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Q2 2013
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INDIA
TOURISM REPORT
INCLUDES 5-YEAR FORECASTS TO 2017
ISSN 1747-8928
Published by:Business Monitor International
India Tourism Report Q2 2013

INCLUDES 5-YEAR FORECASTS TO 2017
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International Copy deadline: February 2013
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CONTENTS
BMI Industry View ............................................................................................................... 7 SWOT .................................................................................................................................... 9
Political ................................................................................................................................................. 10 Economic ............................................................................................................................................... 12 Business Environment .............................................................................................................................. 14
Industry Forecast .............................................................................................................. 16

Inbound Tourism .................................................................................................................................... 17
Table: India Inbound Tourism, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Table: India Inbound Tourism, Top 10 markets by arrivals, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Outbound Tourism ................................................................................................................................. 18

Table: India Outbound Tourism, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table: India Outbound Tourism, Top 10 destinations be departures, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Travel .................................................................................................................................................. 21
Table: India International Tourism Receipts for Transport and Travel, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Table: India Breakdown of Methods of Tourist Travel, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Hotels .................................................................................................................................................. 23
Table: India Domestic Hotels and Restaurants Industry Value, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Table: India Hotel Accommodation, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Economic Analysis ............................................................................................................ 25

Economic Outlook ................................................................................................................................... 25 Positive Implications For Reform .............................................................................................................. 28 Staying Above Consensus ........................................................................................................................ 29
Table: India - GDP by Expenditure, Current Prices Breakdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Industry Risk Reward Ratings .......................................................................................... 31

Table: Asia Tourism Risk Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
India Risk and Rewards ........................................................................................................................... 31 Security Risk Analysis ............................................................................................................................. 32

Table: Table: Asia Pacific Regional Security Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
India's Security Ratings ......................................................................................................................... 33
Market Overview ............................................................................................................... 34

Table: India Key Infrastructure Development Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Table: India Top 10 Global Hotel Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Company Profile ................................................................................................................ 39

Taj Hotels .............................................................................................................................................. 39
Global Industry Overview .................................................................................................. 40

Table: Global Tourism Indicators, International Tourist Arrivals, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Business Monitor International
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Table: global tourism indicators, hotel and establishment units, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Global Sporting Calendar, 2013-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Global Assumptions .......................................................................................................... 46

Global Macroeconomic Assumptions ........................................................................................................... 46
Table: Global Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Table: Global & Regional Real GDP Growth, % chg y-o-y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Developed States, Real GDP Growth Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Table: Emerging Markets, Real GDP Growth Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Global Asset Class Strategy ....................................................................................................................... 53 Macro Outlook ...................................................................................................................................... Equities ................................................................................................................................................ Currencies ............................................................................................................................................ Fixed Income ........................................................................................................................................ 53 54 55 56
Demographic Forecast ..................................................................................................... 58

Table: India's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Table: India's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Table: India's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Table: India's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Methodology ...................................................................................................................... 62
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BMI Industry View

This quarter BMI has revised and restructured its tourism reports, incorporating a greater range of data and focusing on the hotel industry, the value of the tourism industry itself, and the impact of macroeconomic factors.
The India Tourism report examines the trends in inbound and outbound tourism forecasts up to 2017 as well as the long term investment potential of tourism industries in India. A fast growing economy, burgeoning affluent middle class and a broad variety of consistently popular tourist attractions means BMI expects to see substantial growth across a range of indicators including arrivals, departures, number of hotels and tourism receipts.
Following the Commonwealth games in 2010, which saw extensive investment in tourism related infrastructure, the government continues to focus on development of the rail and air transport networks. Although the domestic air travel industry has been beset with issues in 2011 and 2012, including problems caused by fluctuating oil prices, we forecast overall growth in air travel as the domestic market grows and the remit of domestic airlines expands.
India already has an extensive rail network, however this network frequently suffers from overcrowding and lack of adequate facilities which could impact on its growth potential. A program of extensions and expansions planned and underway is starting to address this problem, and with continued investment substantial improvements should be realised.
Security concerns with neighbouring Pakistan could impact on tourism, particularly in the wake of the Mumbai hotel attacks in 2008, led by terrorist groups based across the border in Pakistan. India itself is a generally stable democracy, with a large labour resource pool, excellent natural resources and strong international market links.
India continues to remain a popular tourist destination, with an increasing number of high-end, luxury travellers. As such, many of the top ten global hotel chains are seeking to expand their presence in the country with both city centre hotels and resorts. The country offers a wide variety of destinations, from tiger treks in rural jungles to pristine beaches and modern metropolises. While we expect to see the continuing impact of the global credit crunch on long distance travel to the country from Europe and the United States overall we expect to see an increase in travel from all regions. India will also benefit from hosting the 2020 World Cup in cricket in 2016.
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Recent events and changes in BMI forecasts include:
Major hotel chains continue to expand their presence in India. Hyatt aims to open five new hotels by March 2013 and Hilton will be expanding into the luxury market, opening its first resort, the Hilton Shillim Estate Retreat and Spa offering 99 villas set in 70 acres, in 2013. Starwood expects to open between 6 and 8 new hotels in 2013 aiming to have 100 hotels under different stages of development by 2015. Large scale investment in transport infrastructure will be seen in 2013 with the development of the international airport at Navi Mumbai, expansion of Indira Gandhi International Airport and Cochin International Airport, as well as many other projects. Outbound travel is expected to continue to increase by an average of 13% a year to reach over 20mn per year by 2017, almost double the 2012 figure of 10.8mn. Inbound tourism is also expected to increase, though by a smaller average rate of 3.5% This quarter BMI awarded India an overall Tourism Industry Risk/Reward rating of 48, putting it behind Sri Lanka and Cambodia and ahead of Laos and Indonesia.
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SWOT
India SWOT Analysis
Strengths
Many popular natural attractions including beaches, mountain ranges, jungles and cultural attractions such as the Taj Mahal.
Quality accommodation is increasing in both traditional destinations and further afield. Infrastructure was improved by preparations for the 2010 Commonwealth Games and continues to grow with solid investment.
Weaknesses
A complex industry tax code discourages investment, particularly from foreign investors.
A bureaucratic and expensive tourist visa system acts as a disincentive to visit. Infrastructure needs modernisation, particularly in terms of the currently limited number of international airports, to cope with expansion in number of travellers.
Opportunities
Government expenditure on the tourism industry is rising from a low base giving scope for big improvements.
Medical tourism is on the increase and many firms such as Thomsons are introducing medical tourism packages.
Luxury travel to the area is expanding and there is growing demand for high end accommodation.
Threats
Negative safety perceptions following the 2008 terrorist attacks in Mumbai and continuing regional security concerns will continue to deter tourists over the medium term.
Recent high profile crimes against women could also impact on inbound tourism. The global credit crunch will depress growth figures, particularly in relation to tourists from the UK and the US.
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Political
Political SWOT Analysis
Strengths
India is the world's largest democracy. A secular constitution, framed in 1950, officially guarantees justice, liberty and equality while aiming to promote fraternity among the citizenry. More than 1,000 political parties registered for the April-May 2009 general elections, competing for the preference of India's 714mn eligible voters.
Despite its multitude of problems, India has generally managed to avoid hard authoritarian rule or military coups, which have happened in many other developing countries, including India's neighbours Bangladesh, Myanmar and Pakistan.
Weaknesses
Large coalition governments complicate policymaking at the centre as coalition partners and outside parties pursue their own agendas. The competence of state government varies enormously across India's 35 states and union territories.
India's tense relationship with Pakistan still weighs on regional stability. The two countries have gone to war three times since they were 'partitioned' on independence from British rule in 1947.
Issues such as the ineffectiveness of the executive and judiciary in controlling underhand practices, the apparent arbitrary allocation of government licences, and the uneasy influence of special interest groups remain key investor concerns.
Opportunities
India has in recent years edged closer to the US in foreign policy. Both the US and India are democracies and face threats from militant Islamists; this, combined with the presence of a 2mn-strong affluent Indian diaspora in the US, is bringing the two countries closer together.
Thawing relations with Pakistan has made it easier for the parties to defuse potentially explosive situations, such as the Mumbai attacks in November 2008, which Islamabad acknowledges were planned and launched from its territory.
Threats
India's growing regional rivalry with China, if unchecked, could lead to a more hostile regional outlook.
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Political SWOT Analysis - Continued
India has experienced a series of serious terrorist attacks over the past few years, perpetrated by radical Islamist and rural Maoist groups. The surge in Naxalite attacks has also raised the spectre of further violence.
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Economic
Economic SWOT Analysis
Strengths
India has a very large domestic market, and rising domestic demand is a major driver of economic growth.
A vast supply of inexpensive but skilled labour has turned India into the back office of the world. Around half of the population is younger than 25.
Weaknesses
Despite rapid economic growth, India remains a very poor country. According to BMI estimates, India's GDP per capita was roughly US$1,400 in 2011, a third of the size of China's.
Agriculture remains inefficient, and poor monsoon rains can slash rural incomes and consumption. Two-thirds of the population depend on farming for their livelihood.
India runs chronic trade and fiscal deficits, both of which are near historic highs. The government spends a significant part of its revenue on interest payments, subsidies, salaries and pensions. This limits the amount of money available for infrastructural improvements.
Opportunities
India's emerging middle class will continue to drive demand for new goods and services. A wealthier society, combined with tax reforms, would serve to boost revenue receipts, relieving fiscal pressure.
The government has implemented some tax reforms. A uniform goods and services tax to be implemented in the near future should help boost compliance, thereby raising government revenue.
With Chinese labour costs rising aggressively, India may well enjoy a manufacturing boom in the coming years as multinational look to take advantage of a young, competitive workforce and major transport network improvements.
Threats
India's dependency on oil imports is problematic. This undermines the trade balance and makes India vulnerable to energy price-driven inflation.
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Economic SWOT Analysis - Continued
India is at risk of severe environmental problems. Many of its cities' air and rivers are heavily polluted, raising questions about the sustainability of the economy's rapid growth.
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Business Environment
Business Environment SWOT Analysis
Strengths
India is now one of the biggest recipients of foreign direct investment (FDI) among emerging markets, having attracted US$36.5bn of inflows in FY2011/12.
An inexpensive but skilled English-speaking labour force can do the jobs of Western workers for a fraction of the wages paid in North America or Europe.
Weaknesses
Despite pockets of excellence, such as the IT sector, overall literacy rates in India remain far lower than in other Asian and key emerging market nations.
India's infrastructure is notoriously inadequate. A 500km road journey can take as much as 24 hours owing to poor road conditions, congestion and toll booths.
The competitiveness of local firms is undermined by reams of official red tape, from foreign investment restrictions to inflexible labour laws.
Intellectual property rights are poorly protected in India. The country remains one of the 12 countries on the 'priority watch list' for 2012 compiled by the Office of the US Trade Representative.
Opportunities
India could enhance the competitiveness of local industry through further liberalisation and deregulation.
Ongoing infrastructure projects ranging from roads, railways and airports are likely to provide opportunities for foreign investors for many years to come.
Indian Prime Minister Manmohan Singh is eager to reform the banking sector in order to increase the availability of long-term financing, particularly for large infrastructure projects.
Threats
The arrival of Western players, including management consultants Accenture and technology giant IBM, is bidding up local wages in the outsourcing sector. India faces growing challenges from countries such as Vietnam, the Philippines and, potentially, Bangladesh in a variety of sectors.
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Business Environment SWOT Analysis - Continued
China still remains a major competitor for FDI flows into India. India has excessive bureaucracy and poor infrastructure in comparison with China.
The November 2008 Mumbai terror attacks demonstrated that security issues will remain a key investor consideration.
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Industry Forecast
BMI View: India is experiencing a period of rapid economic growth. A burgeoning middle class with increasing amounts of disposable income is resulting in growth in the domestic travel industry as well as an increase in outbound travel. Infrastructure investments combined with the enduring attraction of India as a tourist destination make this country an attractive prospect for investment. However, widespread poverty, limitations on international investment and ongoing regional security concerns could impact on growth.
5,000 20,000
Ins and Outs

Total Arrivals and Total Outbound Departures, ('000), 2005-2017f
15,000
10,000
2011e
2012e
0 2005 2006 2007 2008 2009 2010
2015f
2013f
2014f
2016f
TOTAL ARRIVALS: Total arrivals, '000 TOTAL DEPARTURES: Out-bound, total departures~ '000
BMI expects that outbound travel will experience consistently large increases over the forecast period. Between 2012 and 2017 we forecast that outbound travel will almost double, reaching over 20mn per year in 2017. The strength of the outbound travel market is based on the increasing wealth of the middle classes as India, with its large, English speaking workforce, becomes a more attractive international investment prospect. The USA is expected to remain the most popular destination for outbound travellers, closely followed by Saudi Arabia.
India has an extensive travel network, however it is in need of large scale investment. The country has 454 airports, of which 16 are designated as international airports. Extensive investment projects are in the pipeline with the government planning to invest US$30bn in airports between 2004 and 2020. This includes plans to have 500 operational airports by 2020.
The rail network in India is the fourth largest rail network in the world, after the US, Russia and China, totally over 64 thousand km in length. The industry suffers from a lack of funds and is in need of extensive investment however BMI expects the railway industry to experience annual average real growth of 8.1% between 2013 and 2017. The rail network combined with the extensive range of airports makes travel around the country simple and inexpensive for tourists.
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2017
Travellers have a range of options for accommodation across the country, including many high end hotels such as Intercontinental and Hilton brands. Many brands are seeking to expand their presence in the country, more details are provided in the Market Overview.
Inbound Tourism
BMI is forecasting steady growth in inbound tourism between 2013 and 2017. Although only a small increase is forecast in 2013, of 0.8%, due to the difficult global economic conditions, from 2014 onwards an annual average growth rate of 4.2% is expected, meaning by 2017 we expect inbound arrivals to reach over 9mn per year.
Table: India Inbound Tourism, 2010-2017
2010 Total Arrivals, '000 5,775.7
2011 6,290.3 8.9 158.1 -3.3 1,259.0 7.3 36.7 10.1 2,218.9 12.4 2,028.8 5.2 311.2 -7.1
2012e 7,665.6 21.9 188.3 19.1 1,820.6 44.6 46.8 27.6 2,579.2 16.2 2,337.7 15.2 354.7 14.0
2013f 7,725.3 0.8 203.4 8.0 1,830.3 0.5 49.0 4.8 2,617.8 1.5 2,321.3 -0.7 362.4 2.2
2014f 8,022.1 3.8 218.9 7.6 1,883.8 2.9 50.6 3.2 2,725.0 4.1 2,439.3 5.1 373.9 3.2
2015f 8,176.3 1.9 227.8 4.1 1,850.9 -1.7 51.1 1.1 2,825.1 3.7 2,500.2 2.5 382.1 2.2
2016f 8,587.6 5.0 240.5 5.6 1,872.3 1.2 54.6 6.9 2,967.0 5.0 2,685.3 7.4 394.8 3.3
2017f 9,111.9 6.1 258.7 7.6 1,957.9 4.6 60.3 10.3 3,162.4 6.6 2,839.6 5.7 413.6 4.8
Total Arrivals, '000, % change 11.8 y-o-y In-bound, arrivals by region, Africa, '000 In-bound, arrivals by region, Africa, % chg y-o-y In-bound, arrivals by region, North America, '000 In-bound, arrivals by region, North America, % chg y-o-y In-bound, arrivals by region, Latin America, '000 In-bound, arrivals by region, Latin America, % chg y-o-y In-bound, arrivals by region, Asia Pacific, '000 In-bound, arrivals by region, Asia Pacific, % chg y-o-y In-bound, arrivals by region, Europe, '000 In-bound, arrivals by region, Europe, % chg y-o-y In-bound, arrivals by region, Middle East, '000 In-bound, arrivals by region, Middle East, % chg y-o-y 163.6 23.8 1,173.7 11.6 33.3 18.3 1,974.6 11.3 1,927.7 8.8 335.1 24.7
e/f=BMI estimates/forecasts. Source: BMI
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As can be seen in the Inbound Tourism, 2010-2017 table, BMI expects to see growth in arrivals from all regions. Arrivals from the Asia Pacific region will continue to dominate inbound tourism figures, reaching over 3mn by 2017, closely followed by arrivals from Europe, expected to reach 2.8mn by 2017, after a slight decrease in 2013 due to the continuing impact of the global credit crunch. Arrivals from North America will see a similar decrease in 2015 but are expected to increase overall by 2017, to reach almost 19mn in 2017.
Arrivals from Africa are expected to see the highest rate of increase over the forecast period as economic growth in this area allows more people to travel. Improving economic conditions in Latin America will also result in increased travel from this region.
Table: India Inbound Tourism, Top 10 markets by arrivals, 2010-2017
2010 USA UK Bangladesh Sri Lanka Canada Germany France Malaysia Japan Australia 526.12 555.91 477.45 128.71 135.88 116.68 131.82 84.39 96.85 81.61
2011 611.17 651.08 456.37 136.40 157.64 120.24 152.26 96.28 103.08 96.26
2012e
2013f
2014f
2015f
2016f
2017f 1,004.00 791.00 399.00 305.00 255.00 253.00 237.00 218.00 189.00 186.00
696.74 799.06 804.93 734.24 796.19 776.53 484.40 480.24 541.88 154.81 204.08 218.81 176.57 208.21 222.36 156.81 184.20 204.34 175.35 204.83 207.80 107.29 112.74 115.79 119.29 145.54 145.35 109.87 135.93 146.21
827.14 931.29 769.25 759.49 468.90 431.96 240.00 266.52 224.07 242.37 191.62 227.72 196.46 225.23 135.34 179.08 124.76 168.02 149.07 169.65
As the breakdown of arrivals by country shows, the top ten market is dominated by arrivals from the US. We expect this to continue over the forecast period. Arrivals from the US are closely followed by arrivals from the UK, with Germany and France also in the top ten. Bangladesh, Malaysia, Australia, Japan and Sri Lanka make up the rest of the top ten, demonstrating the strength of arrivals from the Asia Pacific region.
Outbound Tourism
Outbound travel from India is expected to increase steadily over the forecast period, in fact BMI predicts that India will see an annual average increase of 12.2% between 2013 and 2017 leading the total annual number of outbound travellers to increase from over 10mn to over 20mn.
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The increase in outbound tourism is based on the strength of the domestic economy which is experiencing high rates of growth. BMI expects that India's GDP will increase by over a third between 2013 and 2017. Private consumption over this same period is forecast to almost double providing greater disposable income for travel. Inflation is expected to remain steady at 5% with a concurrent lending rate expected to remain at 6% which should enable development of infrastructure projects.
Table: India Outbound Tourism, 2010-2017
2010 Total Out-bound, tourist departures, '000 Out-bound,tourist departures, % chg y-o-y 8,232.2 24.1
2011
2012e
2013f 12,009.4 10.9 9.4 297.8
2014f 13,760.2 14.6 10.7 343.9
2015f
2016f
2017f 20,282.9 12.0 15.1 549.1
10,023.5 10,831.2 21.8 8.1 205.1 8.1 8.6 264.8
15,815.8 18,114.6 14.9 12.1 401.7 14.5 13.7 474.1
Average Tourist Departure 6.7 per 1000 of the population Out-bound, resident departures by destination, Africa, '000 Out-bound, resident departures by destination, Africa, % change y-o-y Out-bound, resident departures by destination, North America, '000 218.3
22.6
-6.0
29.1
12.5
15.5
16.8
18.0
15.8
1,272.9
1,363.3
1,607.6
1,762.4
2,004.4
2,299.1
2,639.8
2,957.8
Out-bound, resident 17.2 departures by destination, North America, % chg y-oy Out-bound, resident departures by destination, Latin America, '000 42.8
7.1
17.9
9.6
13.7
14.7
14.8
12.0
50.8
56.0
59.8
65.9
72.8
80.9
88.6
Out-bound, resident 42.3 departures by destination, Latin America, % chg y-o-y Out-bound, resident departures by destination, Asia Pacific, '000 Out-bound, resident departures by destination, Asia Pacific, % chg y-o-y Out-bound, resident departures by destination, Europe, '000 Out-bound, resident departures by destination, Europe, % chg y-o-y Out-bound, resident departures by destination, Middle East, '000 4,099.5
18.7
10.2
6.7
10.1
10.5
11.2
9.5
4,477.3
5,057.0
5,597.2
6,395.4
7,313.7
8,295.1
9,,178.9
23.6
9.2
12.9
10.7
14.3
14.4
13.4
10.7
1,288.3
1,401.2
1,573.1
1,738.8
1,956.2
2,198.0
2,474.3
2,777.6
29.1
8.8
12.3
10.5
12.5
12.4
12.6
12.3
1,310.4
2,525.7
2,272.6
2,553.4
2,994.5
3,530.5
4,150.4
4,731.0
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India Outbound Tourism, 2010-2017 - Continued
2010 Out-bound, resident departures by destination, Middle East, % chg y-o-y 27.5
2011 92.7
2012e -10.0
2013f 12.4
2014f 17.3
2015f 17.9
2016f 17.6
2017f 14.0
The majority of outbound tourists will be departing India for the Asia-Pacific region, with annual travellers expected to reach 9mn by 2017. Although outbound travel to the Middle East fell in 2012 due to concerns with regional security, between 2013 and 2017 BMI expects travel to this region to increase to 4.7mn. Shortly behind the Middle East in terms of popularity is North America, with close to 3mn travellers per year expected by 2017 and Europe, with close to 2.7mn. No decreases in travel to any region are expected in the forecast period. In fact by 2017 we predict that the average tourist departure per 1000 of the population will reach 15.1, up from 8.6 forecast for 2012.
Table: India Outbound Tourism, Top 10 destinations be departures, 2010-2017
2010 USA Saudi Arabia Singapore Thailand UAE Malaysia China Hong Kong Italy Oman 1,140.94 389.12 828.90 760.37 701.91 690.85 549.30 530.91 193.00 168.33
2011 1,222.30 1,501.31 868.99 914.97 772.36 693.30 688.64 498.06 210.00 198.28
2012e 1,459.37 1,155.01 960.37 1,099.60 842.28 737.94 763.97 518.34 220.80 212.99
2013f 1,606.06 1,322.29 1,022.71 1,254.50 925.48 768.18 883.19 544.65 232.82 232.70
2014f 1,836.06 1,584.56 1,113.47 1,446.78 1,055.92 827.98 1,085.54 586.40 250.74 263.60
2015f 2,117.04 1,904.98 1,211.63 1,675.69 1,215.29 889.63 1,312.45 634.56 271.17 301.34
2016f 2,442.87 2,276.54 1,302.43 1,930.04 1,400.09 938.80 1,563.90 687.27 293.20 345.12
2017f 2,748.02 2,624.51 1,375.41 2,142.89 1,573.16 981.98 1,799.37 740.22 312.39 386.11
The US is expected to remain the most popular destination for outbound tourists between 2013 and 2017, reaching 2.7mn per year in 2017. Not far behind is Saudi Arabia, popular with affluent Indian tourists, with 2.6mn travellers per year expected in 2017. The Middle East in general has a strong presence in the top 10, it is a nearby destination with many travel links. Travellers to Thailand is expected to show particularly high
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growth with the number of annual visitors from India expected to double by 2017. The only European country in the top 10 is Italy, though other European countries remain popular destinations.
Travel
Due to the strength of the domestic economy and expected increases in travel across inbound and outbound tourists receipts for tourism related transport services in India are expected to grow between 2013 and 2017. Although the 2012 growth rate of 23.7% won't be replicated in 2013, which will see a smaller annual growth of 3.3%, between 2014 and 2017 we expect to see growth of between 8% and 12% per year, leading to annual expenditure of US$1.2bn by 2017. Transport receipts cover costs incurred by tourists on all tourist transportation within India, including fares on buses, railways, airplanes and boat trips (operated domestically), carrier charges and fees, excess baggage fees, car transportation costs and package holiday trips within the country (excluding cruises).
Table: India International Tourism Receipts for Transport and Travel, 2010-2017
2010 International tourism, receipts for transport services, US$bn International tourism, receipts for transport services, US$bn, % change y-o-y International tourism, receipts for transport services, INRbn International tourism, receipts for transport services, INRbn, % change y-o-y International tourism, receipts for transport services, EURbn International tourism, receipts for transport services, EURbn, % change y-o-y 0.5 37.5 23.5 29.9 31.1 23.1
2011 0.6 23.7 29.6 26.2 41.2 32.3 15.8 11.7 738.1 14.0 11.4 6.6
2012e 2013f 0.8 23.5 41.9 41.5 53.2 29.3 19.3 22.1 0.8 3.3 42.1 0.4 52.6 -1.2 19.9 3.1
2014f 0.9 8.7 44.8 6.6 53.8 2.3 21.6 8.3
2015f 0.9 7.1 46.1 2.9 55.3 2.9 23.0 6.8
2016f 1.0 10.8 50.0 8.5 0.9 -98.4 25.4 10.4
2017f 1.2 11.9 56.0 11.9 1.0 11.9 28.3 11.5
International tourism, receipts for travel items, US$bn 14.2 International tourism, receipts for travel items, US$bn, 27.2 % change y-o-y International tourism, receipts for travel items, INRbn 647.4 International tourism, receipts for travel items, INRbn, 20.1 growth y-o-y International tourism, receipts for travel items, EURbn 10.7 International tourism, receipts for travel items, EURbn, % change y-o-y 34.2
1033.4 1035.8 1100.2 1128.5 1220.3 1360.3 40.0 15.2 33.7 0.2 15.9 4.8 6.2 18.0 12.8 2.6 19.2 6.8 8.1 21.2 10.4 11.5 23.6 11.5
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Receipts for travel items increased by 22% in 2012 compared to 2011. 2013 is not forecast to show such substantial growth, however over the entire forecast period we expect receipts for travel items to increase by almost US$10bn to a yearly spend of US$28.3bn by 2017. As with travel receipts this is due to the strength of the domestic economy.
International tourism receipts for travel items are expenditures by international inbound visitors in the domestic economy, including any prepayment made for goods or services received in the destination country. Travel items can include luggage, accessories, sun cream etc.
Table: India Breakdown of Methods of Tourist Travel, 2010-2017
2010e Air transport passengers carried, mn, out-bound Air transport passengers carried, mn, out-bound, % change y-o-y Air transport, registered airline domestic and non-domestic takeoffs, '000 Air transport, registered airline domestic and non-domestic takeoffs, '000, % change y-o-y Domestic Railway passengers carried, mn per km 64.1 17.8 630.0
2011f 78.5 22.3 765.9
2012f 85.0 8.3 814.6
2013f 94.5 11.2 885.7
2014f 108.7 15.0 991.3
2015f 125.3 15.3 1115.3
2016f 143.9 14.8 1254.0
2017f 161.5 12.2 1384.9
4.7
21.6
6.4
8.7
11.9
12.5
12.4
10.4
903,465
791,494 -12.4
818,445 3.4
845,282 3.3
871,887 3.1
898,170 3.0
924,091 2.9
949,646 2.8
Domestic Railway passengers 7.8 carried, mn per km % change y-o-y
As the breakdown of travel methods table above shows, air travel, both outbound and domestic is forecast to increase between 2013 and 2017. While the global credit crunch affected increases in out bound travel in 2012, this only led to a slight decrease in the rate of growth to 8.3% from 22.3% growth in 2011. The annual y-o-y change is expected to increase to between 11% and 15% per year, leading to a total outbound air transport passengers per year of 161mn in 2017. Domestic take offs experienced a similar decrease in the rate of growth in 2012 but is expected to bounce back in 2013 and throughout the forecast period.
The number of domestic rail passengers fell in 2012 but increases are expected to resume in 2013, regaining the 2010 high by 2016 and surpassing it by 2017. The number of domestic rail passengers may decrease as domestic air travel increases in availability and popularity, however the size of the market means investment in rail infrastructure is still an extremely viable prospect.
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As the table of key infrastructure development projects shows, in the Market Overview, India currently has an extensive investment programme in place to improve air and rail networks.
Hotels
The hotel and restaurant industry currently comprises just 1.5% of India's GDP. This figure is not expected to alter over the forecast period as other industries, such as IT and infrastructure remain more important to the economy. Tourism has not traditionally been an area of focus for investment for the government in India, though this may change in forthcoming years.
Despite the lack of importance placed on the industry by the government the value of the industry is expected to see large increases between 2013 and 2017. The limitations of the global economy in 2012 meant that the industry value only increased by 0.3% but in 2013 we expect to see a much larger increase of 16.4% to over US$30bn. Continuing growth based on the strength of the domestic economy, and increases in inbound and outbound tourism, mean that by 2017 BMI expects the value of the industry to reach over US$50bn.
Table: India Domestic Hotels and Restaurants Industry Value, 2010-2017
2010 Domestic Hotels and Restaurants 1,004.8 Industry Value INRbn Domestic Hotels and Restaurants 12.8 Industry Value INRbn, % change y-o-y Domestic Hotels and Restaurants 22.0 Industry Value, US$bn Domestic Hotels and Restaurants 19.4 Industry Value, US$bn, % change y-o-y Domestic Hotels and Restaurants 16.6 Industry Value, EURbn Domestic Hotels and Restaurants 26.1 Industry Value, EURbn, % change y-o-y Domestic Hotels and Restaurants 1.4 Industry Value, % of GDP Domestic Hotels and Restaurants 17.9 Industry Value, US$ per capita
2011 1,204.3 19.8
2012e 1,384.9 15.0
2013f 1,567.2 13.2
2014f 1,776.5 13.4
2015f 1,997.3 12.4
2016f 2,244.2 12.4
2017f 2,520.3 12.3
25.8 17.4
25.9 0.3
30.1 16.4
34.8 15.6
40.8 17.0
46.8 14.7
52.5 12.3
18.6 12.0
20.4 9.8
24.1 18.3
29.0 20.4
34.0 17.0
39.0 14.7
43.8 12.3
1.4 20.8
1.5 20.6
1.5 23.6
1.5 27.0
1.5 31.2
1.5 35.3
1.5 39.2
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India Domestic Hotels and Restaurants Industry Value, 2010-2017 - Continued
2010 Domestic Hotels and Restaurants 17.8 Industry Value, US$ per capita, % change y-o-y
2011 15.8
2012e -1.0
2013f 14.9
2014f 14.1
2015f 15.5
2016f 13.3
2017f 11.0
The growing popularity of India as a tourist destination, and the increase in transport networks, both air and rail, mean that the country is an attractive investment area of hotel groups. As such BMI expects that the number of hotels and establishments will rise over the next five years. While the rate of growth will slightly decline from 17% per year to 13% per year over the forecast period, the number of hotels will still almost double from approximately 3,200 to 6,300 between 2012 and 2017.
Table: India Hotel Accommodation, 2010-2017
2010 Number of Hotels and establishments '000 2.5
2011 2.7 10.6 2.3 -29.3 127.8 8.5
2012e 2013f 3.2 17.7 2.8 20.7 144.8 13.3 3.7 15.2 2.6 -8.6 162.0 11.9
2014f 4.3 15.2 2.7 4.7 181.8 12.2
2015f 4.9 13.9 2.6 -2.2 202.6 11.5
2016f 5.6 13.6 2.7 1.1 225.9 11.5
2017f 6.3 13.4 2.7 -0.6 251.9 11.5
Number of Hotels and establishments '000 % change 35.8 y-o-y Average length of stay, nights Average length of stay, nights, % change y-o-y Hotel rooms '000 Hotel rooms '000, % change y-o-y 3.3 32.0 117.8 27.0
e/f=BMI estimates/forecasts. Source: BM
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Economic Analysis
Economic Outlook
BMI View: Despite the pervasive weakness of recent economic data, there is sufficient evidence across leading indicators to suggest that economic conditions will start to improve in the coming quarters. With this in mind, we are sticking to our above-consensus view on the economy, with our 5.7% and 6.8% real GDP growth projections for FY2012/13 and FY2013/14 coming in well above the Bloomberg median of 5.4% and 5.8%, respectively.
Our call for a gradual recovery in the Indian economy in the latter half of FY2012/13 (April-March) and FY2013/14 appears to be at odds with the pervasive weakness seen across recent economic data. New private sector investment projects fell by a massive 60.7% year-on-year (y-o-y) in Q2 FY2012/13 (JulySeptember) and, as the accompanying chart shows, an increasing number of outstanding projects have been shelved indefinitely. Depressed EU demand, meanwhile, has continued to weigh upon the performance of Indian exporters, with export earnings contracting by 9.7% y-o-y in August. Finally, as illustrated by the 18.6% y-o-y collapse in domestic passenger car sales in August, India's consumer boom has started to unwind.
Uncomfortable Reading
India - Private Sector Project Data & Passenger Car Sales (RHS)
Source: BMI, CMIE Capex, SIAM
Page 25
Such bearish data is difficult to ignore, as is the fact that India's fiscal and trade deficits remain near historical extremes. With this in mind, it would be all too easy to side with consensus view that recent weakness in activity indicators is a harbinger of further gloom ahead for the Indian economy. However, we believe that it is important to distinguish between indicators that lead the business cycle and those which are lagging or coincident in nature. To be sure, a host of variables which we believe exhibit a predictive quality appear to suggest a stabilisation and/or gradual improvement in India's macroeconomic conditions going forward.
Purchasing Managers Indices: India's manufacturing PMI printed 52.8 in both August and September, indicative of a growing measure of stability for the sector at a time when most PMIs across the region have sunk into contractionary territory. Encouragingly, the new export orders index rose to a four-month high of 53.8 from 49.2, rising above the 50-level for the first time since June, which could be viewed as a sign that the weaker rupee has finally started to re-ignite demand for Indian exports. Moreover, the service sector PMI, which is arguably more reflective of India's broader economy, came in at a six-month high of 55.0 in September. Both these dynamics are consistent with an eventual improvement in headline growth.
Leading The Way

India - Purchasing Managers Indices & Commercial Credit, % chg y-o-y
Source: BMI, HSBC/Markit, RBI
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Money Supply: Commercial credit growth has bounced back from a low of 14.2% y-o-y in March to a 10month high of 18.3% in August, and the uptrend is clearly strengthening. Anecdotally, we note that the State Bank of India and HDFC Bank have extended loans of US$6.6bn and US$1.9bn to Tata Steel and Hindalco Industries, respectively, in September - a possible sign that central bank liquidity injections are starting to have the desired effect. While we still expect non-performing assets (a classic lagging indicator) to tick higher, the pick-up in credit growth, coupled with our expectations of forthcoming monetary easing, bode well for the country's investment cycle.
Equity Market: Despite all the bearish sentiment surrounding India's macro prospects, we note that the country's benchmark Sensex equity market is making new highs. Equity market and economic performance can, of course, deviate in the near term. That said, equity investors should start to discount the outlook for earnings (and, by extension, economic growth) over the medium term. The accompanying chart shows the year-on-year change in the Sensex against industrial production growth, with the latter lagged by three months. Given the clear correlation over the past five years or so, the recent acceleration in the Sensex can be viewed favourably from a macroeconomic perspective.
Taking Stock Of Growth

India - Industrial Production Versus Sensex, % chg y-o-y
Source: BMI, MOSPI
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Positive Implications For Reform

We have long argued that much of India's downturn has been self-inflicted, with corruption concerns, policy paralysis and project delays combining to sap investor confidence in the country's macroeconomic prospects. It stands to reason, therefore, that the announcement of a series of economic reforms by Prime Minister Manmohan Singh in September - a move that BMI had anticipated a few months earlier - should help to galvanise investment demand (see 'The Return Of Reform', September 17 2012). While none of the announcements in themselves have led to a profound change in India's business environment, New Delhi's willingness to push through economic policies despite incurring political cost is a major positive signal for investors. Domestic companies which had been holding back capital spending may be encouraged to loosen the purse strings on a renewed belief that approvals and permits will clear government hurdles in hastier fashion. Furthermore, foreign investors who had stayed clear due to political noise are likely to return (particularly if retrospective taxation proposals on foreign companies are kicked into touch as we expect). To be sure, even before the announcement, we had seen a forceful pick up in portfolio capital. According to the Securities and Exchanges Board of India, foreign inflows totalled roughly US$13bn between January and September, one of the best year-to-date performances of recent years, and we expect inflows to remain buoyant in the coming months.
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More Upbeat Than Most

India - Real GDP Growth, %
*Consensus As Of October 2 2012. Source: BMI, Bloomberg
Staying Above Consensus

We could point to several other factors, such as the decent end to the monsoon (which should support agricultural output and rural consumption), that suggest current bearishness towards India's growth prospects is overdone. The consensus view is for Indian growth to remain subdued at 5.4% and 5.8% in FY2012/13 and FY2013/14, reflecting the mainstream view of a prolonged slump in growth going forward. We disagree. We expect real GDP growth to rise from a projected 5.7% this fiscal year to 6.8% in FY2013/14, led primarily by a bounce in investment activity. As leading indicators start to filter through into coincident and lagging economic data, we would expect the consensus view to converge with our own.
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Table: India - GDP by Expenditure, Current Prices Breakdown
2009 Nominal GDP, INRbn 1,4 Private final Consumption Exp., INRbn 2,4 Government final. cons. exp., INRbn 2,4 Fixed capital formation, INRbn 2,4 Exports of goods & services, INRbn 2,4 Imports of goods & services, INRbn 2,4 Net exports of goods & services, INRbn 2,4 Change In Stocks, INRbn 2,4 Statistical discrepancy, INRbn 2,4 Real GDP growth, % change y-o-y 3,4 60,914.80
2010 71,574.10
2011 82,326.50
2012e
2013f
2014f
2015f
2016f
92,981.50 105,487.50 118,913.50 133,510.70 149,716.90
37,081.40
43,383.90
49,615.90
55,663.30
62,395.10
70,271.70
78,581.30
87,873.50
7,742.70 20,417.60 13,000.30 16,469.40
9,107.20 23,313.80 17,475.00 20,660.00
10,358.10 26,146.30 21,817.10 26,434.00
11,675.90 29,752.20 24,592.80 29,091.10
13,398.10 34,140.70 28,742.80 33,227.40
15,089.40 39,533.60 32,675.20 38,300.40
16,794.50 45,246.20 37,568.30 43,834.90
18,692.30 51,546.80 43,194.20 50,169.00
-3,469.00 1,391.70
-3,185.00 1,912.60
-4,616.90 1,958.10
-4,498.20 1,958.10
-4,484.60 1,958.10
-5,625.20 1,958.10
-6,266.50 1,958.10
-6,974.80 1,958.10
-105.3 6.6
-56.5 8.4
1,745.10 6.5
5.7
6.8
6.6
6.9
6.8
Notes: f BMI forecasts. 1 GDP @ Factor Cost, Fiscal years ending March 31 (1990=1990/91); 2 Fiscal years ending March 31 (2011=2011/12); 3 2011=FY2011/12, Factor Cost, f=BMI forecast. Sources: 4 Central Statistics Organisation/BMI.
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Industry Risk Reward Ratings

Table: Asia Tourism Risk Reward Ratings
Rewards Limits of Potential Returns Hong Kong Thailand Singapore Macau Australia South Korea 73.32 73.99 61.29 66.50 57.83 63.93
Risks Risks to Realisation of Potential Returns 77.82 59.79 80.55 67.20 83.27 66.58 83.53 64.09 55.57 67.13 58.97 67.96 50.31 36.25 46.72 41.76 55.20
Tourism Market 80.00 81.96 65.00 72.50 48.33 60.00 35.00 61.67 61.67 53.33 50.00 22.50 46.67 63.33 50.00 46.67 22.50
Country Structure 63.29 62.04 55.73 57.50 72.06 69.83 84.69 59.04 62.26 60.83 55.05 76.55 54.14 42.21 45.54 48.70 42.41
Market Risks 80.22 66.21 85.47 65.00 80.27 70.39 77.27 73.21 65.19 74.52 77.14 67.99 63.77 33.02 35.61 63.88 67.50
Country Risk 75.86 54.54 76.52 69.00 85.72 63.46 88.66 56.63 47.70 61.09 44.10 67.93 39.29 38.90 55.82 23.66 45.15
Tourism Rating 74.67 69.73 67.07 66.71 65.46 64.73 63.47 61.66 60.00 59.57 54.10 51.27 49.85 49.29 47.77 45.76 37.89
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
New Zealand 54.88 Taiwan Vietnam Malaysia China Japan Sri Lanka Cambodia India Laos Indonesia 60.62 61.91 56.33 52.02 44.12 49.66 54.89 48.22 47.48 30.47
Source: BMI
India Risk and Rewards

Limits Of Potential Returns
This is an evaluation of the sector's size and growth potential in each state, along with broader industry/ state characteristics that may inhibit its development. The reward ratings for tourism take into account the numbers and % growth of tourist arrivals over the past year and BMI's forecasts for future growth over 2013. India saw an increase in arrival figures in 2012 and this is expected to continue over 2013. The
Page 31
overall figures for tourism receipts and hotel occupancy were similarly enhanced and offset, and factored in accordingly, giving India a Tourism Market figure of 50. The Country Rewards score takes into account labour costs and infrastructure. India has an extensive travel infrastructure however the industry needs extensive investment and improvement, particularly in terms of international airport availability. The country does however have an extensive available labour pool. Therefore India has a score of 46, reflecting the need for more investment in this area. Risks To Realisation Of Returns This offers an evaluation of industry-specific dangers and those emanating from the state's political and economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. The market risks score takes into account short term political stability and regional stability. India scores 47 reflecting the possibility for regional tensions, particularly concerning Pakistan and the possibility of terrorist attacks, to impact on tourism figures. Despite its stable democracy widespread poverty combined with frequent mass political demonstrations could prove a threat to the tourist industry. Finally, BMI's proprietary country risk scores cover corruption, legal framework, bureaucracy, market openness and security risks. India frequently experiences allegations of corruption, particularly when it comes to the awarding of large scale industrial projects. Limitations on foreign investment and an excess of red tape and bureaucracy also impact on India's score giving it a relatively low 56. As such India is ranked 15th out of 17 in the Asia Pacific Region.
Security Risk Analysis

BMI's Security Ratings service, which integrates closely with our Country Risk service, offers a comprehensive comparative analysis of security risk in three key areas - interstate conflict, terrorism and physical safety for expatriate workers - across major states in each region. The ratings are combined to form a composite security rating to provide an overall guide to long-term trends and risks. We integrate our shortterm political and economic ratings with the terrorism rating, to indicate a state's vulnerability to a sustained terrorist campaign or major terrorist attack. In all instances, the rated period is two years, with each country assigned a score out of 100, with a low score indicating a high level of risk.
Table: Table: Asia Pacific Regional Security Ratings
State Singapore
Interstate 91
Terrorism 87
Criminal 99
Composite domestic risk 93
Regional rank 1=
Composite security risk 92
Ranking 1
Page 32
Table: Asia Pacific Regional Security Ratings - Continued
State Australia Japan Taiwan South Korea Malaysia North Korea Vietnam China Thailand Indonesia Philippines India Pakistan
Interstate 98 90 71 68 81 48 60 80 84 88 84 68 46
Terrorism 83 92 95 86 84 98 98 85 66 68 49 47 26
Criminal 92 91 79 88 69 88 71 59 71 52 40 53 37
Composite domestic risk 88 91 87 87 77 93 85 72 68 60 45 50 31
Regional rank 4 3 6= 5 8 1= 6= 9 10 11 13 12 14
Composite security risk 91 91 82 81 78 78 76 74 74 69 58 56 36
Ranking 2= 2= 4 5 6= 6= 8 9= 9= 11 12 13 14
BMI
India's Security Ratings

India faces many security risks. Active terrorist groups linked to al-Qaeda have been connected to attacks against Westerners and regional border tensions, particularly in Kashmir and states in the north-east mean these areas are particularly volatile. The majority of tourist areas are safe but border regions can be more dangerous, and as the 2008 Mumbai terrorist attacks demonstrated even mainstream tourist destinations are at risk. An increase in crime, including recent high profile attacks against woman, widespread poverty, and large scale political demonstrations, combined with the security risks mean that India is ranked 13th in the Asia Pacific region, ahead only of Pakistan.
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Market Overview
India's economy is expected to continue to grow over the next few years, despite the relatively nonconducive monetary conditions and policy inertia. Infrastructure development is limited by a lack of access to financing, however the government is moving in the right direction and looking at news way of enabling private investors to invest in the infrastructure market. This bodes well for its extensive transport network which is in need of major development if it is to meet the demands of increased inbound and outbound tourism figures.
The strong domestic economy, with high growth in GDP expected between 2010 and 2017 and accompanying increases in private consumption rates, mean that BMI expects to see substantial rises across all sectors of the tourism market, including the number of hotels and available rooms, expenditure on travel related items, and air travel.
India already has an extensive travel network, with its 454 airports, including 15 international airports and plans in place to building close to 150 new airports by 2020. However capacity, particularly at international airports, is limited and expansion is needed. Development has been stunted by a lack of regulatory reforms, particularly concerning the acquisition of land for new airport builds, as well as a lack of funding. Despite these limitations BMI expects the airport sub-sector to grow at an average rate of 6.2% per annum between 2013 and 2017. The railway network is in similar need of investment. Currently the 4th largest rail network in the world, a poor track record of completing projects on time and in budget has impacted on the efficiency of the network and currently, as estimated by Indian Railways, US$2.8bn is needed to complete 918 railway projects. Despite limitations BMI expects to see growth of 8.1% a year between 2013 to 2017 in the rail industry.
Table: India Key Infrastructure Development Projects
Project Name International airport at Navi Mumbai (first phase)
Sector Airports
Value (US Capacity/Length $mn) 1950 40mn passengers
Timeframe early 2012 - 2014
Status Project cost to potentially increase due to new land acquisition bill (Dec 2011) At planning stage New terminal completed
Shimoga, Gulbarga Airports Indira Gandhi International Airport, New Delhi, modernisation and management of airport
Airports Airports
na
na 2600 34 mn passengers
20092007 - 2034
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India Key Infrastructure Development Projects - Continued
Project Name Chennai airport expansion, Tamil Nadu state
Sector Airports
Value (US Capacity/Length $mn) 50.7 23 mn passengers 2300 20 mn passengers
Timeframe
Status
2008 - August 2012 Completed (August 2012) 2008- April 2013 Under construction; December 2012 completion date to be delayed by 3-4 months (June 2011) Tender may start by October 2012 (July 2012) Under construction (Dec 2011) At tendering stage, bids submitted (September 2012) At planning stage
Chhatrapati Shivaji Airports International Airport (Mumbai) modernisation
Mopa international airport Airports (BOT) concession, Goa state Bengaluru International Airport terminal 1 expansion Kushinagar international airport, Uttar Pradesh Airports
670 na
October 2012 2016 June 2011 - Q1 2013 September 2012 -
194 17 mn passengers
Airports
46 1mn passengers
Cochin International Airport Airports expansion (includes a railway station and metro extension as well as leisure facilities, a hotel and a hospital) Kannur International Airport PPP project, Kerala Airports
24.3 5 mn passenger
2010-
252 1.5mn passengers
June 2012 - 2014
At tendering stage, land acquisition completed (June 2012) Project announced At planning stage Land acquisition approval received; Seeking US$17mn grant for land acquisition from state government Under construction Contract awarded (June 2011) Construction to start (June 2011); 191 acres of land allocated Inviting bids for contract (July 2011);
Overhaul of Biju Patnaik Airport, Bhubaneswar Cargo facility at the Delhi International Airport (DIAL) Vijayawada airport expansion, Andhra Pradesh
Airports Airports Airports
32.2 na 35 37 mn passengers 45 na
2010-November 2011 2011-2015 2011-
Harni airport expansion (new Airports terminal) Airport Terminal 1 expansion, Airports Bangalore Jharsuguda airport, Orissa Airports na
255 na 194 17mn passengers na
July 2011 - end 2012 June 2011 - Q1 2013 June 2011 -
Air Traffic Control tower complex, part of Delhi International Airport
Airports
77.7 na
July 2011 November 2013
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India Key Infrastructure Development Projects - Continued
Project Name Integrated (domestic and international) terminal, Chhatrapati Shivaji International Airport (Mumbai), Sahar, Andheri Chandigarh International Airport
Sector Airports
Value (US Capacity/Length $mn) na 10mn passengers/yr
Timeframe 2008 - 2013
Status Under construction (Nov 2011)
Airports
na
na
February 2012 -
US$6.1mn preconstruction phase underway, Under tendering process for project first phase (Feb 2012) Under tendering process (April 2012) Construction due to begin in early-2013 (January 2013) At planning stage (May 2012) At planning stage, seeking consultants for feasibility study (September 2012) At planning stage (August 2012) Under construction, terminal completed (November 2012)
Domestic cargo terminal, Airports Chhatrapati Shivaji International Airport (Mumbai) Fifth international airport PPP Airports project, Aranmula, Pathanamthitta district, Kerala Itanagar international airport PPP project, Arunachal Pradesh Taj International Airport PPP project, Uttar Prades Airports
na
na
April 2012 -
367 na
January 2013 end-2014
na
na
May 2012 -
Airports
na
na
September 2012 -
Mopa BOOT airport, Goa Netaji Subhash Chandra Bose International Airport expansion project (includes terminal, second runway), Kolkata
Airports Airports
470 na 420 16mn passnegers
August 2012 Late 2008 December 2012
Source: BMI Key Projects Database
India has a diverse range of tourist attractions. Undoubtedly the biggest is the Taj Mahal, which attracts nearly 900,000 foreign visitors a year. Additionally India has 29 UNESCO World Heritage Sites and 25 bio-geographic zones, making it a prime candidate for eco-tourism, particularly wildlife tourism. On top of these attractions the country benefits from many world class beaches along 6,000km of coastline as well as access to the Himalayan foothills, and modern cities such as Mumbai.
The top 10 global hotel groups have extensive presence throughout India and many are planning on expanding the number of hotels in forthcoming years.
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Table: India Top 10 Global Hotel Groups
Global Hotel Group Accor Hotels
Presence in [Country]
Hotel Brands present in [Country]
Accor group has 21 hotels in India, providing both budget Sofitel, Pullman, Novotel, and mid range accommodation. As well as locations in Mercure, Ibis, Formula 1 Mumbai and Bangalore, Accor also has hotels in the mountains and developments near several international airports. Radisson, Park Plaza, Park Inn, Country Inn & Suites
Carlson Rezidor Hotel Group Carlson has 63 hotels across 37 different locations in India, with 44 in development giving it the leading presence in India. The group opened 13 new hotels in 2012 and signed a deal to develop a network of 49 Park Inn hotels by 2024. Choice Hotels International
Choice group has 28 hotels across three brands in India Quality, Comfort Inn, Clarion, at a range of locations giving it good coverage across the country, catering more towards the budget traveller. Best Western has hotels at 17 locations under the Best Western brand, with a total of 20 Best Western hotels including business hotels and resorts. The Four Seasons Mumbai offers luxury accommodation with business and spa facilities. Best Western, Four Seasons
Best Western International
Hilton
The Hilton Group currently has 12 hotels in India, with 2 Hampton, Double Tree, Hilton, further hotels expected to open in 2013 in Bangalore. The Eros, group has locations in New Dehli, Mumbai and Vadadara as well as a resort in Goa. Hyatt has 11 hotels in India with 2 more due to open in 2013, the Hyatt Regency Gurgaon and Hyatt Regency Ludhiana. Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt Place
Hyatt
Intercontinental Hotels Group IHG has 15 hotels at 13 locations including Mumbai, Goa, Holiday Inn, Crowne Plaza, Bangalore and New Dehli. New hotels opening in 2013 include the Crowne Plaza Noida. Marriott Marriott group has 22 hotels across 6 brands in India. These include the newly opening Ritz-Carlton Bangalore and Courtyard Bhopal. Starwood currently has 34 hotels in India but has an extensive expansion programme in place with 24 new hotels expected to open by 2016. Courtyard, Ritz-Carlton, JW Marriott, Sheraton, Le Meridien, The Westin, Four Points, W, ITC
Starwood
Wyndham
Wyndham has 17 hotels in India, with 2 in Cochin, and Wyndham, Ramada, Howard others in Goa, Mumbai, Agra, and Bangalore, with a Johnson further 12 hotels under development and plans to introduce 35 properties under the Howard Johnson brand by 2017.
Source: BMI
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As discussed in the Industry Forecast, BMI expects to see growth in both the number of hotels and number of available rooms. The market for luxury high end travel continues to expand, with many of the top 10 global hotel brands rolling out extensive expansion projects in the country. These include Carlson-Rezidor's plans to open a further 49 hotels by 2017, Starwood's plans for 24 new hotels by 2016 and Wyndham's plans for 35 new hotels by
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012e 2013f 2014f 2015f 2016f 2017 200 20,000
Parallel Rise
Number of Hotel Rooms ('000) and Value of Hotel Industry (US$mn), 2000-2017f
300 30,000
100
10,000
2017.The ambitious expansion plans reflect the confidence held in the tourist market in India.
ACCOMMODATION: Hotel rooms, '000 (LHS)
India also has several large domestic hotel brands including The Indian Hotels Co Ltd, Taj Group and Oberoi Group. The ITDC Ashok Group is a particularly well known brand with 33 hotels in 26 locations across India.
INDUSTRY VALUE: Hotels and restaurants industry value, US$bn (RHS)
Notes: 1Individual Expenditure relates to investment in services with an identifiable individual consumer 1 "Ministry of Tourism" 2 "WTTC, BMI"
Overall the tourism market in India is extremely promising and ripe for investment. Despite the
limitations of the global economy, still experiencing the after effects of the widespread credit crunch, the number of both inbound and outbound tourists are expected to increase by 2017, and the leading hotel groups will be seeking to take advantage of this growth. Better regulation of the travel networks, particularly foreign investment in the airline industry and management of rail improvement projects, will help India to take advantage of its growing attraction as the global travel destination of choice.
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Company Profile
Taj Hotels
Company Overview
Taj Hotels Resorts and Palaces forms part of the Tata Group of companies. It has 112 hotels across India, including the Taj Mahal hotel in New Delhi, the Taj Palace Hotel (New Delhi) the Taj Bengal (Kolkata), the Taj Coromandel (Chennai) and the Taj West End (Bangalore). Meanwhile, its beach resorts are at Goa, Kochi and Bentota (Sri Lanka). The company owns 18 international hotels in the Maldives, Mauritius, Malaysia, the Seychelles, Australia, the UK, the US, Bhutan, Sri Lanka, Africa, and the Middle East. The company offers three types of hotel: luxury, leisure and business. The chain's flagship hotel, the Taj Mahal Palace in Mumbai, was the target of the November 2008 terrorist attacks. The company launched a series of reconstruction works pending settlement of insurance claims. Like many other hotel chains, Taj experienced difficulties during the economic slowdown in 2009 but revenue growth has since recovered, totalling INR1,854bn in FY11/12. The company has used the industry downturn to invest in planning new hotels. Five new establishments opened in 2011. The group is looking to expand its Ginger hotels, with the aim of opening another seven by 2014. With this expansion, Taj aims to offer accommodation in its three main target markets: luxury, upper-upscale and upscale.
Financial Data
Profit before tax (FY11/12): INR229.9mn Gross revenue (FY11/12): INR1,854bn Established: 1902
Company Details
Taj Group Mandlik House Mandlik Road Colaba Mumbai 400001 Tel: +91 (22) 2220 25515
Key Personnel
Managing director/CEO: Raymond Bickson Chief operating officer, luxury hotels (India): Jyoti Narang Chief operating officer, Vivanta hotels: Veer Vijay Singh
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Global Industry Overview

BMI View: The global tourist accommodation sector will greatly benefit from the rise in international tourist arrivals forecasted from 2013-2017. The growing number of outbound and domestic-based tourists from Asia and Latin America has provided great incentives for the tourist accommodation sector to increase the number of hotels and rooms on offer across these regions. Even though underlying economic risk remains, over the next five years we estimate annual growth in total hotel units to be within 3-5% from 2013 to 2017.
Despite the difficult global economic picture, international tourist arrivals are expected to grow across 2013. Historically the number of tourists has been rising year on year in eight out of the ten years from 2002-2012, the only fall being in 2009 due to the global economic crisis. In 2012, International tourist arrivals grew by 4.3% in 2012, we saw positive growth stemming from a number of factors including tourists taking advantage of a weaker euro to travel to eurozone states, as well as a growing middle class in Asia who have an increasing inclination to travel abroad. We expect this trend to continue. BMI estimates that international tourist arrivals will report growth of 4.1% at the end of 2013, an increase of 38.6 million tourists to 971.1 million from 2012 across BMI's tourism universe. We forecast that annual growth in international tourists arrivals will remain between 4-5% for the next five years from 2013 to 2017.
Table: Global Tourism Indicators, International Tourist Arrivals, 2009-2017
2009 WORLD: Total Arrivals mn* WOLRD: Total Arrivals mn, % change y-o-y 783.1 -4.9
2010 840.9 7.4
2011 894.3 6.3
2012e 932.5 4.3
2013f 971.1 4.1
2014f 1019.1 4.9
2015f 1068.7 4.9
2016f 1121.1 4.9
2017f 1170.5 4.4
BMI
Growing tourist arrivals driving tourist accommodation
With international tourist arrivals set to grow from 2013-2017, the global tourist accommodation sector will look to support the increase in number of tourists through the construction of new hotel units. Across the world the tourist accommodation sector is likely to face stiff competition, and competitors look set to enhance market share through pricing, aesthetics by introducing wide scale renovations and, mass branding and marketing initiatives in the emerging markets. Over the last few years financial markets have seen an inflow of capital and the tourist accommodation sector has taken advantage of this by taking the opportunity
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to use leverage to initiate wide-ranging hotel renovations and construct new accommodation. Historically the level of total hotel units globally has been volatile, 2010 posted an increase of 3.7%, in 2011 total units slowed down to 0.9% and in 2012 total units increased again by 1.7%. Internationally we see the tourist accommodation sector increasing the number of hotel units across 2013 by 2.2% to 1.099 million units in total by the end of the year. From 2014-2017, BMI forecasts that annual growth in total hotel units to be between 2-2.5%.
Table: global tourism indicators, hotel and establishment units, 2009-2017
2009 WORLD: Number of hotels and establishments, '000* WORLD: Number of hotels and establishments, '000, % change y-o-y 4.9 1011.1
2010
2011
2012e
2013f
2014f
2015f
2016f
2017f
1048.8
1058.6
1076.5
1099.8
1124.0
1149.2
1176.6
1205.9
3.7
0.9
1.7
2.2
2.2
2.2
2.4
2.5
BMI
Regionally, Latin America is set to perform the best, with forecasted growth in total hotel units to be 4.32% in 2013 and 4.35% in 2014. High numbers of growth are dominated by the growing trend in inbound arrivals within the region, and the rise of domestic tourism in countries such as Brazil. Over the same forecast period Brazil will see a surge in new hotel developments in preparation for the 2014 FIFA World Cup to be staged in twelve cities across the country and 2016 Olympics to take place in Rio de Janeiro. Over the last few years in the Asia-Pacific region there have been many large scale hotel development projects. With rising middle classes in parts of Asia such as China and India, people are more likely than ever to travel for leisure. The tourist accommodation sector in the region is likely to capitalize on the greater number of outbound travellers from these countries and provide a greater number of hotels and facilities to offer guests. In 2012, total hotel units increased by 153,358 or 3.8% from 2011. Over the next five years from 2013 to 2017, BMI forecasts the region to grow over 4% annually. In isolation, total hotel units in China and India have grown by an annual average of 12.87% and 18.36% respectively over the last five years from 2012. This is on the back of strong rising levels of domestic tourists and international arrivals that are now attracted by the better infrastructure and facilities on offer at hotels. For 2013 we forecast annual growth of 9% for China and 13% for India. International hotel chains Marriot International, Starwood Hotels & Resorts and Hilton Worldwide have outlined expansion plans in China. Starwood Hotels & Resorts Worldwide, now have 100 hotels in the country and are another 100 have been outlined. Marriot is looking to double its share of hotels within the country by 2014.
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Elsewhere, BMI estimates that total European hotel units will show annual growth of 0.5% for 2012. This lower pace of growth is largely generated by a 0.1% fall in total hotel units across Western Europe for the same period. Falls in domestic income have led to a decrease in domestic hotel demand and a shorter length of stay by international guests have fallen under 4 nights in 2012 for the first time in ten years. Across the region, many unprofitable hotel units have been closed and others have been relocated. Over the next five years from 2013, we expect this trend to continue, and estimate total hotel units will grow in the range of 0.5-1% annually. In the Middle East, BMI estimates a bounce back in hotel construction in 2013 buoyed by a general lift in construction activity within the region, total hotel units will increase by 2.1%.
Hotel rooms also set to increase
For 2013, BMI forecasts that the total number of hotels rooms internationally will grow by 3.3%. The growth in the total number of rooms will be boosted twofold, firstly by new hotel construction which will increase the global stock levels of rooms and secondly by the restructuring and renovation of existing hotel units that will provide greater rooms. BMI forecasts strong growth in the total number of hotel rooms in Latin-America to be 5-8% annually over the next five years from 2013 to 2017. In other regions Europe will grow by 1.5-2%, North America by 1.5-1.6%, Asia by 2-5% and the Middle East by 2-5% over the same forecast horizon.
Room occupancy rates to remain steady
Hotel room occupancy rates remain traditionally high in city based states and locations due to the lack of availability of new land for new hotel construction. Singapore and Hong Kong remain the best with rates of 86.5% and 82.37% recorded in 2011 and BMI estimates this to be around this level at the end of 2012 and going forward into 2013. Regionally higher occupancy rates are seen in Asia, Europe and North America. Globally occupancy rates are estimated to remain between 50-60% over the next five years from 2013 to 2017, where growing room occupation will be counteracted by growth in hotel rooms.
Overnights stays rising in Asia and Middle East
At the end of 2011 total overnight stays internationally saw contractions of 1.6% in North America and 1.9% in Europe from 2010. Africa also noted a contraction of over 6% during the same period with only Asia, Middle East and Latin America showing growth. Trends in Europe and North America remain subdued with hotels in major western cities a lot pricier than emerging market equivalents. In 2012, average length of stay in Western Europe decreased to under 4 nights, the lowest it has been in a decade. We expect this trend to continue and forecast average length of stay to remain under 4 nights from 2013 to 2017.
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Globally, BMI forecasts total overnight stays to grow at over 3% annually from 2013 to 2017, weakness in Western Europe will be more than counteracted by strong growth in overnight stays within the Middle East and Asia. Overnight stays in Middle East will grow by 9% in 2013, and by 3.8% in Asia over the same period. These regions will benefit from the growing number of tourist arrivals from neighbouring nations.
Tourist accommodation sector remains sensitive to economic fundamentals
To take stock, there still remains significant underlying risk to the tourist accommodation sector, any impending global economic slowdown that constricts disposable income will lead to a reduction in future international tourist arrivals. This in turn will lead to a situation of over capacity in the tourist accommodation sector which may result in losses if hotel rooms are left unoccupied. If macroeconomic fundamentals are to improve this will translate into an increase in international tourist arrivals and provide greater incentive for further tourist accommodation construction.
Table: Global Sporting Calendar, 2013-2022
Year 2013 2013
Country Russia South Africa
City/Cities Moscow Rustenburg, Johannesburg, Nelspruit, Durban, Port Elizabeth,
Event IAAF World Championship Athletics Africa Cup of Nations
Sport Mixed Football
2013 2013 2013 2013 2013 2014
Unconfirmed but short list is: Fortaleza, Recife, Salvador, Brasilia, Belo Horizonte, Brazil Rio de Janeiro Myanmar Sweden Czech republic England Bangladesh Naypidaw Malmo Prague London Dhaka, Chittagong, Narayaganj, Rajshahi, Sylhet, Khulna,
FIFA Confederations Cup Asia Games Eurovision Song Contest UEFA Super Cup UEFA Champions League Final 2020 World Cup
Football Mixed Singing Football Football Cricket
2014 2014 2014 2014 2014 2014 2014
Manaus, Fortaleza, Natal, Recife, Salvador, Brasilia, Cuiba, Belo Horizonte, Sao Paolo, Rio de Janeiro, Curitiba, Porto Brazil Alegre Wales Scotland Russia Scotland China South Korea Cardiff Auchterarder, Gleneagles Sochi, Krasnaya Polyana Glasgow Nanjing Incheon
FIFA World Cup UEFA Super Cup Ryder Cup Winter Olympics Commonwealth Games Youth games (Summer) Asian Games
Football Football Golf Mixed Mixed Mixed Mixed
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Global Sporting Calendar, 2013-2022 - Continued
Year 2014 2015
Country Portugal Australia and New Zealand
City/Cities Lisbon Not Decided Cardiff, London, Birmingham, Brighton, Bristol, Coventry, Derbyy, Gloucester, Leeds, Leicester, Manchester, Milton Keynes, New Castle, Southampton, Sunderland Vancouver, Edmonton, Winnipeg, Ottawa, Montreal, and Moncton Toronto Casablanca, Rabat, Fes, Marrakesh, Tangier, Agadir Tibilisi Not Decided Melbourne, Sydney Brisbane Canberra Lens, Lille, Paris, Bourdeaux, Lyon, Marseille, Nice, Toulouse, St-Etienne Rio de Janeiro Not Decided Chaska Lillehammer Not Decided London Moscow, Kazhan, Sochi, St Petersburg Kaliningrad, Kazan, Krasnodar, Moscow, Nizhny Novgorod, Rostov-on-Don, Saint Petersburg, Samara, Saransk, Sochi, Volgograd, Yaroslavl, Yekaterinburg Pyeongchang Gold Coast City Paris Not Decided Tokyo, Sapporo, Yokohama, Osaka, Toyota, Kobe, Fukuoka, Sendai Sheboygan Not Decided
Event UEFA Champions League Final Cricket World Cup
Sport
Cricket
2015 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017 2017 2017
England Canada Canada Morocco Georgia Singapore Australia France Brazil India USA Norway Libya England Russia
Rugby World Cup FIFA Women's World Cup Pan American Games Africa Cup of Nations UEFA Super Cup Asian Games Asia Cup UEFA Euro Olympics 2020 World Cup Ryder Cup Youth Games (Winter) Africa Cup of Nations IAAF World Championship Athletics FIFA Confederations Cup
Rugby Football Mixed Football Football Mixed Football Football Mixed Cricket Golf Mixed Football Mixed Football
2018 2018 2018 2018 2019 2019 2020 2021
Russia South Korea Australia France England & Wales Japan USA Qatar
FIFA World Cup Winter Olympics Commonwealth Games Ryder Cup Cricket World Cup Rugby World Cup Ryder Cup FIFA Confederations Cup
Football Mixed Mixed Golf Cricket Rugby Golf Football
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Global Sporting Calendar, 2013-2022 - Continued
Year 2022
Country Qatar
City/Cities Al-Khor, Doha, Ash-Shamal, Al Wakrah, Umm Salar, Al Rayyan
Event FIFA World Cup
Sport Football
Source: BMI Key Projects Database
Page 45
Global Assumptions
Global Macroeconomic Assumptions
Our global real GDP growth forecasts remain steady, at 2.5% in 2012, 2.9% in 2013 and 3.4% in 2014 and 2015. Nonetheless, we have upwardly revised growth estimates and forecasts for a few key states, most notably the US and China. Despite these amendments, our core global outlook remains relatively unchanged. We believe that 2013 is likely to see improved economic activity, with cyclical indicators beginning to indicate that the near-recessionary conditions seen in mid-2012 are abating. Developed states still have a long way to go before recovering pre-crisis output levels, while emerging market performance will be mixed.
Table: Global Assumptions
2011 Real GDP Growth (%) US Eurozone Japan China World 1.7 1.6 -0.6 9.1 3.1
2012f
2013f
2014f
2015f
2016f
2017f
2.2 -0.7 0.5 7.7 2.5
2.1 0.4 0.9 7.5 2.9
2.5 1.4 1.2 6.7 3.4
2.5 1.7 1.1 6.0 3.4
2.4 1.9 1.1 5.8 3.5
2.4 1.9 1.1 5.8 3.5
Consumer Inflation (ave) US Eurozone Japan China World 3.0 2.6 -0.2 5.6 4.1 2.1 2.1 0.0 3.0 3.5 2.1 1.7 0.3 2.6 3.3 2.1 1.8 0.8 2.9 3.2 2.1 1.9 1.3 2.8 3.2 2.1 2.1 1.8 2.7 3.3 2.1 2.2 2.3 2.7 3.3
Interest Rates (eop) Fed Funds Rate ECB Refinancing Rate Japan Overnight Call Rate 0.00 1.00 0.10 0.00 0.50 0.10 0.00 0.50 0.10 0.00 0.50 0.10 0.00 0.50 0.10 1.00 1.00 0.25 2.25 1.50 0.50
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Global Assumptions - Continued
2011 Exchange Rates (ave) US$/EUR JPY/US$ CNY/US$ 1.39 79.74 6.46
2012f
2013f
2014f
2015f
2016f
2017f
1.27 79.00 6.34
1.25 75.00 6.40
1.20 76.00 6.55
1.20 78.00 6.60
1.20 82.25 6.60
1.20 84.75 6.60
Oil Prices (ave) OPEC Basket (US$/bbl) Brent Crude (US$/bbl) 107.52 111.05 107.05 110.00 99.10 102.00 96.15 99.00 95.20 98.00 93.25 96.00 93.30 96.00
Source: BMI
With the global economy only likely to slowly pick up momentum, further stimulus is desirable, particularly in developed states where economic slack remains significant. Japan and the US are set to up the ante on this front in the new year. Given the state of the Japanese economy, we believe that the further enactment of expansionary monetary and fiscal policy is almost guaranteed, and we expect budget proceedings to come to the fore in Q113. Although we believe that the Bank of Japan (BoJ) is likely to expand its asset purchases at its next few meetings, we expect the newly elected LDP government to keep pressure on the central bank to increase money supply further, and see scope for the party to exert influence over the appointment of the next BoJ governor.
In the US, the decisions announced by the Federal Reserve (Fed) on December 12 changed the game for monetary policy once again. The Fed will now purchase an additional US$45bn per month in 'longer-term' treasury securities, meaning that, beginning in January 2013, the growth of the Fed's balance sheet will accelerate to US$85bn/month, with US$40bn accounted for by QE3. The Fed also set out explicit quantitative targets that must be reached before monetary policy is tightened, so will keep rates at near-zero levels 'at least as long' as the unemployment rate remains above 6.5% and the one- to two-year inflation outlook remains below 2.5%. Our view on US rate policy is not substantially changed by the newly created explicit targets, and we continue to expect the next funds rate hike in 2016; however, we now expect to see at least US$1trn in asset purchases until early 2014, marking a substantial expansion of the Fed's balance sheet by around a third.
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Meanwhile, given the push higher in the euro-dollar exchange rate towards the end of 2012, we have slightly raised our average forecast for 2013 to US$1.2500/EUR from a previous forecast of US$1.2200/ EUR, while maintaining our US$1.2000/EUR projection for 2014. Our long-term expectation for euro weakness versus the dollar is unaffected by this near-term revision.
Table: Global & Regional Real GDP Growth, % chg y-o-y
2011 World Developed States Emerging Markets Asia Ex-Japan Latin America Emerging Europe Sub-Saharan Africa Middle East & North Africa 3.1 1.4 5.6 7.2 4.1 4.8 4.0 3.9
2012f 2.5 1.0 4.7 6.1 3.0 2.6 4.2 5.1
2013f 2.9 1.3 5.0 6.2 3.4 3.2 6.1 3.9
2014f 3.4 1.9 5.1 6.0 3.7 4.0 5.8 4.8
Table: Developed Market Exchange Rates
2011 Eurozone Japan Switzerland UK US$/EUR, ave JPY/US$, ave CHF/US$, ave US$/GBP, ave 1.39 79.74 0.89 1.61
2012f 1.27 79.00 0.94 1.57
2013f 1.25 75.00 1.03 1.58
2014f 1.20 76.00 1.07 1.60
Table: Emerging Market Exchange Rates
2011 China South Korea India Brazil Mexico Russia Turkey CNY/US$, ave KRW/US$, ave INR/US$, ave BRL/US$, ave MXN/US$, ave RUB/US$, ave TRY/US$, ave 6.46 1,108.05 46.68 1.68 12.44 29.41 1.68
2012f 6.34 1,125.00 53.50 1.96 13.05 31.72 1.80
2013f 6.40 1,170.00 52.00 2.15 12.80 32.50 1.78
2014f 6.55 1,100.00 51.00 2.28 12.60 32.75 1.73
Page 48
Global & Regional Real GDP Growth, % chg y-o-y - Continued
South Africa
ZAR/US$, ave
7.26
8.20
9.00
9.00
Source: BMI
Developed States
Our developed state aggregate growth estimate for 2012 has risen to 1.0% from a previous forecast of 0.9%, while it has fallen to 1.3% from 1.4% for 2013. The 2012 upgrade is due to a change in our US real GDP growth estimate for that year, which has been revised up to 2.2% from the 2.0% forecast we set out at the beginning of the year. This is mainly due to the stronger-than-expected real GDP growth figure for Q312 (2.7% quarter-on-quarter annualised), which in turn can be attributed to an unexpected surge in business inventories and national defence spending. Our general outlook for a slow and erratic growth path for the US economy therefore remains in place. Our 2013 growth forecast for the eurozone has slipped slightly to 0.4% from 0.5% previously, owing mainly to a downgrade in the Italy projection to -0.2% from 0.0%. Meanwhile, we have downgraded other growth forecasts for both 2012 and 2013, including those of Austria, Sweden and the UK.
Table: Developed States, Real GDP Growth Forecasts
2011 Developed States Aggregate Growth 1.4
2012f 1.0
2013f 1.3
2014f 1.9
G7 Eurozone EU-27
1.4 1.6 1.7
1.2 -0.7 -0.5
1.5 0.4 0.7
2.0 1.4 1.5
Selected Developed States
Australia Austria Belgium Canada Denmark
2.3 2.7 1.8 2.6 1.0
3.2 0.4 -0.5 2.0 -0.1
1.5 0.9 1.1 1.9 1.2
2.0 1.5 1.6 2.5 1.7
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Developed States, Real GDP Growth Forecasts - Continued
2011 Finland France Germany Ireland Italy Japan Netherlands Norway Portugal Spain Sweden Switzerland UK UK 2.8 1.8 3.0 1.4 0.5 -0.6 1.2 1.6 -1.6 0.8 3.9 2.1 1.0 1.7
2012f -0.4 -0.2 0.7 -0.5 -2.3 0.5 -1.1 3.5 -3.4 -2.1 0.6 0.7 0.0 2.2
2013f 0.6 0.6 1.3 0.3 -0.2 0.9 0.6 2.1 -1.9 -0.5 1.2 1.5 1.0 2.1
2014f 1.9 1.4 1.9 1.4 1.2 1.2 0.9 2.3 0.1 0.5 2.6 1.8 1.4 2.5
Source: BMI
Emerging Markets
Emerging markets (EMs) are estimated to have grown by 4.7% in real terms in 2012, and we forecast a slight acceleration in growth in 2013 to 5.0%. While our aggregate regional forecasts are relatively steady, we have modestly downgraded the 2013 outlook for some major EM economies, including Turkey, the Czech Republic, Poland, Brazil and India.
Owing to the strength in the recent rebound in economic data and upside risks to the external economy, we have upgraded China's real GDP growth forecast for 2013 to 7.5% (from our previous forecast of 7.1%). We have been calling for a cyclical bounce in Chinese growth for a couple of months, and a number of leading and coincident indicators suggest that this is now well in play. Despite this upward revision, we remain below the consensus estimate of 8.1% and believe that the current growth momentum is likely to fade towards the middle of 2013.
Table: Emerging Markets, Real GDP Growth Forecasts
Page 50
Emerging Markets, Real GDP Growth Forecasts - Continued
2011 Emerging Markets Aggregate Growth 5.6
2012f 4.7
2013f 5.0
2014f 5.1
Latin America
4.1
3.0
3.4
3.7
Argentina Brazil Mexico
8.9 2.7 3.9
2.8 1.0 4.0
0.9 3.5 3.4
2.7 3.7 3.7
Middle East Sub-Saharan Africa
3.9 4.0
5.1 4.2
3.9 6.1
4.8 5.8
South Africa Nigeria Saudi Arabia UAE Egypt
3.1 7.4 7.1 4.2 1.4
2.3 6.6 5.2 3.3 2.2
2.8 7.1 4.5 3.6 3.0
3.4 7.2 3.6 4.3 5.2
Emerging Asia
7.2
6.1
6.2
6.0
China Hong Kong India* Indonesia Malaysia Singapore South Korea Taiwan Thailand
9.1 5.0 6.5 6.5 5.1 4.9 3.7 4.0 0.1
7.7 1.8 5.7 6.2 4.2 1.9 1.9 0.9 4.3
7.5 2.5 6.2 5.6 4.5 3.6 3.0 3.0 4.4
6.7 3.6 6.6 6.5 4.3 3.4 4.6 4.0 4.4
Emerging Europe
4.8
2.6
3.2
4.0
Russia Turkey
4.3 8.5
3.4 3.0
3.4 4.4
3.6 5.0
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Emerging Markets, Real GDP Growth Forecasts - Continued
2011 Czech Republic Hungary Poland *Fiscal years ending March 31 (2011 = 2010/11) 1.9 1.7 4.3
2012f -1.2 -1.2 2.3
2013f 0.5 1.2 2.3
2014f 1.9 2.3 3.7
Table: Global & Regional Real GDP Growth, % chg y-o-y
2011 World Developed States Emerging Markets Asia Ex-Japan Latin America Emerging Europe Sub-Saharan Africa Middle East & North Africa 3.1 1.4 5.6 7.2 4.1 4.8 4.0 3.9
2012f 2.5 1.0 4.7 6.1 3.0 2.6 4.2 5.1
2013f 2.9 1.3 5.0 6.2 3.4 3.2 6.1 3.9
2014f 3.4 1.9 5.1 6.0 3.7 4.0 5.8 4.8
Source: BMI
We are below consensus on growth in 2012 for the eurozone, Japan and Russia, according to the Bloomberg survey of analysts. For 2013, we remain below consensus on China, though we are slightly more optimistic on the US, the eurozone, Japan and India.
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%)
US 2012 Bloomberg Consensus BMI 2013 Bloomberg Consensus BMI 2.2 2.2 2.0 2.1
Eurozone -0.4 -0.7 0.1 0.4
Japan 1.7 0.5 0.7 0.9
Brazil 1.5 1.0 3.8 3.5
China 7.7 7.7 8.1 7.5
Russia 3.6 3.4 3.5 3.4
India N/A 5.7 5.8 6.2
Source: BMI, Bloomberg
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Global Asset Class Strategy

With global economic activity set to pick up in 2013, we remain modestly bullish on risk assets.
Macro Outlook
A once-cloudy global macro outlook is becoming increasingly clear, following a year in which it appeared that the world economy could strike recession at any time given a major policy error. We believe that 2013 is likely to see improved economic activity, with cyclical indicators beginning to indicate that the nearrecessionary conditions seen in mid-2012 are abating. Reflation will be a major theme in 2013, with monetary easing already showing some signs of traction, and the world's major central banks kicking off unprecedented quantities of asset purchases.
Going For Gold

US - Monetary Base Projections And Gold Price
Importantly, even though we continue to see a long-term decline in China's growth story as its economy rebalances, we have been calling for a cyclical bounce in Chinese growth for a couple of months, and a number of leading and coincident indicators suggest that this is now well in play. The US fiscal cliff remains the big worry in the near-term, but we are optimistic that at least a temporary postponement of the fiscal tightening will be achieved, if not necessarily a 'grand bargain'. Therefore for the next 2-3 quarters we
Page 53
are relatively sanguine if not particularly effusive on global growth prospects. This is encapsulated in our forecast of 2.9% real global GDP growth in 2013, a rise from 2.5% in 2012, but not a marquee year for economic expansion.
Equities
We continue to see upside for global equities in general, as more solid economic footing and reflationary expectations improve multiples and help underpin corporate profitability. However, we are adopting a neutral stance on two long-standing relative equity views: US over European equities, and Developed over Emerging Market equities.
The Reflation Trade

US - S&P 500 Forward P/E And 10-Year Inflation Breakevens
Source: Macrobond, Bloomberg, BMI
Both of these views have served us well for the better part of two years, but now both look like they have stalled.
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Going Neutral
Ratios of MSCI World Over EM and MSCI US Over Europe Ex-UK
Source: Bloomberg, BMI
For the US over Europe, while we believe that the fundamental story is much stronger in the US over the coming quarters, much of that differential is already priced into the market. For DM over EM, which we adopted in Q410 and has moved 17% in our favour since that time, the EM risk plus overvaluation story has ebbed significantly, with the 15% price-to-book premium for EM in November 2010 having flipped to an 8% discount presently (near 2008 crash levels). Furthermore, we are compelled to go neutral given the heavy weighting of China (for which we have a multi-month bullish view) in the MSCI EM. Despite our loss of conviction on these particular relative value ideas, we believe that the potential upturn in EM and eurozone equities bodes well for global stocks in general.
Currencies
We remain bearish the US dollar amid increasing levels of Fed asset purchases. A general risk-on global recovery environment, with middling US growth, is historically associated with a weaker dollar. Overall, we believe that on a total return basis, the dollar is set to underperform versus a broad mix of higher-yield currencies, particularly in emerging markets.
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Dollar Weakness
US - Broad Trade-Weighted Dollar Index
Source: Federal Reserve, BMI
Gold remains our favourite way to play the global monetary expansion story, and it is one of the few commodities upon which we have a bullish view going into 2013. Gold has performed well during times of Federal Reserve balance sheet expansion, and a further US$1trn in asset purchases by the Fed through to 2014 - further bolstered by monetary expansion elsewhere in the world -- is likely to underpin prices (see first chart). Gold does not look particularly strong technically in the short run, and the US$1,800/oz area will continue to present significant upside resistance, but we expect a move to the US$2,000/oz area at some stage next year.
Fixed Income
Further monetary easing is on the cards worldwide, which should keep a lid on long-end yields. However, we still do not see major gains ahead for fixed income from these levels. Looking at US 10-year Treasury yields, we see an incipient uptrend forming, suggesting that our view for a move to the 2.0% level from 1.7% pre-QE3 remains in place.
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Yield Means EM Debt Still Has Some Appeal

JPMorgan EMBI Plus Sovereign Spread (bps)
Source: Bloomberg
Page 57
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements.
Source: World Bank, UN, BMI
Page 58
The accompanying charts detail India's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split.
Table: India's Population By Age Group, 1990-2020 ('000)
1990 Population, total 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 873,785 121,433 110,203 100,022 88,522 79,490 70,099 62,463 55,037 41,480 35,055 31,111 25,747 20,043 14,429 9,513 9,139
1995 964,486 125,596 118,019 109,012 99,103 87,387 78,294 68,942 61,282 53,730 40,107 33,310 28,776 22,785 16,608 10,917 10,620
2000 1,053,898 126,280 122,588 116,916 108,070 97,881 86,094 77,012 67,651 59,871 52,046 38,247 30,972 25,687 19,149 12,799 12,633
2005 1,140,043 126,239 123,663 121,502 115,850 106,636 96,306 84,574 75,496 66,080 58,066 49,786 35,738 27,858 21,868 15,027 15,354
2010 1,224,614 127,979 123,985 122,622 120,369 114,273 104,865 94,561 82,875 73,759 64,181 55,727 46,753 32,385 23,992 17,451 18,834
2012f 1,258,351 128,484 124,619 122,644 121,090 116,568 108,186 98,203 86,742 76,598 67,124 57,934 49,468 36,362 25,135 18,240 20,955
2015f 1,308,221 127,253 126,017 123,103 121,728 119,172 112,869 103,381 93,046 81,313 71,973 61,948 52,728 42,791 28,298 19,528 23,073
2020f 1,386,909 125,206 125,601 125,310 122,397 120,762 117,972 111,548 101,980 91,529 79,566 69,701 58,863 48,529 37,606 23,198 27,142
f = BMI forecast. Source: World Bank, UN, BMI
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Table: India's Population By Age Group, 1990-2020 (% of total)
1990 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 13.90 12.61 11.45 10.13 9.10 8.02 7.15 6.30 4.75 4.01 3.56 2.95 2.29 1.65 1.09 1.05
1995 13.02 12.24 11.30 10.28 9.06 8.12 7.15 6.35 5.57 4.16 3.45 2.98 2.36 1.72 1.13 1.10
2000 11.98 11.63 11.09 10.25 9.29 8.17 7.31 6.42 5.68 4.94 3.63 2.94 2.44 1.82 1.21 1.20
2005 11.07 10.85 10.66 10.16 9.35 8.45 7.42 6.62 5.80 5.09 4.37 3.13 2.44 1.92 1.32 1.35
2010 10.45 10.12 10.01 9.83 9.33 8.56 7.72 6.77 6.02 5.24 4.55 3.82 2.64 1.96 1.43 1.54
2012f 10.21 9.90 9.75 9.62 9.26 8.60 7.80 6.89 6.09 5.33 4.60 3.93 2.89 2.00 1.45 1.67
2015f 9.73 9.63 9.41 9.30 9.11 8.63 7.90 7.11 6.22 5.50 4.74 4.03 3.27 2.16 1.49 1.76
2020f 9.03 9.06 9.04 8.83 8.71 8.51 8.04 7.35 6.60 5.74 5.03 4.24 3.50 2.71 1.67 1.96
f = BMI forecast. Source: World Bank, UN, BMI
Page 60
Table: India's Key Population Ratios, 1990-2020
1990 Dependent ratio, % of total working age 1

2
1995 68.1 390,771 59.5 573,715 61.5 352,627 6.6 38,144
2000 63.8 410,366 61.1 643,532 56.8 365,785 6.9 44,581
2005 59.1 423,652 62.8 716,391 51.8 371,404 7.3 52,249
2010 55.1 434,865 64.5 789,750 47.4 374,587 7.6 60,278
2012f 53.8 440,077 65.0 818,274 45.9 375,747 7.9 64,331
2015f 52.0 447,272 65.8 860,948 43.7 376,374 8.2 70,899
2020f 50.3 464,063 66.5 922,846 40.8 376,116 9.5 87,947
71.7 364,739 58.3 509,046 65.2

6
Dependent population, total, '000

3
Active population, % of total
Active population, total, '000 4 Youth population, % of total working age 5 Youth population, total, '000
331,659 6.5
Pensionable population, % of total working age 7 Pensionable population, '000

8
33,080
f = BMI forecast; 1 0>15 plus 65+, as % of total working age population; 2 0>15 plus 65+; 3 15-64, as % of total population; 4 15-64; 5 0>15, % of total working age population; 6 0>15; 7 65+, % of total working age population; 8 65+. Source: World Bank, UN, BMI
Table: India's Rural And Urban Population, 1990-2020
1990 Urban population, % of total Rural population, % of total Urban population, '000 Rural population, '000
1995
2000
2005
2010
2012f
2015f
2020f
25.5
26.6
27.7
28.7
30.0
30.6
31.6
33.5
74.5
73.4
72.3
71.3
70.0
69.4
68.4
66.5
216,626.3
247,959.9
281,410.7
314,145.3
367,384.3
385,558.7
413,397.7
464,614.5
632,888.7
684,220.1
734,512.3
780,437.7
857,230.0
872,792.2
894,823.0
922,294.5
Source: World Bank, UN, BMI
Page 61
Methodology
How We Generate Our Industry Forecasts
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal regression modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. BMI mainly uses OLS estimators and in order to avoid relying on subjective views we encourage the use of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for example a deep macroeconomic recession, dummy variables are used to determine the level of impact on the tourism industry.
Effective forecasting depends on appropriately-selected regression models. BMI selects the best model according to various different criteria and tests, including, but not exclusive to:
R2 tests explanatory power; Adjusted R2 takes degrees of freedom into account Testing the directional movement and magnitude of coefficients Hypothesis testing to ensure co-efficients are significant (normally t-test and/or P-value) All results are assessed to alleviate issues related to auto-correlation and multi-co-linearity
BMI uses the selected best model to perform forecasting. It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry forecasting. Experience, expertise and knowledge of industry data and trends ensures that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not.
Within the Tourism industry, this intervention might include, but is not exclusive to: significant hotel industry expansion plans; new economic and political developments that may affect government tourism expenditure; dramatic changes in consumption levels of tourist visitors; the regulatory environment and specific areas of legislation; changes in general societal trends; changes in security levels of tourist destinations; movements in currencies effecting tourist exchange rates; and the development of the tourism industry in neighbouring markets that are potential competitors.
Definitions:
Page 62
International tourism receipts for travel items are expenditures by international inbound visitors in the reporting economy. The goods and services are purchased by, or on behalf of, the traveller or provided, without a quid pro quo, for the traveller to use or give away. These receipts should include any other prepayment made for goods or services received in the destination country. They also may include receipts from same-day visitors, except in cases where these are so important as to justify a separate classification. Excluded is the international carriage of travellers, which is covered in passenger travel items. Data are in current U.S. dollars. Travel items can include such things as sun cream and other common travel accessories etc.
Global Tourism Model
BMI collects inbound tourist arrivals from national sources such as governmental departments, tourism ministries, national statistical providers and central banks. This data is then forecasted on private consumption levels of tourists which also take into account disposable income levels and currency movements to reflect changes in tourist exchange rates. This has then be carefully modelled for each specific inbound country and then carefully aggregated according to country specific requirements to be used in forecasting total arrivals data.
Example of Inbound Arrivals model:
(Inbound Arrivals)t = 0 + 1*(Consumption levels of visiting tourists)t + 2*(Exchange rate movements between visiting country and domestic country)t + t
BMI's outbound departure data is generated from BMI's tourism universe of inbound forecasts where each inbound arrival from country x constitutes an outbound departure from country x. For example, inbound tourist arrivals to the USA from the UK constitutes outbound departures from the UK to the USA in specified year. Data from other countries non-existing in the BMI universe have also been collected and forecasted separately to improve the accuracy of forecasts. This data has then been carefully aggregated according to country specific requirements to form total departure data.
Other Tourism Models
Data such as accommodation, transport, industry values, employment, tourism expenditure and tourism receipts has been modelled against country specific macro-economic variables taking into account BMI's country risk views and where applicable results of BMI's Global Tourism Model.
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Example of Tourism Transport Model:
Air transport passengers carried, mn, out-bound)t = 0 + 1*( Total Out-bound, tourist departures, '000)t + t
Business Environment Ratings Methodology
BMI's approach to Tourism Risk and Reward Ratings is threefold. Firstly, we seek accurately to capture the operational dangers to companies operating in this industry globally. Secondly, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators previously evaluated on a subjective basis. Finally, we use BMI's proprietary Country Risk Ratings (CRR) to ensure that only the aspects most relevant to the industry have been included. Overall, the ratings system - which integrates with those of all industries covered by BMI - offers an industry-leading insight into the prospects and risks for companies across the globe.
Conceptually, the ratings system is divided into two distinct areas:
Limits Of Potential Returns
An evaluation of the sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development.
Risks To Realisation Of Returns
An evaluation of industry-specific dangers and those emanating from the state's political and economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period.
Risk Rated
Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period.
Indicators
The following indicators have been used. Overall, the rating uses two subjectively-measured indicators, and over 41 separate indicators/datasets.
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Table: Tourism Risk/Reward Ratings Indicators Indicator Tourism Rewards
Rationale
Tourist Arrivals ('000)
Gives an indication of market size. The larger the number, the bigger the market potentials. This indicates average tourist spending per visitor. The larger the amount the greater the opportunities available.
International tourism receipts per vistor, <glocur>
Arrivals growth, %
5 year average forecasted growth rate in tourist arrivals. Indicates whether we expect industry size to grow.
Tourism Receipts Growth, %
5 year average forecasted growth rate in tourism receipts. Indicates whether we expect industry revenue to grow.
Hotel occupancy, %
Gives a measure of success of the hotel industry. Higher the number the more revenue hotels are likely to generate.
International, tourism receipts, % of GDP
Size of the tourism industry within the country with respects to GDP. Higher the number, the bigger is the tourism industry within that country.
Country rewards
Physical Infrastructure
Rating from BMI's CRR. Poor power/water/ transport infrastructure serve as bottlenecks to sector development
Labour Costs
Rating from CRR to denote cost of labour. High costs will hinder international competitiveness and vice versa
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Table: Tourism Risk/Reward Ratings Indicators Risks Market Risks
Stability of Exposed Region
Rating from CRR, to denote vulnerability to external shock, the principal cause of economic crises. Such a crisis will complicate long-term planning by suggesting risk of growth volatility and cutting access to investment funding domestically.
Short-term Political Stability
Changes in political and economic policies can have an effect on the levels of government expenditure as well as regulation within the industry.
Country Risk
Legal Framework
Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets
Corruption
Rating from CRR, to denote risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies' ability to compete
Bureaucracy
Rating from CRR to denote ease of conducting business in the state Subjective rating from CRR, to denote predictability of openness to foreign investment trade Subjective evaluation against BMI-defined criteria. The tourism industry is especially vulnerable to security risks.
Market Openness
Security Risk Source: BMI
Page 66
Table: Tourism Risk/Reward Ratings Indicators
Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weighting has been adopted.
Table: Weighting Of Components Component Limits of potential returns Tourism Sector Country Rewards Risks to realisation of returns Market risks Country risk Source: BMI
Weighting 70 60 40 30 45 55
Sources
BMI uses the following sources in the compilation of data and analysis for its range of Tourism reports: national statistics offices, national statistics providers, local industry governing-bodies and associations; central banks, government departments, tourism and commerce ministries, national tourist boards, and statistics from the United Nations Statistical Databases (UNSD - UNData), UN affiliates and The World Bank.
Page 67
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Q2 2013

India Tourism Report Q2 2013

Part of BMIs Industry Report & Forecasts Series

India Tourism Report Q2 2013

Industry Forecast .............................................................................................................. 16

Outbound Tourism ................................................................................................................................. 18

Economic Analysis ............................................................................................................ 25

Industry Risk Reward Ratings .......................................................................................... 31

India's Security Ratings ......................................................................................................................... 33

Market Overview ............................................................................................................... 34

Company Profile ................................................................................................................ 39

Global Industry Overview .................................................................................................. 40

Business Monitor International

India Tourism Report Q2 2013

Global Assumptions .......................................................................................................... 46

Demographic Forecast ..................................................................................................... 58

Business Monitor International

India Tourism Report Q2 2013

BMI Industry View

Business Monitor International

India Tourism Report Q2 2013

Recent events and changes in BMI forecasts include:

Business Monitor International

India Tourism Report Q2 2013

Business Monitor International

India Tourism Report Q2 2013

Business Monitor International

India Tourism Report Q2 2013

Political SWOT Analysis - Continued

Business Monitor International

India Tourism Report Q2 2013

Business Monitor International

India Tourism Report Q2 2013

Economic SWOT Analysis - Continued

Business Monitor International

India Tourism Report Q2 2013

Business Monitor International

India Tourism Report Q2 2013

Business Environment SWOT Analysis - Continued

Business Monitor International

India Tourism Report Q2 2013

Ins and Outs

0 2005 2006 2007 2008 2009 2010

Business Monitor International

India Tourism Report Q2 2013

Table: India Inbound Tourism, 2010-2017

2010 Total Arrivals, '000 5,775.7

e/f=BMI estimates/forecasts. Source: BMI

Business Monitor International

India Tourism Report Q2 2013

Table: India Inbound Tourism, Top 10 markets by arrivals, 2010-2017

e/f=BMI estimates/forecasts. Source: BMI

Business Monitor International

India Tourism Report Q2 2013

Table: India Outbound Tourism, 2010-2017

2013f 12,009.4 10.9 9.4 297.8

2014f 13,760.2 14.6 10.7 343.9

2017f 20,282.9 12.0 15.1 549.1

10,023.5 10,831.2 21.8 8.1 205.1 8.1 8.6 264.8

15,815.8 18,114.6 14.9 12.1 401.7 14.5 13.7 474.1

Business Monitor International

India Tourism Report Q2 2013

India Outbound Tourism, 2010-2017 - Continued