PPP Models in Domestic Tourism

Ashutosh Kharangate, Founder & MD of MARC, talks facts and figures about domestic tourism along with the need of a strong PPP model to revive growth.

In his 2020 Independence day speech, Prime Minister Narendra Modi urged people to visit 15 domestic tourist destinations in India by 2022. An estimated 24 million Indian tourists travel abroad each year and spend approximately USD 25 billion. With International tourism largely at a standstill, this is a huge business opportunity for India. 

By 2028, the tourism and hospitality sector’s direct contribution to GDP is expected to reach US$ 200 billion. Domestic tourists contributed more than 80 per cent of the value since 2013, and close to 90 per cent in 2020. While foreign tourist arrivals in India achieved a growth rate of 3 per cent y-o-y, domestic tourism is increasing by over 18 per cent. They are the unsung heroes in this revival. 

Despite the lockdown, the tourism sector has shown great resilience. After the first wave of Covid19, defying grave expectations, there was a rebound in travel, totally driven by domestic tourism. The average 50-70 per cent occupancy witnessed in Q3 and Q4 of FY21 was driven by domestic tourists. The brighter aspect was ARR. It merely fell by 10-15 per cent as the Indian tourist spends were rerouted domestically. 

Domestic tourism was sparked for several reasons. A primary trend being ‘Revenge tourism’, caused by frustrations of the lockdown and limited spending avenues. Tourists flocked to popular destinations en masse causing saturation. 

International travel restrictions in 2020 helped tourism divert internally as well as remobilise spends in the domestic industry. With large segments of that estimated USD 25 billion now flowing inwards, the effect on ARR (Average Room Rate) was minimised. 

Another trend seen is the ‘Staycation’. Due to the prevailing scare, some vacationers choose to stay closer to home. Restrictions in air travel and safety concerns saw massive tourists inflow, within a reasonable driving distance. A classic case was Goa where occupancy rebounded to 70 per cent of normal in Q3 and Q4 of FY21 when the tourism sector opened up. However, recovery was seen across the Four and Five starred hotels, while budget accommodations continued to struggle. 

What is required now is a strong public private partnership model to revive growth. As two things are critical for travellers; Safety assurance and an attractive travel destination. An ideal opportunity arises for the industry and the Government to come together and reorganise the sector. Each state’s administration and Industry needs to focus on some critical elements. Clear communication to the traveller that they can travel without any concern. Social media campaigns have proven effective thus far. Amplifying focus on unexplored tourist destinations would also add novelty to state tourism. Hinterland and eco-tourism have seen a rise in takers over the last quarters.

Another element is the value for money proposition. When an industry does well, without realising the costs go up. This starts with accommodation, then food, followed by travel. Unfortunately, once the offerings do not match the value, the traveller starts to lack consumer surplus. Better value propositions are sought for. The importance to match the amenities become paramount. 

Certain benchmarks on costs could be based on a detailed research on the competition and expectations of traveller. The Government can work with industry to set guidelines and standardise rates. The grades could be incentivised by the Government through subsidies or reduction of taxes. The Central Government could do the same process at a consolidated level.

Additionally, foreign tourists should be welcomed too. The government could take active steps establishing ties with foreign counterparts such that charters land in India sooner. Each country is using social media to pass on clear messages on the safety and variety of offerings. Imagine creating amenities like special tourist corridors with a bio bubble assurance with exclusive access to places and arrangement of direct transport from airport to the destination. A public private collaboration is indeed needed to convey that the country is open for domestic and foreign tourists, that it is safe and attractive to travel. Let’s remember, Atithi Devo Bhava!

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Domestic Tourism Ashutosh Kharangate MARC


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