Economics of the tourism and hospitality industry in India

India is a country rich in culture and heritage. The country has architectural marvels and monuments in every nook and corner. But do you know there’s more to this beyond pleasing the visitor’s eyes during vacations? Yes, these wonders come under an important sector that contributes significantly to India’s growth – The tourism and hospitality sector.

What is this sector all about, and how does it help the economy? Read the article to learn further.

What does the tourism and hospitality sector in India include?

The hospitality and tourism sector covers all activities related to travelling. While the tourism sector focuses on tourist-attractive destinations and activities related to grabbing the attention of more tourists, the hospitality sector includes everything related to the food and stay of such tourists.

Generally, heritage sites, travel planners, events, transportation, etc., are part of the tourism industry. Restaurants, hotels, motels, resorts, etc., come under the hospitality industry. The two are, however, seen in unison as they are both essential for a comfortable travel. Hence, tourism and hospitality are almost synonymous and cover all activities related to a tourist’s travel.

Also read: From print to digital: The story of India’s media and entertainment sector

History of tourism and hospitality in India

Though travel has existed since time immemorial, the beginning of tourism and hospitality as a sector began during the onset of India’s independence. 

Sir John Sargant’s Committee, established in 1945, marked the beginning of a formal tourism committee in India. In 1966, the Government of India established the India Tourism Development Corporation (ITDC), which continues to operate to date. The Ministry of Tourism supervises the entity today and owns more than 17 hotels under the brand, ‘The Ashok Group’, and is listed on both NSE and BSE.

Growth of the hospitality industry in India

The growth of the tourism industry in India has a lot to do with the country’s five-year economic plans. Though the first five-year plan between 1951 and 1956 did not attribute a special focus to tourism, every plan after that had strategies to promote tourism in the country.

The second five-year plan prioritised developing infrastructure in tourist attractions by improving stay and recreation facilities. The 1960s saw an immense boost, with the number of foreign tourists increasing by over six times. L.K Jha Committee was set up in 1963 to suggest recommendations for the sector’s improvement. Based on their suggestion of increasing the involvement of the public sector, Hotel Corporation of India Ltd., India Tourism Transport Undertaking Ltd., and India Tourism Corporation Ltd. were set up. 

The government continued emphasising tourism as a significant player in the economy. The fourth five-year plan recognised the importance of tourism in contributing to the country’s foreign exchange reserves. 

The sixth five-year plan between 1980 and 1985 was a milestone period of India’s tourism and hospitality. A tourism policy was introduced in 1982 to focus on the goals and objectives. Tourism circuit was another unique initiative that aimed at creating specific routes to channelise tourist traffic.

The tourism industry in India today

Today, the government recognises tourism and hospitality as one of the pillars of the service industry. The sector contributes immensely to the country’s foreign exchange, GDP and employment. Given its role in creating jobs, the government views this as an integral part of the ‘Make in India’ initiative. 

According to the World Travel and Tourism Council:

• India’s travel and tourism ranked number 6, based on its contribution to GDP in 2021.
• The sector ranked number 2, with respect to employment provided in 2021.

The Union Budget of 2023 considered tourism as one of the crucial sectors. The government has various schemes with public-private partnerships to promote tourist activities in the country. The sector also has the credit of being a leading women’s employer, promoting diversity and gender equality. 

The tourism ministry had a special initiative called ‘Visit India’ for 2023, to invite tourists from across the globe to visit the wonders of India. 

• 2022 welcomed 6.19 million foreign tourists to the country.
• The number of domestic travel visitors touched 1.7 billion in 2022.

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• Tourism contributed $16.92 billion to the country’s foreign exchange earnings.

Future of Indian Tourism

The tourism and hospitality sector is considered to be one of the fastest-growing industries in India. 

• By 2028, the revenue is expected to touch $59 billion.
• The Foreign Tourist Arrival (FTA) count is expected to reach 30.5 million by 2028.
• By 2030, the government expects the industry to contribute about $56 billion to foreign exchange and create 140 million jobs in the country.
• Revenue from hotels and accommodation is expected to rise by 8.29% and cross 61 million customers by 2027.
• The cruise passenger traffic is expected to touch 4 million by 2032.
• The government is currently working towards developing tourism in the next 25 years, with an aim for India to be the first travel destination for tourists globally by 2047.

Latest trends in the hotel industry in India

• Personalisation – Personalising and customising the experience for clients is a trend across every industry, and the tourism sector is no exception. From including additional facilities based on the requirement to allowing customers to use their OTT accounts, there have been various initiatives towards personalising the stay experience.

• Virtual reality – This is one of the most exciting trends in recent days. Through virtual reality tours, customers are allowed to see the hotel’s environment from their homes instead of looking at still pictures to make their travel plans.  

• Sustainability – From cosmetics to clothes, sustainable and eco-friendly products are topping the charts today. Similarly, sustainable hotels offering vegan options, utilising efficient waste management techniques, using smart lights, etc., are increasing in popularity.

• Wellness focus – Today, hotels do not just offer stay and food but also offer various facilities related to health and wellness. Fitness centres, meditation rooms, spas, etc., are available in multiple hotels. There are also wellness resorts focusing exclusively on mental and physical health.

• Collective spaces – Hotels and cafes have gone beyond serving food to including office spaces in their services.

Also read: 1853 to 2023: A case study on Indian railways, its birth and growth

Tourism and hospitality stocks in India

Below are the top 5 stocks based on market capitalisation on NSE and BSE, in the hotels, resorts and restaurants category, as of 03 January 2024.

Below are the top 5 stocks based on market capitalisation on NSE and BSE, in the travel services category, as of 03 January 2024.

Bottomline

From 1945 to 2023, India’s tourism sector has witnessed immense growth. Today, it stands as a strong pillar supporting the country’s GDP, employment and foreign exchange earnings. Besides innovative initiatives by the government, the latest trends including social media travel influencing, show promising prospects for India to be one of the most preferred travel destinations in the years to come.