IMPACTS OF COVID 19 PANDEMIC ON THE TOURISM INDUSTRY IN INDIA

FOREIGN TRADE UNIVERSITY

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

IMPACTS OF COVID-19 PANDEMICON THE TOURISM INDUSTRY IN INDIA

5 Nguyễn Thị Yến Phương - 20132800296 Nguyễn Ngọc Hải - 2012280014

7 Nguyễn Thu Hoài - 2013280015

Ha Noi, 9 – 2021

TABLE OF CONTENTS

1 Rationale of the topic: 4

2 Purpose of the paper: 4

3 Scope of research: 4

1 Overview of the Indian tourism industry before Covid-19 4

2 Overview of the Covid-19 pandemic in India 5

3 Food and Beverage: 11

3.2 The impacts of COVID-19 on F&B industry during the lockdown123.3 The impacts of COVID-19 on F&B industry after reopening12

4 Travel companies and travel agents 134.1 Overview about travel companies during the COVID-19 pandemic13

4.2 Impacts of temporary closures due to travel restrictions13

1 Fiscal policy and stimulus package 18

2 Monetary policy and taxation 18

3 Other latest supporting policies 19

I INTRODUCTION

Tourism is one of the most essential factors in the success of many economies around theworld It increases the economy's earnings while also enhancing the country's value, and identity.The importance of tourism in India stems from the benefits it provides With a ranking of 7, Indiaaccounted for 4.97 percent of international visitor arrivals in the Asia Pacific Region in 2019(tourism.gov.in, n.d.) Coronaviruses (CoV) are a broad family of viruses that cause symptomsranging from the common cold to more serious diseases like MERS-CoV and SARS-CoV 1 OnDecember 31, 2019, China notified the World Health Organization (WHO) of instances ofpneumonia with an unknown cause discovered in Wuhan, Hubei Province, China The first case ofCOVID-19 infection was reported in Kerala, India, on January 27, 2020, when a 20-year-old womanwith a one-day history of dry cough and sore throat presented to the Emergency Department ofGeneral Hospital, Thrissur, Kerala (Andrews et al., 2020) On January 30, 2020, the NationalInstitute of Virology announced her oropharyngeal swab result as positive for COVID-19 infection.COVID-19 has had a significant impact on the tourism industry in India The difference betweentwo-year trends (2019–2020) can be seen in table 2 (Chandel, Kanga and Singh, 2021).

Figure 1: Comparison of Tourism Loss During April - December (2019 - 2020)

The tourism industry is the greatest revenue-generating; however, it is seeing adecline owing to the pandemic effect As a result, the crisis provides a chance for theIndian government to reconsider how tourism interacts with other economic sectors, withthe goal of better measuring and managing it while keeping to the primary goal of revivingthe tourism industry.

1 Rationale of the topic

Tourism has long been recognized as a powerful prerequisite for economic growth,particularly for a globally fifth-largest economy The lockdown in India has shaken theeconomy by hitting different economic sectors, especially the tourism industry, whichhas collapsed over the days.

2 Purpose of the paper

Give an overall picture of India’s tourism and evaluate the risk of the pandemic on thisindustry.

3 Scope of research

The subject of research: Tourism industry in India affected by the pandemic.Period of research: The research consists of data collected in 2020-2021.

II BACKGROUND:

1.Overview of the Indian tourism industry before Covid-19 1.1 Indian inbound tourism

According to the World Tourism Organization, the inbound tourism expenditure as a shareof GDP was 1.1 percent in 2019 Foreign Tourist Arrivals in India increased by 2.8% (10.93million) in 2019 Overall, India welcomed 28.9 million visitors including Non-resident Indiansliving abroad who visited India for various purposes (Yogendra Tripathi, 2020).

India has been the destination of many foreign tourists In 2019, the 5 most important sourcemarkets for Foreign tourist Arrivals were Bangladesh (21.37%), United States (13.80%) & UnitedKingdom (9.75%), Sri Lanka (3.35%) & Canada (3.32%) (Blinkvisa.com, 2020).

1.2 Indian outbound tourism

India is one of the fastest-growing outbound travel markets in the world With more than1.3 billion inhabitants (2019), India has potential for future growth in outbound tourism.

In 2019, almost 27 million Indian nationals departed on outbound travels fromIndia, marking an increase from the previous year In the same year, the outbound tourismexpenditure over GDP was at 1.0 percent Interestingly, since 2000, an exponential rise wasseen in the number of Indian nationals traveling outside the country for leisure and otherreasons (Statista, 2020).

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According to Yogendra Tripathi (2021), top destinations for Indian Nationals’Departure are UAE (23.72%), Saudi Arabia (10.83%) and the USA (10.72%) Additionally,India took up 4.97% of international tourist arrivals in Asia Pacific Asia in 2019, with therank of 7th.

1.3 Indian domestic tourism

With a rich culture and breath-taking natural beauty, India is one of the leadingtourist destinations in the world, leading to the increasingly monied middle-class of thecountry who are spending more time and money than ever before on domestic travel In2017, the domestic expenditure on tourism was around 186 billion U.S dollars At thesame time, the collective government spending on the tourism sector that year was about2.61 billion dollars (Statista, 2020) In 2019, over 2.3 billion domestic tourist visits weremade across India, an increase from the previous year Furthermore, an exponential rise inthe local tourist visits was seen from the year 2000 to the present across the country.

2 Overview of the Covid-19 pandemic in India

So far, India has undergone two main waves of Covid-19 Up to 20 September 2021, thiscountry recognised 3,34,48,163 cases of Covid-19 and the number of deaths was 4,44,838 with1.33% of the death rate (Government of India, 2021) The first cases of COVID-19 in India werereported on 30 January 2020, and the peak of the first wave in September 2020 with over 90,000cases reported per-day before dropping to below 15,000 in January 2021 In March 2021, the secondwave took place in India, which was much more devastating than the first, with shortages ofvaccines, hospital beds, oxygen cylinders and other medical supplies in parts of the country By lateApril, India led the world in new and active cases On 30 April 2021, it became the first country toreport over 400,000 new cases in a 24-hour period (Wikipedia, 2021) Since July 2021, India hasreported 3,998 COVID-19 deaths in a single day, the

country’s highest death toll in a month, indicating that a third wave is imminent, which iscurrently under discussion refers to a possible surge in cases at the national level (AmitabhSinha, 2021).

III THE IMPACTS OF COVID-19 ON TOURISM SECTOR:

1.Transportation 1.1 Aviation

When the pandemic hit the country, all scheduled international flights and domesticpassenger flights were canceled from March 23 and March 25 in 2020, respectively Theimpact of this disturbance can be gaged by the loss figures of India's two biggest carriers.IndiGo incurred overall deficits of Rs 2,884 crore and Rs 1,194 crore in Q1 and Q2 of thisfiscal respectively SpiceJet posted overall deficits of Rs 600 crore and Rs 112 crore in Q1and Q2, respectively.

Due to COVID-19-related restrictions on flights in 2020-2021, India’s domestic andinternational passenger traffic diminished at a CAGR of -9.02% and -28.64%, respectively, from thefiscal year 2015-2016 to 2020-21 In 2020-21, airports in India reduced by 61.7%, and freight trafficdeclined at a CAGR of -1.77% (According to Telangana Today article).

Other wings of the aviation sector also took a hit The revenue of Indian carriersdeclined by 86 percent, airport operators witnessed an 84 percent drop, and Air Indiareported a 78 percent fall in revenue during April-June 2020, compared to April-June 2019.(Mallapur, C., 2020)

Figure 1.1: The impact on aviation revenue of India during April-June 2020,over April-June 2019

Because airports are reliant on aviation operations, they are generating less money as aresult of the pandemic The number of passengers passing through AAI airports decreaseddramatically from 14.5 million in January 2020 to 27,687 in April 2020 After the removal of

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cubs and restrictions post the first phase of COVID 19 and public mobility resumed pickingup with 2.97 million footfalls in August 2020 However, the second wave wreaked havocon it once more (C Mallapur, 2020).

For the first time since its inception, the Airports Authority of India (AAI) hasincurred losses due to a drop in traffic at various airports It registered a 65% decline in itsrevenue in financial year 2021, which fell from Rs 12,837 crore to Rs 4,482 crore resultingin a loss of Rs 2,814 crore as compared to a profit of Rs 1,985 crore (Chandra, J., 2021)

In addition, due to high infection rates, numerous countries with whom India hasbilateral agreements to conduct charter flights, such as the United Kingdom and the UnitedStates, have restricted arrivals (Shah and Freed, 2021)

run up debt at an alarming rate The highway agency’s debt hit a new high of Rs 3.17 trillionat the end of FY21, up 27 per cent from Rs 2.49 trillion at the end of March 2020.(According to The Economic Times and Business Standard Article)

Suprio Banerjee, Vice President & Sector Head, ICRA Ratings, reported that thegrowing momentum has been impeded by the rapid surge of Covid cases in the secondwave The same is reflected by a reduction in E-way bill volumes and road freight volumesover April-May 2021.

During Lockdown 1 and 2, only 1 to 2 % of normal services are operational Inresponse to government requests, 67 percent of the operators are only providing specialservices for medical and essential personnel 81 % of the operators reported no ridership atall (According to the UITP Statistics Brief )

1.3 Railway

Traffic revenue of the Indian Railways fell by 42.3 percent in August 2020, as passengertrain services were still disrupted by the Covid-19 epidemic Union Railways Minister Piyush Goyalreported that the total number of originating passengers till the end of August 2020 was a meagre1.27% of the corresponding period in the last financial year 2019.

During the coronavirus pandemic, the Indian Railways lost Rs 36,000 crore, with aloss of Rs 6,500 crore on revenue generated from ticket sales (during the first two phases oflockdown itself)

(According to The Economic Times and Times of India)

1.4 Maritime Transport

During April-May of FY2021, overall cargo throughput at major ports contracted by22% Cargo segments like POL (petroleum products and liquid freight), thermal coal, andcontainers have all seen steep declines Non-major ports also saw a 22-24% drop in volumeduring this time period.

The terrible Covid-19 issue in India is threatening operations at several of thecountry's busiest ports, increasing fears that the action may cause shipping delays that willaffect global supply networks

After operations were "severely disrupted" by the epidemic, Karaikal Port insouthern India declared force majeure until May 24, 2021, according to a post on itswebsite The terminal, which claims to be India's largest non-state port, handles a variety ofcommodities including coal, sugar, and petroleum The port of Gopalpur in Odisha has alsodeclared force majeure, according to IHS Markit

According to G Veeramohan, president of the Vizagapatam Chamber of Commerceand Industry, cargo movement at Visakhapatnam Port, one of India's major maritimeterminals, is also hampered after the local traders' group declared force majeure in the portregion till May 19.

(According to the Business Standard)

According to the Government of India, the growth in container traffic at major portsin India reached 9.98 TEUs (20-ft equivalent units) in FY2020 at a growth of 1.12% year-on-year basis but declined to 4.93 TEUs during April-October 2020 due to the COVID-19-induced restrictions.

(Statistic provided by The Ministry of Ports, Shipping & Waterways Report)

2 Accommodation

Due to the ongoing situation, travel restrictions are being observed at national andinternational levels These travel bans, border closures, event cancellations, quarantinerequirements, and the fear of spreading disease, have set outrageous difficulties on thetravel industry and especially hospitality sectors (Kaushal and Srivastava, 2021).

2.1 Serviced Accommodation

According to the Economic Times, less than 3 million foreign tourists visited India in 2020,a plunge of around 75 percent compared to the previous year, due to the travel restrictions imposed.Foreign tourist arrivals in 2019 stood at 10.93 million while in 2020, the figure was only 2.68million As of December 2020, most of the hotels in India are not fully open (Gautam, 2021) Also,it was believed that foreign tourists will not get back to India in a rush after the country’sstanding as a safe destination, has taken a severe beating overseas due to the

record-high Covid-19 caseload, surging death toll, and criticism over the authority’s handlingof the second wave of the pandemic (Mahanta and Chaturvedi, 2021) As a result, according to theStatista Research Department, in fiscal year 2021, the occupancy rate of hotels in India was 33.8percent, a significant drop from over 60 percent in recent years.

Figure 2.1.1: Occupancy rate of hotels in India from financial year 2001 to 2021

Pursuant to The Times of India, with Covid-19 restrictions being reinforced in Uttarakhandfollowing the second wave of the pandemic, hoteliers across the Kumaon region said that thebookings for April had collapsed and many of the establishments were on the verge of closure Thehoteliers assumed that after suffering huge losses during the peak tourist season last year, they couldnot survive if yet another summer witnessed no tourist activity

(Jha, 2021) Among the various types of hotels, midscale hotels had the highest occupancyat nearly 37 percent, while the overall average was about 34 percent in 2021 which was asignificant decline compared to previous years (Statista, 2021).

Figure 2.1.2: Occupancy rate in hotels across India in FY 2021, by category

2.2 Self-serviced Accommodation

The pandemic has hit the travel and tourism industry so severely that it could takeyears for the industry to revive However, unlike the serviced accommodation, the Covid-19 pandemic had paved the way for a new adaptation which was self-servicedaccommodation in 2020 The popularity of homestays has increased manifold in the post-Covid era when social distancing, cleanliness, hygiene, and privacy have become the toppriorities for travelers Hotels have several touchpoints and larger footfalls compared tohomestays, which has made the latter the preferred ‘get away’ accommodation in thecurrent scenario (S Lamba and Mohan, 2021) In the financial year 2020, Airbnb, themost common online holiday rental and home-sharing platform, had seen a significantincrease compared to the two previous years The revenue of the accommodation platformAirbnb India stood at 687 million Indian rupees in 2020 compared to the average of over300 million Indian rupees in the years 2018 and 2019 (Statista, 2020).

Figure 2.2.1: Revenue of Airbnb India from financial year 2018 to 2020

However, with the re-imposed restriction during the second wave in 2021, thesummer season was impacted this year again across both the serviced and self-servicedaccommodation According to The Times of India, the owners of guesthouses andhomestays in Kausani and Kasar Devi villages claimed that the bookings were down by 70to 80 percent due to the surge in Covid-19 cases Additionally, several tourists who hadplaced bookings are now asking for a refund (Jha, 2021) With frozen incomes, the focusfor the hospitality industry is now on cost control and minimizing the fixed costs.

3.Food and Beverage:

3.1 The overall impact of COVID-19 on F&B industry

In the recent research from Indian Food Service Report (IFSR) 2019 of India's NationalRestaurant Association, this sector has experienced tremendous growth in the last 3 years andgenerated significant employment opportunities for 7.3 million people in 2018-2019 (Bose, 2020).Being one of the largest service-based industries, however, the restaurant industry has alsowitnessed tremendous challenges, suffering the same downward trend with many economic sectorsduring the COVID-19 pandemic According to the rating agency CRISIL, in 2020, the Indianrestaurant industry is experiencing a 50 to 70% decline in revenues in this fiscal year because of thedisruptions caused by the pandemic (Vig and Agarwal, 2021) In the recent report from The Quint,the most challenging problem in the crisis is the massive unemployment with 15 to 20% job cutduring the lockdown, which means approximately 1.5 million people lost their jobs due to theCOVID-19 pandemic (Bose, 2020).

3.2 The impacts of COVID-19 on F&B industry during the lockdown

The first nationwide lockdown only allowed essential services to operate, therefore, allrestaurants had to suspend their businesses The pandemic has detrimentally impacted the restaurantentrepreneurs as they fight for their survival due to the lack of capital and negative cash flows Inthe new research published by Statista, in a survey conducted by POSist, 65%

of restaurant operators in India stated that “high operational costs” was the major challenge fortheir businesses in 2020, whereas only 22% said that “an increasing competition” was

challenging (Statista, n.d) The travel restrictions and border policies have negatively affected thetourism industry, consequently, the restaurant industry has also experienced interrelated impacts onboth inbound and domestic markets In a new research by food delivery and restaurant discoveryfirm Zomato, 40% of the dining out restaurants may not reopen at all owing to the disruptionresulting from the COVID-19 pandemic (Ishwar, 2020).

3.3 The impacts of COVID-19 on F&B industry after reopening

After the complete shutdown for six months, the government started to relax the regulationswhich allowed restaurants to open at reduced capacities with the social distancing norms However,there were multiple challenges for all the restaurant entrepreneurs to recover their businesses.According to a study from Wiley Public Health Emergency Collection, despite being allowed toreopen, restaurants still need to make a lot of efforts to tackle new regulations of social distancing.First, the entrepreneurs are required to keep the distance of 6ft between tables and amongemployees which is challenging for the limited-space businesses Moreover, they would need toallocate money for the maintenance of safety and hygiene standards and inferior innovation aftersix-month suspension and other operating expenditures However, the financial issue is not the easyone to address when the COVID-19 hits the economy.

One of the most challenging problems is the change in consumer behaviour and theirdemand after the lockdown People are likely to have increasing concern about the maintenance ofeffective hygiene and sanitization practices in the public places To be more specific, people wouldhave the inclination to take-away food instead of having a dine-in meal The

entrepreneurs need to predict the new tendency and adapt quickly with the “new normal” tomeet the demand of their consumers Otherwise, the restaurant industry would have to witness asignificant decline in revenues as a direct consequence of the pandemic For example, Café

Coffee, founded in 1996, grew into India’s largest coffee chain and operated more than 1,752

outlets across some 243 cities in the country during 2018-2019 (Portal, 2021) However,according to Allegra World Coffee Portal, its revenue in 2020 had a significant decline by67% compared to the previous year and its store footprint had shrunk 67% to 572 storesacross 165 cities (Portal, 2021).

4.Travel companies and travel agents

4.1 Overview about travel companies during the COVID-19 pandemic

According to The Economic Times, the novel coronavirus has adversely affected the traveland tourism sector, which is one of the largest industries in India, and had devastating impacts onthe travel companies, tour operations as well as travel agents since the first outbreak in March 2020(Impact of coronavirus on Indian tourism could run into thousands of crores of rupees, 2020).Because of the onset of COVID-19 pandemic, it was essential for the Indian government to imposestrict lockdown, the first being travel restrictions (Statista, n.d) With the progression of COVID-19,almost all countries started restrictions on their borders crossing as part of national emergencyresponses (ILO, 2020) Therefore, according to The Economic Times, this is the one of the worstcrises ever to hit the Indian tourism industry impacting all its geographical segments - inbound,outbound and domestic, almost all tourism verticals (Impact of coronavirus on Indian tourism couldrun into thousands of crores of rupees, 2020).

4.2 Impacts of temporary closures due to travel restrictions4.2.1 Booking cancellation and visa suspension

Officials of travel and tourism companies told a uniformly dismal story of cancelledbookings from February 2020 leading to “complete paralysis” by mid-to-late March2020 Flooded with requests for cancellation, many of the smaller agencies, who arefinding it difficult to operate and afford the salaries for their employees, are consideringshutting down operations temporarily (Reporter, 2020) In addition, according to the newresearch of The Economics Times, with the suspension of all tourist visas from thegovernment, the situation seems to be worse (Impact of coronavirus on Indian tourismcould run into thousands of crores of rupees, 2020) It means the forward booking for theinbound season which should be started picking are all canceled, showing highlydiscouraging signs of important global travel for contracting for the next season.

Figure 4.1 Share of tour operators in India affected by lockdowndue to the coronavirus pandemic

In research from Statista, in June and July 2020, seventy four percent of surveyedtour operators in India claimed that they had to close their office(s) during the lockdowndue to the Covid-19 pandemic (Statista, n.d) From the remaining who tried to keep theirbusiness somehow running, roughly nine percent invested in training their employees Onlyapproximately ten percent of the rest could keep virtual working with their clients.

4.2.2 The unemployment

As many as nine millions of jobs in the travel and tourism sector, which accountedfor 12,75% of Indian employment are at risk, according to the World Travel and TourismCouncil, if this trend continues as the Covid-19 crisis progresses, it will be a setback for thenational economy (Chaitanya Mallapur, n.d) 3,500 licensed tour guides are among theworst hit with many forced to take odd jobs over the past year and a half According toSanjay Sharma, president of Tourist Guides’ Federation of India (TGFI) “A majority ofthe guides are facing severe financial crisis situations consequent to cancellation of allthe tours and visits to the monuments,” ((Hindustan Times, 2021) However, most travelagencies are willing to reschedule bookings without additional charges, and some operatorsare giving full refunds for international flight bookings to affected countries such as China,France, Italy, Iran and Japan (Reporter, n.d).