India Tourism Report Q3 2009

Q109 Tourist Arrivals Slow Sharply Data released by India's Ministry of Tourism in April 2009 indicated that tourist arrivals fell by 12.9% in March 2009, with 471,627 tourists arriving in the month. This follows a similar decline in February, with only 501,885 arrivals, compared to 561,393 in February 2008. However, even these declines represent a slight improvement from the January figure, when arrivals slumped a dramatic 16.6% y-o-y. As a result, revenues also fell in Q109, with tourist-related revenue falling to INR4,437 crore in March, representing an 11.9% y-o-y decline.

The abrupt decline in tourist arrivals in Q109 is not surprising, despite relatively strong growth of 5.6% y-o-y for 2008 as a whole. The November terrorist attacks in Mumbai, which specifically targeted places frequented by tourists, will have a major medium-term impact on tourism. Although the Indian authorities have publicised efforts to improve security and identify the perpetrators, the perception of India as amore dangerous country will impact holiday choices, particularly for Western tourists. Moreover, with fewer tourists choosing to holiday abroad during the global economic downturn, those that do may now be attracted to countries perceived as safer than India. While this will have little impact on diaspora visitors, particularly from the UK and North America, these underlying factors will contribute to a greater than expected decline in India's tourism industry in 2009.

Government Launches Tourism Incentive Package The Indian government is well aware of the risks that the Mumbai bombing and the global economic downturn pose to the country's large tourist industry. As a result, in May the Ministry of Tourism launched a month-long Incredible India campaign in major North American cities, including Boston, Los Angeles, San Francisco and Toronto. These will be complemented by an ongoing roadshow campaign, taking in countries such as Singapore, Australia, Japan, Korea and the UK. Moreover, incentives are being offered directly to travellers and tour operators. Some package offers include complementary flights for a travelling companion, additional sightseeing tours and extra nights' accommodation when a stay is booked.

Diverging Fortunes For Domestic Airlines Preliminary data suggests that two of India's major domestic carriers will post improved results in FY Q4 2008-2009 (January-March 2009). Both Jet Airways and its subsidiary SpiceJet are likely to reduce their losses, following the implementation of a strategy aiming at cutting back less profitable routes and reducing operational costs. Jet lost INR384.5 crore in Q4, while JetSpice lost INR123.6 crore in the same period. Both losses were largely caused by heavy operational costs resulting from the surging price of fuel in H108. With this cost reducing, Jet is expected to post of loss of INR200 crore in Q4, while JetSpice's loss may reduce to as much as INR50 crore. However, rival carrier Kingfisher Airways is taking longer to recover from the 2008 slowdown, with losses expected to rise to INR350 crore in Q4, from INR200 crore in Q408. Kingfisher has experienced a significant rise in cost following its launch of international flights in late 2008, although it hopes to recoup these losses over full-year 2009.