Road Ahead for Tourism & Hospitality Industry: RSTV- Big Picture

Background of the Episode

• This edition of the Big Picture analyzes the impact of the Coronavirus pandemic on the Tourism and Hospitality industry.

Significance of the Tourism and Hospitality Sector:

Global perspective:

• The tourism and hospitality sector accounts for around 10% of the global GDP.
• The sector has a tremendous potential to create employment opportunities in large numbers, given the higher forward and backward linkages of the sector. The sector acts as a multiplicator of jobs, as every direct job in this sector creates 6-8 times indirect jobs.
• Apart from the obvious economic significance of the sector, it also has significant social impact given its potential for a distributed model of growth and employment opportunities for a wide variety of people including the unskilled and semiskilled labourers.
• The tourism sector is also crucial in helping build awareness, character, knowledge and tolerance.

Indian perspective:

• Contrary to the popular belief of the tourism and hospitality industry being a peripheral sector, in the recent past, it has become a crucial sector for the Indian economy.
• The travel and tourism sector accounted for 2 per cent of India’s GDP in 2018 and generated around 26.7 million jobs in 2018 alone.
• The sector accounts for nearly 12.75% of the employment in India. Also considering the indirect jobs it creates, the number would be even higher.
• Given the issue of jobless growth in India, it is an important employment generating sector in the country.
• Notably, it provides employment opportunities for a wide array of professionals ranging from skilled to unskilled people.
• Given the regional inequality in growth, in India, the sector also plays a critical role in ensuring decentralized development.
• The travel and tourism sector is an important source of foreign exchange for India.

Get UPSC Notes for Indian Economy by clicking on the linked article

Impact of COVID-19

• The sector had reported good progress up until January 2020 and the number of tourists both international and domestic was expected to reach a record high.
• However, the outbreak of the Wuhan Coronavirus had placed extensive travel restrictions and movement regulations, both at the global level and within the country. The travel and hospitality sector has been severely affected and is facing a crisis. The cascading effect of the global Coronavirus pandemic is crippling the tourism and hospitality industry.
• Media reports suggest Foreign Tourist Arrivals (FTA) in India have come down by about 67 per cent in the January-March quarter, while for domestic tourists the figure is lower by nearly 40 per cent.
• Given the global nature of the present crisis, the tourism sector is under great stress -the world over. This is an unprecedented situation for the sector.

Concerns

The collapse of the sector:

• The tourism and hospitality sector has been the most affected sector due to the current lockdown since the whole sector has been brought to a standstill and has almost zero new revenue.
• Given the uncertainty with respect to the current crisis, there could be an impact on future investment decisions in the sector.

Macro-economic impact:

• Given its substantial share in India’s GDP, a slump in the sector will have a considerable macroeconomic impact in the form of reduced growth.

Job loss:

• The biggest impact would, however, be on the employment scenario. The sector could witness salary cuts and also job losses.

Way forward

• Given the high impact of the pandemic on the sector and also considering the significance of the sector in the Indian economy there is a need for special attention and measures.

Government efforts:

Short term measures:

• The problem that the sector is currently facing is with respect to survival. The major concerns are with respect to liquidity crunch, payment of salaries etc.
• In the short term, there is a need for state support in the form of a moratorium on loans, extending statutory deadlines, providing low-interest loans, tax cuts, etc., which could help ensure sufficient liquidity in the sector and ensure the sector sustains till the lockdown ends.
• The government can consider providing subsidy to hotels based on the criteria of their employment maintenance. This move could deter the owners from resorting to job cuts and thus help avoid its ripple effects in the economy.
• There have been reports that several governments are considering using the empty rooms in hotels as a backup option for additional bed capacity in case of an emergency. The government can consider paying a small fee for the services of such hotels which can help them sustain their finances.

Read previous RSTV articles here.

Long term measures:

• In the long term, the government should look for creative solutions to induce business for this sector through appropriate policy measures.
• This could involve incentivizing the Indian Corporates to hold their meetings in hotels by providing tax deductions.
• The government policies should also incentivize domestic travel, given the fact that the contribution from international tourism would require a longer time to recover.

Industry efforts:

• Notably, several hotels have been hosting medical personnel and providing them with food. There have also been reports of several hotels providing food packets to migrants.
• Under the Stranded in India portal, hotels have come forward to host several tourists stranded due to the lockdown in place.
• Through the Stranded in India portal, the Tourism ministry has helped more than 1,200 stranded foreign tourists.
• Given the drastic changes in people’s social behaviour that could be expected in a post-pandemic scenario, the hospitality and tourism sector should consider revaluating and re-engineering their business models for viability in a changed scenario.