Professional Documents
Culture Documents
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Ashish Narula WMP7084 Ashish PahujaWMP7085 Astha Malik WMP7086 Avneet Kaur WMP7087 Chandramouli K WMP7088 Deepak Arora WMP7089 Deepak Priya WMP7090 Dheeraj Gupta WMP7091
Table of Contents
DEVELOPMENT OF TOURISM IN INDIA .............................................................................................................. 4 Early Development ............................................................................................................................................. 4 Types of tourism ................................................................................................................................................. 5 Trends in Tourism Industry ................................................................................................................................. 8 World trends .......................................................................................................................................... 8 India Trends ........................................................................................................................................... 8 Businesses benefitting from Tourism................................................................................................................. 9 IMPACT OF TOURISM IN INDIA ........................................................................................................................ 15 POSITIVE IMPACTS ............................................................................................................................... 15 NEGATIVE IMPACTS ............................................................................................................................. 15 Indian tourism industry in comparison to the world tourism industry .......................................................... 16 Current Scenario in Tourism Industry of India: ................................................................................................ 16 Indias Place in World Tourism: ........................................................................................................................ 17 Demand & Supply Scenario: ............................................................................................................................. 19 Demand Scenario: ................................................................................................................................ 19 Supply scenario: ................................................................................................................................... 19 Government Policies & Initiatives: ................................................................................................................... 20 Various factors affecting Tourism .................................................................................................................... 22 Application of Micro Economic Concepts in Tourism industry ....................................................................... 23 Monopoly -Price Discrimination.......................................................................................................... 25 Prospects of tourism firms .................................................................................................................. 26 Effect of Income on Tourism (Engel Curve) .......................................................................................... 27 Future of Indian Tourism .................................................................................................................................. 31 Incredible India !! ................................................................................................................................. 31 India on the World Map ....................................................................................................................... 31 Government Policy Initiatives ........................................................................................................................... 32
Going Forward- Destination India ..................................................................................................................... 32 World Tourism Outlook .................................................................................................................................... 34 References......................................................................................................................................................... 35
Table of Figures
1. Facts about Tourism 2010 ............................................................................................................................... 7 2. Total contribution of Travel & Tourism to GDP ............................................................................................. 10 3. Breakdown of Travel & Tourisms to GDP .................................................................................................... 11 4. International tourist arrival ........................................................................................................................... 12 5. ITA by country of destination ........................................................................................................................ 12 6. India Domestic Tourist (millions) ................................................................................................................... 13 7. Foreign tourist arrival Vs Foreign exchange earnings (India) ........................................................................ 13 8. India - Other jobs Vs Tourism Jobs ................................................................................................................ 14 9. India - GDP Vs Tourism Industry .................................................................................................................... 14 10. Relationship between Price of Hotel room vs Number of rooms demanded. ............................................ 23 11. Positive and negative Market Shock ........................................................................................................... 24 12. Economies and Diseconomies of Scale........................................................................................................ 24 13. Diminishing Marginal Utility Principle ......................................................................................................... 25 14. Monopoly -Price Discrimination .................................................................................................................. 26 15. Effect of Income on Tourism (Engel Curve) ................................................................................................. 27 16. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 ................................................ 28 17. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 (Graph) ................................... 28 18. Domestic Tourist (Million) ........................................................................................................................... 29 19. WTO Tourism Vision (International Arrivals)............................................................................................... 34
Introduction
The concept of Travel and Tourism is as old as civilisation. The OECD glossary of statistical terms defined tourism as the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited.
flow into the economy through growth of tourism in the shape of increased national and State revenues, business receipts, employment, wages and salary, buoyancy in Central, State and local tax receipts can contribute towards overall socio-economic improvement and accelerated growth in the economy. Tourism has also become an instrument for sustainable human development including: Poverty elimination. Environmental regeneration. Job creation. Advancement of women and other disadvantaged groups
Tourism is overwhelmingly an industry of private sector service providers, although the public sector has a significant role to play in infrastructure areas either directly or through Public Private Partnership (PPP) mode. It is a multi-sectoral activity characterized by multiple services provided by a range of suppliers. It is quite similar to manufacturing industry, where the supply chain is as important as the end product. The related sectors include airlines, surface transport, hotels, basic infrastructure and facilitation systems, etc. Thus, the growth of tourism cannot be attained unless the issues related to all the related sectors are addressed simultaneously.
For a developing country like India which is on the path of modern economic growth through structural transformation of the economy, tourism is the right vehicle. The value-added effect of tourism is increasing. India has emerged as one among the top 40 tourism earners. Thanks to the vibrant tourism industry, there is now an almost assured channel of financial flow to the country. With its forward and backward linkages with a host of sectors like transport, hospitality, education, health, banking etc., India is all set to reap full potential of this vibrant sector.
Types of tourism
Medical tourism
The medical tourism industry in India has been estimated to increase to around US$2 billion over the next couple of years. Expenditure of key health care treatment is up to 30 percent low in comparison to the United States and United Kingdom. Medial tourism in India emerges as a huge money generator. India has been promoting its healthcare tourism by giving the tourists with personal healthcare services. It is projected that the total marketplace for medical tourism will reach US$2 billion by 2012, representing a CAGR of 60.69 percent.
Spiritual tourism
India is spotted with a number of spiritual destinations. A visit to these places would help in spiritual selfdiscovery. In fact, divine tours of India allow one to care for the spirituality within oneself by going deep into the rich religious history of the country. Spiritual tours of India take one to quite a few spiritual destinations in the country which are famous for their religious and spiritual significance. Spread all over India, these spaces give tourists the delight and peace that may have eluded them for long and which may have stimulated them to visit the piously and religiously rich India.
Rural tourism
Those in the urbanized world who have an enthusiasm for facts about customary ways of life, arts and crafts will be fascinated to visit rural India. Rural India has much to present to humanity. As a historic civilization 5
rich in arts, crafts and culture, rural India can come forward with significant tourist spots. Thousands of overseas tourists visit rural areas in Rajasthan, Gujarat and south India every year. The government has realized what rural India can offer to the world. Rural tourism can also reduce absolute dependence on agriculture. It has now revived traditional crafts, buildings, art etc.
Adventure tourism
India has got varied geographical areas and climate which would aid in adventure tourism. India has land mass, beaches, rivers, hill & mountains to enjoy whatever form of adventure one likes. The hilly regions present many opportunities for mountaineering, rock climbing, trekking, skiing, skating, mountain biking and safaris, while the flowing rivers from these mountains are ideal for river rafting, canoeing and kayaking. Oceans have huge and profound area of water provides many chances for adventure sports in the form of diving and snorkelling.
Ecotourism
This is a responsible form of tourism which encourages going back to normal products in each part of life. It is also the key to sustainable ecological development. Primarily, ecotourism means creating as small an environmental impact as possible and serving to maintain the original nature, so encouraging the conservation of wildlife and habitats when visiting a place. Ecotourism has measured the highest growing market in the tourism industry, according to the World Tourism Organization, with a yearly growth rate of 5 percent worldwide and representing 6 percent of the world GDP and 1.4 percent of all consumers spending.
India Trends
Indian travel and tourism industry bounced back from the effects of global economic slowdown last year and is optimistic of good business growth in 2011. 2010 was a recovery period for the Indian travel and tourism industry. The focus clearly was to revive business hit by the economic downturn and restore trust among travellers worldwide that India is a safe destination and has come out of the shadows of the 2008 Mumbai terror attacks. Innovation and reworking business models played key roles in revitalizing business reeling under the effect of global economic slowdown. With corporate travel and inbound traffic hit badly, the huge potential of domestic tourism was explored seriously for the first time by many travel and hospitality players. Companies diversified their portfolios with niche product offerings and tested the water with new avenues of marketing like social media. The Ministry of Tourism, Government of India also decided to bring the industry under one platform by spearheading the idea to form the Confederation of Indian Travel & Tourism Industry (CITTI). This is a landmark moment in the Indian tourism as all the travel, tourism and hospitality associations came together for the first time to submit a common pre-budget memorandum.
The online travel industry has observed a significant growth over the last year and international movement is further expected to see an upsurge this year. This increase will be due to more accountability, transparency and safer payment options offered by the online medium Consolidation by way of mergers and acquisitions is becoming a dominant trend. The small to medium travel agents are finding it very difficult to survive as today you need volume and huge funds to sustain. Aviation sector has seen phenomenal growth. Low Cost Carriers (LCCs) in the coming years will be preferred over legacy carriers. One can see the growth of LCCs in the Indian market and it will take place for both short and long haul travel. Numbers of airports are increasing and this is connecting India much better.
o o o o o o o o o o o o o o o o o o
Proportion of income from tourism Eating and Drinking Restaurants Pubs Cafes Night-clubs Miscellaneous Crafts Supermarket Garages Sports Equipment Other retail
All of income from tourism Accommodation Hotels Holiday villages Time-shares Guest houses Self-catering Camps / Caravans
Travel Agents Transport Airlines Cruise ships Car Rentals Visitor Attractions Theme Parks Museums/Galleries Historic sites
Recreation Facilities Cinemas/theatres Swimming Poools Public Transport Buses, Trains, etc Taxis
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POSITIVE IMPACTS
1. Generating Income and Employment: Tourism in India has emerged as an instrument of income and employment generation, poverty alleviation and sustainable human development. It contributes around 6.0% to the national GDP and 9.25% of the total employment in India. Almost 25 million people are now working in the Indias tourism industry. 3. Source of Foreign Exchange Earnings: Tourism is an important source of foreign exchange earnings in India. This has favourable impact on the balance of payment of the country. The tourism industry in India generated about US$100 billion in 2008 and that is expected to increase to US$275.5 billion by 2018 at a 9.4% annual growth rate. 4. Preservation of National Heritage and Environment: Tourism helps preserve several places which are of historical importance by declaring them as heritage sites. For instance, the Taj Mahal, the Qutab Minar, Ajanta and Ellora temples, etc, would have been decayed and destroyed had it not been for the efforts taken by Tourism Department to preserve them. Likewise, tourism also helps in conserving the natural habitats of many endangered species. 5. Developing Infrastructure: Tourism tends to encourage the development of multiple-use infrastructure that benefits the host community, including various means of transports, health care facilities, and sports centers, in addition to the hotels and high-end restaurants that cater to foreign visitors. The development of infrastructure has in turn induced the development of other directly productive activities. 6. Promoting Peace and Stability: The tourism industry can also help in promoting peace and stability in developing country like India by providing jobs, generating income, diversifying the economy, protecting the environment, and promoting cross-cultural awareness. However, key challenges like adoption of regulatory frameworks, mechanisms to reduce crime and corruption, etc, must be addressed if peace-enhancing benefits from this industry are to be realized.
NEGATIVE IMPACTS
1. Undesirable Social and Cultural Change: Tourism sometimes led to the destruction of the social fabric of a community. The more tourists coming into a place, the more the perceived risk of that place losing its identity. A good example is Goa. Hippy culture lead to a rise in the use of drugs, prostitution and human trafficking. This had a ripple effect on the country. 2. Increases Tension and Hostility: Tourism can increase tension, hostility, and suspicion between the tourists and the local communities when there is no respect and understanding for each others culture and way of life. This may further lead to violence and other crimes committed against the tourists. The recent crime committed against Russian tourist in Goa highlights this concern. 3. Creating a Sense of Antipathy: Tourism brought little benefit to the local community. In most all-inclusive package tours more than 80% of travelers fees go to the airlines, hotels and other international companies, not to local businessmen and workers. Moreover, large hotel chain restaurants often import food to satisfy 15
foreign visitors and rarely employ local staff for senior management positions, preventing local farmers and workers from reaping the benefit of their presence. This has often created a sense of antipathy towards the tourists and the government. 4. Adverse Effects on Environment and Ecology: One of the most important adverse effects of tourism on the environment is increased pressure on the carrying capacity of the ecosystem in each tourist locality. Increased transport and construction activities led to large scale deforestation and destabilisation of natural landforms, while increased tourist flow led to increase in solid waste dumping as well as depletion of water and fuel resources. Flow of tourists to ecologically sensitive areas resulted in destruction of rare and endangered species due to trampling, killing, disturbance of breeding habitats. Noise pollution from vehicles and public address systems, water pollution, vehicular emissions, untreated sewage, etc. also have direct effects on bio-diversity, ambient environment and general profile of tourist spots.
The efforts made by the Ministry of Tourism & culture in the last few years have had a salutary effect on the Indian Tourism Industry.
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Contibution of Travel and Tourism to Exports and Receipts World Average Total tourism exports as percentage of total exports 12.15 Tourist Receipts 5.2 India World Rank
9.5 11.8
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Contibution of Travel and Tourism to Employment World Number of Employed 207.1 million India 25 million Rank 2nd
India's Tourist Profile : Domestic & International Percentage Share of India 0.38% 0.69% 4.60%
World ($) International Arrivals Tourism Receipts Domestic Tourism Worldwide 698 million 595 billion 6980 million
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Supply scenario:
According to estimates by HVS International, around 10856 rooms in Delhi, 9318 in Mumbai, 7794 in Bangalore and 7408 rooms in Hyderabad are to be expected to be added in by 2011.
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Harness its direct and multiplier effects for employment and poverty eradication in an environmentally sustainable manner
Focus on domestic tourism as major driver of growth Acknowledges the critical role of private sector with government working as a pro active facilitator and catalyst; Create and develop integrated tourism circuits based on Indias unique civilization, heritage, and culture in partnership with states, private sector and other agencies. Ensure that the tourist to India gets physically invigorated, mentally rejuvenated, culturally enriched and spiritually elevated and feel India from within
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Benefits of the scheme earned by one service provider of a Group company can now be utilized by other service providers of the same Group Company including managed hotels.
Incredible India Under this program government promotes India through various integrated marketing programs
Atithie devo Bhava ( Gusets are equal to God) Under this program the Government create awareness among Indian people who come in contact with the tourist.
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o Social Factors
Healthy lifestyles are being encourages Young population ( Demographics)
o Cultural Factors
Festivals Maintenance of historical monuments, Museums, Galleries
o Political factors
Terrorism & Security, Infrastructure, International politics etc.. Worlds largest democracy Religious tolerance Relations with neighbouring countries
o Governmental factors
Aggressive campaign Incredible India Tax exemptions and price competitiveness
( 6th overall in this category) Upto 100% NRI investments are allowed
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The demand curve and the supply curve are drawn above for the price of the room and the number of rooms demanded. An equilibrium point is reached when the number of rooms supplied is equal to the number of rooms demanded at a certain price. Also, the demand curve and the supply curve could be shifted due to many economic factors and accordingly the equilibrium point would be shifted. Below is a table showing positive and negative Market Shock for the various economic factors
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The above picture represents the concept of economies and diseconomies of scale for the motel industry. 24
In the above picture, S is the satisfaction level, d is the number of days tourist stay at the destination and d* is Optimal duration of tourist stay. According to the theory of diminishing marginal utility, the utility of any good decreases as the quantity consumed increases. The satisfaction (S) a tourist may benefit from a destination is linked to the duration of the stay (d). After staying for d* number of days, satisfaction level of tourist starts decreasing.
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In the above graph, we measure quantity along the x-axis and price(P), average cost(AC), marginal cost(MC), average revenue(AR), marginal revenue(MR) along the y-axis. The monopolist faces a downward sloping demand curve and as such his MR curve is also downward sloping. The monopolist will produce at the profit maximizing level which is the point where 1. MR=MC and 2. MC cuts MR from below.
This happens at the point E and accordingly the quantity supplied would be Q* and the price charged is P*. The AC curve intersects Q at the point F. As such his TC =C*FQ*0. His TR= P*GQ*0 and the profit earned is denoted by the area P*GFC*. The monopolist earns profit in the long run also as there is no competitor to enter the industry and take away his share of profits. The above graph applies to the SOTC , Thomas cook and cox and kings when they were enjoying monopoly status in the industry. When a monopolist discriminates between consumers the practice is called Price Discrimination. He is sometimes able to charge different prices to different consumers of the same commodity. In the Tourism Industry the consumers are categorized into different classes and accordingly the prices are charged .
Most of the tourism and travel firms would have constant returns to scale, as the output of the firm doubles when the input doubles. Inputs could be identified as the drivers, tourist cabs, seats for staff, computers etc. But there could be economics of scale as well when the cost of inputs could be reduced by using a better technology (early information through internet, faster ticket booking etc.). For most of the tourism firms, demand curve will be determined by the market demand curve & individual agencies will have horizontal demand curve as they are working in a competitive environment. Also, there can be monopolistic behaviour for few firms who are able to differentiate in terms of their service & reputation (Thomas cook etc.) Their demand curve will have downward slope & will be earning profit in short run, but in the long run their economical profit will be zero as more firms might enter the industry to share the profit.
As shown in the above chart, GDP per capita of India is increasing over the last few years.
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17. Number of Docmestic Tourist Visits to all States/UTs in India, 1997-2010 (Graph) 28
As shown in the above table and graph, number of domestic tourist visits are also increasing over the last few years.
In the above table, GDP per capita and the domestic tourist visits are shown together for the years 1997 to 2010.
18. Domestic Tourist (Million) Domestic tourist visits are plotted against the GDP per capita in the above chart. The above table and the chart represent the income effect (Engel Curve) for different years for the domestic tourism industry. Below table shows the Elasticity of income. Note that % change in tourism with respect to % change in income is positive.
Elasticity = %change in tourism/% change in income Increasing tourism with income increase so Tourism has positive elasticity with income
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Indias governmental bodies have also made a significant impact in tourism by requiring that each and every state of India have a corporation to administer support issues related to tourism.
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The demand for travel and tourism in India is expected to grow by 8.2 per cent between 2010 and 2019 and will place India at the third position in the world. India's travel and tourism sector is expected to be the second largest employer in the world, employing 40,037,000 by 2019. Capital investment in India's travel and tourism sector is expected to grow at 8.8 per cent between 2010 and 2019. The report forecasts India to get capital investment worth US$ 94.5 billion in the travel and tourism sector in 2019. India is projected to become the fifth fastest growing business travel destination from 2010-2019 with an estimated real growth rate of 7.6 per cent.
Incredible India !!
India is probably the only country that offers various categories of tourism. These include History tourism, Adventure tourism, Medical tourism (ayurveda and other forms of Indian medications), Spiritual tourism, Beach tourism (India has the longest coastline in the East) etc. Explore India One can choose the locales of your choice, and see what each state has to offer and can lose oneself in the wonder that is India. Tourists have the options of exploring modern cities that have grown organically from the roots of a multi-coloured past,make a pilgrimage to holy shrines that echo with tales of antiquity, fun and frolic on a vast array of golden beaches that dot an enviable coastline, washed by two seas and an ocean. Sport with adventure in style. Jungles lure the tourists to a fascinating world at a diverse array of wildlife sanctuaries and national parks....... this is the wonder that is India.
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It is fast turning into a volume game where an ever-burgeoning number of participants are pushing up revenues of industry players (hotels, tour operators, airlines, shipping lines, etc). Thus, the tourism sector is expected to perform very well in future and the industry offers an interesting investment opportunity for long-term investors. The Indian tourism sector is seen generating $42.8 billion by 2017, a 42 percent surge from 2007, according to an industry research note by auditing and consulting firm Deloitte Touche. Despite the challenges being faced in terms of a slowing economy, sluggish demand and security concerns, the country was fighting back and tourism developments were taking place, it said." Although there will inevitably be some short- to medium-term set backs, the long-term outlook remains positive," it said." Despite the deepening world economic crisis, India's economy remains in decent shape and is still experiencing some of the strongest growth rates in the world," the Deloitte report said. Despite the numerous problems, tourism industry was the second-largest foreign exchange earner for India. This is resulting foreign hospitality groups rushing towards India. International tourists account for a little over 5 million visitors, while domestic market is seen at more than 700 million. Limited infrastructure poses a constraint to the free flow of tourists, but the Indian government is addressing the issue through upgradation of existing airports and building new ones. It is also considering other incentives such as offering air travel and accommodation for foreign tourists who visit India for the third time. It may also pick up the bill for tour operators promoting domestic and medical tourism and is mulling income tax exemption for hoteliers if they invest 50 percent of profits into infrastructure.
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This is resulting in greater room occupancies and average room revenues (ARRs) in the country. ARRs have moved up from Rs. 3200-3400 last year to Rs 4000-4200 this year. Room occupancy rates have shot up from 75-80% in 2002 to over 90% now. Infact, in Bangalore it is now estimated at 100%.
Constraints: The major constraint in the development of tourism in India is the non-availability of adequate
infrastructure including adequate air seat capacity, accessibility to tourist destinations, accommodation and trained manpower in sufficient number. Poor visitor experience, particularly, due to inadequate infrastructural facilities, poor hygienic conditions and incidents of touting and harassment of tourists in some places are factors that contribute to poor visitor experience. Hotel room rents in India are still expensive compared to counties like Thialand and China. This hurt Indian tourism. Though this discrepancy has come down, still there is some gap. Some of the reasons for this are high luxury and entertainment taxes and high landing charges applicable in Indian airports. Tourism in India is a state subject. Each state separately spends on tourism and tourism related activities, whereas if these funds were spent in a cohesive manner by a central agency to showcase the entire country as one destination, the results would probably have been far more spectacular.
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References
http://www.iata.org/ http://tourism.gov.in/ http://civilaviation.nic.in/ www.incredibleindia.org World travel and tourism council reports (www.wttc.org) www.economywatch.com www.ilfsindia.com/downloads http://planningcommission.nic.in/reports/generalp/pl_vsn2020.pdf http://www.ibef.org/download/IndiaNewOpportunity.pdf http://www.unescap.org/EDC/English/Commissions/E63/E63_14E.pdf http://www.ret.gov.au/tourism/Documents/tmc/tourism-industry-potential.pdf http://pib.nic.in/feature/feyr2001/fmay2001/f010520011.html http://www.isc.hbs.edu/pdf/Student_Projects/Nepal_Tourism_2011.pdf http://www.isc.hbs.edu/pdf/Student_Projects/Morocco_Tourism_2008.pdf http://www.indiacore.com/tourism.html http://tourism.gov.in/writereaddata/CMSPagePicture/file/marketresearch/New/2010.pdf http://tourism.gov.in/writereaddata/CMSPagePicture/file/marketresearch/stat1-09.pdf http://tourism.gov.in/writereaddata/CMSPagePicture/file/marketresearch/stat2-09.pdf
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