The Hindu : Tour operators turn to domestic segment

Online edition of India's National Newspaper
Sunday, May 04, 2003

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Business

Tour operators turn to domestic segment

By Ramnath Subbu

A girl wearing a mask to protect from the flu-like Severe Acute Respiratory Syndrome (SARS) watches a dolphins show at Hong Kong's Ocean Park, a major tourist spot. Hong Kong unveiled a HK$11.8 billion (U.S. $1.5 billion) emergency economic package, the region's biggest so far to ease the impact of the deadly SARS virus. -- Reuters

MUMBAI MAY 3. While the global tourism industry, which has been reeling after the events of September 11, 2001, was dealt with another blow by the war on Iraq and the alarming spread of the SARS (Severe Acute Respiratory Syndrome) virus, the impact on Indian tourism has not been as bad. L. P. Singh, Chief Operating Officer, Leisure, Cox & Kings, said, "The trends are not indicating any major drop. It does not seem to have affected inbound tourists as there have been only about 1 per cent cancellations. Outbound tourism has been partly hit, the initial market was dead for some time but corporate travel has been postponed, not cancelled".

There are four million outbound tourists and the segment is growing at 15-20 per cent per annum as against 2.4 million inbound tourists. Further, Mr. Singh said growth rates in the current year would be the same as last year when it was negative. Last year, while outbound tourism grew 15-20 per cent, inbound tourism dropped 25-30 per cent. "This is likely to reverse itself in the current year," said Mr. Singh, adding, "as such, there were no cancellations from inbound tourists from the U.S., the U.K. and the EU. The war per se has been discounted but SARS could be a major factor if it hits India".

In outbound tourism, there has been a churn due to international events but, Sunil Gupta, Head, Leisure, Thomas Cook India, said, "In outbound, travel to the European destinations is bouncing back. All those who had postponed are now coming back to take advantage of the peak holiday season".

Zubin Karkaria, COO, Kuoni India, said, "People are readying to holiday during the summer vacation despite international events (and the war is safely out of the way) albeit to destinations other than the Middle East. Of course, those who were planning their holiday in Southeast Asian destinations have decided otherwise in lieu of SARS but have certainly not given up their chance to holiday internationally. Those who had planned, budgeted and accordingly saved for their vacation to the Far East are now simply diverting their holiday plans to another destination. Europe is the most promising locale".

Fortunately, the inbound tourist season ends in April and the summer months are the leanest. The inflow gradually picks up and peaks in October. In the last quarter of 2002, there was, what had seemed a marked revival but that was because of the small base in the previous year because of the 9/11 attacks.

Uttam Dave, CEO, PKF Consultants, a multinational firm providing consulting services to the hospitality, leisure and tourism industry, said, "At the moment, the inbound tourism industry has escaped the Iraq war and SARS effects. What is fortuitous is that the aggressive `Incredible India' campaign has coincided with problems in the Middle East and Far East".

Also, in the light of these developments, domestic tourism has a good opportunity. "Today, domestic tourism is definitely a most promising sector for the travel industry to rely on. Although domestic tourism is the fastest growing segment within this industry, it remains a virtually untapped and unregulated market," said Mr. Karkaria.

There are several sites, which have been identified like the `heritage' sites of Ajanta and Hampi.

The industry feels that the government really needs to promote new circuits. Other than the success stories such as Goa, Rajasthan and Kerala, States such as Karnataka, Maharashtra and Chhattisgarh have been promoting themselves and met with fair degree of success.

Simultaneously, the larger players are cashing in on the booming domestic interest. Mr. Karkaria said, "Now domestic tourism is also looking up much to our advantage and Kuoni has launched `Sita Holidays of India' with 1001 ways to re-discover India. With the introduction of this new strategic business unit (SBU), Kuoni India strives to bring in an organised means of travel to Indians in India".

"Thomas Cook has pioneered Rail Holidays which is an inexpensive way to travel. We got into it in a big way, pre-buying of rail tickets through the government. Now others are also coming in. In fact, one third of our domestic revenues is from `Rail holidays,'" said Mr. Gupta.

The 2002-03 Budget had referred to the tourism sector as a priority area in view of the beneficial impact on employment growth and generation of foreign exchange.

A comprehensive tourism development package had been proposed. This was re-iterated in this year's budget. Also, the withdrawal of the 10 per cent expenditure tax on hotels and the extension of benefits of Section 10(23) (G) to the hotel industry (three star hotels upwards) essentially means that institutions would not have to pay tax on the interest income from loans to them. Mr. Singh said, "The Budget 2003-04 was a good start for tourism with greater allocations. The only negative factor was the increase in service tax from 5 per cent to 8 per cent. Hopefully, this would be waived".

However, Mr. Gupta felt that tourism would boom only when the infrastructure is in place — roads, inexpensive hotels and trains.

The Government needs to do a lot more to push occupancy like slashing taxes, dropping rates in the off-season and addressing constraints such as aviation, he said.

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