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What is the Impact of Coronavirus on Indian Tourism and Travel Industry?

Public Policy
Sep 7, 2020 6:13 AM 5 min read

The tourism sector of a country generates foreign exchange, drives regional development, and directly supports various businesses and numerous types of jobs such as catering, tourist operators etc.

It also underpins many local communities. As a labour-intensive sector, it commands a major share of the employment rate of several countries. For instance, tourism makes up 15.7% of total employment in Iceland, 13.5% in Spain, 10.3% in Ireland, 10.0% in Greece, and 9.8% in Portugal.

It contributes 8.1% of total employment in India, and was naturally not averse to the job losses and salary cuts inflicted by COVID-19. According to the Federation of Associations in Indian Tourism & Hospitality (FAITH), about 3.8 crore people in the country faced unemployment due to the pandemic and resulting lockdowns.

Impact of COVID-19 on Hospitality and the Industries it Sustains

The hospitality sector is dependent on travel, trade and tourism for its sustenance. The pandemic has decimated the operations of major sectors like the hotel industry, and also affiliate branches like tour guides and lodging.

Due to the coronavirus outbreak, the massive rate of cancellations of bookings and trips have badly affected the ability of hotels to operate across India. As per Hotelivate, a hospitality consultancy, the hotel industry could have faced losses in the range of $1.3-1.55bn this year.

Currently, 15-25% of employees in branded hotel chains are either contractual or regular employees who would be the first victims of any mass lay-offs. In the USA, 7.7 million jobs were lost in the hospitality sector while the same figure stood at 1 million in France. 

The coronavirus has also had a devastating impact on occupancy rates on hotels. In March 2020, towards the end of which month the nationwide lockdown began, Indian hotels registered an 80% YoY decline in Occupancy Rate and 12-14% decline in average daily rates (ADR). In fact, hotel consultancy STR reported that seven countries endured an occupancy rate decline YoY higher than 70% (in order of intensity: Italy, Lebanon, South Korea, Greece, Kuwait, China and Croatia), with Italy leading the pack with a 93% decline.

What is the Impact of Coronavirus on Indian Tourism and Travel Industry?


Suggestions to Mitigate the Impact of COVID-19 on Tourism Sector

Government Intervention

The Ministry of Tourism and Ministry of Finance need to work jointly to resolve issues in the tourism sector regarding the payment of salaries and liquidity shortages. Providing a moratorium on term loans and value added tax (VAT) exemptions could also help ease the financial burden on those struggling with poor business activity. The Government can also set up Employee Provident Fund (EPF) and Employee State Insurance (EPF) measures, if they haven't been done so already. In countries like Croatia, Greece and Austria, similar relief measures have been introduced.


National Role

Governments across the world have used empty rooms in hotels as backup options for extra bed capacity, by paying a small fee to hotels. This went a small way in helping these hospitality companies manage their finances. 


Incentives and Subsidies

Action should be taken to promote tourism both at domestic and international level by providing incentives and subsidies to tour operators.


Re-engineering Business Model 

The hospitality sector, in addition to relying on government interventions, should focus on improvising its business model given the impending changes in people's social behaviour vis-a-vis social distancing and hesitation to travel far distances. Investing in safety and hygiene would reassure customers in availing their services. For example, the idea of emptying the middle seats or alternate rows of airplanes and other modes of transport is a welcome step. Higher focus on the use of cashless payment methods and contactless food deliveries is an effective strategy to win the trust of customers. 


Concept of Travel Bubbles 

Amidst the economic downturn, governments across the world are considering the idea of a “travel bubble” to revitalise their tourism sectors. “Travel bubbles” are an agreement between countries or regions within a country that allows for travel across borders for non-essential trips without the requirement of a 14-day quarantine upon arrival. The goal is to create safe passage for travel in an attempt to normalise economic activity.


What is the Impact of Coronavirus on Indian Tourism and Travel Industry?


Australia and New Zealand were among the first to discuss the plan for a travel bubble. Baltic countries such as Estonia, Latvia and Lithuania have also approved a travel bubble to allow tourism. India can consider the same to keep the travel and tourism industry afloat while limiting the risk of new infections by standardising testing requirements for all travellers and ensuring limited movement of incoming tourists within destination cities.


Digital Solutions

Virtual tourism experiences of various historical places, museums and other tourist attractions offer a novel digital solution. Such measures will boost the confidence of tourist operators and tourist guides, while also incentivising users of such platforms to travel when the pandemic subsides. For instance, BSocial is a travel company that launched an app named “Experience Makkah" for virtual Hajj pilgrimages. Companies like andBeyond, Singita, Lewa Wildlife etc have begun rolling out “virtual safaris” on social media. And the response has been overwhelming.


Web Portals

India can develop an application or web page through which frequent updates are shared regarding the business and economic situation to  those engaged in the hospitality industry. They could serve as the first point of contact when the economy is finally reopened for tourists. 


All in all, there is a critical need to adopt tourism policy based on a customer-centric scientific approach by maximising the utilisation of technology and integrating this with the governmental approach so that relief measures are consistent. By aligning the policies of the Government with those specific to the tourism industry, this can not only safeguard numerous jobs but also make recovery more rapid. 


Written by Tanya Jaiswal, ‘In My Opinion’ Scholar, Moolya Foundation

Disclaimer: Views expressed are personal


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