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The connection between Wall Street and the Taj Mahal may be not be obvious but it is real enough for India’s hoteliers.
The country’s lively tourist trade – used to coping with crises ranging from floods to terrorism – is now bracing itself for a slow down following the recent global markets shock.
“There will be negative impact on inbound tourism to India. Pretty much what happened after 2008, but perhaps to a lesser extent,” P R Srinivas, an analyst at Deloitte India, told beyondbrics.
Foreign tourist arrivals in India dipped in 2009 after the 2008 Lehman crisis hit the global travel industry, especially among the wealthy Americans and Europeans who patronise India’s luxury resorts.
The total of foreign tourists visiting, fell from 5.4m to 5.2m from 2008 to 2009, before recovering sharply last year to 5.5m.
Last week, P R S Oberoi, the veteran hotelier whose family runs the luxury Oberoi chain, warned about the challenges facing the Indian economy in the aftermath of US debt downgrade and EU debt crisis. Oberoi told the company’s annual meeting in Kolkata:
There was an expectation that global economies would see a recovery in 2011. Unfortunately, this is not happening. Global economies and the economic environment are volatile and the world is confronted with economic uncertainties which could impact the company’s business.
Oberoi added that domestic factors weren’t helping – he said inflation, escalating interest rates and corruption scandals had tarnished India’s reputation as a destination of choice for foreign direct investment.
India faces several challenges. Inflation needs to be curbed. Increasesin interest rates and the recent scandals do not augur well for foreign direct investment. Terrorism has emerged as a key challenge and could be a deterrent to the growth of the country’s travel and tourism industry.
But the hotel industry might still have a glimmer of hope in the form of domestic tourists. This industry has been flourishing as the sheer numbers of domestic tourists taking to travelling has been growing steadily to around 700m annually.
While many of these spend little, the government estimates that in some parts of India domestic travellers are starting to spend more than foreign visitors.
Digambar Kamat, chief minister of Goa, a state that receive a large number of foreign and domestic tourists, last week told a New Delhi tourism conference: “While the domestic travellers stayed in star hotels and participated in festivities, sports and held wedding functions, the foreign traveller ate in shacks.”
According to SME Times, Subodh Kant Sahai, national tourism minister, said, “Domestic tourism has witnessed annual growth of 10.1 percent over the previous year and this is good sign for entrepreneurs to grow especially for small players.”
He raised the growth target for domestic tourism from 9 percent to 12 percent in the next five years and said tourism companies must aim to double their businesses in the next five years by providing better facilities to tourists, entertainment and a glimpse of India’s spiritual and cultural life.
Srinivas said this creates opportunities for budget and mid-market hotels. “The demand from domestic tourists is in the mid-market segment and we will see a growth in the segment.”
But with a number of international hotel chains announcing ambitious expansion plans in India, the immediate outlook could be tricky, especially if the downturn in foreign tourism materialises and extends beyond a few months. Srinivas said: “New supply, increasing competition combined with lower numbers of people coming in, all amounts to a challenge for the industry.”
But Oberoi, founded in 1934 by PRS Oberoi’s father MS Oberoi, has survived bigger upheavals in its long history.
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