India has passed through several foreign exchange crises, which has distorted government policy in many areas. In tourism, for instance, the approach has been to woo the foreign traveler who pays in dollars, though visitor numbers in recent years indicate that it is the Indian tourist who should be the target. But for several reasons, some of them fortuitous, a growing focus on the domestic market is already visible.
According to the latest available government figures, in 2010, the total number of foreign tourist visits was 17.85 million, a growth of 24.2% over 2009. Domestic tourist visits on the other hand, stood at a whopping 740 million, an increase of 10.7% over the previous year. The absolute numbers show why domestic tourism merits more attention, many observers say. The growth figures are even more notable in light of data from the previous year, 2009, when foreign arrivals actually fell 0.1% from 2008. Globally, tourist arrivals fell 4% that year because of the economic crisis and the swine flu pandemic, according to the World Tourism Organization. But in India, domestic tourism held up in 2009, increasing by 18.8%.
For an industry that had been designed for the foreign tourist, the growing influx of domestic travelers has been a wake-up call. Indians may not be as free with their spending as Americans, but the advantage is that they are unlikely to put off travel plans within the country due to an outbreak of swine flu, for example. In an uncertain environment — where global economic slowdowns and terrorist activity have become a way of life — the Indian travel industry is coming to realize that domestic tourists are their primary audience, with foreign visitors providing a boost in good years.
That’s the way it is in most large countries. “Domestic tourism lays the foundation,” says Amitabh Kant, CEO and managing director of Delhi Mumbai Industrial Corridor Development Corporation. Kant in earlier postings was the brains behind the very successful “Incredible India” and “Kerala: God’s Own Country” tourism promotional campaigns. “You develop domestic tourism and it then becomes a springboard for international tourism,” he notes. “Then you constantly evolve [your tourism product] to cater to both types of tourists. Wherever tourism is big, it’s both domestic and international.” But in India, government policy has long catered to foreign tourism, creating challenges for the industry’s continued growth, critics say.
In Favor of Foreigners
The government’s favoring of foreign travelers is evident in its infrastruture policies, which encourage amenity-laden five-star-caliber hotels that are out of the reach of a budget traveler, rather than more stripped-down establishments. “Elsewhere in the world, the hospitality industry starts with three-star and four-star hotels and then the market grows,” Kant notes. “In India, tourism started with high-end, five-star tourism. It was the reverse process.”
The government gave tax incentives to hotels on their foreign exchange earnings. Foreigners had to pay in U.S. dollars. (This rule was changed recently; payments can now be made in rupees.) Dollar-paying customers were charged a higher room rate than local Indians. If developers weren’t hampered by investment constraints, building a five-star establishment was the way to go. Margins were obviously much better.
But that’s only part of the story. Jagdish Patil, managing director of the Maharashtra Tourism Development Corporation (MTDC), says that some states with limited tourism resources had to choose between upmarket and downmarket. Their choice was obvious, because they couldn’t cope with the larger numbers of visitors that would be attracted by more budget-conscious establishments. As a result, airports to cater to foreign tourists were developed in preference to railway stations and tourist trains that would be used by domestic travelers.
The composition of the domestic tourists made things more difficult. Domestic tourism is skewed towards one category — temple tourism. The state of Andhra Pradesh attracted 155 million visits in 2010, topping the charts in India for total tourist visits. Expectedly, it boasts the largest number of pilgrimage destinations.
For many hoteliers, it does not make commercial sense to start operations at such places. To begin with, there is the affordability factor: Most pilgrims won’t be able to pay even three-star rates. B.N. Kumar, executive director of Concept PR, who has visited many of these temples, notes that the sites have good dormitory arrangements, package tours tend to take care of accommodations for their own clients and very cheap lodging is available a short distance away. “At Tirupati, there are more than 60,000 visitors daily,” he says. “The top end — the people who would normally stay at five-star hotels — go to corporate quest houses.” Companies have set up such guest houses; many Indian business families have a guru or a deity.
Tirupati is run by the government; it was taken over in 1987 after various financial irregularities surfaced. It is the richest temple in the world and attracts more visitors than the Vatican. “But the visitors are of low value,” Kant notes. Mass tourism, he points out, is always of low value. But at Tirupati at least, the government, through the trust, is taking some action. “Now there is a big movement toward better hygiene,” says Kant. “At the dharmshalas [religious guest houses] there are clean sheets and clean bathrooms.” Adds Kumar: “The whole darshan [view of the deity] is now run very efficiently. You are given tokens; you know exactly when your turn will come.”
The transportation environment is also a part of the tourism infrastructure. In India, the approach here has long been to create islands of luxury. Foreigners and rich Indians can sightsee from air-conditioned buses driven from air-conditioned hotels to air-conditioned restaurants to savor the taste of India. But that, too, is changing. Today’s foreign tourists include many who want to see the real thing, giving rise to rural tourism, village tourism, festival tourism (participate in the “great goat sale” for instance) and many approaches designed to take visitors out of the five-star bubble of protection. The National Tourism Policy of India 2002, which has not been updated for 10 years but remains the roadmap, even talks of boosting backpack tourism.
The 2002 policy is often considered the first step in turning the spotlight on domestic tourism. When it was framed, India’s foreign exchange reserves had crossed US$60 billion, the information technology industry was bringing significant profits into the country, and tourism and remittances were no longer the two pillars holding India’s financial edifice upright. According to the policy, “[The government] accepts that the earlier policy did not lay adequate emphasis on domestic tourism…. Due importance should be given to domestic tourism, particularly tourism connected with pilgrimage.”
The numbers had shot upward in the decade before the policy was drafted. Domestic tourism was 63 million visits in 1990 rising to 210 million in 2000. As mentioned earlier, it has reached 740 million today. With weekend getaways becoming popular (and with many Indians now planning such jaunts more than once a year), the domestic tourism numbers can go much higher.
How is today’s figure of 740 million domestic tourists compiled? Patil of the MTDC notes that the states compile tourism numbers using different methods. Some use the number of visits; others, the number of visitors. “Suppose Mumbai has 10 destinations,” he says by way of example. “If a person visits all 10 destinations, some states project that as 10 visitors. But in Maharashtra [Mumbai is the capital of Maharashtra], we project it as one visitor. There has to be some uniform policy.” Adds Manmeet Ahluwalia, marketing head of Expedia India: “it’s never been easy to collect that data within India because of various challenges.”
But because pilgrimage travel accounts for a big chunk of the domestic market and that figure is easier to estimate with data from the temples, few in the tourism industry feel that the 740 million figure is off the mark — although devotees, too, could visit a place of pilgrimage more than once a year: the first time to pray for a favor, the second time to thank the Gods for granting it.
The temples are very rich — even the poorest devotee makes a financial contribution during his visit — and many are spending to make improvements to the sites. Some, like Shirdi in Maharashtra, have even started attracting the mid-market tourist.
The organized private-sector hotel industry has yet to make a push to attract domestic travelers in a big way, but it is also setting up shop in the last mile. The Taj Group, part of the Tata conglomerate, has set up a chain of budget hotels under the Ginger marquee. Most locations are business hotels (traveling businessmen are classified as tourists, too). The Tatas even got the late C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid, involved in designing a product in the “budget economy space.” “There is improved economic activity in the country,” says Ginger CEO Prabhat Pani. “A lot more people are traveling on business.”
Business may be the current focus on the Ginger chain, but it is also looking to garner leisure travelers. “We have a good mix between business and leisure,” notes Pani. “Our aim is to be tap into this large and growing domestic travel [market]. A person who stays with us officially for business often returns for short leisure trips. We don’t have [amenities] like a pool, a bar [or] multiple restaurants…. What we give is a neat, clean and hygienic place that is safe and secure.” Ginger has also competition: The Accor Group has rolled out Formule 1 hotels, and others entering the sector include Peppermint Hotels, Berggruen Hotels, Lemon Tree, Louvre Hotels, Premier Inn and Hometel.
“Right now, the mid-segment market has become very lucrative and that’s why you have a number of international chains — Pullman, Carlson, Novotel, Hilton, Accor, Holiday Inn, Intercon — coming in,” says Kant. Adds Ahluwalia of Expedia: “It is a much healthier scenario than it was 10 years ago. There are a lot of these budget properties that are coming up, [which is helping to] ease the supply side of the hotel industry. Therefore, people have more choice and more hotels to stay in.”
Wooing the Home Crowd
There is another reason behind the spurt in domestic tourism: it is finally being marketed. For many years, all tourism advertising and promotion was handled by central government bodies. They sold India, not any particular state or destination. A few years ago, some states started providing bigger budgets to their own departments of tourism. Those departments had concentrated on developing infrastructure; they were now told to go sell the state. The original idea was to attract the foreign tourists who had a wealth of options in a huge country like India. But the states soon discovered that the campaigns were equally appealing to Indians at home.
Domestic tourism proved to have other benefits as well. Non-pilgrimage centers like Goa and Kerala always had a season. In Goa, foreign tourists start coming in early October. The three monsoon months before that are devoid of foreign tourists as Westerners don’t want to go from a cold climate to a wet climate; they want the sun. Thus, Goa enjoyed a long three-month siesta. Hotels and eateries were shut down and the entire economy slowed. Today, however, “Goa in the Rains” is being sold as a domestic package. The state is also rolling out other attractions designed specifically for Indians.
Kerala, too, has a three-month monsoon, which is now been packaged as the “Dream Season.” There are other attractions — yoga, ayurveda, wellness camps — thrown in, which appeal mainly to Indians. In the early days, facilities in both states were offered at a discount during the off-season. Today, the rates are comparable. New hotels and restaurants are also targeting the mid-market segment.
“When I became Kerala secretary of tourism, the state was a four-month market,” notes Kant. “It was totally driven by international tourism. We started marketing Kerala in places like Chennai, Hyderabad and Bangalore. Then we went into [second-tier cities] like Surat and Ahmedabad. We realized that Indians have the capacity to pay almost at a par with international tourists and they can come [at any time of] the year. You have to focus on domestic tourism to make a place a year-round destination. International tourism will always be seasonal.”
“There was a time when the state tourism corporations would only target foreign nationals,” says Ahluwalia of Expedia. “But of late, tourism boards have started focusing on the Indian tourist. They have TV and print campaigns. While they still want foreign tourists, they also want Indian tourists to come in because ultimately, that’s where you will get the volumes.”
Patil of MTDC says all of the states are going in their own direction in regards to domestic tourism. “Competition is always better for improving quality,” he notes. What he doesn’t want happening is that states start fighting amongst themselves for the same customers. “It shouldn’t happen that I am pulling tourists from Goa.” Last year Patil’s budget was US$33 million. It has been raised to US$41 million.
The Rupee Impact
There is another factor that is impacting tourism today. Many Indians who once had intentions of traveling abroad have had their plans curtailed due to the sharp fall in the rupee, which has lost more than 25% of its value against the dollar in the past year, causing planned foreign holiday travel to become that much more expensive. Travel agencies report that outbound travel is weakening, although there is no hard data as yet. But some of these people are expected to opt for domestic destinations instead.
The rupee’s travails have given an accidental push to domestic tourism. But such beneficial fallouts cannot be counted on forever; boosting domestic tourism requires planning, Kant points out. “The ease of travel domestically is very critical,” he says. “Internationally, domestic travel has expanded very rapidly in large countries. The railways and buses have played a very major role in the growth. In India, it’s very difficult to get railway reservations because the railways haven’t grown as they have in, say, China.” For buses, there is a taxation issue as each state has its own taxes and norms. The result: no large fleets or operators. Budget airlines made a difference, but many have closed down and some have raised fares, Kant adds.
The other important factor is the quality of experience on the ground. “States need to take ownership of their destinations and create a unique experience where a tourist goes back spiritually invigorated and mentally rejuvenated,” notes Kant.
There is something more important than the physical infrastructure, Patil says. “We must create awareness among our people that unless you have pride in your own destinations, you won’t be able to convince others how important they are.”