Travel and tourism is among the most prominent industries in India, with a total contribution of more than 247 billion USD to its GDP (1).
While other parts of the economy were turbulent in the past few years, the tourism industry had expanded as a crucial source of foreign exchange for India. And for people on the ground, it created jobs both directly and indirectly.
A shock came in March 2020 with the onset of the COVID-19 pandemic to the entire globe. Governments worldwide had to impose a lockdown, the first being travel restrictions. Consequently, the travel and tourism industry turned among the worst impacted industries, and it was no different for India.
As the year progressed, the government slowly lifted restrictions across different parts of the country. And as it reached the festival season in late 2020, the Indian travel and tourism industry finally attracted travelers. While the industry had a tough year, they anticipated that it would take about two years to reach the pre-COVID levels.
From people’s perspective, several of them yearned for a weekend trip after months of lockdown.
According to Statista research (2), India is among the rapidly emerging tourist destinations in the globe. With beautiful varying landscapes, from snowclad mountains to beaches, diverse culture, cuisines, and traditions, it has plenty to offer to its international and domestic travelers alike.
Additionally, awareness and marketing initiatives like the Incredible India campaign, e-visa option has helped make traveling in India more accessible for foreign tourists.
However, domestic tourists are the one that makes up the lion’s share in the country and its revenue. The Indian government continued schemes like ‘Dekho Apna Desh‘ even in pandemic with a series of webinars on domestic tourist spots. With several western countries still following travel restrictions, it is most likely that domestic tourists would bring the travel and tourism industry on the recovery track in 2021 (3).
Today, let’s see what is happening in the travel industry and its future outlook.
The COVID-19 Pandemic Impact
Last month, the annual EIR, Economic Impact Report from WTTC, World Travel and Tourism Council highlighted the coronavirus pandemic’s full devastating impact on the worldwide travel and tourism segment in 2020, which suffered a considerable loss of almost 4.5 trillion USD (4).
The annual EIR from the WTTC, the World Travel and Tourism Council, which represents the worldwide travel and tourism private sector, revealed that the sector’s GDP contribution dropped a staggering 49.1%, compared to the overall worldwide economy, which dropped by merely 3.7% in 2020.
According to Gloria Guevara, the President, and CEO of WTTC (5), we must praise the governments worldwide for their prompt actions and saving so many jobs and livelihoods with their several retention and schemes, without which the figures would be far worse.
Regardless, the WTTC’s annual Economic Impact Report shows the full extent of the pain the industry endured over the past year, which has needlessly devastated many businesses and lives, large and small.
She further asserted that no one wants to go through what many have had to suffer during the last difficult 12 months. The research indicates that the global travel and tourism sector alone has been devastated with a burden of an unprecedented loss of about 4.5 trillion USD.
Additionally, the sector’s GDP contribution is plunged by almost half. Hence, the travel and tourism industry must get the needed support to power economic recovery. Gloria believes that it will be instrumental in enabling the world to revive from the pandemic effects.
The segment’s contribution to global GDP dived to 4.7 trillion USD last year, 5.5% of the global economy, from nearly 9.2 trillion USD in the previous year, 10.4% of the global economy.
In 2019, the global travel and tourism industry was thriving, and it generated one in four of all new jobs globally, contributing 10.6%, 334 million jobs worldwide.
However, in 2020, as the pandemic ripped through the heart of the industry, the world lost nearly 62 million jobs, representing a drop of 18.5%, leaving only 272 million people employed across the industry worldwide.
The entire travel and tourism ecosystem felt the job losses, with SMEs, which make up over 80% of all businesses in the segment, particularly affected. Moreover, as one of the globe’s most diverse sectors, the impact on minorities, women, and youth was also significant.
The threat is still there as many of these jobs are supported by government retention schemes and reduced hours at present, which can be lost without a full recovery in the industry.
While WTTC is continually making efforts to restore international mobility and rebuild global consumer confidence and has praised governments worldwide for their prompt response, the tourism body fears that the government can’t continue to prop up threatened jobs indefinitely. Instead, it believes that the government should focus on recovery to power the worldwide economic upturn by saving businesses and generating new jobs.
The report also unveiled a shocking loss in international travel spending, 69.4% down on the previous year. Meanwhile, domestic traveling spending also fell by 45%, a lower decline because of some internal travel in some countries.
The Indian Travel and Tourism Industry
The tourism industry is an indispensable part of the ‘Make in India’ initiative. The industry plays a crucial role as an economic multiplier in creating vacancies at a rapid pace. It also has a substantial sectoral output in MSME, with participants from the most prominent cities to the smallest towns and villages.
The Indian government has taken numerous initiatives such as the national skills development program, SEIS, service exports from India scheme, and MICE, meetings, incentives, conferencing, and exhibitions. These initiatives have led to substantial job creation at the ground level (6).
The tourism industry employs more than 40 million people, and these schemes have immensely assisted Indian tourism exports on several fronts. For instance, the incentives provided under SEIS have offered scope for offering packages at competitive prices and attracting more visitors.
With the SEIS implementation, India generated export revenue from the tourism industry of approximately 195k crore INR in 2018. In 2019, the total foreign exchange revenue was more than 210k crore INR. According to WTTC, in 2019, India generated over 5.6 percent of total export revenue.
While speaking on the matter, Maneck Davar, the chairman of SPEC (7), stated that the services exports promotion council had made representations to the finance and commerce ministries for SEIS release for 2019-20. Since service sectors, especially hospitality, education, and medicals, have suffered during the coronavirus pandemic and any relief would be welcome. Government can also put a cap to ensure that benefit goes to small and medium service providers; no exporter avails a benefit of over five crore INR.
While the Indian government has announced several manufacturing sector schemes, it has not announced any for services, even though it has registered consistent and positive growth.
Since the pandemic has hit, the tourism industry started believing that the Indian government is ignoring them.
It is also worth highlighting that the travel industry is undergoing one of its most significant existential crises. Spinning under its colossal blow, about 30% of India’s inbound tour operators may have to shut the shops permanently. The statistics could be as much as 60 to 70 % as per some estimates (8).
Restrictions on international travel and tourism in the nation severely affect the tour operators’ revenues.
The Distress of Cleartrip
According to an ET report (9), Cleartrip, one of the country’s oldest ticketing platforms, faces a severe downturn amid the pandemic induced lull in the travel and tourism industry.
Last month, several speculations emerged that Flipkart, the ecommerce major, is eying its acquisition in a distress sale.
This week’s new reports confirmed the speculation, with Flipkart closing the deal with Cleartrip as a part of its diversification drive. While no terms of the acquisition have been disclosed, reports suggest that a deal is likely to value the latter at about 40 million USD and subject to regulatory approvals.
Cleartrip, an online travel aggregator, was founded in 2006 by Hrush Bhatt, Stuart Crighton, and Matthew Spacie. To date, it has secured 56.4 million USD in six funding rounds from six investors. It last secured funds in a venture round in January 2019 (10).
Even though the travel and tourism industry briefly had a recovery trajectory, as COVID-19 infections spread rapidly again across the across, several states started imposing lockdown and night curfew. It again plunged the travel and tourism industry into uncertainty. International travel restrictions continue to hamper revenues.
Additionally, Cleartrip also did not perform well in the year preceding the pandemic. In the fiscal year 2020, Cleartrip reported a 2.5% year-on-year revenue drop at 318.8 crore INR for the year ended March 31, 2020.
Its operating income of 273.5 crore INR witnessed a drastic drop of 10% in the fiscal ahead of the lockdown, which further impacted its operations since April 2020. The company dropped its expenses by 6.8% to 333.2 crore INR and cut its loss in half to 14 crore INR.
The Route to Recovery
While 2020 and the first half of 2021 have been ruinous for the travel and tourism industry (11). With millions globally still in lockdown, WTTC research indicates that if international travel and mobility are resumed by June this year, it can significantly boost worldwide and country-level GDPs and Jobs.
As per the research, the sector’s contribution to worldwide GDP can rise sharply n 2021, up by 48.5% year-on-year. The research also indicates that its contribution can almost reach the same levels as 2019 in 2022, with a year-on-year 25.3% rise.
There are also predictions that if the worldwide vaccine rollout continues at the current pace and travel restrictions are relaxed before the busy summer season, the 62 million jobs lost last year can return by 2022 (12).
Additionally, WTTC also strongly advocates the resumption of safe international travel in June this year. It believes that if the governments worldwide follow its four recovery principles, including a comprehensive, coordinated international testing regime on departure for all non-vaccinated travelers, to eliminate quarantines.
It also includes mandatory mask-wearing, enhanced health and hygiene protocols, shifting to individual traveler risk assessments instead of national risk assessments, and continued support for the tourism sector, including liquidity, fiscal, and worker protection.
Furthermore, the introduction of digital health passes, like the recently announced ‘Digital Green Certificate,’ would also support the sector’s recovery (13). Governments worldwide need to offer a solid and clear roadmap and allow businesses to ramp up their operations to recover from the pandemic’s ravages.
India’s New Tourism Policy
When the Indian travel industry was crying out for the government’s support, the Indian tourism minister announced that India is planning to unveil a new tourism policy (14).
Prahlad Singh Patel, tourism minister (15), stated that India has embarked on a journey to achieve the top ranking in the industry by 2024 despite the obstacles.
About two months ago, the center circulated a new proposed tourism policy among states for finalization. As per reports, it focuses on developing religious, medical, and other tourism facets. It also focuses on offering new destinations other than the popular ones like the Qutub Minar and the Taj Mahal.
He further added that their leadership is focusing on developing the travel and hospitality segment. They have sent tourism policy to state governments, enabling the country to reach its target.
The journey aimed at India to the first position in the segment but then the coronavirus pandemic happened. Patel believes in the people of India, the traditions and culture, leadership, and belief. The target they had set, they are now looking to achieve it in 2024. Even though there are several obstacles, he is confident that they will achieve them.
Patel stated that they have decided to use the Chinese language at monuments, where more than 1 lakh tourists visit. However, they are not comfortable in Hindi and English. They have also proposed to put Korean to use (16).
Moreover, the government has also initiated a tourist facilitator course in which 5,500 people have already registered. India’s challenges lie in handling foreign tourists if they visit places facing challenges in managing the coronavirus crisis.
The Post-pandemic Scenario
We all know that after the pandemic, the world will never be the same again (17). And people are going to explore it more cautiously. In a quest to wanderlust quenching in the post-pandemic, people would step out of their routine and still would not skip on save behavior. Moreover, they would seek places that are hospitable and safe. Thus, the onus is on the tourism sector to rekindle people’s confidence and respond to the changing tourism trends.
In India, the segment is evolving to the new requirements as they resume services after the lockdown. The state and central government have issued SOP, standard operating procedures, and the change is visible at popular tourist places, restaurants, and hotels.
The security scan at the entrance has sanitization and thermal screening added to the checks, they are sanitizing lobbies more often, and the staff is more cautious.
Several services are now turning contactless, while there are many more that we can’t robotize for now. Those in the industry may need to acquire additional skills or reskill for the safety procedure in the scenario. The managers would also have to relearn the market trends study. The finances would require rework to ensure ‘safe protocols’ do not make the visitors’ stay expensive.
There would still be things like travel restrictions and infection prevalence in the local city that would stay beyond the tourism stakeholders’ vision or control. Thus, the industry must return to a ‘new normal’ with baby steps.
The new beginning would increase local tourist emphasis since overseas visits are likely to remain less for some more time. The local travelers are more prone to go for short weekend staus and may return in higher frequency (18).
Such weekend gateways package deals would continue to attract visitors from local visitors looking for a break from the daily routine. Individual resorts, hotels, or state departments can design similar packages to meet potential travelers’ requirements.
These visitors would prefer a destination with assured safety standards. Increase in area per cover, live cooking for guests to see every food production step, partition per table outdoor seating, digital menu use, disposable crockery and cutlery, driver through online delivery, and take-outs will be ordered of the day.
For business travelers, city hotels may continue b boarding and lodging places only with strict COVID-19 SOPs. However, leisure travel is going to be resort-centric with a lot of open space. Among these, there may be a class of people who are not feeling explorative but are looking to have some quality time with family and friends in a protective environment. The theme, heritage, and luxurious resorts may come as their initial preference if offered with the set of other desired amenities.
As uncertainty prevails on the travel industry’s future and millions employed in the sector, few rays of hope are emerging from promising vaccine rollouts. However, even if tourists would return, safety procedures are here to stay. The industry needs to display resilience and innovation with its spirit to offer a comfortable, sustainable, and safe experience for the tourists (19).
While we know that India and the worldwide’s travel industry is set to emerge, there are clear advantages for Flipkart as it acquires Cleartrip. Mainly because of the fact that the platform also offers train bookings as an official partner of the IRCTC, the Indian Railway Catering and Tourism Corporation. It means that Flipkart would be able to directly offer train booking via its platform, something which it currently does not.
Flipkart had first forayed into the online travel segment in 2018 when it started offering MakeMyTrip’s travel services on its platform. As of today, Flipkart’s travel plage is powered by ixigo and allows people to book flight tickets and integrations for hotel and bus bookings. Amazon also launched travel booking in the same year, with its flight booking feature incidentally being powered by Cleartrip.
The two leading players in India’s e-commerce segment, Amazon and Flipkart, have of late embraced the super app strategy through assimilating a range of offerings within their parent brand, with a substantial recall value among customers (20).
It is also worth highlighting that both platforms also launched online grocery offerings in 2019 and rapidly scaled them amid the lockdown. Both companies have since forayed into the online pharmacy segment as well. In digital payments, Flipkart’s parent Walmart owns UPI market leader PhonePe, while Amazon enabled it via Amazon Pay in 2019.