Weak rupee fails to lure foreign tourists

With the rupee in a sky-dive this year, one would have expected foreign tourists to make a beeline for India. But data from the Tourism Ministry show otherwise.

Foreign tourist arrivals into India grew only 4 per cent between January and November this year, lower than the 5 per cent growth in 2012. The growth is also a mere one-third of that in 2010. This was despite the rupee plunging 12 per cent in the first eleven months of 2013.

One explanation for this anomaly could be travellers planning their journey well in advance, say industry experts. According to Arup Sen, Director, Special Projects, Cox & Kings, “foreign tourists plan and book their holidays at least eight to nine months in advance. The impact (of the falling rupee) will be seen only on the bookings of the next season that begins in October 2014.”

There also appears to be a strong link between the state of the global economy and foreign travel in to India. In 2009, when the world economy shrank, foreign tourist arrivals fell 4 per cent. Over the next two years, as growth picked up, tourists poured into India. With the global economy again stuck in the low gear in 2012 and 2013, foreign tourism too lost pace.

Rajiv Kaul, President, The Leela Palaces Hotels and Resorts concurs with this analysis: “The rupee depreciation did not boost foreign tourist arrivals as expected, partly because the global economy continued to face a downturn, reducing outbound leisure travel, especially from the European and American markets. Besides, the country’s taxation policy for the sector makes it an expensive destination compared to other South-East Asian countries.”

With spending on leisure travel being discretionary, it is among the first to take a hit when times are bad. Business-related travel too improves when the economy is doing well and business sentiment is positive. However, despite the economic gloom, all is not lost for the tourism sector.

What has stood the tourism industry in good stead over the last couple of years is the robust growth in domestic tourism. In fact, even as foreign tourist inflows fluctuated in tandem with the health of the global economy, domestic travellers have increased consistently — the growth being in double digits. Between 2009 and 2012, domestic tourists grew at 12-20 per cent.

“We have grown in line with industry trends, with growth rates of around 25 per cent. Hotels in tourist locations such as Kerala, Goa, Agra, Rajasthan, Tamil Nadu and Gujarat have done quite well as much of the inventory has been absorbed by the domestic travel market,” says Arup Sen.

With recovery in growth in the US, which accounts for the largest share of foreign travellers to India, picking up pace, better days await the tourism industry. The UK, another big source of tourists, has also shown signs of growth in recent times.