Domestic Demand Shields India's Tourism Amid Global Geopolitical Tensions

Despite global headwinds, the hospitality sector remains relatively stable, supported by a strong 'V-shaped' recovery and robust domestic demand, according to a report by PHD Chamber of Commerce and Industry (PHDCCI).

Moreover, the restaurant and food services segment also saw mixed trends.

While domestic demand and food delivery, contributing up to 30 per cent of revenues for organised players, continue to provide stability, input cost inflation of 10-15 per cent and softer international footfall are weighing on margins.

The report highlighted that domestic tourism continues to act as the primary growth engine, supported by emerging travel trends such as "revenge travel", staycations, bizcations and experiential dining.

Inbound tourism has taken a hit, with foreign tourist arrivals declining by 15-20 per cent, particularly in the leisure segment, as travellers adopt a cautious approach amid geopolitical uncertainty.

The PHDCCI, in its report, highlighted that India's tourism, aviation & hospitality sectors -- which contribute nearly 8 per cent to GDP and support over 40 million jobs -- are once again facing external headwinds due to geopolitical tensions.

At the same time, outbound travel patterns are shifting, with Indian travellers increasingly preferring short-haul destinations such as Thailand, Singapore, and Vietnam, while long-haul and transit-dependent routes have seen moderation.

The strong recovery seen in 2025 has helped cushion the impact. Branded hotel inventory had expanded to nearly 200,000 rooms, while domestic aviation traffic crossed 5 lakh passengers per day, reflecting a sustained rebound in demand, it said.

The report also flagged that these disruptions have increased flying time by 2-4 hours on key routes.

The disruption of key Middle East air corridors, among the busiest global transit routes, has also reduced connectivity efficiency and pushed up airfares.

To mitigate risks and strengthen resilience, the PHDCCI recommended diversifying international air routes, enhancing bilateral connectivity, and rationalising taxes across aviation turbine fuel (ATF), hospitality and food services.

The report further emphasised the need to strengthen digital travel facilitation, streamline visa processes and expand destination marketing in alternative global markets.

It concluded that while the West Asia conflict poses short-term disruptions, it also presents an opportunity for India to build a more resilient, diversified and self-reliant tourism ecosystem.

- IANS