By Dripto Mukhopadhyay
I am working on a paper related to inbound tourists to India. This paper will include identification of determinants and forecasts for inbound tourism to India at country and regional level. However, quite a few interesting facts have emerged related to Indian tourism during working on this paper. I want to share a small part of it including the forecast for total inbound tourism to India from all countries and regions of the world. I think this article might interest all my friends in the tourism sector in the world, especially in India.
Global economic recession has taken its toll on world tourism. India was also affected adversely and this was a real cause of concern for millions of those who are directly or indirectly linked to this potential sector. It affected the tourism sector hard, especially, from last quarter of 2008 till 3rd quarter of 2009. Presently, the situation looks like better compared to the months of core recession period. However, even if it is considered that the recession is over and we have entered into the recovery period, for most of the countries the recovery is expected to remain low during 2010 as well as for 2011.
Several incentives came into play from all sub-sectors of such as hotel industry, tourist operators, aviation industry etc. However, these incentives did not really play a major role since the period of recession was marked with large number of layoffs, salary cuts and their multiplier effect on the overall economies. This was combined with the incidents of 26/11 terrorist attack in Mumbai, which had shaken the entire country exposing the brutal faces of terrorism. The spread of swine flu must have also played its part on Indian tourism during this period.
In such a volatile situation, it is important that we are able to predict tourism activities, especially, for a short-term so that the players involved with the industry can plan their activities accordingly. I will limit my observations only to inbound tourism to India, i.e., foreign tourists’ arrivals (FTA) to India. Before coming into the forecast, I want to show the past trend in Indian tourism regarding FTA. We can see three distinct periods experienced by Indian tourism regarding this indicator. The figure given below shows these structural changes with vertical red broken lines.
The data considered here for this analysis is from 1981 to 2008. The figure distinctly identifies the periods which are a) 1981 to 1985, b) 1886 to 2002 and c) 2003 to 2008. To substantiate the visual identification, I have presented the following table which shows average increase in FTA per year and average growth in FTA per year during these three periods.
Structural Change in FTAs Over Time
| Period | Average annual increase in FTA (%) | Average annual growth in FTA (NO.) |
| 1981-1985 | 0.20 | -4957 |
| 1986-2002 | 4.01 | 62499 |
| 2003-2008 | 14.68 | 499273 |
For forecasting purpose I have used an econometric model. Since this is slightly technical in nature, I am not going into the complicated modeling part of the analysis, rather will highlight the dimensions that are important to understand for everyone. From planning purpose it’s important to understand the likely impact of any incidences like change in the economic growth pattern, change in petroleum prices, change in exchange rates, terrorism and several others. I have taken care of about 10 important indicators which include macro-economic as well as socio-demographic characteristics. Several models were run to identify the best possible model and the elasticity related to the explanatory variables.
The elasticity related to a few important findings are:
- Income (Gross Domestic Product as well as disposable income) is the most significant indicator making impact on tourism decision.
- Exchange rate also plays an important role though not as strong as income.
- Policy initiatives, especially on promotional aspects have a huge role to play in tourism demand. In case of India, “Incredible India Campaign” launched by the tourism department has a significant impact in attracting tourists to India. Thanks to the Tourism Ministry and especially to Dr. Amitabh Kant.
- Economic liberalization has also played an important role, since opening up of the economy has generated lots of export import related activities which increases number of business tourists substantialy.
- Terrorist activities have an adverse impact; however, this is more short-lived than a long term one. The impact remains for a couple of month or so and also depends on originating country.
I have given here the forecast for 2009 and 2010. The forecast has considered the economic growth as predicted by International Monetary Fund (IMF). I have given three scenarios based on different economic condition of the world economy.
Estimated Total Foreign Tourist Arrival to India during 2009 and 1010
|
|
|
pessimistic scenario | ||||
| 2009 | 5154714 | 5305754 | 5006500 | ||||
| 2010 | 5532180 | 5854723 | 5224443 |
Tourism - Need for Sustainable Approaches 
Very interesting – don’t you think Visa on Arrival can have a dramatic impact on these projections? After years of talking about it, just saw in the news that India is trying it out with visitors from 5 countries.
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Surely visa on arrival will have significant positive impact. In fact, several other positive steps towards regulatory aspects related to the sector can work as a big booster. Unfortunately, tourism sector is not yet developed as a concrete exclusive sector; that is a real hindrence in developing a proper regulatory mechanism for the sector as a whole.
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Dripto, a very good approach and perhaps one of the better ones in existing literature. one query: what GDP have you considered and why?
thanks
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Thanks Samantak. For forecasting inbound tourism to India from all over the world, I have considered world GDP at constant price in US$ term for the relevant period.
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fine and sounds good…….
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So there is a positive change in 2010 then where is the recessio for tourism?secondly what were the arrivals in 2008? year 09 is definately lower thn 08 and for some people even 08 was lower then 07.Visa on arrival and more international airports is the key for more growth.
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Hi
According to leading economists of the world receission is already over and the current phase can be termed as slow recovery period. This trend will probably continue for another year or so. However, the negative growth experienced by the economies will change into positive growth during 2010 and that is reflected in inbound tourist forecasting. You are right; the inbound tourists should be lower in 2009 compared to 2008. Visa, new airports etc. are the facilitating factors and not determinants. These will work as catalysts for promoting India tourism abroad.
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There should be more focus on tourist frm east europe n russia, india is still cheap destination
regards
manohar basantani
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Hi Manohar
You are very right. India is still a much cheaper destination. I have forecasted number of tourists from all regions of the world including Eastern Europe as well as top 15 countries in terms of inbound tourists to India. However, could not share those numbers since those are confidential.
Best
Dripto
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VISA ON ARRIVAL AND YOU BOOST THE ARRIVALS:
you are the BEST IN THE WORLD on IT.
what are you waiting for to give borders IT ? a miracle ?
CMON stand up and ASK loudly attention to those in charge of this.
INDIA is the future of tousism as soon as adopt IT on a large scale and you do have everything indeed. Young people amazingly smart, will to work hard, great enterpreneur. The goverenement will make a lot of money cause able to control the arrival on the accomodation resources. you can create network of accomodations and so many things.
INDIA is the next touristic paradise considering that you do have the IT in house.
BUT VISA is the first move
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Hi, nicely put. I feel the actual boost that can come in tourism sector in India, is through promotion of niche(s) that are exclusive and attractive. Like Spa Tourism, Medical tourism, Spiritual Tourism and the one I promote Astronomy Tourism… such USPs will get more people to come here
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Hi Amit
I agree with you. promoting the USP of a destination is the prerequisite for attracting tourists to any place. However, perhaps are way behind in this. Hope all our friends will gear this up in near future so that we can attract more and more tourists from abroad as well as can encourage domestic tourismalso.
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Hi!
Very intresting . There are primarily 2 ways in looking at it. FTA for corporate and FTA for Tourism. Generally speaking when we look at different periods in India the gworth from both ways have come in but yes in the last few months it has slowed down due to the recession and due to other reasons. However we are fortunate that the curve is a “v” and not “U” and that is the reason why the expectation are high but it will also depend on the shape of the curve in other economies which we believe would be essential for India in the coming years . Corporate sectar has been steady but we need to do more for promoting India as a destination (small, medium locations). A transformation has to happen and that initiative has to be taken by the govt. which would be followed by other investors, also make the country very much investor friendly. This will help to build the brand “Incredible India”. Short promos for 8/12 months does not even create a buzz in the international market. India has a lot to share , show and that can only be done with the help of the govt./state/local legislation etc. In other word.
Starting off with domestic , a huge potential lies within and our country has alot in store which many other exotic locations do not have from desserts to rain forests to snow capped mountains to the sea/islands .But again we have not marketed these destination within our own country. I believe the first step would be to market these destinations internally and develope them, then automatically they would become preferred locations by themself.
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Thanks Amritaksha! I aapeciate your views. In fact, my personal view is for small and medium enterprises, domestic tourism will always remain a big booster.
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Hello sir
I feel that promotional activities like ‘Incredible India’ have a minimal effect because in west we are still a snake charmers country! Secondly, the impact of terrorist activities are not short term they bear a significant impact on long term revenue (Afghanistan, Pakistan and Iran) are tall standing examples. I also feel that the economic crises has not yet ended (Dubai is a classic case again.) I agree that the disposable income plays a vital role in choice of destination but again the key question is which income categories of people are more likely to be our customers, because I feel that higher income category people will always opt for better destinations in terms of (service, security, and infrastructure related parameters) so it leaves us with a cluster of Mid-income levels only.
Sound great model at holistic level but when we drill down the model to state levels how could account for variables like political unrests, regional imbalances, and infrastructure lacunas in the system. I think that we can also build predictive models using multinomial logistic regression model even at state level to help the state governments augment the tourism activities.
My knowledge levels are like curtailed samples kindly forgive my ignorance if mistaken
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Hi Krishna
Its nice to receive your comments. Let me clarify a few things to make the model more clear.
1. “Incredible India” is perhaps the first initiative on part of the government to promote Indian tourism in foreign countries. India is still a snake charmers’ country. The the percentage of poeple with this opinion is gradualy reduing and certain amount of that credit can definitely be attributed to this campaign. However, its not yet significant enough to be equally important with other macro-economic factors mentioned in model or to play a key role in a model to forecast.
2. The model says that terrorist incidences have short lived inpact which is proved econometriaclly. There are several papers whci are available in internet also support this fact. The countries like afganisatan etc., its continuous terror activities, rather war which is disturbing. We are talking here for individual terror incidence and its impact. I am sure you have understood the difference.
3. Its always debatable whether the recession is over. The growth rates of the economies suggest that its no further negative growth in most of the cases especially the 3rd and 4th quarter of this year. Dubai incidence might not be a picture of the entire world. However, everyone believes that we are going through a very very slow recovery period and which is going to stay there for time.
4. Its unimportant whether the foreign tourists are of richer class or middle income group till one is planning for target oriented promotion. We are still at the nascent stage of pormotional activities. Perhaps those target oriented promotional mechanism will be important after a few years when we will have some basic idea at least about “how to promote”!! However, unless we have hard data on incomedistribution of every country and region, there is nopoint on commenting on this.
However, this model was captures a overall trend. You have said rightly regarding the multinomial logistic regression for statelevel forecasting. But you require a large scale primary survey on tourist data. I believe you have done any work on tourism, you must be familiar with the Domestic tourism survey 2003. A paper was published by the authors on domestic tourism trend using logistic model.
Thanks for your keen interest in the topic. Will look forward to your comments on future blogs too. Do you work on tourism areas?
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Having worked in inbound industry with one of the market leader I have had opportunity of seeing the market very closely.
Infact India is not “cheap” destination. The cost accommodation in 4-5 is very high. There are very few players in the market who are experimenting with their product lines. Till date about 60% of business for any big inbound company comes from good old golden triangle.
Lack of checks & balances in the industry either by the government or by industry bodies is another concern.
I agree that the tourist arrival is bound to increase here on. However whole lot of cleaning needs to be done before we gear up for substantial increase in FTA’s.
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Hi,
Am highly impressed by the approach of the paper. Would love to receive a copy of the same. However, I am not sure whether you have taken the effect of CWG for the year 2010. Kindly correct me if am wrong.
Piyush
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