Indian Tourism Sector and Union Budget 2011

Indian Tourism Sector
Implication of Union Budget 2011

Copyright © 2011 The Other Home. All rights reserved
International Tourism Industry
International Tourist Arrivals was totaled 642 million between January
and August 2010, expecting to increase in the range of 5%-6% over the
full year.
International Tourist Arrivals (ITAs), 2001-10

(Figures in Million) 920 933
901 880
847
802
762
682 702 691
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
Source: World Tourism Organization (www.unwto.org)

Top 10 Destination – Country wise
Out of a global total of 880 million tourists in 2009, India was ranked at
41st place, still a long way to be among top 10 destinations in the world.
International Tourist Arrivals by Country of Destination. 2008, 2009 and 2010

(Figures in Million)
79 79
74 2008
2009
61
58 57 56
2010
55 53 53
52 51
43 43 43
30 30 29
28
26 25 24 25 25 24 22 24 23 22 23
5 5 6
Fra nc e Unit e d S pa in China It a ly Unit e d Turke y Ge rma ny Ma la ysia Me xic o India

S tates Kingdom
Source: World Tourism Organization (www.unwto.org), http://www.statistics.gov.uk/cci/nugget.asp?id=352

Figures for Italy and Germany are not updated. 4
World Travel Market
• In 2009, International tourism with tourist arrivals was down by 4% and
world travel exports fell by 9% worldwide. However, Asia was least
impacted
Decline in Number of International Tourists, 2009
(Figures in %)
• World tourism is recovering rapidly. According to WTO, the number of

international tourists increased by 3-4% in 2010.
Source: World Tourism Organization (www.unwto.org) and Indian Economic Survey 2010-11
6
Tourism Market in India
Tourism is the key area which can yield large benefits for society.
• India is a land of vast attractions, ranging from diverse natural

formations to historical monuments and relics going back to more
than two millennia, there is vast scope for expansion of tourism in
India.
• In 2010 the total number of foreign tourists that arrived in India
was 5.58 million and they brought in a foreign exchange earning of
Rs. 648.89 billion ($14.4 billion).
• It should be possible for India to get many times more inbound
tourists than it currently does.

Foreign Tourist Arrivals
India’s performance in tourism sector has been quite impressive over this
decade.
Foreign Tourist Arrivals (FTAs), 2006-10
(Figures in Million)
5.37
5.58
• FTA in India jumped to 5.58 million in
4.98 5.11
4.45 2010 compared to 5.11 million in
2009. Similarly, FEE increased to $14
billion compared to $11 billion in
2009.
2006 2007 2008 2009 2010
• There is a need to offer unique
Foreign Exchange Earning (FEEs), 2006-10 experience to international tourists.
(Figures in $ Million)
14.19
– International tourists are used to
10.73
11.75 11.39 booking their stay online.
8.63
– In India, Tourists have to depend
on local travel agents to find a
place to stay.
2006 2007 2008 2009 2010
Source: Indian Tour Operator Promotion Council; Ministry of Tourism and Culture 8
Domestic Tourists Statics
Describing domestic tourism is the “backbone” of India Tourism
Industry.
Domestic Travelers, 2006-10 • The number of domestic

(Figures in Million) tourist visits increased to 705
705
650 million in 2010 compared to
527 563
650 million in 2009.
382
• However, the major share of
domestic tourism include
religious trips, family reunion
2006 2007 2008 2009 2010E
and business travel trips from
one place to another.
Source : Ministry of Tourism and Culture 9

Tourism - Major Engines of Economic Growth
• Tourism is one of the major engines of economic growth in most parts of the
world including India.
– Since tourism does not fall under a single heading in the National Accounts
Statistics, its contribution has to be estimated.
• According to the UN World Tourism Organization, tourism provides 6-7% of
the world’s total jobs directly and millions more indirectly through the
multiplier effect in this sector.
Tourism’s Contribution - GDP and Total Jobs, 2007-08

(Figures in %)
In absolute numbers, the total
number of tourism jobs in the
country increased from
38.6 million in 2002-03 to
49.8 million in 2007-08.
10
Exports of Travel Services
• World exports of Travel Services was valued at $870 billion in 2009.
– In 2009, all commercial services sectors were affected by the global crisis
but not to the same extent. Travel was the least impacted segment with
a negative growth of 9% in 2009.
India’s Export of Services, 2000-01 and 2010-11 • India is moving towards a
(Figures in %)
services-dominated GDP. The
share of Software and Business
services are increasing.
Miscellaneous
• However, the cause of concern is
GNIE the decline of exports of Travel
Insurance
Transportation Services from 21.5% in 2000-01
Travel
to 12.4% in 2009-10.
• India has not yet tapped the vast
Source: Indian Economic Survey 2010-11 tourism potential.
GNIE= Government not included elsewhere
Miscellaneous includes Software Services, Business Services, Financial Services and Communication Services 11
National Tourism Policy 2002
To strengthen the National Tourism Policy 2002’s critical pillar of
Suraksha (Safety), the Government has adopted the Code of Conduct
for ‘Safe and Honorable Tourism’ on 1st July 2010.
• National Tourism Policy evolves around six broad areas such as Welcome
(Swagat), Information (Suchana), Facilitation (Suvidha), Safety (Suraksha),
Cooperation (Sahyog) and Infrastructure Development (Samrachana).
• The key aim of the ‘Safe and Honorable Tourism’ is to ensure that Indian
tourism follows international standards of safe tourism practices, applicable to
both tourists and local residents, i.e. local people and communities who may
be impacted by tourism in some way.
– The Code has been formed to sensitize travellers and the travel industry,
close all possibilities of exploitation, specifically of women and children,
and make India a safe tourism destination.
12
Mega Tourism Projects
Ministry of Tourism (MoT) is making concerted efforts for development
of nationally and internationally important destinations and circuits
through Mega Tourism Projects.
• Mega Tourism Projects are a judicious mix of cultural, heritage, spiritual, and eco
tourism in order to give tourists a holistic experience.
– MoT is coordinating with with other Central Government ministries such as
Railways, Civil Aviation, Road Transport & Highways, Food Processing and Urban
Development as well as the concerned State Governments to achieve convergence
and synergy so that the impact of investment in these destinations is maximized.
– Till date, the Government has identified 38 projects out of which 23 have been
sanctioned.
• In order to meet the huge skill gap in the hospitality industry, the Government has put
in place a multipronged strategy which includes strengthening and expanding the
institutional infrastructure for training and education. Besides, steps are being taken for
skill training of youth in the hospitality sector and providing skill certification.

Tourist Visa on Arrival (TVoA)
• In order to promote tourism, Government of India launched a scheme of Tourist Visa on
Arrival (TVoA) in January 2010 on pilot basis.
– Citizens from 11 countries are cover under the TVOA scheme - Finland, Japan,
Luxembourg, New Zealand, Singapore, Cambodia, Laos, Vietnam, Philippines,
Myanmar and Indonesia.
– A total of 6,549 VoAs were issued in 2010, of which Singapore (1814), New Zealand
(1944), Japan (1457) ,Finland (1263) and Luxembourg (71).
– In January 2011, a total of 790 VoAs were issued, of which New Zealand (242),
Finland (156), Japan (155), Singapore (125), Philippines (98), Luxembourg (6),
Cambodia (4), and Vietnam (4).
• Persons holding Diplomatic/ Official passports are not eligible to avail this facility.
• It is single entry visa a short period with a validity of 30 days strictly for the purpose of
tourism and a tourist can come to India only twice a year on this visa. The fee for the visa
on arrival is $ 60 (Sixty United States Dollars) or equivalent amount in Indian Rupees per
passenger (including children).
14
Inbound Tourists Vs. Outbound Tourists
India sends out more outbound tourists than it gets inbound ones, which
is fairly unusual for an emerging economy
Inbound Vs. Outbound Tourists, 2006 - 10
(Figures in million) • India is one of the fastest-growing
outbound travel markets in the world
and has witnessed a growth of over 20%
over the last few years.
• India inbound tourism market is still in
nascent stage. India’s share in
international tourist arrivals is a paltry
0.60% in 2010.
• Outbound Indians are more than double
the inbound tourists, though foreign
exchange outgo due to outbound
Indians is much less than the foreign
exchange inflow from inbound tourists.
Source: Ministry of Tourism, Research and Markets 15
Tourism - Hotels and Restaurants
The hotels and restaurants sector is an important sub-component of the
tourism sector.
Growth in Availability of Hotel Rooms • The hotels sector comprises various forms of
(Figures in %) accommodation, namely star category hotels,
heritage category hotels, timeshare resorts,
apartment hotels, guest houses, and bed and
breakfast establishments.
2008-09 2009-10
• Availability of good quality and affordable hotel
2004-05 2007-08
rooms plays an important role in boosting the
growth of tourism in the country. Presently
there are 1593 classified hotels with a capacity
of 95,087 rooms.
The CAGR in the GDP contributed by • Several studies have identified the demand-
the hotels and restaurants sector was supply gap in hotel rooms in India; some of
8.5% in 2004–05 to 2009–10. them have estimated a gap of 150,000 hotel
rooms, of which 100,000 rooms are in the
budget segment.
Source: Economic Survey 2010-11

17
Commonwealth Games 2010 (CWG)
• India hosted the 19th Commonwealth Games in which 71 countries and territories
participated, were organized successfully by India. The event has significantly
contributed to employment generation, infrastructure development, tourism inflow, and
growth in national income.
• The Sports Ministry had undertaken a massive and unprecedented training programme
for the top sportspersons of India, to prepare the Indian contingent for CWG 2010. A
Scheme for Preparation of Indian Athletes for CWG 2010 was put in place for providing
comprehensive and intensive training and exposure to Indian sportspersons, both
domestically and abroad.
– In this effort, 170 Indian and 30 foreign coaches and 78 supporting technical
personnel were involved.
– This has resulted in the best-ever performance by India in any major, multi-
disciplinary sports event with a haul of 101 medals (38 gold, 27 silver, and 36
bronze), which is more than double the medals India won at CWG, Melbourne,
2006.
– This achievement placed India second in medals tally after Australia and ahead of
major sporting countries such as England, Canada, and South Africa.

19
Budget 2010-11 Vs. 2011-12 – Tourism Sector
Budget Budget
2010-11 2011-12
• Service tax on air conditioned

• In order to boost investment in the
restaurants possessing licenses to serve
tourism sector which has high
alcoholic beverages.
employment potential, the
government extended the benefit of • Service tax on hotel accommodation, in
investment linked deduction. excess of declared tariff of Rs. 1,000 per
• day.
Benefits of 100% investment linked
tax deduction on capital expenditure • Revision in service tax rates on air travel
(excluding land, goodwill and financial ― Hike in domestic and international
instrument) for building and travel (economy class) by Rs. 50
operating a new hotel (commissioned and Rs. 250 respectively.
after 1st April 2010) of two-star ― Tax on domestic air travel (other
category and above, extended from than economy) at standard rate of
select locations to across the country. 10% (in line with international
travel).

Budget Impact on Hotels & Tourism
Impact- • The levy of service tax on room tariffs / restaurants, the
Negative impact of which will be passed on to the end customer, is
likely to have a detrimental impact on demand as it
drives up the effective consumer cost. However, roll out
of GST could neutralise this impact.
• The incremental tax on air travel will also push up the
travel bill, the quantum of the same would be low.
However coupled with impact of the increased fuel
surcharge, higher travel cost could have a detrimental
impact on airline traveller volumes.
21
Industry Reaction
• The hospitality sector has reacted strongly against the rise
in service tax on hotel rooms and restaurant bars and
demanding for a rollback.
• With this move, the total amount of tax on the room
charges would amount to 17.5% in Kerala and Goa,
compared to just 3% tax with other competing tourism
destinations like Singapore, Malaysia and Indonesia, nearly
six times higher.
• Tour operators are also unhappy with the government for

enhancing service tax on air travel.
• The rise in service tax on domestic economy class airfare
and international economy class airfare would negatively
impact air travel.
22
Financial and Fiscal Incentives
The Government has announced various financial and fiscal incentives
for the hospitality sector.
• A five-year tax holiday under the Income Tax Act for two, three, and four star
category hotels located in all United Nations Educational, Scientific and
Cultural Organization (UNESCO) World Heritage sites (except Mumbai and
Delhi) for hotels starting operations from 1st April 2008 to 31st March 2013.
• Other incentives include:
– Relaxation of external commercial borrowings (ECB) to reduce the liquidity
crunch being faced by the hotel industry for setting up new hotel projects
– Allowing FDI up to 100% under the automatic route for the hotel and
tourism-related industry
– Delinking credit for hotel projects from real estate by The Reserve Bank of
India , thereby enabling hotel projects to avail of credit at relaxed norms
and reduced interest rates.

Registration – Tour Operators & Agencies
The government also has a voluntary scheme of granting approval to
bonafide tour operators, travel agents, tourist transport operators,
and adventure tour operators who satisfy certain criteria specified
in terms of turnover, infrastructure, and manpower.

25
Ministry of Tourism
The outlay for the Ministry of Tourism is Rs. 11.7 billion ($2.6 billion),
including Rs. 1.1 billion ($24 million) for North-East Region & Sikkim.
Ministry of Tourism – Outlay, 2009-11 • The Ministry of Tourism planned to

(Figures in Rs. Million) continue promotional efforts under the
1,170
1,056
70.8 ‘Incredible India’ campaign in overseas
1002
68.5
56.1 and domestic markets.
• The Ministry also planned to lay
emphasis on social awareness campaigns
1100.0 in the domestic market to sensitize the
934.5 1000.0
masses and various stakeholders to the
importance of tourism.
• The key challenge is to establish India,
into some traditional areas such as
2009-10 2010-11 2011-12
tourism and shipping where other
countries have already established
themselves.

Physical Target 2010-11
The total outlay for the scheme is towards:
• Product/Infrastructure Development for Destination and Circuits
• Assistance for large Revenue Generating Projects
• Domestic promotion and publicity including Market Development
Assistance, Assistance to Institutes of Hotel Management / Food
Crafts Industry
• Capacity building for Service Providers
• Incentives to Accommodation Infrastructure
• Externally aided projects for development of Buddhist
Centers/Sights at Ajanta/Ellora and Buddhist Centre in Uttar
Pradesh
27
Physical Target 2010-11
• GOI UNDP Endangerous Tourism Project

• Market Research including 20 years perspective plan
• Construction of Building for Indian Institute of Skiing and
Mountaineering at Gulmarg
• Computerization and Information Technology
• Creation of Land Bank for Hotels
• 2.5% of the Annual Plan (2011-12) has been allocated for TSP
(Tribal Sub Plan) under the plan scheme “product/infrastructure
development for Destinations and circuits”
28
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Indian Tourism Sector

Implication of Union Budget 2011

International Tourist Arrivals (ITAs), 2001-10

Source: World Tourism Organization (www.unwto.org)

International Tourist Arrivals by Country of Destination. 2008, 2009 and 2010

Fra nc e Unit e d S pa in China It a ly Unit e d Turke y Ge rma ny Ma la ysia Me xic o India

Source: World Tourism Organization (www.unwto.org), http://www.statistics.gov.uk/cci/nugget.asp?id=352

• World tourism is recovering rapidly. According to WTO, the number of

• India is a land of vast attractions, ranging from diverse natural

Copyright © 2011 The Other Home. All rights reserved

Domestic Travelers, 2006-10 • The number of domestic

Source : Ministry of Tourism and Culture 9

Tourism’s Contribution - GDP and Total Jobs, 2007-08

Copyright © 2011 The Other Home. All rights reserved

Source: Economic Survey 2010-11

Copyright © 2011 The Other Home. All rights reserved

• Service tax on air conditioned

Copyright © 2011 The Other Home. All rights reserved

• Tour operators are also unhappy with the government for

Copyright © 2011 The Other Home. All rights reserved

Copyright © 2011 The Other Home. All rights reserved

Ministry of Tourism – Outlay, 2009-11 • The Ministry of Tourism planned to

Copyright © 2011 The Other Home. All rights reserved

• GOI UNDP Endangerous Tourism Project

'The Other Home', an India-focused, specialized

• The company is promoting various non-hotel properties -

For more details, please visit: www.theotherhome.com or read

Research India was founded in 2007 by a team of

• Research India was formed with the objective of providing local

For more details, please visit: www.research-india.com or mail us at

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