Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tourism: Weakening prospects - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 20, 2001

    Tourism: Weakening prospects

    The global markets are in turmoil after the US attacks. In India too, the Sensex ended at 2,800 mark after gaining some ground in the last two days. Worldwide the airlines and hotel stocks are out of favour. Indian tourism industry is also expected to see a contraction in revenues in the current year.

    Hotel and tourism industry reported impressive earnings growth of 23% on an 8% rise in revenues for the year ended March '01. This was after a slack period in FY00 when net profits dipped by 35% on a negative sales growth.

    The industry is again headed for a hit, with the attacks on the world's largest financial centre in the US. Topline growth of hotel majors, including Indian Hotels, EIH and ITC group of hotels, are expected to decline in the current year on large-scale cancellations and long postponements by international as well as domestic corporate customers. Already in the 1QFY02, the domestic air passenger market grew by just 1.4% as against a 12% growth recorded in the corresponding quarter of the previous year. The Indian tourism industry estimates a 5% reduction in inbound and outbound travel as of now, but this figure is expected to rise to almost 40% in the next few months.

    India's largest hotel chain, the Taj group has indicated that it will cut costs aggressively due to the expected sharp drop in the number of customers in the next few weeks. As per the reports, ITC group of hotels has already registered 500 cancellations last week by international customers. October and November are considered to be peak season for tourism industry. Most hotel chains derive 60% of their business from European, American and Japanese clients. Now with the downturn in these economies, tourism business is likely to be on the lower side in the next two months. As per some reports, 20% of existing domestic ticket bookings have already been cancelled. Also, devaluation in Indian rupee is making foreign travel expensive for the Indian travelers.

    The world travel industry is already taking a dip due to the heightened uncertainty about what actions the US would take in light of the attack. Tourism is the lifeblood for many countries, especially less developed nations that have no other major industries. According to the report of 'The World Tourism Organization' (WTO), the money spent by vacationers is the main source of income for almost 40% of the world's countries.

    The US, which accounts for the largest share of the world's GDP, is likely to see a slowdown in spending on tourism industry. Americans were the world's largest spenders on the tourism in 1999 (US$ 60.1 bn), followed by Germans at US$ 48.2 bn and Japanese at US$ 32.8 bn. Following the attacks, the US airlines are cutting back services dramatically. The country's nine largest airlines have reported that they are incurring losses ranging from US $100 m to $250 m each day. Lack of consumer confidence in the safety of air travel is likely to affect the world tourism industry.

    Since the beginning of the year 2001, the industry has recorded an increase of 3% (7.4% in 2000). According to the WTO report the industry is expected to grow at a slower rate of 1.5% in the current year. Even during the Gulf War, although International air passenger traffic fell from 280 m in 1990 to 266 m in 1991, tourism industry still managed to grow by almost 2.1%. Over the past 50 years, the industry has never recorded a decline in growth, despite several calamities.

    In the short term, the outlook is very uncertain and it would be difficult to measure the exact impact on the industry. The rebound in the activity highly depends on the actions from the US. For the Indian travel industry, which is the largest foreign exchange earner, the real impact would be reflected after the beginning of the festival season (around November).



    Equitymaster requests your view! Post a comment on "Tourism: Weakening prospects". Click here!


    More Views on News

    Indian Hotels: Domestic Operations Performs Well (Quarterly Results Update - Detailed)

    Oct 17, 2016

    Indian Hotels has reported a 5.6% YoY increase in the consolidated topline and a consolidated loss of Rs 1,695 m for 1QFY17.

    Indian Hotels: Recovery Still Far Away (Quarterly Results Update - Detailed)

    Mar 28, 2016

    Indian Hotels has reported a 13.2% YoY increase in the consolidated topline and a standalone net profit of Rs 1.2 m for the quarter ended December 2015.

    Indian Hotels: A good operating performance (Quarterly Results Update - Detailed)

    Nov 24, 2015

    Indian Hotels has reported a 13.2% YoY increase in the standalone topline and a standalone net profit of Rs 1.2 m for the quarter ended September 2015.

    Indian Hotels: Exceptional gain boosts bottomline (Quarterly Results Update - Detailed)

    Aug 28, 2015

    Indian Hotels has reported a 10.2% YoY increase in the consolidated topline and a consolidated net profit of Rs 348 m for the quarter ended June 2015.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms