March 8, 2018

Travel & Tourism Industry Analysis

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Travel & Tourism Industry Analysis

Must know facts:

  • India’s tourism industry is experiencing a strong period of growth, driven by the burgeoning Indian middle class engaging in constant weekend travels , growth in high spending foreign tourists, and coordinated government campaigns to promote ‘Incredible India’.
  • Tourism in India accounts for 9.6 per cent of the GDP and is the 3rd largest foreign exchange earner for the country.
  • During 2006–17E, direct contribution of tourism and hospitality to GDP is expected to register a CAGR of 14.05 per cent.
  • In 2016, foreign tourist arrival in India stood at 8.8 million, by 2025 foreign tourist arrivals in India is expected to reach 15.3 million, according to the World Tourism Organisation.

 

Influencing Factors for price change:

  1. News from Ministry of tourism’s several steps to make India a global tourism hub, is certainly a propellor of sorts to boost stock prices.
  2. Rise in disposable income of middle class, boost in low cost health care, growth in employable population in service sector especially Information technology, is certainly a helpful trend which transpire to growth in tourism.

 

Understanding the Industry:

The tourism industry in India is substantial and vibrant, and the country is fast becoming a major global destination. India’s travel and tourism industry is one of them most profitable industries in the country, and also credited with contributing a substantial amount of foreign exchange. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country.

However, the hospitality sector is one of the most heavily taxed industries and is saddled with multiple layers of tax such as GST, service tax etc. ranging from 20 per cent – 30 per cent. This multiple taxations adds to operational costs and reduces profitability. While the real operationalisation of the much awaited GST regime is expected to rationalise the taxation structure, bring a positive outcome with streamlined taxes, enhance ease of doing business and lower cost for the consumers, there is an urgent need for lowering the tax levied, to incentivize and attract more investments to the sector.

The hotel industry in India thrives largely due to the growth in tourism and travel. Due to the increase in tourism with rising foreign and domestic tourists, hotel sector is bound to grow. There is an emergence of budget hotels in India to cater to the majority of the population who seek affordable stay. International companies are also increasingly looking at setting up such hotels. Imbalance in increase in tourists both domestic and foreign not been supported with equal number of rooms is a latent source of opportunity for growth.

Several reasons are cited for the growth and prosperity of India’s travel and tourism industry. Economic growth has added millions annually to the ranks of India’s middle class, a group that is driving domestic tourism growth.  Thanks in part to its booming IT and outsourcing industry a growing number of business trips are made by foreigners to India, who will often add a weekend break or longer holiday to their trip. Foreign tourists spend more in India than almost any other country worldwide.

 

Estimated Market Size:

India is the most digitally-advanced traveller nation in terms of digital tools being used for planning, booking and experiencing a journey. India’s rising middle class and increasing disposable incomes has continued to support the growth of domestic and outbound tourism.

 

Road Ahead:

As a natural extension of digitisation, ability to plan vacations with end to end technology connecting the last mile travel either side of the country is a major propellor for flourishing tourism trend in India.  India’s travel and tourism industry has huge growth potential. The tourism industry is also looking forward to the expansion of E-visa scheme which is expected to double the tourist inflow to India. India’s travel and tourism industry has the potential to expand by 2.5 per cent on the back of higher budgetary allocation and low cost healthcare facility, according to a joint study conducted by Assocham and Yes Bank.

 

Top Stocks in the industry:

Hotel stocks – Indian Hotels, EIH, Westlife Dev, Mahindra Holidays, Hotel Leela & many more.

(Please note above stocks are not recommendations, they are purely for information purpose only)

 

Information Source / References: IBEF, Ministry of Travel & Tourism, The Economic Survey 2016–17 & 17/18, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports,

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