The Indian tourism and hospitality industry has emerged as one of the key drivers of growth in the services sector in India. The foreign exchange earnings from 2016 to 2019 grew at a CAGR of 7% but dipped in 2020 due to the COVID-19 pandemic. In 2020, the Indian tourism sector accounted for 39 million jobs, which was 8% of the total employment in the country. India ranked 10th among 185 countries in terms of travel & tourism’s total contribution to GDP in 2019. In an exclusive conversation with Financialexpress.com, Dr Abhay Sinha, DG, Services Export Promotion Council (SEPC) talked about the current state of travel industry in India and impact of recent developments. Excerpts:
How will a 15% hike in airfares impact air travel, tourism and hospitality in India?
Inbound tourism has gone down by 74% after the pandemic but the sector is forecasted to witness a rebound in growth. The hike in airfare might impede the growth and momentum of the same. To sustain the rebound in growth and continue to operate the sector needs incentives to storm this phase. However, rise in jet fuel prices has been a dominant factor which can be attributed to this hike in airfares and there seems to be no overnight solution to the same because of geo political issues leading to higher oil prices (Russia Ukraine War).
Do you think a weakening rupee has doubled the challenge for airlines because key cost items like fuel, maintenance, lease rentals, and overhaul costs are billed in US dollars?
Yes, because most of the payments relating to fuel and maintenance are billed in US dollars , the loss of value of Indian rupee certainly leads to an increase in operating costs of airlines. The change in the rupee’s position has left a window open for a change in dynamics. Therefore, we are looking at schemes that help us augment the inflow of foreign currency and we are also in talks with the government to aid the sector with innovative ideas like allotment of funds with capping or support in terms of raw materials et al. Bringing down government taxes on different items like ATC fuel could also help.
What are SEPC plans to boost inbound tourism in India?
Continuing with the earlier initiatives and the immense efforts for ensuring SEIS for the travel and tourism sector for 2019-20, SEPC SEPC is working very closely with IATO, FAITH and others to address all issues and concerns. SEPC is strongly advocating for incentives for the sector in the forthcoming FTP. That would provide a new lease of life to this worst-affected sector. For attracting inbound tourists SEPC will be carrying out a series of activities at the global level with IATO, FAITH and other associations. This synergy is very much required. During the pandemic too, SEPC extended support to its members from the travel and tourism sector for its participation in State.
In cognizance of the impact of the pandemic on the services sector, especially inbound tourism, the Services Export Council under the Ministry of Commerce is propounding innovative ideas to augment inbound tourism and accelerate engagement with the travel and tourism trade industry. One of these measures is ‘Atithi’, a major inbound expo to promote India as a global tourism destination. The core objective of events like Atithi is to communicate and highlight to the stakeholders the value that SEPC can bring and deliver to the inbound industry in India beyond the SEIS (Services Export from India Scheme).
Atithi is the outreach program for inbound tourism and the Council will be seeking the support of the trade and industry associations as well as stake holding from the Ministry – Ministry of Tourism, Government of India. SEPC has already received approval from the Ministry of Commerce for holding ‘Atithi’ and the council has started consultations with the stake holding trade associations and the Ministry of Tourism in this regard. The dates for the event will be announced at a curtain-raiser conclave in Delhi on August 26. The core principle is to build an eco-system that is conducive to inbound tourism. The Council is also organizing the tourism conclave in August 2022 to promote India as a tourism hub with focus on inbound tourism.
Could that change if such hikes also coincide with an increase in prices across the hospitality sector?
We are geared to address all issues of the services exporters and inbound tourism is a critical area that we are actively focusing on. The council is in the process of finalising an innovative alternative to SEIS for the benefit of the travel, tourism and hospitality MSME. It will be a simple and market-oriented proposal and expected to provide some relief to the sector considering the instability of the market currently.
Luxury bespoke travel is back in a big way and companies catering to the niche segment are witnessing demand that is higher than pre-Covid levels. Will it also impact luxury travel as well?
The luxury travel market has seen an inundation of consumers determined to make up for the lost time due to the pandemic. There are positive stipulations that this will continue at a steady pace. Several factors define luxury travel like exclusivity, hyper-personalization, unique experiences, intuitive service etc so we believe the sector might tide through these difficult times.