India’s wasted tourism potential

The sector could generate significantly more foreign exchange earnings, if India could get its act together

The World Economic Forum’s (WEF’s) travel and tourism competitiveness index, released last week, showed that India had moved up 12 places and now ranks 40th among 136 nations globally. The report also noted that this was the largest leap made by any country in the top 50, thereby making India, with its rich and diverse cultural heritage and natural beauty, a prime candidate to lead the so-called Asian century in travel and tourism. So much for potential—but will India deliver?

The numbers tell a complex story. On the one hand, foreign tourist arrivals have been on an upward trajectory at least since the turn of the century. According to the ministry of tourism, India hosted 8.89 million tourists last year compared to only 2.65 million tourists in 2000. But when compared with other countries, India’s performance leaves much to be desired. For example, while India hit an all-time high last year, it was still nowhere close to France, which topped the list of foreign tourist arrivals with 84.5 million visitors. The US (77.5 million) was second, followed by Spain (68.2 million), China (56.9 million) and Italy (50.7 million).

Europe’s dominant position on the list can be explained through the Schengen agreement, which allows citizens of member states to travel freely across international borders. The US too has a visa-waiver agreement with most European Union countries as well as a handful of others for easy access. But what about non-Schengen states like China—or, for that matter, Turkey (39.4 million tourists in 2015), Mexico (32.1 million) and Russia (31.3 million), all of which have significantly higher tourist numbers than India?

India’s foreign exchange earning from tourism has followed a similar pattern. In 2015, for example, India earned more than $23 billion in revenue from international tourism, a significant hike from the $3.5 billion it made in 2000. However, the US earned $204.5 billion from international tourists and China $114.1 billion, in 2015—making India’s $23 billion seem like chump change.

However, parsing the numbers more carefully shows that while overall revenue from tourists in India is low because of fewer visitors, the average revenue per tourist is actually quite high. For example, while the average tourist spends about $2,639 in the US, she spends about a comparable $2,610 in India and about $2,005 in China. In France (and this is generally true for other European countries as well), the number drops to $543 per tourist.

This is because a large chunk of the tourists visiting France are other Europeans with Schengen privileges on short trips from across the borders. But while such tourists add to the numbers, they don’t always spend a lot of money. In contrast, when a French or German tourist takes a long-haul flight to India for what is ostensibly a well-planned holiday, they tend to stay longer and spend more money. For India, this is not as much a success story as much as it is an indication of a missed opportunity: When they are here, tourists are clearly willing to spend; but they are simply not coming here in adequate numbers in the first place.

Is this because of India’s many problems, such as cumbersome visa regulations, bad travel infrastructure, poor sanitation, collapsing law enforcement systems and concerns about women’s safety? On each of these counts, India ranks poorly on the WEF index. Five-star luxury—given the high revenue per tourist—may shield visitors somewhat from these issues but it cannot get rid of them entirely. Yet another factor at play here is the large number of business tourists (who expectedly are high-spenders) that India gets vis-a-vis leisure tourists, which somewhat skews the narrative. It is worth asking then: Is India getting its fair share of budget travellers especially since it is otherwise one of the most affordable travel destinations? Are middle-class tourists, who want a certain degree of comfort and hassle-free travel but cannot afford to go the five-star route, staying away?

If true, that is another challenge for India as it will have to prepare for the changing profile of the international tourist. As the WEF report notes, foreign travel is no longer a luxury enjoyed only by wealthy Westerners. The lowering of trade barriers and the rise of the middle class in many emerging economies mean that North America and Europe, which have dominated the travel markets till now, may give way to international travel from Africa, Asia and the Middle East.

Currently, India receives the maximum number of tourists from the US, followed by Bangladesh, while regionally, Western Europe and North America make up for a large chunk of the country’s foreign tourists—at 23.42% and 18.62% in 2015, respectively. South Asia tops the list with 24.25% but that is to be expected given that it is India’s neighbourhood. What is of concern though is that other regions that are expected to send out tomorrow’s tourists don’t seem to have India on their radar. In 2015, only 8.72% of India’s foreign tourists were from South-East Asia while East Asia made up 6.92%, West Asia 5.20%, Eastern Europe 4.12%, Australasia 3.89%, Africa 3.66% and Central and South America, 0.88%.

The silver lining here is that all these regions, except Eastern Europe, have been sending more tourists to India than before and the government is also cognizant of the fact that a lot more needs to be done on the home front. It has started with liberalizing the visa regime which is expected to improve the numbers quickly. But that’s only the first step. Making it easier to visit India won’t do much when being a tourist in India is replete with problems.

How do you think India can become more tourist-friendly?