22 September, 2020
India is one of the known tourist destinations in the world, thanks to the magnificent monuments, rich cultural heritage, and history. An added advantage has been the diversity offered in every aspect by different states that leaves tourists wondering if they even are visiting the same country.
This tourism is not only limited to options of sightseeing but also includes religious attractions and other medical/wellness tourism that involve Ayurvedic and spa therapy. Today, we have a look at the tourism industry from the perspective of an investor in order to provide insights into what picture it has to offer.
An Overview of the Tourism Sector in India
The tourism sector in India attracts close to 11 million foreign tourists every year. The Taj Mahal alone attracts nearly 6 million people. The domestic tourism industry brings in a huge contribution to the industry The Kumbh Mela saw a whopping 150 million visitors in 2019.
This has resulted in the Indian tourism industry growing at a fast pace (nearly 10% YoY). As of 2018 Tourism industry was one of the major growth drivers of India’s economy contributing close to $250 billion or 10% of the country’s gross GDP.
—What forms part of the tourism sector?
1) Tours and Travel Agencies
These include tour operators, travel agents, online travel agencies, etc. They offer tours and travel services packages in a single product. These packages include travel, accommodation, and guides These services and packages are also provided online. For eg. Thomas Cook, Cox and Kings, Goibibo, Makemytrip.
The transport sector connects tourists and destinations around the world. This sector is comprised of the Airline Industry, Car Rentals, Water Transport, Railways, etc. If we look into the aviation industry in India, a few of the leading companies are Indigo, Spice jet & Jet Airways. Further, in the railway, the only publically listed company in India is IRCTC.
3) Accommodation and catering
The Accommodation sector forms one of the most integral parts of the tourism industry. This is because tourists need a place to stay and rest. These may range from top-class hotels, camping, or rented accommodations. Taj Vivanta, Club Mahindra, Airbnb, etc. If we look into affordable housings, OYO has made a remarkable presence in this sector.
4) Food and Beverages
Apart from being one of the basic needs, it is also safe to say that this sector alone attracts a portion of tourists both domestic and foreign. This includes restaurants, bars, cafes, nightclubs, etc.
5) Other Connected Sectors
These include attractions, financial services (currency exchange), the entertainment sector( casino, shopping malls, theme parks), etc. For Example Goan Beaches, Imagica waterpark, UB city.
Why should you invest in the Indian tourism sector?
General Scenario while Investing in Incredible India
Apart from the potential already mentioned above, there are multiple reasons why one should invest in the tourism sector. The most important being the government support. The government has brought forward many schemes like Incredible India in order to market and boost tourism. The government has also allocated funds and introduced policies that are aimed at preserving tourist sites.
In 2014, the government introduced the e-tourist visa which enabled tourists to get an Indian visa quickly online. The government in order to gain tourist confidence also introduced a Tourist police task force specifically established to ensure the safety and security of tourists.
Investing in Incredible India during COVID-19
It may come as a surprise if you were told that there may be a ray of opportunity in investing in the tourism-related sectors during the pandemic we are in. This is because of all the sectors it is tourism that is the worst hit. This has sent the stocks of most tourism dependant companies tumbling.
But it is also important to foresee that the pandemic will end one day with the introduction of a vaccine. This, in turn, has the possibility of leading to an explosion of tourism after people have spent months cooped up in their homes due to fear of traveling.
While Investing in Incredible India theme, one should remember that the tourism industry although distressed currently will not always remain so. The major assets i.e. monuments, cultures, traditions remain despite the pandemic. Selecting stocks that have the ability to weather the storm provides investors with the opportunity to ride the profits in the short term.