PESTLE Analysis of Indian tourism industry

Introduction about the topic :

It is time for India’s Tourism sector. Driven by a surge in business traveller arrivals and a soaring interest in India as a tourist destination, the year 2006 has been the best year till date.

Incredible India !!

India is probably the only country that offers various categories of tourism. These include history tourism, adventure tourism, medical tourism (ayurveda and other forms of Indian medications), spiritual tourism, beach tourism (India has the longest coastline in the East) etc.

Explore India – choose the locales of your choice, and see what each state has to offer. Lose yourself in the wonder that is India. Meander through lands steeped in chivalry and pageantry that begin before recorded history. Explore modern cities that have grown organically from the roots of a multi-hued past. Make a pilgrimage to holy shrines that echo with tales of antiquity. Frolic on a vast array of golden beaches that dot an enviable coastline, washed by two seas and an ocean. Sport with adventure in style. Let the jungle lure you to a fascinating world at a diverse array of wildlife sanctuaries and national parks……. this is the wonder that is India.

Indian Tourism industry is one of the most important export industries of the country. Although the international tourist inflow is relatively low, India has found tourism emerging as an important sector of its economy.

Tourism yields substantial foreign exchange for India. It is turning into a volume game where a large number of participants are contributing to the revenue of the industry. Segments such as hotels, tour operators, airlines, shipping etc.

Growth period of Indian tourism industry

The tourism industry in India is substantial and vibrant, and the country is fast becoming a major global destination. India’s travel and tourism industry is one of them most profitable industries in the country, and also credited with contributing a substantial amount of foreign exchange. This is illustrated by the fact that during 2006, four million tourists visited India and spent US $8.9 billion.

Several reasons are cited for the growth and prosperity of India’s travel and tourism industry. Economic growth has added millions annually to the ranks of India’s middle class, a group that is driving domestic tourism growth. Disposable income in India has grown by 10.11% annually from 2001-2006.

Thanks in part to its booming IT and outsourcing industry a growing number of business trips are made by foreigners to India, who will often add a weekend break or longer holiday to their trip. Foreign tourists spend more in India than almost any other country worldwide. Tourist arrivals are projected to increase by over 22% per year through till 2010, with a 33% increase in foreign exchange.

The Tourism Ministry has also played an important role in the development of the industry, initiating advertising campaigns such as the ‘Incredible India’ campaign, which promoted India’s culture and tourist attractions in a fresh and memorable way. The campaign helped create a colorful image of India in the minds of consumers all over the world, and has directly led to an increase in the interest in tourism industry has helped growth in other sectors as diverse as horticulture, handicrafts, agriculture, construction and even poultry.

Welcome to Incredible India

Namaskar,

Welcome to Incredible India! A journey into mysticism through the land of the unexpected. Bounded by the majestic Himalayan ranges in the north and edged by an endless stretch of golden beaches, India is a vivid kaleidoscope of landscapes, magnificent historical sites and royal cities, misty mountain retreats, colorful people, rich cultures and festivities. Modern India is home alike to the tribal with his anachronistic lifestyle and to the sophisticated urban jet-setter. It is a land where temple elephants exist amicably with the microchip. Its ancient monuments are the backdrop for the world’s largest democracy.

If you’re planning a holiday to India, looking for hotels and accommodation and events information or simply interested in India as a country you are sure to find many insights on the multifaceted travel options to India here.The timeless mystery and beauty of India can be experienced only by visiting this ancient Land. There’s just one thing you’ll need to travel through 5000 years of culture and tradition- A comfortable pair of shoes.

The following table provides the major tourist attractions in India by state:

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The various segments within tourism are:

Medical Tourism

It is one of the fastest growing segments in India. India has been able to leverage on certain advantages it has over other countries like highly skilled doctors, cost effective treatment, improved quality of private healthcare etc. Some of the common treatments for which overseas patients to come to India are heart surgery, knee transplant, cosmetic surgery and dental care. India’s traditional rejuvenation therapy like yoga and ayurvedic therapy are also becoming popular.

Eco Tourism

It is relatively new segment in India. It involves visiting natural areas without disturbing the fragile ecosystem. Eco tourism generates wealth for the local people, who in turn take measures to conserve and protect the environment and natural resources. India with its natural diversity is one of the pristine places in the world for eco tourism. The Himalayan region, Kerala, Northeast, Andaman and Nicobar Islands and Lakshadweep islands the Western and Eastern Ghats are some of the hot spots for eco tourism in India. India has some of the best wildlife reserves in the world, rich in flora and fauna.

Heritage Tourism

Heritage tourism is a very lucrative segment in India. It is widely believed it would emerge as the most important segment within tourism in terms of revenue generation by 2010.India has a rich cultural history and reflection of its glorious past is still visible in its numerous forts, monuments, palaces, places of worship etc. Heritage tourism itself can be further classified as colonial heritage, urban renewal, religious tourism, industrial heritage and ethnicity. The Indian government must show keen interest in preserving the heritage sites from a tourism perspective.

Adventure Tourism

India’s varied geographical and climatic conditions offer excellent opportunity for adventure sports. In recent times the popularity of adventure tourism has increased. Adventure sports like river rafting, rock climbing, mountaineering, trekking, skiing, snow climbing, scuba diving and angling can be undertaken in the country and the country offers multiple locations to choose from. The trans Himalayan region, the Garhwal and Kumaon mountains, the Western Ghats, deserts of Rajasthan, Andaman and Lakshadweep islands are some of the most popular destination for adventure tourism.

Future trends

• The real GDP growth for travel and tourism economy is expected to be 0.2 per cent in 2009 and is expected to grow at an average of 7.7 per cent per annum in the coming decade.
• Earning through exports from international visitors and tourism goods are expected to generate 6.0 per cent of total exports (nearly $16.9 billion) in 2009 and expected to increase to US$ 51.4 billion in 2019.
• According to the Ministry of Tourism, Foreign Tourist Arrivals (FTAs) for the period from January to March in 2009 was 1.461 million. For the month of March 2009 the FTAs was 472000.The reason for the decline is attributed to the ongoing economic crisis.
• In spite of the short term and medium term impediment due to the global meltdown the revenues from tourism is expected to increase by 42 per cent from 2007 to 2017.

PESTLE Analysis of tourism industry

Definition

The PESTLE framework is an analysis tool that is used to identify the key drivers of change in the strategic environment (Johnson et al., 2008). PESTLE analysis includes Political, Economic, Social, Technological, Legal, and Environmental factors.

Political effect on tourism industry-

Political violence has done considerable damage to tourism in Asia and the Pacific over the past few years. But industry experts say the damage is not necessarily permanent. Governments and industry leaders say much can be done to rebuild tattered tourism reputations.

As the world watched, a small band of terrorists killed scores in Mumbai last November. Although India has often suffered from political violence, this attack – aimed largely at travelers and foreigners – was a new horror.

The globally televised attack, coming during an international economic slump, contributed to an eight percent fall in tourist arrivals this year.

In Thailand, tens of thousands of anti-government protesters laid siege to Bangkok’s airports late last year, essentially trapping more than 350,000 travelers in the country for a week. Before that shock had worn off, a few months later, another group of protesters led violent riots in Bangkok.

The two incidents added to the damage from the world economy cut tourist arrivals to Thailand by 20 percent in the first six months of 2009.

Phornsiri Manoharn, the chairwoman of the Pacific Asia Travel Association, says many tourists still worry that Thailand’s political tensions could spoil their visits.

“When people saw any demonstration like that they associate with the closing of the airport,” said Manoharn. “Even [though] we don’t close [the airport] but they look like the demonstration, that they might and that’s why they’re afraid.”

Tourism is important to the Asia-Pacific region. In Southeast Asia, it contributes over three percent to economic output. In some parts of the region, tourism accounts for 10 percent of employment; in the Pacific island nations of Fiji and Vanuatu, the figure is over 30 percent.

But as India and Thailand have seen, violence and instability quickly scare away visitors.

Recovery comes, but usually more slowly than after natural disasters.

John Koldowski is PATA’s communications director.

“What we have seen in many cases is where there is some sort of intervention effect – it’s been natural or no fault of anybody – the rebound has been very quick,” he said. “Where there has been intent to cause harm as in the case of a say terrorist attack – and where there has been a long history of such attacks occurring in that destination or nearby destination, it takes a little longer to come back.”

But with the right government and industry responses, visitors will return. For instance, in October 2002, bombs set off by Islamic militants on the island of Bali killed more than 200 people, most of them foreigners. The island, one of the world’s most famous tourist destinations, saw arrivals fall by 36 percent in 2003.

Koldowski said the first bombings shocked the tourism industry.

“Bali is a classic case there – it took some time [to recover] because it had never occurred there before – it was so dramatic and affected specific western tourists,” he said.

But the Indonesian government cracked down on terrorists and boosted security. And tourism industry professionals worked hard to woo back visitors. When another attack three years later left 20 people dead, PATA reported that tourist arrivals were little affected.

And twin bombings at international hotels in Jakarta last July are expected to do little damage to tourism.

In South Asia, Sri Lanka and Nepal hope the end of long-running conflicts will entice more visitors.

Sri Lankan officials say the end of a civil war earlier this year brought a surge of interest from foreign investors and hotel operators.

Dileep Mudadeniya, Sri Lankan Tourism Promotion Bureau managing director, says there are opportunities for tourism, particularly in areas long closed off by the war.

“North and east, which have not actually taken any kind of development for the last 20 years, virgin beaches, land, monuments is available and the people also come and exploit something or look at something totally undiscovered,” said Mudadeniya. “We are going on the line which is ‘undiscovered, unspoiled, an island of authenticity’, which we can offer.”

In Nepal, political agreements have ended a Maoist insurgency that lasted more than a decade.

The minister for Tourism and Civil Aviation, Sharatsingh Bhandari, says Nepal’s transition from conflict to peace is in itself a tourism draw.

“Now we are going to form a new Nepal. So giving the message for the New Nepal and inviting the people to see, not only the prospect of tourism itself but even the process of transition of the political system from ‘bullet to ballot.’ That was done successfully by the Nepalese themselves,” he said.

Industry analysts say tourism in Asia is likely to expand rapidly over the next few years. But, the key, they say, is that governments find ways to prevent political violence, and act quickly to calm fears when it does happen.

Economic effect on tourism industry-

The service economy is driving growth in most OECD countries. It represents a large part of economic activity and its importance continues to grow. Tourism, a large, complex and fragmented industry which is still very difficult to define and measure, is a key component of the service economy (30% of international trade in services in the OECD area). In terms of revenue, OECD countries generate about 70% of world tourism activity. Tourism, which has expanded dramatically over the past 30 years, looks set to continue growing as societies become more mobile and prosperous.

Obtaining better information on services, the least developed side of statistics, is an important challenge for statistical agencies and a necessity for political analysis. Measuring tourism is part of a wider move to improve our knowledge of how economies work, what they produce and what changes occur over time. It is no longer enough to measure physical flows (arrivals and overnight stays) and monetary data (revenue and expenditure relating to international tourism).

In the early 1980s, the OECD began work to set up a model acceptable at international level which gave rise to the OECD Tourism Economic Accounts, which measure certain socio-economic aspects of tourism. While developing this tool, the OECD produced a more precise definition of tourism, visitors and tourist expenditure [Note: OECD (1996), OECD Tourism Statistics – Design and Application for Policy].

Despite its economic importance, governments, especially in developed economies, still do not adequately recognise tourism. For this reason, the OECD has developed and recently approved the OECD Guidelines for a Tourism Satellite Account and an Employment Module. These integrated statistical tools aim to measure the economic aspects of tourism (value added, jobs, revenue, investment, profits) in order to provide a more convincing demonstration of this activity’s economic significance.

Furthermore, together with the United Nations, the World Tourism Organization and the European Commission (Eurostat), the OECD has developed a ” UN-WTO-OECD-EUROSTAT Tourism Satellite Account: Recommended Methodological Framework”, approved by the 25-member United Nations Statistical Commission on 1 March 2000. A publication is available.

Other work undertaken in this area includes statistical research. OECD and Eurostat regularly organise international forums on tourism statistics to share ideas, experiences and concepts with Member and non-members countries, the scientific community and the tourism industry. The United Kingdom, with the support of Eurostat and the OECD, organised the Fifth International Forum on Tourism Statistics (Glasgow, 20-23 June 2000). Similar forums have been organised in Vienna (1994), in Venice (1995), in Sintra (1996) and in Copenhagen (1998).

Technological effect on tourism industry-

Definition of Tourism Technology

The convergence of industries has forced people to create terminology such as information technology, biotechnology, ubiquitous technology and even cultural technology to explain frequently talked about topics. Tourism Technology is a term that encompasses all social, cultural, managerial, and value-adding activities of the tourism industry. Tourism Technology also incorporates and encourages technological advancements and economic development in the tourism industry.

The Origin of Tourism Technology

“Tourism Technology”, initially based on the concept of cultural technology, is a more comprehensive term covering knowledge used to add to the value of tourism products on a micro level and the management of the travel and tourism industry on a macro level. New tourism products are also the end result of tourism technology combining with other industries. These include medical tourism, educational tourism, agricultural tourism, marine tourism and the application of information technology to the travel and tourism industry.

Application of Tourism Technology

The term “technology” can easily call to mind scientific achievements, computer graphic skills, special effects and other engineering-related images. However, “Tourism Technology” encompasses the integrated fields mentioned in the previous paragraph, statistics, managerial and socio-cultural know-how, and skills that the tourism industry can adopt to design, produce, and market various tourism products. In addition to coordinating various aspects of human resources in the travel and tourism industry, “Tourism Technology” describes a comprehensive field containing but not limited to such widely referred to subjects as entertainment technology, contents technology and creative technology.

Software for Tourists

One of the latest applications is software that permits tourists to customize their visits according to their preferences. Luis Castillo Vidal, computer engineer of the University of Granada and one of the authors of the study, points out that, in order to design the customized visit plans, they have used Artificial Intelligence techniques, “a science that provides computers with abilities to solve problems which, in principle, can only be solved by humans”.

Users must have access to the internet, either through a computer, a mobile phone or a PDA, in order to be able to access a web where they can define their preferences and needs, such as their artistic, cultural and gastronomic preferences, their lifestyle and favourite hours, whether they are disabled or not and the spending capacity.

Environmental effect on tourism industry-

The quality of the environment, both natural and man-made, is essential to tourism. However, tourism’s relationship with the environment is complex. It involves many activities that can have adverse environmental effects. Many of these impacts are linked with the construction of general infrastructure such as roads and airports, and of tourism facilities, including resorts, hotels, restaurants, shops, golf courses and marinas. The negative impacts of tourism development can gradually destroy the environmental resources on which it depends.

On the other hand, tourism has the potential to create beneficial effects on the environment by contributing to environmental protection and conservation. It is a way to raise awareness of environmental values and it can serve as a tool to finance protection of natural areas and increase their economic importance.

• Three main impact areas: natural resources, pollution, and physical impacts
• Environmental impacts at the global level
• Other industry impacts on tourism
• How tourism can contribute to environmental conservation

Social effect on tourism industry-

Jamaica is primarily a ‘sun, sea and sand’ destination and, therefore, the primary recreational activities of visitors include sun and sea bathing on the beaches. Tourists who visit Jamaica are, therefore, primarily involved in activities such as going to the beach, snorkelling, scuba diving and glass-bottom boating.

Jamaica’s tourism product is dependent on the coral reefs and their associated ecosystems such as seagrass beds and mangroves. These ecosystems are, however, threatened by natural causes and human behaviour such as coastal pollution, rapid coastal development, over-fishing and global warming.

All parties involved (the citizens, the tourism industry and the visitors) have a vested interest in the management of the environmental resource base and an obligation to do their part to support this management. If the environment is degraded all parties stand to lose – visitors will fail to come (or will be willing to pay less) and the countries will lose an important source of economic benefit. In other words the environment will produce reduced economic, ecological, and amenity benefits.

Microeconomic theory is essentially the study of the equitable distribution of scarce goods or benefits. In this example the scarce benefit is the Jamaican beach tourism product. The economic theory provides approaches to making the demand and supply of these scarce benefits more efficient. Demand of the ‘good’ in this case is the ‘beach-lust’ (sun, sand, sea) tourism of Jamaica. This is in contrast to the ‘wonder-lust tourism’ such as safaris, mountain climbing, cultural and heritage tourism that is observed in other parts of the world. The ‘good’ is supplied at a cost which would include the traditional costs of, labour and capital etc. However when the cost of the provision of the good does not take into account negative externalities such as environmental damage, this results in market failure. If this market failure is not corrected it will result in a loss in social welfare (dead-weight loss).

Jamaica’s current tourism model is based on the construction of mega super inclusive resorts, which often require engineering solutions such as dredging, groyne construction and limestone blasting in order to create swimming beaches, and construct buildings a few meters away from the high water mark. Construction and operation of tourist facilities such as hotels and other attractions also result in significant alterations to the terrestrial environment, trees, insects, birds etc. Operation of these entities also results in the diversion of resources such as water and electricity which could have been used elsewhere in the society.

MARKET FAILURE

Increased construction activity in the coast provides relatively short term and low-skilled employment. The intermittent demand for this pool of labour often results in the proliferation of unplanned settlements and squatter communities that are established close to the resort areas. These settlements are typically located in the hills and mountains above the coast. The creation of these communities results in the destruction of the watershed in these areas as well as inadequate sewage treatment and solid waste management. All of which contribute to reduced environmental quality; for example, reduced water quality as a result of increased nutrients and turbidity in the coastal waters.

The simple economic analysis of Jamaica’s tourism model outlined above suggests that market failure exists. The fundamental reason for the market failure associated with Jamaica’s tourism model is the fact that the economic ‘rent’ associated with the natural environment is not captured by the people of Jamaica.

‘Economic rent’ is an excess return on an asset, a profit above normal market rates of return. Rents usually arise from assets that are scarce and fixed in supply. Beachfront property is a very good example of the type of assets that will yield economic rent. Or another example is the higher property costs in Coopers Hill or Beverly Hills when compared to Havendale or Mona, the economic rent (or value added) in this case being a view of the city. It can be argued that economic rents such as the beauty and natural environment should accrue to the people of Jamaica and not to foreign tourists or tourism operators. Rents are essentially a type of payment for the use of the resource. So the first reason for market failure is that there is no real capture of economic rents.

A second example of market failure is that these tourism entities that are currently gaining all of the rents are also not accounting for the negative externalities of their activities. For example, hotels do not pay for the true costs of pollution and negative impacts associated with the use and operation of their facilities. However the problem of market failure does not stop here. As with several other Caribbean nations, the development of the tourism industry is heavily subsidised by the Jamaican government. Hotels and attractions are given tax holidays (e.g. no taxes for 10, 15, 20 years), duty is waived on imports of construction materials among other things.

Additionally, the Government’s facilitation such as fast-tracking permit requirements and their suspected role in circumventing environmental and planning regulations can reduce costs to investors and also be viewed as a subsidy. So in addition to the non-capture of rent and ignoring negative externalities, government subsidies to the tourism industry through tax holidays and other waivers also exacerbate the problem of market failure. This in turn means that the welfare of the society i.e. the Jamaican people is even more reduced.

POSSIBLE REMEDIES

As was highlighted above correcting market failures can be achieved through the implementation of taxes. In the case of Jamaica’s coastal tourism this would mean that investors are forced to internalise environmental costs. This would theoretically lead to better environmental management and sustainable development of the tourism industry. However, given the current political climate in Jamaica and the influence of the tourism industry players this suggestion is likely to be received with hostility.

Given this fact a more feasible way of capturing some of the economic rent is to capture a small portion of the benefits that accrue to the visitors to the island. This would be through the use of the existing system of arrivals taxes from cruise and stopover visitors to the island. However, unlike the current system where the charges are often hidden in room surcharges or airline tickets the additional environmental tax should be explicitly identified.

HIDDEN COSTS

There are, of course, wider questions of the true economic contribution of tourism. Clearly tourism is very important to Jamaica’s economic sustainability. The Jamaican tourism industry accounts for 32 per cent of total employment and 36 per cent of the country’s GDP according to many studies. However, based on some of the market failures described above, are there more costs that are not being considered? Tourism has many hidden costs, which can have unfavourable economic effects on host countries such as Jamaica.

The direct income for a country is the amount of tourist expenditure that remains after taxes, profits, and wages are paid and after imports are purchased; these subtracted amounts are called leakage.

For the all-inclusive tourism model, studies show that about 80 per cent of travellers’ expenditures go to the airlines, hotels and other international companies, and not to local businesses or workers. In addition, significant amounts of income actually retained at the destination level can leave again through leakage. For example, the profits gained by foreign-owned tour operators, airlines, hotels, are repatriated to their home countries. Estimates made for Third World countries range from 80 per cent in the Caribbean to 40 per cent in India. In layman’s term, on average, of each US$100 spent on a vacation tour by a tourist from a developed country, only about US$5 actually stays in the developing-country destination’s economy.

The current tensions between local craft vendors, restaurants and other service industries and large resort chains are all too common and point to the problem of leakage. Super inclusive hotels do not encourage guests to venture outside the walls of the hotel and so most of the tourist’s experience is limited to the entertainment as well as the sun, sea and sand activities available at that location. One could say that Jamaica the country is not the destination, it is actually the ‘resort’ that is the destination. More comprehensive studies on this issue are urgently required by our academic institutions in the region. Caribbean researchers have a responsibility to provide balanced information that can enrich the discourse between all the relevant stakeholders. Much of the discourse is driven by short sightedness and politics on one side and passionate advocacy on the other. Too often the arguments of the contending parties (developers versus environmental advocates) are not supported by balanced information.

Legal effect on tourism industry-

MUSCAT — Tourist traffic into the Sultanate is projected to scale new highs next year on the back of a raft of major initiatives, most notably an aggressive campaign targeting new markets, according to the Under-Secretary of the Ministry of Tourism Mini