The travel and tourism sector has become a trending topic after Tata AMC recently launched India’s first tourism index fund. Also, some major updates are expected in the budget for this sector. Now, it would not be wrong to conclude that tourism is a sector that investors should look forward to investing in. How to get started? With the basics – let us explore the potential of the best tourism stocks in India for 2024.
Global Tourism Sector
Before we get to the Indian tourism sector, it is essential to discuss the global tourism industry so you have a reference point for comparison. In 2023, the Travel and Tourism sector contributed around $9.5 trillion to the global economy. On top of it, more than 21 million new jobs were created in this sector during the same period.
The top two economic contributors were Europe and North America, which accounted for $579 billion and $363 billion, respectively. On the other hand, APAC ranked first in job creation – the region created 8.7 million new jobs in 2022. This is around 40% of the new jobs created globally in the sector.
Indian Tourism Industry Trends
Let us now look at the Indian tourism industry trends. India’s relative global rank in tourism spending as a contribution to GDP was sixth in FY22. Also, India’s tourism spending contributed 6% to its GDP in FY21. The numbers are expected to grow to 7% by FY31. It is expected to grow at a CAGR of over 7% to 9% between FY19 and FY28.
The Indian travel and tourism market for air, road, air, and hotels accounts for around Rs 3,808 billion, and this is expected to grow to Rs 5,904 billion by FY28. Based on these numbers, the travel market is expected to grow at a CAGR of 9%.
Reasons for the growth of the tourism sector
Here are some reasons that may lead to the growth of the tourism sector in the coming years:
Government Initiatives: There have been many drivers of tourism and Indian government policy initiatives that promote domestic tourism, and the development of tourism infrastructure is at the top. For example, the launch of Swadesh Darshan. Under this scheme, the government has developed an integrated approach to provide lasting visiting experiences by creating tourist circuits on specific themes to attract both domestic and foreign leisure travelers.
Higher Disposable Income: The middle-class income is becoming increasingly mobile through disposable income growth. As a result, the vacation frequency and travel have increased compared to the past. There is a growing share of discretionary spending in overall income, of which the share of travel spending is also increasing the most.
Social Media: Everyone can relate to this. How often has your travel destination been locked because you saw someone else post their travel details on social media? Social media has increased exposure for tourist destinations in the past decade.
Domestic travel becoming popular: As per reports, around 21% of all Indian travelers in 2022 have visited international destinations, and the rest have visited domestic destinations.
Ease of booking: The convenience of booking with OTAs has and will continue to play a big role in reducing information asymmetry and increasing the comparison of travel modes.
Rise of Experiential travel: It is becoming a thing in India, especially for the young age group. Young ones are increasingly focused on experiences and personalized travel rather than buying expensive packaged holidays – which used to happen earlier.
Affordability: Affordability is key in the travel industry. Even luxury destinations are being made more affordable to fit into middle-income consumer budgets, with deals and newer destinations becoming popular due to their oversized tickets.
Understanding companies in the tourism sector
You must know that tourism is a vast sector as different companies cater to traveler’s needs. Here are some types of companies (sub-sectors) included in the industry:
- Accommodation: It includes all businesses providing stay options for tourists – hotels, resorts, etc.
- Food and Beverage: This sub-sector includes all businesses serving food and drinks to tourists.
- Transportation: It includes all businesses involved in moving tourists from one place to another – airlines, train companies., ride-sharing, etc.
- Travel Services: It consists of businesses that help tourists plan and book their travel arrangements – Online Travel Agencies (OTAs).
- Attractions and Activities: It includes businesses and locations that attract tourists and offer experiences – Theme Parks and Amusement Parks.
Top Travel and Tourism Companies in India
As shown above, there are many sub-sectors under tourism, and you would have figured out by now that not many companies are listed in the above sub-categories in India. Here are some listed companies of tourism stocks in India to look at:
Risks associated with the tourism sector
Here are some risks associated with the tourism sector that you must be aware of before investing in best stocks for long term from this sector:
- Cyclicality: The tourism industry is cyclical. You must understand that companies can be significantly impacted by economic downturns, pandemics, or geopolitical events.
- Seasonality: Travel patterns often have seasonal fluctuations, affecting the revenue and profitability of tourism companies.
- Competition: The tourism sector is highly competitive, with companies competing for market share and potentially affecting profit margins.
Should you invest in tourism industry stocks?
We have discussed the various reasons why the tourism sector may do well in the coming years. We also covered the risk. The ultimate decision to invest in this or any other sector stocks is yours. You need to put in effort, evaluate the risk, and then take the call.
If you do not want to take an investment call – which stocks to buy and sell – you can leave that to Jarvis Invest. It has an AI tool for stock market india that filters stocks on 40 crore data parameters and helps you create a diversified portfolio based on your risk profile and investment horizon.
