CHAPTER - I
INTRODUCTION
INTRODUCTION
TOURISM
Tourism is travel for pleasure; also the theory and practice of touring, the business of
attracting, accommodating, and entertaining tourists, and the business of operating tours.
Tourism may be international, or withon the traveller's country. The World Tourism
Organization defines tourism more generally, in terms which go "beyond the common
perception of tourism as being limited to holiday activity only ", as people "traveling to
and staying in places outside their usual environment for not more than one consecutive
year for leisure, business and other purposes".
Tourism has become a popular global leisure activity. Tourism can be domestic or
international, and international tourism has both incoming and outgoing implications on a
country's balance of payments. Today, tourism is a major source of income for many
countries, and affects the economy of both the source and host countries, in some cases
being of vital importance.
Tourism suffered as a result of a strong economic slowdown of the late-2000s recession,
between the second half of 2008 and the end of 2009, and the outbreak of the H1N1
influenza virus, but slowly recovered. International tourism receipts (the travel item in the
balance of payments) grew to US$1.03 trillion (740 billion) in 2011, corresponding to
an increase in real terms of 3.8% from 2010. International tourist arrivals surpassed the
milestone of 1 billion tourists globally for the first time in 2012,the same year in which
China became the largest spender in international tourism globally with US$102 billion,
surpassing Germany and United States. China and emerging markets such as Russia and
Brazil had significantly increased their spending over the previous decade.
The word tourist was used by 1772 and tourism by 1811.
William F. Theobald (1994) suggested that "etymologically, the word tour is derived from
the Latin, 'tornare' and the Greek, 'tornos', meaning 'a lathe or circle; movement around a
central point or axis'. This meaning has changed in modern English to represent 'one's
turn'. The suffix ism is defined as 'an action or process; typical behaviour or quality',
while the suffix, ist denotes 'one who performs a given action'. When the word tour and
the suffixes ism and ist are combined, they suggest the action of moving in a circle.
Describing a circle implies returning to one's starting point, so a tour is a round-trip
journey, i.e. the act of leaving and ultimately returning to the original starting point.
Therefore, one who takes such a journey can be called a tourist."
Today, three schools discuss the roots of 'tourism'. The French School, led by A. Houlot,
argues that the term 'tourism' comes from the old Aramaic Tur, which was used for the
exploration and movement of people in the Bible. This word was used for the first time
when Moses began his expedition to the lands of Canan.Another school of thought, the
Onomastic School, considers the origin of the concept not from a linguistic perspective
but rather links it to the last name of the French aristocrat Della Tour. According to this
school, after Carlos V signed a treaty with England in 1516, in celebration of this event,
the future king gave the Della Tour family exclusive rights to conduct commercial
transport and related businesses.A third school focuses on the Anglo-Saxon world, and
scrutinises Theobalds thesis. Surmising that the roots of the word 'tourism' lie in the
ancient Anglo-Saxon term Torn, these scholars have found evidence that the term was
coined in the 12th century by farmers to denote travel with an intention to return. Over
the centuries, the meaning of the word has shifted. By the middle of the 18th century,
English noblemen used the term 'turn' to refer to trips undertaken for education and
cultural exploration. In reality, the purpose of the noblemens trips to the different parts of
the kingdom was to acquire knowledge that was later useful for governing.
Significance of tourism
Tourism is an important, even vital, source of income for many countries. Its importance
was recognized in the Manila Declaration on World Tourism of 1980 as "an activity
essential to the life of nations because of its direct effects on the social, cultural,
educational, and economic sectors of national societies and on their international
relations."
Tourism brings in large amounts of income into a local economy in the form of payment
for goods and services needed by tourists, accounting for 30% of the world's trade of
services, and 6% of overall exports of goods and services. It also creates opportunities for
employment in the service sector of the economy associated with tourism.
The service industries which benefit from tourism include transportation services, such as
airlines, cruise ships, and taxicabs; hospitality services, such as accommodations,
including hotels and resorts; and entertainment venues, such as amusement parks,
casinos, shopping malls, music venues, and theatres. This is in addition to goods bought
by tourists, including souvenirs, clothing and other supplies.
Definitions
In 1936, the League of Nations defined a foreign tourist as "someone traveling abroad for
at least twenty-four hours". Its successor, the United Nations, amended this definition in
1945, by including a maximum stay of six months.
In 1941, Hunziker and Krapf defined tourism as "the sum of the phenomena and
relationships arising from the travel and stay of non-residents, insofar as they do not lead
to permanent residence and are not connected with any earning activity." In 1976, the
Tourism Society of England's definition was: "Tourism is the temporary, short-term
movement of people to destinations outside the places where they normally live and work
and their activities during the stay at each destination. It includes movements for all
purposes." In 1981, the International Association of Scientific Experts in Tourism defined
tourism in terms of particular activities chosen and undertaken outside the home.
In 1994, the United Nations identified three forms of tourism in its Recommendations on
Tourism Statistics:
Domestic tourism, involving residents of the given country traveling only within this
country
Inbound tourism, involving non-residents traveling in the given country
Outbound tourism, involving residents traveling in another country
The terms tourism and travel are sometimes used interchangeably. In this context, travel
has a similar definition to tourism, but implies a more purposeful journey. The terms
tourism and tourist are sometimes used pejoratively, to imply a shallow interest in the
cultures or locations visited. By contrast, traveler is often used as a sign of distinction.
The sociology of tourism has studied the cultural values underpinning these distinctions
and their implications for class relations.
World tourism statistics and rankings
Total volume of cross-border tourist travel
International tourist arrivals reached 1.035 billion in 2012, up from over 996 million in
2011, and 952 million in 2010. In 2011 and 2012, international travel demand continued
to recover from the losses resulting from the late-2000s recession, where tourism suffered
a strong slowdown from the second half of 2008 through the end of 2009. After a 5%
increase in the first half of 2008, growth in international tourist arrivals moved into
negative territory in the second half of 2008, and ended up only 2% for the year,
compared to a 7% increase in 2007. The negative trend intensified during 2009,
exacerbated in some countries due to the outbreak of the H1N1 influenza virus, resulting
in a worldwide decline of 4.2% in 2009 to 880 million international tourists arrivals, and
a 5.7% decline in international tourism receipts.
Recent Developments
There has been an up-trend in tourism over the last few decades, especially in Europe,
where international travel for short breaks is common. Tourists have a wide range of
budgets and tastes, and a wide variety of resorts and hotels have developed to cater for
them. For example, some people prefer simple beach vacations, while others want more
specialised holidays, quieter resorts, family-oriented holidays or niche market-targeted
destination hotels.
The developments in technology and transport infrastructure, such as jumbo jets, lowcost airlines and more accessible airports have made many types of tourism more
affordable. The WHO estimated in 2009 that there are around half a million people on
board aircraft at any given time. There have also been changes in lifestyle, for example
some retirement-age people sustain year round tourism. This is facilitated by internet
sales of tourist services. Some sites have now started to offer dynamic packaging, in
which an inclusive price is quoted for a tailor-made package requested by the customer
upon impulse.
There have been a few setbacks in tourism, such as the September 11 attacks and terrorist
threats to tourist destinations, such as in Bali and several European cities. Also, on 26
December 2004, a tsunami, caused by the 2004 Indian Ocean earthquake, hit the Asian
countries on the Indian Ocean, including the Maldives. Thousands of lives were lost
including many tourists. This, together with the vast clean-up operations, stopped or
severely hampered tourism in the area for a time.
Individual low-price or even zero-price overnight stays have become more popular in the
2000s, especially with a strong growth in the hostel market and services like
CouchSurfing and airbnb being established.
INDIAN TOURISM INDUSTRY
The Indian Tourism and Hospitality industry is one of the largest segments under the
services sector of the Indian economy and offers the most diverse products globally. The
countrys rich history, cultural heritage, diversity of religion, variety of landscapes and
medicine fascinate both, budget and luxury travelers. Tourism in India has registered
significant growth over the years, which is led by rising incomes, increasing affordability,
growing aspirations, increasing globalization, and a growing airline industry along with
improvement in travel-related infrastructure.
The industry holds immense potential for the Indian economy and it can provide impetus
to other industries through backward and forward linkages. This sector contributes
around 6.23% to the national GDP and 8.78 % of the total employment of the country.
The direct contribution to the GDP totaled US$ 30.95 Bn in 20121 and is expected to rise
to ~US$ 40.8 Bn this year. The market size of the tourism and hospitality industry stood
at ~US$ 117.70 Bn. The industry grew at a CAGR of 36.50% during 2009-2013 and
growing at a forecasted CAGR of 15.15%, it is expected to become a ~US$ 418.90 Bn
industry by 2022.
The Indian tourism and hospitality industry has emerged as one of the key drivers of
growth among the services sector in India. The third-largest sub-segment of the services
sector comprising trade, repair services, hotels and restaurants contributed nearly US$
187.9 billion or 12.5 per cent to the Gross Domestic Product (GDP) in 2014-15, while
growing the fastest at 11.7 per cent Compound Annual Growth Rate (CAGR) over the
period 2011-12 to 2014-15. 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. Tourism is also a potentially large employment generator
besides being a significant source of foreign exchange for the country.
Market Size of the Industry in India over the last decade ( $ In Bn )
Accommodation and Catering: This segment is highly fragmented and it is further
divided in two broad sub segments namely; Restaurants and
Hotels. It is the largest segment of the industry and it is mostly dominated by the
unorganized sector
Tourist Destinations: This segment comprises Indias vast array of tourist destinations
varying from world heritage sites to beautiful scenic destinations and extravagant
festivals among other attractions
Events: It is the newest segment of the industry and it is driven by the rising trend of
concerts, youth festivals and weekenders in the country
Travel and Tour Formats: This segment works under two broad categories; Offline Mode
and Online Mode and it comprises various tour and travel formats such as Eco-tourism,
Medical tourism, Adventure tourism etc.
EVOLUTION OF THE INDUSTRY
GROWTH DRIVERS
REGULATORY DRIVERS
The Government of India has initiated a number of steps to ensure full utilization of the
potential that tourism and hospitality holds in India
Central Level Initiatives
State Level Initiatives
Elimination of Custom Duty for Import of Exemption of Luxury Tax and Sales Tax for
equipment and liquor for new projects
Capital subsidy program for budget hotels
5-7 Years for new Projects
Small capital subsidy for the development
of budget hotels
Five year income tax holiday granted to 2-4 Below market rate allotment of land
star hotels established in specified districts controlled
by
State
for
development
having UNESCO-declared World Heritage projects Zonal auction rate has been
Sites
B. External Drivers
brought down
1. FDI Inflow: Out of the total FDI inflow in the last decade, the hospitality sector
contributed ~3% of the inflow. The hospitality sector requires over US$ 10 Bn investment
in the coming five years for which the government is relying on FDI by making
regulatory changes in-line with the past investment trends
2. Increasing Domestic Travel Visits and Foreign Travel Arrivals (FTAs):
Domestic Travel Visits
From 269.60 Mn domestic travel visits in 2002, the number rose to 1.04 Bn in 2012. Over
the last decade, the domestic travel visits increased by a CAGR of 14.41%. The Ministry
of Tourisms vision is to achieve 3.22 Bn travel visits by 2022 with a compounded annual
growth rate of 12%
Foreign Travel Arrivals
Foreign tourist arrivals (FTAs) grew at a CAGR of 10.70% during the last decade. In
2012, the Indian tourism and hospitality industry clocked 6.58 Mn FTAs as compared to
2.38 Mn during 2002, growing at the same rate it is expected to touch ~18.19 Mn by
2022 (As shown in Fig.2). The foreign exchange earnings also increased to US$ 17.78 Bn
in 2013 as compared to US$ 3.10 Bn in 2002.
3. Changing Consumer Dynamics and New Schemes for easy Finance:
Changing Consumer Dynamics
India has the second largest plastic cards base in the Asia Pacific region. The
outstanding plastic cards in 2007 were ~130 Mn and in 2012, the number rose to more
than double at ~296 Mn cards. 35% of those who use plastic cards use it for travel and
dining.
New Schemes for easy Finance
Players such as Thomas Cook, Cox & Kings and SOTC have tie-ups with ICICI Bank,
CitiBank and Kotak Mahindra to offer holiday nowpay later schemes. These banks
also offer a basket of products such as personal loans for the purposes of business,
wellness or sports travel.
(C) Internal Drivers
1. Demand-Supply Gap: Statistics on the demand and supply for hotel rooms indicate that
India currently has around 1,28,000 hotel rooms spread across the various hotel
categories, whereas the requirement of rooms in India is estimated at more than 2,00,000
rooms The impact of this demand and supply gap is felt by way of increased room tariff.
In metro cities, the room rents have simply sky rocketed.
This is especially the case with mid segment and budget hotel categories where a large
gap in supply exists at the moment
2. New Entrants in the Sector: Apart from the demand and supply gap, there are other
internal factors that drive growth for the industry.
Healthy performance of the services sector (specially IT and ITes) has led to increased
number of business travelers (both domestic and international) in the country which
makes it imperative for such companies to either build their own hospitality infrastructure
or use hotels etc, other such examples are as under:
Market Size
The number of Foreign Tourist Arrivals (FTAs) has grown steadily in the last three years
reaching around 4.48 million during JanuaryJuly 2015. Foreign exchange earnings
(FEEs) from tourism in terms of US dollar grew by 3.2 per cent during January-July 2015
as compared to 1.9 per cent over the corresponding period of 2013. FEEs during the
month of July 2015 were Rs 11,452 crore (US$ 1.74 billion) as compared to FEEs of Rs
10,336 crore (US$ 1.57 billion) in July last year.
Foreign Exchange Earnings (FEEs) between January-July 2015 were US$ 11.41 billion
compared to US$ 11.06 billion in the same period last year. The growth rate in FEEs in
rupee terms in January-July 2015 was 6.9 per cent.
Investments
The tourism and hospitality sector is among the top 15 sectors in India to attract the
highest foreign direct investment (FDI). During the period April 2000-May 2015, this
sector attracted around US$ 8.1 billion of FDI, according to the data released by
Department of Industrial Policy and Promotion (DIPP).
With the rise in the number of global tourists and realising Indias potential, many
companies have invested in the tourism and hospitality sector. Some of the recent
investments in this sector are as follows:
Fairfax-owned Thomas Cook has acquired Swiss tour operator Kuoni Group's business in
India and Hong Kong for about Rs 535 crore (US$ 85.6 million) in order to scale up
inbound tour business
US-based Vantage Hospitality Group has signed a franchise agreement with India-based
Miraya Hotel Management to establish its mid-market brands in the country.
Thai firm Onyx Hospitality and Kingsbridge India hotel asset management firm have set
up a joint venture (JV) to open seven hotels in the country by 2018 for which the JV will
raise US$ 100 million.
ITC is planning to invest about Rs 9,000 crore (US$ 1.42 billion) in the next three to four
years to expand its hotel portfolio to 150 hotels. ITC will launch five other hotels - in
Mahabalipuram, Kolkata, Ahmedabad, Hyderabad and Colombo - by 2018.
Goldman Sachs, New-York based multinational investment banking fund, has invested Rs
255 crore (US$ 40.37 million) in Vatika Hotels.
Japanese conglomerate SoftBank will lead the Rs 630 crore (US$ 95.6 million) funding
round in Gurgaon based OYO Rooms.
MakeMyTrip will acquire the travel planning website Mygola and its assets for an
undisclosed sum, and will together look to focus on innovating the online travel segment.
Government Initiatives
The Indian government has realised the countrys potential in the tourism industry and
has taken several steps to make India a global tourism hub. Some of the major initiatives
taken by the Government of India to give a boost to the tourism and hospitality sector of
India are as follows:
Government of India plans to cover 150 countries under e-visa scheme by the end of the
year besides opening an airport in the NCR region in order to ease the pressure on Delhi
airport.
The Tourist Visa on Arrival (TVoA) scheme enabled by Electronic Travel Authorisation
(ETA), launched by the Government of India on November 27, 2014 for 43 countries has
led to sharp growth in usage of the facility. During the month of July, 2015 a total of
21,476 tourist arrived on e-Tourist Visa as compared to 2,462 during the month of July,
2014 registering a growth of 772.3 per cent. During January-July, 2015 a total of
1,47,690 tourist arrived on e-Tourist Visa as compared to 14,415 during January-July,
2014 registering a growth of 924.6 per cent.
The Government of India has set aside Rs 500 crore (US$ 79.17 million) for the first
phase of the National Heritage City Development and Augmentation Yojana (HRIDAY).
The 12 cities in the first phase are Varanasi, Amritsar, Ajmer, Mathura, Gaya,
Kanchipuram, Vellankani, Badami, Amaravati, Warangal, Puri and Dwarka.
Under Project Mausam the Government of India has proposed to establish cross cultural
linkages and to revive historic maritime cultural and economic ties with 39 Indian Ocean
countries.
Road Ahead
Indias travel and tourism industry has huge growth potential. The medical tourism
market in India is projected to reach US$ 3.9 in size this year having grown at a CAGR
of 27 per cent over the last three years, according to a joint report by FICCI and KPMG.
Also, inflow of medical tourists is expected to cross 320 million by 2015 compared with
85 million in 2012. The tourism industry is also looking forward to the expansion of Evisa scheme which is expected to double the tourist inflow to India. Rating agency ICRA
ltd estimates the revenue growth of Indian hotel industry strengthening to 9-11 per cent in
2015-16. India is projected to be the fastest growing nation in the wellness tourism sector
in the next five years, clocking over 20 per cent gains annually through 2017, according
to a study conducted by SRI International.
Growth of Tourism and Hospitality in India
Tourism in India accounts for 6.8 per cent of the GDP and is the third largest foreign
exchange earner for the country
The tourism and hospitality sectors direct contribution to GDP totalled US$ 44.2 billion
in 2015
Over 200615, direct contribution is expected to register a CAGR of 10.5 per cent
The direct contribution of travel and tourism to GDP is expected to grow 7.2 per cent
per annum to US$ 88.6 billion (2.5 per cent of GDP) by 2025.
