India Tourism Report Q3 2010

Industry Forecast Scenario

Arrivals

Table: Arrivals Data, 2006-2014

2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

Arrivals (‘000) 4,600 5,081 5,282 5,024 5,533 6,141 6,814 7,479 8,131

Tourists (‘000) 4,421 5,150 5,347 5,012 5,534 6,159 6,850 7,532 8,202

% change y-o-y 16 4 -6 10 11 11 10 9 16

Tourist arrivals by mode of transport used (‘000)

Air 3,851 4,509 4,688 4,383 4,858 5,426 6,055 6,675 7,284

Road 544 617 634 604 650 705 765 825 884

Sea 27 25 25 24 26 28 30 32 35

Tourist arrivals by purpose of trip (‘000)

Leisure 4,333 5,050 5,249 4,911 5,438 6,068 6,765 7,452 8,127

Business 88 99 97 100 96 91 85 79 73

f = BMI forecast. Notes: 1% difference between sum of regions and tourists, so 1% was added to regional forecasts to
reach number of tourists. Visitor numbers modelled on number of tourists. Source: World Tourism Organization
(UNWTO)

Preliminary data released by the Indian Ministry of Tourism in January 2010 show that India’s tourist
industry experienced a dismal year in 2009. Overall, arrivals totalled 5.02mn, a fall of 6% y-o-y, from the
5.28mn received in 2008. Although this is a sharp fall, particularly given that pre-2008 annual growth
rates were over 10%, monthly figures painted a more encouraging picture. The worst declines were in
Q109, with a decline of 17.6% in January 2009. While some of this decline was related to the global
downturn, it was primarily caused by the negative impact of the November 2008 terrorist attacks in
Mumbai, which targeted the popular Taj Mahal Hotel and other tourist areas, where 174 people were
killed, including nine gunmen, and over 300 were injured. This attack was one of the most serious ever to
take place in India and will have a major impact on tourism in the medium term, given that Mumbai is a
major tourist hub and the most popular point of entry for foreigners visiting India.

Although the Indian authorities have publicised efforts to improve security and identify the perpetrators,
the perception of India as a more dangerous country will affect holiday choices, particularly by Western
tourists. Moreover, with fewer tourists choosing to holiday abroad during the global economic downturn,
those that do may now be attracted to countries perceived as safer than India. While this will have little
impact on diaspora visitors, particularly from the UK and North America, these underlying factors
contributed to a greater than expected decline in India’s tourism industry in 2009.

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 India Tourism Report Q3 2010

In this regard, it is perhaps encouraging that arrivals registered even minimal growth in June and July
2009. Arrivals then declined during the rainy season in Q309 but picked up strongly towards the end of
the year, with December registering 21.0% y-o-y growth and arrivals of 646,024. This unusually high
growth reflected a statistical rebound from the extremely poor December 2008 figures, following the
attacks in Mumbai in November.

It is highly encouraging that visitor arrivals continued to grow into 2010. In Q110, visitor arrivals totalled
1.5mn, up by a strong 12.8% y-o-y. Arrivals in March also showed high growth, of 12.9% y-o-y to
472,000 people. It is very positive that India has maintained strong levels of visitor growth into 2010,
indicating that the industry recovery is now well underway. This will have positive implications for
domestic companies in terms of earnings, with foreign earnings from tourism surging above levels of
arrivals growth. In March 2010, foreign exchange earnings from tourism reached US$1.2bn, representing
growth of 39.4% y-o-y over March 2009. As such, we believe India is beginning to return to its pre-2008
growth trends, with the Commonwealth Games in October 2010 providing another boost for the
recovering tourism sector.

Expenditure

Table: Tourist Expenditure & Economic Impact, 2006-2014

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Tourist expenditure
(US$mn) 9,227 11,029 12,788 12,116 13,522 14,840 16,511 17,947 18,896

Contribution to GDP (%) 1.0 1.0 1.1 0.9 0.8 0.7 0.7 0.6 0.6

Contribution to export of
goods (%) 7.5 6.6 7.3 7.3 6.8 6.3 5.8 5.3 4.7

Contribution to export of
services (%) 12.2 12.2 12.6 11.5 10.7 9.8 9.1 8.2 7.2

Economic Impact

Direct industry
employment (‘000) 11,921 12,487 12,767 12,568 12,945 13,299 13,747 14,132 14,387

Government expenditure
– individual (INRmn)* 11,926 13,038 15,679 16,967 18,433 19,687 21,364 23,147 25,011

Government expenditure
– individual (US$mn)* 278 294 340 368 400 427 464 503 543

Government expenditure
†
– collective (INRmn) 27,352 29,913 35,968 38,930 42,294 45,173 49,021 53,112 57,391

Government expenditure
†
– collective (US$mn) 638 675 781 845 918 981 1,064 1,153 1,246

e/f = BMI estimate/forecast. Notes: * Individual expenditure relates to investment in services with an identifiable
†
individual consumer. Collective expenditure relates to investment in services that cannot be assigned to a particular
group of tourists. Source: World Travel & Tourism Council

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Inbound Tourism

Table: Tourists Arrivals By Region, 2006-2014

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Africa (‘000) 137 154 166 172 183 198 217 235 255

% change y-o-y 5.00 12.03 7.70 3.69 6.31 8.56 9.28 8.70 8.42

North America (‘000) 873 952 990 878 983 1,058 1,151 1,246 1,345

% change y-o-y 13.59 9.01 4.03 -11.37 11.96 7.71 8.77 8.20 7.96

Latin America (‘000) 39 50 53 53 55 60 64 69 75

% change y-o-y 8.88 27.87 7.44 0.47 3.57 7.78 7.81 7.70 8.06

Asia Pacific (‘000) 1,611 1,820 1,954 1,992 2,162 2,349 2,578 2,820 3,069

% change y-o-y 12.92 12.96 7.38 1.94 8.54 8.65 9.74 9.38 8.83

Europe (‘000) 1,662 2,071 2,069 1,800 2,029 2,363 2,700 3,014 3,302

% change y-o-y 15.85 24.55 -0.10 -12.97 12.70 16.49 14.24 11.63 9.55

Middle East (‘000) 98 104 115 117 123 130 140 148 156

% change y-o-y 13.87 5.65 10.89 1.04 5.20 6.14 7.47 5.77 5.67

e/f = BMI estimate/forecast. Source: UNWTO, Ministry of Tourism

Table: Tourist Arrivals By Country, 2006-2014 (‘000)

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

UK 734 919 932 786 907 1,051 1,214 1,380 1,505

US 697 755 790 699 786 843 912 984 1,060

Canada 177 197 201 179 196 215 239 262 285

France 175 230 255 201 223 247 276 307 337

Germany 157 208 232 140 170 206 229 256 286

Sri Lanka 155 167 180 187 200 215 231 249 267

Japan 119 132 127 92 101 105 112 119 126

Australia 110 154 162 168 190 213 240 273 301

Malaysia 107 119 129 126 135 146 160 176 192

South Korea 71 76 81 81 92 99 109 120 132

e/f = BMI estimate/forecast. Source: UNWTO, Ministry of Tourism

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We expect the US and the UK to remain India’s most important sources of visitors, although the
economic slowdown in both countries means that total arrivals from both slowed during 2009, although
they are set to pick up in 2010.

Tourism plays an important role within the Indian economy. It is the third largest generator of foreign
exchange earnings, and the World Travel & Tourism Council (WTTC) believes that tourism will
contribute 8.6% to GDP in 2010. The WTTC forecast total demand for Indian tourism to grow by 6.7% in
2010 but then by an annual rate of 8.5% between 2010 and 2020. However, it is not a sector that has been
prioritised by the Indian authorities.

Travel operators complain that the country’s capacity is not sufficient to fulfil its potential in attracting
visitors. Frequently criticisms include the complexity of the taxation structure for the sector and the lack
of international airports – a major issue given India’s size and population. A lack of hotel rooms is
another major obstacle for India to overcome (see Market Overview – Hospitality).

Tourist Attractions
India’s biggest tourist attraction remains the Taj Mahal, which attracts nearly 900,000 foreign visitors a
year, while the desert state of Rajasthan, the foothills of the Himalayas and the sandy beaches of Goa are
also very popular. Overall, India offers one of the most diverse ranges of tourism anywhere in the world.
The country has 26 world heritage sites and 25 bio-geographic zones, which makes it a prime candidate
for ecotourism.

The country also has 6,000km of coastline and several world class beaches. India also has varied wildlife
and many people come to ride the nation’s extensive rail network. Lonely Planet ranks India among the
top five travel destinations in the world.

By 2014, we anticipate that the number of foreign visitor arrivals will be over 8mn. We anticipate that
visitor arrival growth will remain pretty robust, expanding at a rate of 5.5-8.0% y-o-y during 2010-2030,
following a dip in 2009, and receiving a boost from the Commonwealth Games in New Delhi in 2010.
Given rising government support for the sector – and assuming improvement in relations with Pakistan –
BMI predicts that the tourism sector will become an increasingly important contributor to the Indian
economy over the coming years.

Focus On Kerala
Among India’s 28 states, the southern state of Kerala is among the most popular among tourists. One of
its major attractions is its climate, which is moderate for most of the year, with two rainy seasons. The
state also has some of the most beautiful and extensive beaches in India, with a number of high-end beach
resorts located within easy distance of the two main airports, Cochin (Kochi) and Trivandrum.

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In addition to the beaches, Kerala has a number of different environments to explore. The hills are only
four hours drive from the coast, providing a cooler alternative to the beach at the height of summer. The
Cardamom Hills are home to numerous tea and spice plantations, providing an opportunity to explore
India’s agricultural regions. Between the coast and the hills is a stretch of tranquil canals and river ways
that can be explored either by boat or foot from a number of resorts.

Kerala also offers a number of different cultural experiences. Its proximity to neighbouring Sri Lanka
means that it has a number of cultural traditions unique within India, including kathakali dancing and the
kalari martial art. Kerala’s most defining characteristic is perhaps its reputation as the centre of ayurvedic
medicine, a system of traditional natural remedies and therapies, including massages and body treatments.

Kerala’s diversity means that it has become a popular tourist destination, particularly during the winter
months. In addition, its southern location means that it is often visited as part of a holiday package
incorporating visits to India and Sri Lanka, a popular combination. Kerala is also a popular destination for
domestic tourists, ensuring that its tourism industry remained steady even during the general industry
downturn in 2008-2009

Focus On Rajasthan
One in three foreign tourists in India visit the state of Rajasthan. As one of India’s northern states,
Rajasthan encompasses the former Rajput kingdom and is on the border with Pakistan. It has a number of
different climatic regions to visit, including the Thar Desert (also called the Great Indian Desert) and
Aravalli mountain range.

Rajasthan offers a number of experiences for tourists. It is a major site for outdoor adventurers, with
many choosing to explore the region on horseback and by camel. It is also has many palaces and forts
from the colonial era and Indian kingdoms.

The state is also a major site of arts and handicrafts, with many high quality goods exported outside the
country. Jewellery, particularly gold, is very popular and the heavy furniture is often of especially good
quality. Tours of workshops and timber yards are popular tourist attractions.

Rajasthan’s capital city is Jaipur, which is usually the first port of call for tourists arriving from Mumbai.
Also known as ‘the pink city’, Jaipur was India’s first planned city and is a major hub for excursions
around the state. Other population destinations in Rajasthan include the Ranthambhore National Park,
Khejarla Fort in Jodhpur and Chittorgarh Fort.

Rajasthan’s northernmost location and varied attractions make it a one of India’s most visited states,
particularly on tours of northern India. Between 2000 and 2008, foreign tourist arrivals growth averaged
10-15% per year, with domestic tourism also booming. However, the state suffered in 2009, with tourist

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arrivals falling by 10.7% y-o-y to 26.6mn. But with the tourism industry recovering, tourist arrivals to
that state are expected to pick up in 2010, with international tourism expected to rebound particularly
strongly.

Outbound Tourism

Table: Outbound Tourism Data, 2006-2014

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Departures by residents (‘000) 6,241 7,033 7,802 8,217 9,392 10,371 11,482 12,678 13,879

% change y-o-y 20.48 12.69 10.94 5.32 14.29 10.42 10.72 10.41 9.48

Resident departures by destination region (‘000, unless stated)

Africa 279 230 310 0 321 336 356 381 407

% change y-o-y 22.33 -17.53 34.50 -100.00 100.00 4.67 6.02 6.93 6.82

North America (‘000) 494 669 702 785 882 991 1,113 1,243 1,374

% change y-o-y 16.86 35.36 4.97 11.80 12.41 12.30 12.33 11.72 10.54

Latin America (‘000) 17 18 21 23 25 27 30 33 36

% change y-o-y 16.86 35.36 4.97 11.80 12.41 12.30 12.33 11.72 10.49

Asia Pacific (‘000) 2,689 3,019 3,413 3,782 4,217 4,702 5,247 5,830 6,413

% change y-o-y 13.27 12.27 13.05 10.81 11.50 11.50 11.60 11.10 10.00

Europe (‘000) 746 772 969 1,062 1,171 1,306 1,463 1,638 1,816

% change y-o-y 35.82 3.48 25.46 9.59 10.33 11.46 12.09 11.94 10.89

Middle East (‘000) 2,015 2,324 2,388 2,566 2,776 3,009 3,272 3,553 3,834

% change y-o-y 26.89 15.34 2.74 7.47 8.17 8.42 8.73 8.58 7.90

e/f = BMI estimate/forecast. Source: UNWTO, Ministry of Tourism

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Table: Resident Departures By Destination Country, 2006-2014 (‘000)

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Singapore 659 749 830 929 1,038 1,160 1,297 1,443 1,589

Bahrain 590 671 745 828 926 1,036 1,159 1,290 1,421

Kuwait 561 628 700 765 850 944 1,049 1,160 1,271

Saudi Arabia 345 613 561 599 645 695 752 813 873

US 407 567 557 614 681 755 839 928 1,030

Thailand 430 506 547 606 676 755 843 936 1,030

China 405 462 527 587 658 737 826 921 1,016

Malaysia 279 422 409 459 518 583 656 735 813

UK 367 336 450 461 535 607 684 762 836

Hong Kong 192 205 203 208 215 223 231 241 250

e/f = BMI estimate/forecast. Source: UNWTO, Ministry of Tourism

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