INDUSTRIAL ANALYSIS

TOURISM

(2008-2010)

1

Declaration
I here by declare, to the best of my knowledge and belief, that this project titled “Industrial Analysis on Tourism” is an original project done by me, submitted to the Department of Business Administration, in partial fulfillment of the requirements for the award of the degree of Master of Business Administration, in the academic. I also further declare that this project work has neither been reproduced nor submitted else where to any other university for any other purpose, to the best of my knowledge and belief.

Place: Date:

2

INDEX
Particulars
Chapter 1- DEMAND DETAILS 1.1 Product details 1.2 Technology details 1.3 Investments 1.4 Other Points Chapter 2 – INDUSTRY STRUCTURE 2.1 Structure 2.2 Barriers in industry Chapter 3 – INDUSTRY ENVIRONMENT 3.1 Fragment 3.2 Emerging 3.3 Decline Chapter 4 – INDUSTRY PARTIES 4.1 Policies 4.2 Research and Development 4.3 Role of Service and Advertising Chapter 5 – INDUSTRY ATTRACTIVENESS 5.1 Potential 5.2 Industry Growth 5.3 History 5.4 Life cycle stages Chapter 6 – INDUSTRY PERFORMANCE 6.1 Sales 6.2 Profitability 6.3 Technological Advancement Chapter 7 – Conclusions & Suggestions

Page No
4

16

28

37

46

55

60-63

3

Chapter-1

DEMAND DETAILS

4

Product Details:
The tourism product which is mainly destination (tangible) can only be experienced (intangible). The panoramic view of the location (destination), travel to the destination, the accommodation & facility as well as entertainment at the destination all forms the tourism product. Thus tourism is a composite product combination of attraction, facilities and transportation. Each of these components has it is own significance in the product mix and in absence of even one single component, the product mix is incomplete.

Attraction of the destination, include: • • • • Natural site: Beach resorts, hill stations. Places of historical interest: Monuments, archeological sites and Events: Trade fair, musical festival, games, etc. Cultural attractions: History & folklore, theatre, religion, arts, etc.

museums.

Facilities compliment attraction. These make it possible for the tourist to stay & enjoy the attraction.
• •

Accommodation: Hotel, hostel, campsites. Food: Restaurants, cafes, bars.
5

• •

Local transport: Taxis, coaches. Recreational facilities: Entertainment, sport activity, shopping

facilities.

Accessibility is the means by which the tourists arrive at the location as without the transportation facility the attraction is of no use.
• •

Infrastructure: Roads, rail, airport, etc. Equipment: Speed & size of the vehicle.

With increasing number of destinations, travel methods & choice of accommodations, the firm offers these products in the form of package tours to facilitate consumers to choose from the combinations. These package tours cater to varying tastes, economy, attitudes & the need for exclusive service. The idea that service products are intangible is an important one, but increasingly firms are trying to make their offering more tangible, and thereby increasing their recognition amongst the target-buying group. Tangible gifts such as toiletries, flight bags, even bath robes bearing the company’s logo or brand name.

Branding plays a very important role in tourism marketing. Hotel chains, airlines, & travel operators in particular employ tremendous efforts to ensure
6

that their name is widely recognized & synonymous with quality, value etc. Product positioning helps in identifying the images & perceptions of the tourist products as well as tourists organizations, which match the needs of the tourist customers.

Technology Details
The tourism industry is broadly people centric. The work starting from destination enquiry, selection, booking, ticketing, etc. everything has a human touch to it. Even now people providing such service sit with their customer to make them decide on their spots. Now, with the advent of modern technologies some jobs such as ticketing & hotel reservations are done through internet and the industry is progressing towards medium contact.

Technology plays a major part in the promotion of a place. Better communication facilities are one of the first prerequisites for growth in the inflow of tourists. This has been made possible with technology. Better technologies in the field of communication with cheaper costs have seen

7

many remote and inaccessible areas of the country get connected to the rest of the world. This connectivity has made these places visible to the world.

Similarly better transportation facilities have led to a dramatic increase in the number of tourists visiting any particular place. The presence of an airport and the availability of frequent flights are a great convenience to any traveller.

Investments
Investments by the state:

With a view to encourage flow of investments into development of tourism infrastructure, the state tourism has formulated the investment subsidy scheme.This would hinge on the scale of investments and also on the regions where the tourism projects come up. The micro tourism units with an investment up to Rs 25 lakh can avail an investment subsidy of 25 per cent in special tourism zones (STZs) and 20 per cent in other regions. For the mini tourism units with investments in the range of Rs 25-50 lakh, the investment subsidy would be 20 per cent of the investment
8

amount or Rs 7.5 lakh for the projects coming up in the STZs. For setting up projects in other regions, the mini-tourism units are entitled toan investment subsidy of 15 per cent of the invested amount or Rs. five lakh. Similarly, the small tourism units pumping in Rs 50 lakh-Rs one crorecan enjoy an investment subsidy up to 10 per cent of the invested amount or Rs 7.5 lakh. In case of projects being developed in STZs, they can avail an investment subsidy of 15 per cent or Rs 10 lakh.The medium as well as large tourism units are also eligible for interest subsidy on term loans. The medium tourism units who invest in the range of Rs 1-10 crore are eligible for an interest subsidy of five per cent on term loans while the large tourism units with investments from Rs 10-50 crore can get an interest subsidy on term loans. In case of mega tourism projects with capital investment exceeding Rs 50 crore, the state government may consider a special package, excluding the tax based incentives, on a case to case basis. The interest subsidy would be paid only for the first five years from the commencement of commercial operations of the project.

Foreign Direct Investment:
Government of India is allowing 100% FDI in Hotels and Tourism, through the automatic route and alsoidentified the investment opportunity of about $8-10 billion in the next 5 years in tourism sector. India hassignificant potential for becoming a major global tourist destination. It is estimated that tourism in India could contribute Rs.8,50,000 crores to the GDP by 2020 ( approx. 1800 million USD) if you properly planto develop and invest on Connectivity Infrastructure, Tourism Infrastructure, Tourism Products, CapacityBuilding and Promotion & Marketing (WTTC report). It is estimated there is a need of around 10 BillionUS $ required for development of tourism as per the different state tourism estimates

9

for the next fiveyears. When you think about the long term capital requirement of all states, it is estimated around 56billion US $ for the next 20 years. A rapidly growing middle class, the advent of corporate incentive travel and the multinational companiesinto India has boosted prospects for tourism. India's easy visa rules, public freedoms and its manyattractions as an ancient civilization makes tourism development easier than in many other countries. Inorder to attract more visitors, India needs to increase room supply, open further its skies to increase aircapacity, and upgrade its airports, roads and other infrastructure to global standards. Also tourismdevelopment needs to be pursued with a focus on sustainability. Though the Government of India is allowing 100%FDI in automatic route to India in tourism sector andthere is a wide gap between the demand and supply of hotel rooms and other tourism infrastructureprojects, we have attracted the FDI for a volume of 660.87 million US $ which is 1.46% of the totalFDI inflow into our country from April 2000 to December 2007.

Reasons for FDI investment in Tourism:
• Economic liberalization has given a new impetus to the hospitality industry. • The Indian hospitality industry is growing at a rate of 15% annually. The current gap betweensupply and demand expected to widen further as the economy opens and grows. • The government forecasts an additional requirement of 200,000 rooms by the turn of the century. • The travel and hospitality industry continues to be the sector, which has largely profited from the fastgrowing economy of India. This has largely been due to the
10

3.9 m tourist arrivals in FY06 (15%growth) over the previous period. The compounded growth in tourist inflow over the last ten years(FY89-FY09) has been 8.2%, while in the last five years, growth stands at 9.1% per annum. • This increase in the number of tourist arrivals in the country lifted the country’s standing in the worldof tourist destinations. The country is ranked fourth among the world’s must see countries. Thesector continues to face certain problems. • The country continues to be marred by poor infrastructure facilities like poor road management, rail and air and sea connectivity. However, the present government in its endeavor has taken a few initiativeslike opening of the partial sky policy. This allows private domestic airline operators to fly on theIndian skies. Some states continue to be in political uncertainties. • As per the 2004 findings, the total number of approved rooms by the Government of India stands ataround 99,000 (estimated). These rooms are further classified into various segments out of which,five star and five star deluxe hotels account for around 27% of the total capacity, three star hotels(22%), four star (8%), two star (9%), one star and Heritage hotels (2% each) and the rest is dividedbetween unclassified and unapproved hotels. • A rapidly growing middle class, the advent of corporate incentive travel and the multinationalcompanies into India has boosted prospects for tourism. India's easy visa rules, public freedoms andits many attractions as an ancient civilization makes tourism development easier than in many othercountries. • The five star hotel segments have grown the fastest during the last five years at a CAGR of 12%.Further, this segment can be divided into 3 sub-segments Luxury, Business and Leisure. The growthin this segment indicates the genre of travelers coming into the country. Over the last few years thecountry has witnessed a large influx of business travelers in the country owing to relaxation of thegovernment’s stand on Foreign Direct Investments (FDI) for most of the sectors in the country.

11

• Many foreign companies have already tied up with prominent Indian companies for setting up newhotels, motels and holiday resorts. The entry of McDonald’s, PepsiCo’s Kentucky Fried Chicken,Domino’s and Pizza Hut has given an international glitz to the hospitality sector. • It costs an average of US$50-80 million to set up five-star hotels with 300 rentable rooms in India.The gestation period is usually between three and four years.

Reasons for Low FDI in Indian Tourism
The following are the some of the reasons for low foreign direct investment in this sector. They are: • Multitude of taxes: Ours is the highest tax structure on tourism projects in the Asia Pacific region. Multitude of central and state taxes- luxury tax, expenditure tax - is the fundamental problem plaguing the tourism sector. There is no national wide tax policy there by some international hotel chains are hesitating to establish their subsidiaries in the India. High Taxes: One of the fundamental problems plaguing the Indian tourism sector is a multitude of Central and State level taxes, which lead to an increased cost to the tourists. A comparison of the Corporate Tax level in India, which affects the hospitality sector, in comparison with our neighbours, shows India’s poor competitive positioning.

12

On the indirect taxes front also, India fairs poorly as compared to competing destinations. The followingtable and figure showcases tourism related major indirect taxes benchmarked across comparable locations.

13

Delay in FDI Approvals & Govt. Policies: Huge delay in Foreign Direct

Investment approvals in Hotel & Tourism sector. Due to delay in approvals and lack of guidelines in the tourism policy, the Alfred Ford’s proposed Himalayan Sky Village is pending since last three years. If it is approved it is one of the highest FDI in the country in tourism sector with US$ 300 million which also provides employment to around 3000 people. • Highest import duty on imported liquor used in hotels: Under the WTO Negotiations for Market Access under the Agreement of Agriculture (AoA), India had bound its tariffs at 100% for primary products, 150% for processed products (this is the relevant category for liquor) and 300% for edible oils, except for certain items (comprising about 119 tariff lines), which were historically bound at a lower level in the earlier negotiations.

14

With the additional duties and sales tax levied by the State Governments the cost of alcoholic spirits sold in hotels to bonafide guests is exorbitant. The international precedence for liquor related levies also do not substantiate the current level of taxes. Rationalization of the tax on liquor is therefore important to make. • Service Tax on Tour Operators: The services provided by a tour operator

typically includes a wide range of services covering transportation, boarding and lodging arrangements, local sight-seeing and guide services, etc. which are procured through sub-agencies. Even though 60% abatement is provided, taxation of the gross service amount leads to double taxation and increases the burden for the tourists.

Inland Air Travel Tax:Air connectivity and Pricing are proven to be critical

barriers in India’s ability to become competitive in the global tourism market. In the current context, domestic air travel is much more expensive than international destinations located at a similar distance. The disparity between Foreign Travel Tax (FTT) and Inland Air Travel Tax (IATT) is one of the major factors. FTT constitutes between 2%- 3% of the ticket price while IATT effectively constitutes 12%-13% of the total ticket price, except for north-eastern states where the latter has been exempted. The cost of domestic air travel is too high in India as compared to international standards. The primary reason for this is costly Aviation Turbine Fuel, which constitutes close to 40% of an airlines operating cost. This in turn is due to the structure of duties and levies prevalent in India. The basic customs duty of 20% with a CVD of 16% results in a total tax of 39.2%. The differential rates of sales tax being charged by state governments further complicate the duty structure. This has led to increased costs to the airlines, which in turn gets passed on to the consumer.
15

OTHER POINTS (if any)

16

Chapter-2

INDUSTRY STRUCTURE

17

18

2.0 Indian Tourism Corporate Chart:

19

2.1 Travel agents and tour operators
These men act as a fuel making the industry an run for money by providing the customers a complete satisfaction and also play a major role in bridging the gap between the customers and other players(countries).

Following diagram shows the channel of distribution in tourism industry:

Tourism Product

Attraction

Accommodation

Transport

Tour Operator

Travel Agent

Customer

20

Composition and Channel of Distribution (Structure)
Major industries that support tourism industry are depicted in the diagram below. These facilities decide the status of a place in a tourist's portfolio. They on one hand attract tourists to a particular destination and on the other act as a major demotivating factor if they are unable to fulfill the expectations of the visitors.

The middleman may be a tour operator, who is the wholesalers, who buy tourism products in bulk and make them available to travel agents who are retailers. The range of tourist products which are bought by the tour operators are airline seats, hotel accommodation, bus for local sight-seeing, etc. They may also sell directly to customers.

AIRLINE AIRLINE

HOTELS HOTELS

COMPOSIT ION

DESTINATION DESTINATION S S

TRAVEL AGENTS & TRAVEL AGENTS & TOUR OPERATORS TOUR OPERATORS

Airline Industry

21

Airports are the primary infrastructure facility that a country has to offer to the international tourists. It would be surprising to note that renowned tourist destinations like Jaipur and Goa do not have an international airport. Foreign guests, who constitute more than 60% of the tourists destined for these cities, currently have to travel via Mumbai, unless they are ready to charter a flight. This makes things cumbersome and time consuming, thus discouraging many time conscious tourists from visiting these places. Similar is the case of cities like Agra, Udaipur and Varanasi where foreign tourists account for approximately 50% of the total tourists arrival. SWOT ANALYSIS – Airline Industry

STRENGTHS

WEAKNESSES

Airline is the most preferred • Inefficiency of the domestic mode of transportation by the airlines- there are number of instances foreign tourists as the convenience of flight being cancelled or delayed. provided by the airlines is higher. • Lack of basic facilities at the • The savings in time that this airport. mode of transport offers is immense. • Government does not allow the capacity of existing airports to increase private and foreign operators are not given clearances to operate in the country.

22

OPPORTUNITIES

THREATS

As the tourism industry expands • Domestic airlines (Air India and the airline industry is also in for a Indian Airlines) face major competition boom. from other transnational airlines. • Development and up gradation • Other countries like Singapore and of the present airports china also try to grab potential tourists.

India's geographic location makes it an ideal location to serve as a link between the East and the West.

Hotel Industry
Hotel industry is an essential part of tourism. The expansion of tourism is well inevitable bringing out development of the hotel industry. Hotel industry is so closely linked with the tourism industry that it is responsible for about 50% of the foreign exchange earning form tourism trade and enterprises. The rising volume of tourism influx brought into light, the shortage of hotels in important tourists centres’. Keeping in view the changing standards in the international hotel keeping,the Indian industry has to make a number of improvements. It’s not enough to have adequate hotel accommodations, it is equally necessary to have at various levels, low priced, moderately priced, high priced, and a few luxury hotels.

23

Hotels may be categorized depending upon factors such as: • Locations • Categorization according to plan • Categorization according to number of rooms. • Categorization by type of clientele. • Categorization by the length of stay of guests. • Categorization by the facilities that the hotel offers. The Indian hotel business focuses largely on foreign tourists with only 30% of the business coming from the domestic business and the leisure travels. The tourist arrivals in India are seasonal in nature, with the best season being from September to December followed by a steep fall till May. The period June to September gains momentum once the monsoons are over. The slack season is generally used for renovation work and the period is characterized by discounts to attract clients. Hotels form one of the most important support service that affect the arrival of tourist to a country. The major players in the industry are Indian Hotels Company Ltd (IHCL) operating under the Taj brand, the Oberoi, Oriental Hotels, Hotel Leela Venture and the Ashoka chain of hotels, owned and operated by the Indian Tourism Development Corporation (ITDC).

24

SWOT ANALYSIS – HOTEL INDUSTRY

STRENGTHS • A very wide variety of hotels is present in the country that can fulfill the demand of the tourists. • There are international players in the market such as Taj and Oberoi. Thus, the needs of the international tourists travellers are seen to while they are on a visit to India. • Manpower costs in the Indian hotel industry are one of the lowest in the world. This provides better margins for Indian hotel industry.

WEAKNESSES

• The cost of land in India is high at 50% of total project cost as against 15% abroad. This acts as a major deterrent to the Indian hotel industry. • The hotel industry in India is heavily staffed. Indian hotel companies have a staff to room ratio of 3:1, this ratio is 1:1 for international hotel companies. • In India the expenditure tax, luxury tax and sales tax inflate the hotel bill • India offers a readymade tourist by over 30%. Effective tax in the destination with the resources it has. South East Asian countries works out Thus the magnet to pull customers to only 4-5%. already exists. • Only 58,000 hotel rooms are available in India today, which is less than the Bangkok hotel capacity. • The services currently offered by the hotels in India are only limited value
25

added services.

26

OPPORTUNITIES

THREATS

• Demand between the national and the inbound tourists can be easily managed due to difference in the period of holidays. For international tourists the peak season for arrival is September to March when the climatic conditions are suitable whereas the national tourist waits for school holidays, generally the summer months. • In the long-term the hotel industry in India has latent potential for growth. This is because India is an ideal destination for tourists as it is the only country with the most diverse topography. For India, the inbound tourists are a mere 0.4% of the global figures. This number is expected to increase at a phenomenal rate thus pushing up the demand for the hotel industry

• Guesthouses replace the hotels. This is a growing trend in the west and is now catching up in India also, thus diverting the hotel traffic. • Political turbulence in the area reduces tourist traffic and thus the business of the hotels. In India examples of the same are Insurgency in Jammu Kashmir and the Kargil war. • The economic conditions of a country have a direct impact on the earnings in hotel industry. It can see that the present economic slowdown in India has led to a 51.6% fall in the industry average net profits for the second quarter of the current financial year, 2000.

Destinations

27

These include the several religious, historical and trade places in India like Delhi, Agra (TajMahal), Rajasthan, Tirupathi, Mumbai, Hyderabad, Manali, Goa etc. which are not just tourist hot spots but also business Centre’s for tourism industry.

Some of the most Popular tourist destinations in India:

Dal lake-Kashmir

Taj Mahal-Agra

28

Kerala

Charminar-Hyderabad

2.2 Barriers in Industry
• Government:

The government is the most important player in this industry and all the other players have to follow the lead taken by it. However, the actions of the government have not been proactive. Rather it has been late in rising to the opportunity that the tourism industry offers. There are not enough incentives being offered to the other players like Hotels and the travel agencies. The government should be taking the lead and attracting the industry to places that have vast tourist potential but have still not fully developed. There are various restrictions in areas like Sikkim and the Northeast that should be relaxed so that more people can visit those places.

• Infrastructure:

Poor

Delayed or absence of connectivity to different locations, lack of proper accommodation facilities, bad roads and no communication facilities are some of the factors that are stopping people from visiting many places. Unless the
29

infrastructure is properly developed, a large majority of tourists will give the country a skip.

• about the law and order situations:

Apprehensions

The lack of security that is faced by a lot of tourist is also a major cause for concern. There have been many instances where tourist have been physically assaulted, robbed and sexually harassed. Any such incident reflects badly on the country and creates a negative image.

• about the Country:

Misconception

The image of the country has taken a long time for the change from the old image of the land of snake charmers. There are many places where the image of India is one of poverty, superstition, and diseases. One of the main reasons why tourist do not visit the country has been the fear of been infected by some exotic disease. The case of Plague in Surat in 1994 led to a decrease of 36% in arrival of foreign tourists in India All these misconceptions unless addresses immediately will create a problem for the growth of the industry.

30

Chapter-3
31

Future

INDUSTRY ENVIRONMENT

Augmented

Formal

Core product

3.1 FRAGMENTATION

Total Product Concept:

32

The Destination Product :

Core prod uct Formal

The basic benefit The expected

An experience providing an insight into a different culture, tradition and lifestyle. • • Comfort during the tour Instruction manual provided for better

understanding of the places of visit; brand name – e.g.

33

Kerala known as “God’s own country” • Quality assurance and TQM – e.g. Kerala has

quality assurance and TQM implemented for all its products (backwater life and habitats and traditional houseboats), services and facilities. This implies it has complete cleanliness in its surroundings and eco-tourism is also assured. Providing the tourist with guide cassettes and also an interpreter to increase interactivity and understanding. Eg – tours to historical and archeological sites requires In addition Augmented to the expected benefit elucidation, which can be ensured through the mentioned means; serving multi-purpose tourism, i.e. forming a chain of destination, circuit theme by cuddling different states. Eg 1 – educational circuit, business circuit, pilgrimage circuit, beach circuit – Kerala backwaters, Goa ,TamilNadu. Eg 2 - Rendezvous with Maharashtra and the Mughals. Future Beyond the An experience through which a tourist gets physically usual, serendipity (pleasant surprise) invigorated, mentally rejuvenated, culturally enriched and spiritually elevated. E.g. – The New Rajasthan Gift: ‘Palace On Air’. British Airways will convert its 70-seater Boeing into a ‘flying palace’ with all possible luxuries flavored with the Rajasthani ambience. Tourists (who will be treated as Kings) will tour Rajasthan in Limousines (one for each) and will have personal assistants – ‘Darbaris’ to take care of
34

every need.

The Airline Product:
Transportation, serving food drinks, staff

Core product

The basic benefit

Formal

The expected

Cleanliness, timely flights, polite and courteous behavior, safety Comfortable seats, smiling employees, on par with international standards Welcome flowers, managers word of thanks, entertainment shows to delight and surprise the travelers on the flight

Augmented

In addition to the expected benefit

Future

Beyond the usual, serendipity (pleasant surprise)

The Hotel Product:

35

Core

The basic benefit

Serving rooms, food, kitchen and staff. Cleanliness, timely service,

Formal The expected

polite and courteous behavior, menu availability, music. Sparkling floors, ambience,

Augmented

In addition to the expected smiling employees, music of benefit choice, Welcome flowers, welcome drink. Cookies in the room,

Future

Beyond serendipity surprise)

the

usual, (pleasant

manager’s word of thanks, giving surprise parties to the guest and delight the guest. The emphasis is on relationship marketing.

TOUR-OPERATOR PRODUCT:

36

Core product

The basic benefit

Packaged tour which includes travel guidance, planning, pricing, accommodation, local travel and sight seeing

Formal

The expected

Insurance, airport pick-ups, foreign exchange assistance (Raj Travels), airline ticketing, safe travel guide, branding the product for easy identity. Eg – SOTC, Cox & Kings, etc

Augmented

In addition to the expected benefit

Payment option – ‘travel now, pay later’ (on the basis of bank affiliations), tourism on credit card (Raj Travels); premium offers – special package deals; guarantees – in case of cancellation of flights, tour failures, bad weather, etc. ; loyalty schemes; weather reports – of different countries, with month wise – maximum, minimum temperature, humidity and rain; recommended tours – for every age group and interests; take away gifts (souvenirs) - at the end of every tour

Future

Beyond the usual, serendipity (pleasant surprise)

Make your own package (customized packages); free photo sessions; video shooting – of the entire trip by the tour operators; incentives – with every tour package, one more, at half the price.

3.2 Industry Trend (Emerging or Declining)
37

The tourism industry not unlike the other industries grows with the increase in the spending of the people. The more the people spend the more the industry grows. The spending power of the people has been increasing in the country and all over the world. Since India is concentrating on the international tourists, the large increase in the spending power in most developed countries has left a large amount of idle cash in their hands. This has led to the tourism boom the world over and India has been no exception. The tourism industry has been growing steadily. Below are the charts depicting the growth in of the tourism industry various dimensions - Foreign tourist arrivals, Foreign exchange earnings, etc.

38

39

40

Chapter-4

INDUSTRY POLICIES

41

4.1 Policies
High capital expenditure acts as an entry barrier in the industry with the availability of prime land at economically viable rates being a major constraint. The gestation period is long and break even normally takes five to eight years to happen. Due to this the established players like Indian Hotels, E.I.H, etc. have an advantage over foreign majors as they already have well establishments at prime locations. India was late to wake up to the potential of tourism as an industry that is not just an earner of previous foreign exchange but also one that could generate a lot of employment through horizontal and vertical linkages. The importance and significance of tourism could be understood from the observation of UNESCO, which says, "Tourism is a traditional instrument, which enables culture to the rehabilitated and made know to the rest of the world". It is said it's a smokeless industry and has become second to the petroleum industry in world trade. This great importance was formally acknowledged when the XXIU.N General assembly designated 1967 as international tourist year with a unanimous resolution recognizing that "tourism is a basic and most desirable activity deserving the praise and encouragement of all peoples of government". When traveling away from home, tourist comes in contact with the places they visit with their inhabitants and social exchange takes place. Their presence and social background affect the social structure and mode of life at the destination. Tourists are in turn affected by the experience and and often carry back home with them, new habits and new outlook on life. Tourist has great educational significance. Contact between people of different races and nationalities widen ones outlook. Tourism, whether domestic or international has common economies significance in the sense that money earned in places visited large sums of transferred to the host economies where this money provided a source of income, a means of livelihood and amenities for the resident
42

population. Purchasing power is generated in the receiving areas through the expenditure of visitors. Money received is spent and resent and this multiplier process the host country is a beneficiary. International tourism is of great importance in international trade in the sense that it enters into the balance of payments of accounts of individual countries generating tourist traffic and export for countries receiving tourist traffic. For many countries is a major item in world trade. These countries exhibit faster growth in tourism than in trade of goods. Domestic and International Tourism Usually, a distention is drawn between domestic or internal and foreign of international tourism. In domestic tourism people travel outside their normal domicile to other areas within the country. Barriers like language, currency and documentation are not in the domestic tourism. But in India, since difference estates have different languages;one’s own language may not serve a medium of communication. Domestic tourism has no balance of payment implications. When people travel to a country other than which they normally live in is known as international tourism, the distinction between domestic and international tourism is now diminishing. The reasons being: • Language barriers are reduced by improving language skills • Currency and customs unions are developing in many European countries. • With globalization the free movement of people is growing. Considering the greater multiplier effect in domestic tourism, domestic tourism would have received greater emphasis in India. Reliable data on the growth of domestic tourists traffic are not available as not extensive survey has been conducted on a national level by any agency, government or otherwise not given the numerous festivals celebrated throughout out the year, the innumerable tourist's centers in the country, the geographical
43

expands and the resource constraints, estimates of documents tourists' traffic through an executive survey is considered impossible. Domestic tourism if considered separate from the travel for religious and commercial purpose. It is a post-independence phenomenon. Industrial growth, improvement in the standard of living, rise in disposable income and most importantly the improvement of tourist infrastructure search as hotels, air, train and road transport has contributed to the impressive growth in tourist traffic. The definition of a domestic tourist is a person who travels within the country to a place of residence and stays at hotels or other accommodations establishments run on commercial basis or in dharmashalas, sarais, chaultries etc. for duration of not less than 24 hours. The factors that govern the magnitude of domestic tourist traffic are the religious and cultural importance of a place. The extent of manufacturing, business and trading activity, the climatic conditions, the infrastructure facilities available and the geographical location etc. the current rough estimate of domestic tourism in India is ten million a year.

4.2 Research & Development:
Effective Market Research to ‘Understand Tourists’ Conducting extensive market research to know about the desired destination attributes and tourists’ satisfaction might be one part of the overall ‘competitiveness enhancement strategy’ for Indian Tourism Industry. In this context a research undertaken by Mauritius Tourism can serve as a model. It conducted a year long survey at their main airport and covered all tourists of their target market, at the time when they were leaving the country. This research provided them critical insights about the experience and aspirations of their target

44

market which helped in further boosting up their bread and butter industry by making it more attractive and pleasurable for those who matter. India can replicate the model after making obvious adaptations. Restructuring ‘Organization Structure’ and ‘Planning Framework’ Tourism and Melbourne Tourism – Beginning from the top level, in order to be competitive, a competitive organizational structure’ and ‘planning framework’ are a prerequisite. Structural setup at the top of Indian Tourism Industry is not sufficiently business / industry oriented and is adversely affecting the all important work of framing the plans, policies and guidelines, which then affect the implementation of the same at the lower levels. The adverse affects are visible in the structure and working of the government owned establishments in this industry (tourist bungalows, hotels, railways and other transport, HR in TDC, destination management etc) who do not seem to belong to this industry. Till the seventh 5 year plan (1985 – 90) tourism was never given the importance it deserves and poor planning and lack of coordination, characterized by ambiguity and vagueness and contradictory policies, led to an unregulated growth of tourism in India. In other words the whole structure at the top and the foremost function of planning are not competitive enough to provide Indian Tourism Industry with a strong foundation and right direction. In this context, the structural model of Canada Tourism which is business oriented and suitable for a highly competitive environment, can be considered after obvious adaptations for Indian requirements. Canada tourism has specifically chosen 10 destinations and divided them in 3 regions (Asia- Pacific, North America, European / Latin America) as their target market with separate marketing departments for each and in this way it has achieved accountability and focus. They research, identify and monitor the ‘key
45

trends’ in tourism for each of their target market and on that basis conduct a thorough SWOT analysis of each region and finally, set specific priorities for each region as to what to achieve. This structure creates “target market specialists” who understand the tourists from their target markets and thus are better equipped to satisfy them. The Marketing Department is engaged in toplevel guidance, planning and research and it is supported by a sales department that implements marketing development activities and leads the media and promotion activities. Effective Destination Management through Encouraging Business Operators for Adopting Higher Standards - Case of Great Barrier Reef Marine Park (Australia) – Destination Management is another area where Indian Tourism Industry has performed miserably and negatively affects the impression of tourists. The Great Barrier Reef (Australia) presents a remarkable case of destination management and it falsifies the great Indian myths about destination management that ‘large number of tourists and large areas are tough to manage’. This marine park has a boundary of 2300 kms. and it welcomes 2 million tourists and 4.9 million recreational visitors every year. The Great Barrier Reef Marine Park Authority (GBRMPA) has been created by Australian Tourism to manage this destination and the marine park has recently won the ‘best destination’ prize GBRMPA encourages tourism business operators to take up – “The EcoCertification Program” (developed and operated by Ecotourism Australia, for ensuring, identifying and monitoring high standards in ecologically sustainable tourism operations and thereby helping in protecting and managing the destination) and it rewards business operators, if they adopt high standards or

46

improve their performance in ecotourism through lucrative incentives, like – extending duration of their work permits, listing them on official website and publications (Australian Ecotourism Directory etc), showcasing them at various important tourism related events (exhibitions etc).

4.3 Role of Advertising
Creation of awareness is an important factor in the formulation of marketing mix for the tourism industry. The aim of promotion falls into three main categories: • • • To inform To remind To persuade

It will always be necessary to inform prospective customers about new products and services, new uses, price changes, information to build consumer confidence and to reduce fears, full descriptions of service offerings, image building (of destinations) etc. Some of the important aspects of advertising are• Advertising and sales promotion- these activities are very effective when supplemented by publicity and personal selling. Advertising messages range from subtly attractive visual messages and symbols designed to appeal and stimulate travel desires and needs, to simple sales announcements drawing attention to specific product offers. • Most travel and tourism advertising is aimed at consumer or the travel trade aiming specifically on a tourist product but large organizations like airlines and hotel groups also buy media space to communicate the name and image of the organization as a whole.
47

• Public relations and publicity- This include regular articles and photographs of the tour attraction, use of TV, radio holiday program and travel journalists to promote editorial comments. • Word of mouth- research shows that about 80% of the tourists visited different places on the persuasion of their friends and relatives and also their own judgement. This indicates word-of-mouth promotion is an important tool in tourism marketing. • Incentives - Incentives to agents, customers and sales force are also given to induce immediate response like-price cuts, discount vouchers to use certain facilities in the location, free gifts, price draws etc. • Brochures- these are provided by the tour operators to stimulate customers and motivate them to buy. They are used to demonstrate in pictures and words the image and positioning of the product and organizations. New concept in promotion - “PIPELINE PROMOTION” Hotel owners and airlines need to promote their services to tour operators who are in effect wholesalers of travel services and products as well as promoting their service to end users and independent travellers. Similarly tour operators will want to ensure that travel agents sell their services in a positive manner and will therefore want to advertise to the agents the benefits of selling their tours whilst advertising a totally different set of benefits to the end user.

The Incredible India Campaign
This campaign which was started in December 2002 is the first intensive initiative from the tourism department towards increasing tourist inflows to India. The campaign touts the country’s Mystical, Spiritual and Healing traditions. It focuses on small, unexplored tourist spots.

48

The Department of Tourism won the PATA GOLD AWARD (2003) for BEST MARKETING in print media category.

Achievements of the campaign:
• • • • • Foreign exchange earnings went up by 23 % (2003). International tourist arrivals increased by 16 % . Total earnings increased from Rs.14000 cr. to Rs.17200 cr. INDIA selected among the top 10 preferred destinations: “The Conde Nast Among the top 5 destinations: “The Lonely Planet Travel Guide”.

Traveller”.

49

Chapter-5

INDUSTRY ATTRACTIVENESS

50

5.1 Potential
India is a multi-destination country with a variety of tourist attractions and facilities. It is the second largest net foreign exchange earner by way of invisible exports. Tourism creates more jobs than any other sector for every rupee invested. It has a major role in promoting large-scale employment opportunities. Keeping this in view, it has been granted the status of an industry. Several incentives have been made available by the Central and State governments to this sector. These efforts have largely promoted tourist arrivals in the country during the first quarter of this year. Foreign exchange earnings during this year have registered a significance increase of 9.3 per cent so far. The total earnings up to March 2001 were Rs. 4,430.79 cr. In dollar terms it was US$ 977.18 million. In view of the fierce competition in tourist generating markets from several countries, it becomes necessary for India to strengthen its promotional and marketing efforts continuously even to maintain its existing marketing share. Steps are, therefore, being taken to develop and implement strategic marketing programs based on market segmentation analysis. Efforts are continuing to focus on cultural heritage as well as pilgrim tourism, extensive use of technology measures to improve tourist information, laying stress on NRI and ethnic segments, special campaigns promoting India in summer and monsoon months and promotion of yoga and Ayurveda for mental, physical and spiritual health.
51

5.2 Industry Growth
India's tourist industry is booming due to a rush of foreign tourists and increased travel by Indians to domestic and overseas destinations. Nearly four million foreign tourists visited India in 2008, a 15% increase over the previous year. Prospects look even better this year, with tourist arrivals already up nearly 20%. The visitors are pouring in from all over the world: Europe, Africa, Southeast Asia and Australia. At the same time, the number of Indians traveling abroad last year increased by 30%, to 4.5 million. The boom has come even as global tourism has dropped, due to the September 11 terrorist attacks in the United States, the outbreak of Severe Acute Respiratory Syndrome in East Asia, and the Iraq war. Tourism professionals cite several reasons for the buoyancy in the Indian industry. The recent surge in the Indian economy has raised middle class incomes, prompting more people to spend money on vacations abroad or at home. At the same time, India's emergence as a global information technology hub and an aggressive advertising campaign by the government are credited with changing India's image from that of a land of snake-charmers, and sparking new interest among overseas travellers.

52

5.3 History
ITDC came into existence in October 1966 and has been the prime mover in the progressive development, promotion and expansion of tourism in the country. Broadly, the main objectives of the Corporation are: To construct, take over and manage existing hotels and market hotels, Beach Resorts, Travellers’ Lodges/Restaurants; To provide transport, entertainment, shopping and conventional services; To produce, distribute, tourist publicity material; To render consultancy-cum-managerial services in India and abroad; To carry on the business as Full-Fledged Money Changers (FFMC), restricted money changers etc; and To provide innovating, dependable and value for money solutions to the needs of tourism development and engineering industry including providing consultancy and project implementation.The authorised capital of the Corporation is Rs 75 crores and the paid up capital as on 31.3.2005 was Rs 67.52 crores. 89.9748% of the paid up equity capital of the Corporation is held in the name of President of India. The Corporation is running hotels, restaurants at various places for tourists, besides providing transport facilities. In addition, the Corporation is engaged in production, distribution and sale of tourist publicity literature and providing entertainment and duty free shopping facilities to the tourists. The Corporation has diversified into new avenues/innovative services like Full-Fledged Money Changer (FFMC) services, engineering related consultancy services etc. The

53

Ashok Institute of Hospitality & Tourism Management of the Corporation imparts training and education in the field of tourism and hospitality. Presently, ITDC has a network of eight Ashok Group of Hotels, six Joint Venture Hotels, 2 Restaurants (including one Airport Restaurant), 12 Transport Units, one Tourist Service Station, 37 Duty Free Shops at International as well as Domestic Customs Airports, one Tax Free outlet and two Sound & Light Shows. Besides, ITDC is also managing a hotel at Bharatpur and a restaurant at Kosi on behalf of the Department of Tourism. In addition, it is also managing catering services at Western Court, Vigyan Bhawan, Hyderabad House and National Media Press Centre at Shastri Bhawan, New Delhi.

Delhi Declaration:
To promote tourism interests, the World Tourism Organization (WTO) organised, a South Asian Ministerial Summit on Joint Promotion and Marketing of Tourism’ with support from the South Asia Travel and Tourism Exchange (SATTE), on April 23,2001 in New Delhi. The Ministerial Summit was presided over by the Minister for Culture and Tourism, ShriAnanth Kumar. It was held within the framework of SATTE 2001. The major conclave is yet another manifestation of the solidarity among the South Asian nations to further promote the region on a collective basis in the primary source markets. The Summit has also marked the beginning of a new and lasting relationship between WTO’s Member States in South Asia and SATTE which has emerged as the premier forum for marketing South Asian Tourism. The South Asian Tourism Ministers’ Meet has suggested a joint marketing plan to promote the region as one tourist destination and to celebrate 2003 as the visit South Asia year. The three-day meeting was attended by Pakistan, Bangladesh,
54

Sri Lanka, Nepal, Bhutan and Iran, besides India. The Ministers participating in the meeting were of the opinion that despite an overall growth of 9 per cent last year in the region, the total tourist arrival was less than 1 per cent of the global marketing share. Inadequate projection and negative perception of South Asia held by some of the travel trade and prospective tourists in the main tourist generating markets was one of the factors to be addressed urgently. The Minister of Tourism, ShriAnanth Kumar, said that a time-bound action plan would be taken up very soon for marketing the South Asia region as an emerging destination. WTO’s Expertise would be sought to chalk out the financing, review and monitoring mechanisms. A coordinating meeting would also be set up as the organizational link between the Governments and the industry in the region and to draw a strong public-private partnership program for promotion of tourism, he said. After the meeting, the participating countries signed The Delhi Declaration which suggests their joint commitment to promote the region as one destination. The Declaration suggested a common logo and slogan, joint participation of South Asia Tourist village at prominent travel trade fairs the world over, organizations of South Asia Travel Mart in rotation in member countries, joint advertising and hosting of multi-country familiarization trips for travel agents, tour operators and media persons. It also suggested creation of a dedicated regional tourism web site and development of South Asia Travel Agents’ Accreditation Scheme – based on an agreed curriculum and testing procedure. The meeting was attended by the Ministers of Sri Lanka, Nepal, Maldives, Iran and representatives of Pakistan and Bangladesh. The Secretary General of World Tourism Organization, President, European Commission, Chairman of Ceylon
55

Tourist Board and industry leaders, representatives of airlines, hotels and travel trade also participated in the meeting. During the deliberations India and Nepal agreed to set up a working group to identify areas of cooperation in tourism which may include combined tourism circuits, cooperation in infrastructure development and joint marketing of tourism products. Both the countries will also sign a tourism agreement to provide for a task force for implementation and review progress once in six months. During the meeting, both the sides decided to form Buddha Circuit including the birth place of Gautam Buddha in Nepal and the places in Indiawhere he preached. A Religious Circuit including PashupatiNath and Muktinath in Nepal and Kashi in India also to be formed. An Adventure Circuit was also proposed in view of the keen interest in mountains and rivers of both the countries the world over to be jointly marketed by India and Nepal. To spread greater awareness about the country’s rich heritage and to encourage conservation and restoration efforts, South Asia Travel and Tourism Exchange (SATTE) and Indian National Trust for Art and Cultural heritage (INTACH) have joined hands to institute awards for excellence in the field. Both SATTE and INTACH are committed to conservation of India’s natural and cultural heritage, long-term sustainable tourism and preservation of the living culture of local communities at heritage sites. To offer support and promote responsible tourism that is sensitive to the heritage of the country, SATTE and INTACH have instituted an award in each of the three categories - a conservation project at a heritage site of excellence in concept and execution; an innovative heritage tourism project that provides a sound interpretation of culture and offers the visitors a unique opportunity to understand
56

the many layers of India’s heritage and a tourism project that contributes to protection and enhancement of its natural and cultural environment.

5.4 Life Cycle Stages:
The life cycle of the tourism product

As in other economic sectors, tourism follows a "product life cycle", with a curve similar to that of the above graph. In this process several stages can be identified: STAGE 1: DISCOVERY During the early "discovery stage" of the cycle a small number of unobtrusive visitors arrive seeking "unspoiled" destinations. These early "explorer" tourists generally speak the language and identify with the local culture. The social impact in this stage is generally small and resident attitudes are fairly positive towards tourism. STAGE 2: LAUNCH During this stage the number of incoming tourists increases. The host community responds to the increasing numbers of tourist by providing facilities. Businesses
57

remain family based and the visitor-resident relationship is still harmonious. Later in this stage, visitor numbers increase and the community becomes a tourist resort. Outside interests become involved developing businesses and tourist facilities. This is typically the stage during which TNC (Trans-National Corporations) foreign investment enters the cycle. Migrant workers, attracted by the prospect of tourist-related jobs, may enter the community and reduce resident contact with visitors. The tourist-relationship is converted into one of business as the novelty of new visitor arrivals declines. The more culturally sensitive "explorers" move on to new "unspoiled" areas and are replaced by the mass market. STAGE 3: STAGNATION The stage in which saturation is reached. The quality of tourist services falls, demand levels off, and the environmental degradation of the tourist destination begins to be obvious and worrying. The tourist destination at this stage is said to have reached 'maturity'. STAGE 4: DECLINE which represents the current state of mature tourist destinations on the Costa Brava in Spain. Falling profits lead to foreign-owned businesses withdrawing and the community is left to "pick up the pieces".

58

Chapter - 6

INDUSTRY PERFORMANCE

59

6.1 Profitability:

60

6.2 Technological Advancement:
E–Commerce All those web sites and portals launched by government as well as private organizations would offer a wide range of tourism products and services like airlines, hotels, restaurants, camp-sites, tours, activity centers, concerts, festivities, shopping and many more with choicest of assortments of services. Plan the tour online through agents’ web sites. Reservation or shopping of facilities for train, airlines, cruise, hotels, resorts, motels, rental cars and adventures can be done on line. Still leaving a part of simple web based portal, which just provides static information & beautiful pictures with less updated knowledge and data transfer, tourism industry is expecting more practical and satisfied chain solutions from Information Technology.

61

Advance technologies in Tourism Industry Rather than .Com & e-commerce, travel and tourism industry is looking for solution like E-Business or U-Business (Universal Business) solutions. Customer relationship management CRM based system enables service provider to provide knowledge, value and efficient service to its clients. CRM enables service provider to build up a life time relationship by providing on time solutions. Especially tourism industry needs excellent CRM solutions to assist visitors or clients before flying on tour, during tour and always after tour services. CRM solutions can be provided to a visitor through web, email, call centre, kiosks and travelling information offices anytime & anywhere. What an experience! We are standing at "TajMahal" and we are able to read history details with all graphics and animated roles on multimedia kiosks. Even we can check our further travel registration request process through kiosks. So much beyond our imagination. Value chain integration Tourism industry is a chain of many service providers. In long term solutions, cost cutting & effectiveness in data & information transfer, speed in transactions and looking towards heavy multimedia based services – back end systems need excellent value chain integration through solutions like SCM, ERP and CRM. However till today applications of SCM and ERP are not up to the industrial remarks as tourism industry is kind of service industry.

62

Knowledge Management Systems KM and business intelligence systems have wide scope of implementation in Tourism industry. Well, well, well we can imagine it. Comparing history timelines and providing instance knowledge about place on the spot makes eager to know more about place to a tourist. Even information enables analyst to find tourist’s behaviour and trends with data and information. To find out customer’s demand is no more difficult task. Use of advance technologies Interactive Digital Television (IDTV), Mobile technologies and Internet are carving new faces in customer services for tourism industry. That’s great for adventure tourist. Where am I? You are in dangerous forest. Beware!! Through a mobile, tourist can be guided through cultural heritage through multi – language voice, text or images. Even it is possible for a tourist to find details on fees, opening days and timings for nearby places. Find bookshop, cafe, restaurant or ATM from where ever we are. Wishing you a Happy journey : In advanced countries, e – tourism concept was applied and put in practice in last decade. However e – tourism is still in growing phase with advance technology’s application. But for developing countries and underdeveloped countries it is under utilization phase. With application of e-tourism, the travellers would be able to make online reservation, bookings and receive immediate confirmation; this would remove a lot of obstacles that are faced by a tourist.
63

Chapter - 7

CONCLUSIONS

64

Conclusion:
Tourism Industry is a very dynamic industry and so are its challenges and strategies, therefore a learning approach towards ‘best-practices’ would yield better results in enhancing competitiveness of this industry. Also, the need for sound perspective in planning and “private-public-community” participation is imperative for this purpose. This paper was an attempt to illuminate the area through simple yet effective examples and cases collected from around the world, based on their contribution in making their respective Tourism Industry more competitive. It leaves a background for further research, as assessing the implications of using the above mentioned ‘best-practices’ in Indian Tourism Industry can be another rewarding study.
• •

Foreign exchange earnings went up by 23 % (2003). International tourist arrivals increased by 16 %. INDIA selected among the top 10 preferred destinations:

“The Conde Nast Traveller”.

Among the top 5 destinations: “The Lonely Planet Travel Guide”.

The planning framework of Indian Tourism Industry can be redesigned, taking World Tourism corporation’s recommendations of 2002-07 as a base. Tourism has adopted an ‘industry oriented outlook’ for making professionally designed specific plans for responding to changing consumer demands and other critical and contemporary issues, like: •

Destination marketing; Product, branding and competitive positioning,
65

• • • • •

Pricing, Market segmentation, Promotion and distribution Cross agency cooperation Site Management

Contemporary and detailed planning, which professionally addresses specific issues, has added to the competitiveness of their tourism industry and can very well do the same for Indian Tourism Industry. Make the business operators realize that - ‘Tourism Survives Till The Destination Does’: Tourism business operators realize that for their business, they will ALWAYS need a healthy Great Barrier Reef. Increasing realization of this interdependence has led to the development of a strong active partnership Significantly improving the destination management as well as competitiveness of Tourism business outcomes at the Marine Park. Public Private Partnership is critical for enhancing competitiveness: Enhancing coordination and cooperation between public sector and private sector undertakings of the industry will help in creating a wholesome experience for the tourists. In this industry where both play equally important role, it is not possible for both to perform in isolation. Moreover, it will be a ‘win-win’ situation for both the sectors as both can benefit by each other’s expertise and resources. Handover the Funds in Right Hands: Case of Vermont Tourism (USA) has created “Fund for Tourism Marketing Initiatives (FTMI)” program. Under this, it awards financial grants (on merit basis) to local organizations for building /
66

expanding events, marketing programs, advertising campaigns and public relations programs that hold significant potential for measurable increase in travellers to Vermont. Sensitize the Community for sustainable competitiveness: Community is an important stakeholder in tourism industry and can play a vital role in enhancing its competitiveness through sharing the responsibility and thus easing out the job of sustainability and destination management to some extent, but unfortunately, in Indian Tourism Ministry this important stake holder of tourism industry has been rarely involved and sensitized for such efforts. Effective deployment of ‘Human Resources’: Although, some private players have opened their own academies to develop talent, but it is not possible either for the private sector or for the public sector, to cater to the growing demand single-handedly. ‘Private-Public Partnership’ for development of world class academic, training and development infrastructure can be a remedy and can enable the industry to take advantage of this most valuable and most widely available resource in the country. Government should encourage infrastructure development in this area as well with a long term vision. It is very simple that adding more airlines and hotels would not lead to anywhere if there are not enough people to work for them and high training costs and recruiting from abroad will push the already high operating costs further.

67

Sign up to vote on this title
UsefulNot useful