’s air transport industry employs over 400,000 people directly and 940,000 are employed in related supply chains.

Effects of Coronavirus on Travel & Tourism in India

• On account of Coronavirus, the Indian tourism and hospitality industry is expecting a potential job loss of around 38 million.
• In the third week of March 2020 itself, the hotel sector saw a decline of more than 65% in occupancy levels as compared to the same period in 2019.
• With international and domestic travel on halt, demand for turbine fuel has substantially declined.
• Indian Association of Tour Operators (IATO) estimates the hotel, aviation and travel sector together may suffer a loss of about ₹85 billion keeping in mind the travel restrictions imposed on foreign tourists.
• Impact of Covid-19 would be felt on both white and blue collar jobs.
• India’s outbound and inbound travel will witness an all time low.
• The restaurant industry in India is expecting almost zero revenue in the immediate term, and a drop of 50% in the months to come.
• At least 30 per cent of hotel and hospitality industry revenue could be impacted if the situation doesn’t improve by the end of June 2020.
• There is a threat of job loss of nearly 15% in the hotel and restaurant industry once the lockdown is lifted, as they will not see an immediate surge in demand.
• Aviation industry in India could incur losses worth ₹ 27,000 crore ($3.3-3.6 billion) in the first quarter of 2020-21.
• The passenger growth of airlines is likely to fall sharply to a negative 20-25% growth for the 2020-21.

Things to Know

• The tourism sector was already facing some trouble before the rise of the Covid-19 pandemic due to the impact of the global economic slowdown.
• Economic growth in the world decelerated in 2019-20, resulting in weaker growth in foreign tourist arrivals and foreign exchange earnings from tourism in India.
• With more than 60% of organised hotels in India shut, recovery should be expected gradually.

Recovery Plans

As per the point above, we are staring at a gradual or in fact slow recovery scenario of the tourism industry in India, however, the important thing to focus on is there’s hope of recovery after all. For the recovery of the sector few things have been proposed by leaders in the industry.

• Experts have emphasised on the need to focus on the potential of domestic tourism and try to gain some profit through it.
• ICC suggests setting up of a ‘Travel & Tourism Stabilisation Fund’ with direct benefit transfer to each unit to prevent financial and job loss.
• The experts also recommend cost optimisation at all operational levels.
• It is also being recommended to cautiously utilise the FF&E Reserves. Operators would need to support the hotel owners.
• Any dry powder that is available in the market should be utilised more on buying operating assets rather than building new ones.

Coronavirus may have brought the pace of travel & tourism industry in India to a complete halt, but it hasn’t yet defeated the spirit of the people involved in this sector. The blow may seem harsh but there’s still hope left. We believe, if we persevere and stay in this together, you as travellers and we as operators, we will get through this what right now feels like a nightmare. Our request to you is to not give up on your plans of domestic travels this year. Once things are in place, we will be back with our unmatched travel services. Remember like everything else in our lives, This Too Shall Pass.