WTTC, India Initiative December 11, 2010

1. ECONOMIC IMPERATIVE OF TOURISM WTTC, India Initiative December 11, 2010

2. ECONOMIC IMPERATIVE OF TOURISM “Developing tourism amid the global downturn would do much to boost economic growth and employment and expand domestic consumption.” Wen Jiabao, Chinese Premier (Peoples Daily, April 21, 2009)

3. Travel and Tourism is one of the largest industries globally in terms of Size and Employment Key Global Industry Sizes- in Bn USD, 2009 Global Employment in Travel & Tourism**, 2009 Travel & Tourism 250 Million *GDP at current prices * *Includes indirect employment Source: WTTC

4. In India Travel & Tourism accounts for around 5.9% of the GDP and 9.2% of employment - one of the largest employers Key Industry Sizes in India (2009) – in Bn USD Employment* in Key Industries in India (2009) in Mn *GDP at 2009 prices *Military includes only direct employment * Source: Ministry of Tourism

5. 78 45 18 Travel and Tourism industry creates more jobs per capita investment No. of jobs created for every Rs. 1 Million of Investment Source: Planning Commission Report

6. Travel & Tourism can create additional 37 Mn jobs out of the 120 Mn jobs* needed in the next ten years Travel & Tourism Industry Employment Projections*, Mn • Travel and Tourism has created ~11 Mn jobs in the last 6 years • Employment in Travel & Tourism has grown at ~5.2% as compared to India’s total workforce growth of 2.9% Addnl Jobs 2009-20 87 37 Mn Addnl Jobs 2003-09 50 11 Mn 39 According to RBI, India will add ~120 Mn to its working population by 2020 which will make India’s working population 28 percent of the global force * Future growth assumed to be 5.2% i.e. same as past Source: NSSO, Ministry of Tourism Data

7. ECONOMIC & SOCIAL IMPERATIVE OF TOURISM TOURISM & POVERTY ALLEVIATION Source of Livelihood Non Farm Livelihood Revitalization for culture & preservation of local skills Jobs, Education, training & Infrastructure Access to Markets for under privileged Growth & diversification in marginal & remote areas Reduction in Isolation Enterprise development of micro, small & medium sized enterprises Mitigate challenges of the Red Corridor Sustainable Environment Management

8. Global Comparisons - I Beach Tourism- Goa vs. Phuket Number of Visitors (Mn), 2009 5.0 Total 2.7 Foreign Domestic Source: Goa Government, Tourism Authority of Thailand

9. Global Comparisons - II Heritage Tourism- Angkor Wat vs. Hampi Number of visitors (Mn) 2006 Less than 1% of the foreign tourists visiting India visit Hampi 2.0 0.9 0.05 Foreign visitors to Hampi are more of backpackers with low spending power as compared to Ankor Wat which attracts tourists with high spending power Source: UNESCO, Government of Karnataka, Washington Post

10. Global Comparisons - III Historical Monuments- Great Wall of China vs. Taj Mahal Number of visitors (Mn), 2009 Badaling is just one section of the great wall (the most visited section). Number of visitors to the entire wall is much higher Source: ASI, Royal Geographical Society, UNESCO, Badalinggreatwall.com

11. Global Comparisons - IV Foreign Tourist Arrivals and FDI Foreign Tourist Arrivals (Mn), 2009 Cumulative FDI in Tourism, USD Bn* Source: Ministry of Tourism, UNWTO Source: DIPP India, China Official Data * Upto Dec 2008 Even though 100% FDI is allowed in tourism industry in India, investors find the processes to be tedious and complicated and non-remunerative enough, which has resulted in miniscule FDI in the sector

12. Some Gaps Hotel Capacity, 2009, ’000 Rooms Number of Commercial Aircrafts, 2009 Source: Ministry of Tourism Data Source: CAPA Data Number of Airport Pax (Mn), 2007 Indoor Exhibition Space, 2006, ‘000 Sq M Source: CAPA Data Source: Global Association of the Exhibition Industry

13. Infrastructure Key Concerns Convergence Awareness & Promotion Skill Development Taxation Key Areas Of Concern

14. Convergence at Centre Current State of Coordination Some Examples • Finance • Infrastructure Status • Multiplicity of taxes • Deemed Exporter Status • MEA/ Home • Visa regulations and delivery • Visa on arrival • Roads/ Railways • Connectivity of tourist destinations • Way Side amenities/ facilities • Environment and Forest • Rationalisation of CRZ rules • Eco tourism policy • Civil Aviation • ATF a declared good • Conducive aviation policy • Urban Development • Urban design and civic management Finance HRD Civil Aviation Tourism Road/ Railways MEA/ Home Urban Dev Envt & Forests

15. Convergence at State and Urban Local Bodies (ULBs) Current State of Coordination Some Examples • Town and Country Planning • Building Codes • Land Use Policies • Municipal Corporations • Sanitation & Cleanliness • Waste Management • Police • Safety and Security • State Finance • Multiple Taxes • Resource Allocation • Environment & Forests • Management of eco sensitive sites • Roadways & Transport • Seamless travel • Road Taxes • Bus network • Highway Amenities Town & Country Planning Municipal Corp. Police Tourism State Finance Roadways & Transport Health Envt & Forests

16. WTTC India Initiative PROPOSES…

17. Quality Infrastructure- Integrated Tourism Destinations (ITDs) Development of Integrated Tourism Destinations (ITDs) Support Needed • WTTCII suggests creation of 50 Integrated Tourism Destinations (ITDs) • ITDs are needed to coordinate /plan and execute • Land use planning • Municipal infrastructure • Transport linkages • Regulations • ASI • Police • Local taxation • Promotion & Marketing • Integrating tourism into various development schemes e.g. JNNURM, MNREGA etc. • Empower CEO of ITDs may be DM/ MC/ other appropriate official • CEO to be given authority to undertake land planning of the areas designated as ITDs • Special status and tax / investment incentives in ITDs • Improvement of roads (National Highways, State Highways etc. ) connecting the ITDs to nearby locations including last mile connectivity • Availability of funds to support development of ITDs though PPP model

18. Awareness and Promotion Promote ‘Incredible India’aggressively in India and Internationally Speedy Implementation of Global Travel Mart India (GTMI) Sensitize masses – Deliver ‘Atithi Devo Bhava’ message to the country Make all tourism sites tourist friendly Ensure seamless travel across states– One India Remove discriminatory pricing for foreign tourists from all monuments

19. Skill Development Include MoT in PM’s Council on Skill Development and Industry in the National Skill Development Coordination Board Management • Tourism related education to be encouraged in Universities • Culinary Institutes, Hotel Management, Food Craft Institutes, Tourism management • Historical site management, forest management • Conservationists, monument/ museum curators Service Providers • Tourism Guides • Adventure/ Ecotourism specialists • Event and conference management skills • Foreign and Indian language training General Skills • Dhaba and wayside facilities management • Hygiene and sanitation • Drivers • Cooks and Waiters Most of skill development is needed at the bottom of the pyramid

20. Taxation Excise Octroi Road Tax GST VAT Service Tax F & B Tax Luxury Tax Hotels, Tour Operators etc. may be exempted from service tax on foreign exchange earnings as other exporters. Taxes levied on Tourism Industry should be unified, rationalized and made globally competitive.

21. Next Steps Constitute a Steering Committee on Tourism (similar to MSME) headed by the Principal Secretary to PM ( including all concerned ministries and stakeholders) Include MoT in PM’s council on skill development and Industry in National Skill Development Coordination Board Facilitate development of Integrated Tourism Destinations (ITDs) Increase outlay for the Ministry of Tourism Creation of Confederation of Indian Travel and Tourism Industry (CITTI)

22. GAP ANALYSIS OF THE TOURISM SECTOR IN INDIA WTTC, India Initiative February 2011

23. HOTELS COMPOSITION OF THE TOURISM INDUSTRY DESTINATIONS/INFRASTRUCTURE AIRLINES TOUR OPERATIONS ESSENTIALS OF TOURISM

24. COMPARISON VIS-À-VIS OTHER COUNTRIES Source UNWTO, 2009

25. Projected Size of Tourism Industry (Rs. billion) Size of the Tourism industry is expected to grow from Rs. 4,413 billion currently to about Rs. 21,011 billion by 2022, growing at a CAGR of 13%. Source: National Skill Development Corporation Report, 2009

26. Gap Analysis in the HOTEL SECTOR The Tourism Ministry estimates a shortage of 1.5 lakh hotel rooms with two-thirds required in the budget category.  India has just around 1,25,000 hotel rooms across luxury, first-class, mid scale and budget categories. One in four hotel projects planned in the Asia Pacific region is in India. 94,115 branded rooms are planned by 2013-14. Despite this India will still be short of travel accommodation.  • Supply: • Shortage of 100,000 guest rooms short in the country. This is expected to keep ARRs high for the next few years • Trained Manpower for additional jobs • Barriers to entry: • High capital costs, poor infrastructure facilities and scarcity of land especially in the metros • Policy: • In FY09, Rs 5.2 bn for development of tourism infrastructure was allocated. This figure is higher by Rs 970 m as compared what was allocated in the previous year. However, it is only 1% of the total government spending. RBI has allowed ECB upto US$ 100 m in January 2009, which would help in raising funds. The Centre and States are also working out a PPP (Public-Private-Partnership) model to increase hotel capacity.

27. Gap Analysis in the AVIATION SECTOR CAPA has forecast that domestic traffic will increase by 25 % to 30 % till 2010 and international traffic growth by 15 %, taking the total market to more than 100 million passengers by 2010. India's civil aviation passenger growth, presently at 20 %, is one of the highest in the world, and is expected to surpass countries like China, France and Australia. By 2020, 400 million Indian passengers are likely to be airborne. • Supply: • Shortage ofAircrafts, While fleet size has increased manifolds, from just 184 aircrafts in 2005 to around 425 in 2009 with scheduled operators, not much infrastructure has been added. This leads to congestion, delays and deteriorating experience. Lack of MRO facilities • Manpower: availability of Trained and Quality Manpower for Pilots, Technicians and Cabin Crews. • Barriers to entry: • Regulations that may prove as barriers to domestic operations include regulations governing minimum fleet size, minimum equity requirements, route dispersal guidelines • At higher capital costs, existing and new players would find it very challenging to raise any funds • Policy: • The high state tax levied on the ATF (Aviation Turbine Fuel) in India makes it one of the most expensive in the world. As compared to the world average of 20-25%, ATF accounts for over 40% of the total cost for the airline companies, eating into their margins. • . Projected Growth in the Aviation Sector Source: IATA

28. Human Resource Requirements in Tourism Industry Projections for Hotels, Restaurants & Tour Operators (in ’000s) Projections for Pilots, Engineers and Cabin Crew in Indian Aviation CAPA Research

29. IN CONCLUSION - To scale up from 5.1 Million to 10 Million • There exists infrastructure gaps –will necessarily need upgradation, development of existing and creation of new infrastructure from the scratch, transparent PPP Models will help – better facility will attract tourists • Need more capacity in Airlines (Foreign & Domestic), Transportation and Hotels to carry and host tourists • New additional capacity in each segment would need Skilled Manpower – Government & Stakeholders must work together to nurture the same. • Fiscal incentives and involvement of Government both at Central & State level to induce growth, to set up infrastructure, must give Indian Tourism Products a competitive pricing advantage vis-à-vis other destinations in Asia Pacific Region • Policy realignment in terms VISA access to Foreign Tourists at the Central Level and encourage Domestic Tourism at the State Level • Unplanned growth may result in disasters – Need for a carefully planned approach • Create and monitor Short Term & Medium Term goals starting from 2011 – 2015 to achieve 10 Million Tourists • Realign Marketing Strategy and Tap and source Key Markets • Develop new products like Golf Tourism, give impetus to existing ones like Cruise Tourism

30. List of immediate initiatives taken to boost the foreign tourist arrival 1.) Retrograde step of introducing service tax on rooms of 5% & Restaurants of 3% in recent budget. This move will keep foreign tourist away as it would hinder Indian hotels to be non competitive as compared with hotels with neighboring competitive destinations like Malaysia & Thailand where tax ranges from 0-7%. To offset this levy a proposal has been given to Ministry of Finance and Government of India to exempt foreigners paying in convertible foreign currency from this tax. This is in line with the decision of the Government to extend the same fiscal benefits to hotels, tour operators , travel agents and transporters as extended to exporters who earn in foreign exchange. Thus, the service tax now being charged on rooms and restaurants as well as for services rendered in hotels for use of health clubs, salon , business centers, banquet halls etc would be exempted from service tax as long as the payment is received in convertible foreign exchange from foreigners

31. List of immediate initiatives taken to boost the foreign tourist arrival……contd 2) Request is being made with Ministry of External Affairs and Government of India to extend the visa on arrival scheme which are now permitted to 10 countries such as , Japan, Luxembourg , Finland , New Zealand ,Singapore,Vietnam, Cambodia, Laos, Myanmar & Philippines and add list of countries from where bulk of tourist come at present. These countries are US, UK, Schengen, CIS ( Commonwealth of Independent States ) etc. Also at present the visa on arrival facility is only available in metros like Delhi, Mumbai, Kolkata and Chennai. It has been requested that other destination where foreign tourists land such as Goa, Cochin, Trivandrum and Hyderabad also be provide these facilities

32. List of immediate initiatives taken to boost the foreign tourist arrival..contd 3)The issue regarding the development of state roads /highways to various destinations of tourist interest has taken up with the earlier Minister for Road Transport & Highways Mr.Kamal Nath and now with new Secretary of same industry About 15 destinations of tourist importance has been identified like Hampi, Badami, Ajanta Ellora , Khajurao etc where Last Mile Connectivity is extremely deplorable and therefore central funds for development of these roads from these ministries’ available resources have been requested on a priority basis. After the first 15 destinations has been authorized , another 15 destinations will be identified by the Ministry Of Tourism, Government Of India and WTTC.

33. List of immediate initiatives taken to boost the foreign tourist arrival..contd 4) Issues with the Ministry of Culture concerning Management of facilities & civic amenities at the various Heritage Sites/Monuments and implementation of anti tout rules were taken up with the Secretary ,who assured that various time bound programs for the site /monuments will be implemented on priority  Long outstanding issue of discriminatory entry ticket pricing for foreign tourist versus Indian tourist and the need for fast track entry pricing at monuments to expedite access to tourists at monuments was taken up with Ministry of Culture and the secretary assured early implementation of proposal Also the secretary, ASI accepted the need to have world class Signage's to be put up at heritage sites/monuments as well as the need to undertake landscaping and upkeep of surrounding areas of these monuments without impinging ruling of the Supreme Court of India.The various stake holders in the hotel industry could also be offered these heritage sites/monuments to be maintained by them as part of their CSR activities

34. List of immediate initiatives taken to boost the foreign tourist arrivalcont… 5)With constant follow up with FHRAI the RBI in Sep 2009 deleted hotels from the classified real estate thus enabling them to avail of financial assistance for their project at lower rate of interest. However the industry’s request for the inclusion of hotels within the definition of Infrastructure Lending as listed by the R.B.I. is yet to be accepted by the Government This is again being followed up rigorously so that with the inclusion of hotels ,commercial banks and financial institutions would be enabled to grant financial assistance to Hotels with a higher debt : equity ratio upto 4:1 instead of being limited to 1.5:1 under CRE tenure, debt repayments to be upto 15 years as given to Airport, Ports etc. instead of the earlier norm of upto 10 years. Also Hotels would be able to avail of External Currency Borrowings (ECB’s) and Foreign Currency Convertible Bonds (FCCB’s) up to USD $ 500 million under the Automatic Route prescribed by the RBI instead of the USD$ 100 million limit now under the automatic route and any larger amounts under the approval route of the RBI. The Planning Commission of India had been requested to kindly intervene on the pending request for the inclusion of Hotels within the definition of Infrastructure Lending as listed in RBI.

35. Two pending points with the Government of Maharashtra concerning tourism regarding the grant of industry status to hotels and other tourism 1. In spite of Government Of India having issued about 8 years ago industry status to hotels and other related industries the benefit of the industrial rate for power and water ,as well as the duty on the basis of industry and not commercial , has not been conferred to hotels . As a result hotels, restaurants etc continue to be charged electricity rates as charged to commercial consumers and the electricity duty is also charged as per commercial consumers. Other tourism friendly states like Goa for many years extended industrial rate for power and water to hotels and restaurants to encourage tourism in the state. Tourism is Goa’s largest revenue generator and generates employment for a large number of work force2. The recent amendment in the entertainment tax which extends the tax to restaurants which have performances of even musicians or music played by disc jockeys(DJ) has caused a lot of anguish with several musicians. Soloists and instrumental performers have been rendered jobless due to steep increase in taxes which the restaurants are unable to bear. The levy of this tax has been requested to be reviewed as it is a Retrograde step

36. Thank You