Posted: March 16th, 2022
Comparative Country Studies Research Paper
tourism industry of India and Indonesia. Apart from this fact book present important data and statistics related to the overall international tourism industry of that Asian tourism industry.
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India and Indonesia, both are showing positive trends and growth projection in tourism industry. There are several macroeconomic, socio-cultural, economic, political, and other factors of both countries which have long lasting impact on the growth potential of the overall tourism industry.
In report also give important recommendations and findings on account of which country is more feasible to start business related to tourism industry.
The goal and purpose of this paper is to do detailed comparative analysis of business environment and opportunities in two different countries with respect to a particular industry. The industry selected in this regard is tourism industry with specific consideration on hotels and restaurants. The two countries selected for this comparison are India and Indonesia. The fact book will cover all relevant factors and aspects of the tourism industry of both countries.
The report will first introduce and describe the industry selected i.e. tourism industry, the important attributes and statistics of this industry worldwide and specifically in Asia as the countries selected are both from Asia. It will be beneficial to study the tourism industry of these countries in reference to the tourism industry of overall Asia.
This fact book or paper will be an important tool to analyze and evaluate that how and why the conditions and factors related to tourism industry are different in both countries i.e. India and Indonesia. The fact book will present the comparative analysis which will be facilitate and help in taking decision about the selection of country for investing in the particular industry of tourism.
Hence this fact book will be relevant and useful for the businesses and investors who are looking forward to do business or invest in tourism industry in any of these countries or more generally in Asian market. The tourism industry is one of the growing and progressing industries all over the world. Apart from this the tourism industry of any country is highly dependent on the macro environment, social, cultural, political, and economic factors of that country. Hence before deciding to enter into tourism industry of any particular country one should analyze all these factors and attributes of that country.
METHODOLOGY:
The methodology followed to compile this fact book or paper is of secondary research. The already published work on the tourism industry is used to analyze and evaluate the overall situation of the tourism industry in the both countries. The data is gathered and used from different papers and websites of tourism industry. This methodology was used because of the availability of limited time and cost.
INTRODUCTION TO THE TOURISM INDUSTRY:
Tourism industry is growing and progressing at a rapid pace. More and more people are becoming interested in tourism and are adopting tourism as their favorite leisure activity or hobby. The definition of tourism is that it is travelling for leisure, recreational, or vacation purpose. There are many people in this world who like to travel to different locations, regions, and countries for recreational and fun purpose. World Tourism Organization has given the definition of tourist. According to this organization, a person who is travelling to different countries, regions, and places other than his normal environment and surroundings and is staying there for more than a day but less than one year, for any reason of leisure, entertainment, vacation, and even business is known as a tourist.
Despite of the fact that tourism has become one of the popular and famous international activities for utilizing free or leisure time, it has also been affected and influenced by the economic crunch and recession like any other industry. The tourism industry experienced adverse impact and influence of economic downturn, as people started to cut down their expenditures and spending on travelling and other recreational activities. The economic downturn and recession forced people to hold tight their budget and expenditure and focus more on savings. This cut down in budget for recreational and travelling purpose was visible by witnessing the decrease in activities related to tourism and receipts of international tourism.
It was in the year 2008 that this decreasing tendency was witnessed in international tourism and was more rapid in the year 2009. The international tourist arrivals showed a significant and worth considering decrease of -8% in the start of the year 2009. It was in the year 2010 that the tourism industry again reported growth and increase in the international tourist arrivals. The growth in the tourism industry is still uneven, but it is being considered that the industry has started to recover from the phase of decline. This phase of recovery started in the last quarter of the year 2009 and the tourism industry reported that international tourists’ arrivals have been increased and have shown positive growth of 7% in the first quarter of the year 2010 (UNWTO, 2009).
(Source: UNWTO World Tourism Barometer)
Hence it can be viewed clearly that the international tourism industry is reflecting a trend of positive growth which is beneficial for businesses related to the tourism industry.
TOURISM, LEISURE, HOSPITALITY, AND CULTURE INDUSTRY AND MARKET OF ASIA:
As the focus of the report is on the tourism industry of two Asian countries it will be beneficial and significant to evaluate and analyze the tourism industry and market of Asia. This will facilitate and help in analyzing and comparing the tourism industries of India and Indonesia more effectively and efficiently.
As stated before, in the year 2010 the overall international tourism industry showed a positive growth. Despite of this overall positive trend there were some discrepancies and uneven results in certain locations and regions. In the beginning of the year 2010, a positive and outstanding growth of 12% was shown by the region of Asia and Pacific. Within this region, the fastest growth projections and trends were shown by the sub-regions of South Asia and South East Asia. Both sub-regions reflected a positive growth of 14% for each sub-region.
This region has witnessed highest growth trends in the international tourists’ arrival. Asia is one region which has reflected fastest and quickest recovery from the negative impacts and influences of the worldwide economic crunch and recession in almost every other industry. Similarly the region demonstrated the fastest recovery trend in the tourism industry and more specifically in the arrivals of international tourists. According to the report of the World Tourism Organization the region demonstrated an increase of 12% in the growth rate as compared to the growth rate of overall international tourism industry which is 7% (UNWTO, 2010).
(Source: UNWTO Asia Pacific Newsletter 2010)
The major contributors in this increased growth rate in the region of Asia are China, India, Republic of Korea, Japan, and Indonesia. The tourism industry of India and Sri Lanka has been trying to recover from economic recession on one side and on the other from their internal problems for example the terrorist attacks in Mumbai and the civil war in Sri Lanka. The tourism industry of India reported a growth of 11% in the starting months of the year 2010, and that of Sri Lanka reported a positive growth of 49% which is remarkable (UNWTO, 2010).
The investment in the tourism industry in the region of Asia is increasing despite of the economic crunch and declining profits. The countries in the region are taking important and considerable measures and steps in order to increase the capacity of flights and introducing new routes which will be economical. The growth in capacity of hotel showed a slowing down trend, but is still worth consideration.
The governments of India and China have recognized and acknowledged the importance of the tourism industry. The investors have also recognized the potential of the China and India in the improvement of the Asian and international tourism industry in the long run. China is the first country to recognize and announce tourism as one of the important strategic pillar of the economic growth of the country. Apart from this India is also showing huge growth potential and is demonstrating positive growth in the tourism industry. The government of India after realizing the importance of tourism industry in the economic growth is investing heavily in the development of new infrastructure which will support the growth of the tourism industry. The country is building new highways, is up-gradating important and significant historical places and gates, investing in hotels of international standards etc. Other than this the investors have also identified significant and important niche markets like adventure tourism and rural tourism. There is also huge growth in the medical tourism industry in India. The tourism industry and market of India has further shown positive trends and growth after the launch of popular marketing campaign of Incredible India and the initiation of the programs like visas o arrival for various international tourists (UNWTO, 2010).
Hence one can say that the tourism industry of Asia has shown considerable and remarkable growth and progress and the region has demonstrated worth mentioning and considering recovery from the overall decline due to economic crunch and recession.
This is the overall situation of tourism industry in the Asian market and some of the important and significant countries of the region. In order to further investigate and decide to invest in tourism industry of any particular industry one has to evaluate different important factors of that particular country which will impact the demand, growth projections, and investment in the tourism industry.
THE COMPARISON OF COUNTRIES:
Macro Economic Indicators and Market Demand:
India:
For the last few years tourism in India has been growing because India is rich in history, destinations, diversity in religion, beauty, cultural heritage etc. India has also been able to attract large number of visitors because of the advancement in medical industry as well as IT industry. India travel and tourism industry, according to the world travel and tourism council (WTTC), would grow and will earn revenue of $42 billion in 2010 contributing 3.1% of the total GDP. Beside this, tourism industry would almost generate revenue of $118 billion and its contribution would be 8.1% of the total GDP as tourism industry directly and indirectly impacts other businesses in the country (IBEF, 2011).
Every year more than 5 million annual foreign tourist come to India. As Indian tourism industry generated revenue of about $100 billion in 2008 so it is expected that it will grow further at an annual growth rate of 9.4%. India has the highest 10-year growth potential so according to WTCC from 2009 to 2018 India will be one of the most favorite destinations for tourists. Travel and Tourism competitiveness report in the year 2007 India was ranked 6th and 39th in terms of price competitiveness and safety respectively (IBEF, 2011).
Medical and IT industry are two major industries that attracted large number of foreign visitors. The medical tourism industry of India is currently experiencing a growth of 30% annually and by the end of 2015 this industry is expected to become an industry of Rs.95000 crore. By the end of 2012 the expected value of medical tourism to India would become as large as $2 billion. People are finding India as a good place for medical care because of good facilities and low cost along with qualified doctors. Every year almost 150,000 tourist come to India for economical healthcare operations (Connnell, 2006).
Because of the different international events foreign tourists are expected to increase. Large numbers of sports fans, from different parts of the world, are going to attract by Indian Premier League, Common wealth Games and Formula 1. Also with better infrastructure, better facilities, low-cost airlines, more efficient road connectivity, and more resources are going to help Indian tourism Industry.
Indonesia:
Indonesian tourism industry is professed to an important element and constituent of the economy of Indonesia. The Indonesian government recognizes and understands the importance of the tourism as a key and vital source of foreign exchange revenues, also the number of the international visitors increased by 3.6% to 6.45 million visitors’ arrivals, in the year 2009 (Nenad, 2011).
According to the cultural and tourism minister of Indonesia, Jero Wacik, around 7 million international visitors and tourists visited Indonesia in the year 2010 and this number of international visitors’ arrival is expected to increase to 7.7 million in the year 2011. Jero Wacik also announced the change in the branding of Indonesian tourism industry and in 2011 the ‘visit Indonesia year’ will be replaced by ‘wonderful Indonesia’. Moreover, the average spending of U.S. $1,100 is also expected by each visitor and the total revenue of $8.3 billion is predicted (Nenad, 2011).
Socio Cultural Conditions and Institutional Conditions:
India:
The tourism industry of India would grow in spite of the short-term problems and issues like shortages of the hotel rooms. By the end of 2018, this industry is estimated to grow at the rate of 9.4% annually and the total industry would increase to $275.5 billion.
With increasingly use of IT services of Indian companies and more international events the tourism market is expanding currently, foreign tourists are increasing and thus in the coming years the demand of the hotels would grow. So, the hotel industry of India is expected to grow the most in the coming future.
Several players in the market has recognized the opportunity in the hospitality and tourism sector of India and to meet the increasing demand of the foreign tourist they have started opening new hotels in the country. There are around 130,000 hotel rooms in India currently and because of the increasing number of the tourist in the country this number is expected to grow.
Because of the different international events foreign tourism is expected to increase in India. Many foreigners are visiting India because of the outsourcing industry and booming IT industry in India and it would increase the number of foreign tourist arrivals. In India during 2010 foreign tourist arrivals grew at a rate of 9.3% equaled 5.58 million tourists in comparison to the total number of foreign tourist of 5.11 during 2009.
To upgrade and expand the infrastructure of the country in order to promote tourism the government has taken several initiatives such as upgrading of the national highways, airports, improving roads and improving the overall infrastructure.
There are some issues over shortages of rooms in India even today. According to World Travel and Tourism Committee (WTTC) to cover the increasing demand of the tourist in the next 2 to 3 years India needs 50,000 more rooms.
The investors have started invested in tourism industry because in the future there will be more demands of the hotels and rooms. Marriott International is one of the chief names in this regard. According to the Arnie Sorenson, COO of Marriott International, over the next five years Marriott have planned to expand its network to more than 100 hotels in India.
Roots Corporation, a subsidiary of Indian Hotels Company (IHC), has also announced its expansion plan in India and they are opening 60 to 70 hotels in 23 different locations of the country. Under the Fortune brand by 2011, 25 more hotels would be opened by ITC.
Indonesia:
Culture and tourism minister of Indonesia has announced that 50% projected growth in the revenues will be because of around 600 different meetings, conventions, exhibitions which are being predicted to take place in the year 2011 at different places across Indonesia. So because of the different conventions and exhibitions the major growth projections are expected.
Moreover, the government of Indonesia is projecting and promoting the country as having a unique nature and beautiful culture, generous and friendly people, different varieties of food and price competitiveness are compared to other countries. Indonesia is also promoting tourism industry and other attractions in the country as economic friendly under the banner of eco cultural banner. Through the Ministry of Culture and Tourism the government of Indonesia is monitoring the tourism industry.
Different campaigns have started by the government aiming to increase the international tourism and the main focus is on the tropical destinations with different cultural attractions, beautiful blue sky and white sand beaches. For this, popular locations and destinations, such as Bali, are selected to construct the different beach resorts and hotels. Government of Indonesia is focusing on promoting the cultural tourism and it is considered to be the most significant and essential part in tourism industry of Indonesia. Tourism in Indonesia is being used as a mean of promotion and preservation of cultural heritage.
The government of Indonesia is striving to increase the investments and funds in the tourism industry as tourism industry helps in the overall growth of the economy. Lack of the investments and funds are the major problem being faced by the tourism industry of Indonesia so in order to promote an investment friendly climate and environment serious measures need to be taken.
Different policies and programs are announced by the government of Indonesia in order to encourage the local and the foreign investment in tourism industry. Package policy is the example of such policy. Under this policy different rules, systems and regulations regarding to the tourism industry of the country has revised by the government of Indonesia. For this, they have simplified the process of starting a corporation and getting a license for operations. Along with improving the area of man power and human resource tax incentives are also provided.
The tourism industry of Indonesia is reporting the positive growth in the investments and funds because of these actions and steps. The total investment was reached to the level of Rp 7 trillion last year which was contributed to 300 different business units and out of this 80% contribution is made by foreign investors.
Historical Developments in Tourism Industry:
India:
India is famous for its historical heritage and places. From the very start India has been the favorite and one of the popular tourism destinations. The tourism industry of India has always shown positive growth, trends, and developments. The market of India has reported exceptional growth in the hotel or restaurant industry for that matter. With increase number of arrivals of international tourists, the demand of more hotels and restaurant has increased considerably and is still increasing. Because of this increase in demand more and more hotels are being established in India.
Apart from this the sudden growth of medical tourism has also increased the growth potential of the overall tourism industry of India. Many international visitors are coming to India for medical reasons because of the high quality treatment at low cost. This has also increased the demand of hotels and restaurants and has contributed in the development and growth of tourism and hotel industry in India.
The government of India is also supporting the growth and development of the tourism industry and is devising measures and taking steps that will encourage both foreign and local investment.
Indonesia:
The tourism industry of Indonesia has gone through several phases of development. Although the economic condition of the country has been shaky and not stable, some of the provinces of Indonesia like Bali have managed to reap the benefits from tourism. The government of Indonesia started to take interest in the services industry more specifically in tourism industry and established Ministry of Tourism for this purpose. The government has formed a national policy on tourism in order to facilitate and fasten the growth and development of the industry.
In the last 32 years because of the centralized government, many provinces of Indonesia were not completely developed on equal basis. For this reason, despite of the fact that Indonesia is rich with factors and attributes for attracting tourists, the growth rate of tourism industry of Indonesia is less than that of other neighboring countries. The government of Indonesia has realized this fact and has started to work along with the local governments for the growth and development of tourism industry and to identify and develop locations for the attracting international tourists other than Bali.
The tourism industry of Indonesia is mostly based on the natural richness of the country and focus of government is also on protection of nature and for this purpose several environmental regulations have been imposed related to the tourism industry. These all efforts on part of the government of Indonesia for the growth and development of the tourism industry have resulted in attracting more international tourists in Indonesia.
This growth in the arrivals of international tourists has increased the demand of hotels and restaurants in the country. The government is also supporting and facilitating the establishment and development of new hotels and restaurants. The Ministry of Culture and Tourism of Indonesia has provided with the rate of room occupancy of different hotels and statistics about the accommodation, worker, visitor per day for the reference of the different investors and businesses.
The Conditions of Market and Industry:
India:
Supply Market Conditions:
The economic condition of India is relatively stable. The cost of labor is less and also the cost and bargaining power of other important input factors is also relatively less.
Demand Market Conditions:
The demand and growth of tourism industry of India is increasing. The hotels and restaurants are charging high prices and the bargaining power of tourists is low because of less availability of rooms.
Competition:
There is intense completion in the market and the tourism industry and hotel and restaurant market is already at maturity and saturated. But there is still growth potential because of increase in demand. Apart from this the overall tourism industry of India is facing competition of other countries in this region specially China (Anand, 1976).
Threat of New Entrants:
Because of high growth potential and high profits the threat of new entrants in the market is high as more and more investors are looking forward to enter in this growing and prosperous market.
Threat of Substitutes:
The threat of substitutes is also high as people are moving to other methods and ways of recreations and vacations then going abroad for tourism.
Indonesia:
Supply Market Conditions:
The economic conditions of the country are not stable. But the country has cheap labor and other input factors. The bargaining power of suppliers is low (Walpole, & Goodwin, 2000).
Demand Market Conditions:
The demand and growth of tourism industry has shown some positive growth trends in the recent years. The hotels are charging competitive prices in order to attract more customers.
Competition:
The competition level in the market is high because of the relatively low demand and growth and less international tourists. Also the tourism industry of Indonesia is facing huge competition from the tourism industry of other countries in the region.
Threat of New Entrants:
The threat of new entrants has increased because of the policies of government which are supporting more investment in the industry.
Threat of Substitutes:
The threat of substitutes is also increasing because of changing social and cultural preferences.
MAJOR FINDINGS AND RECOMMENDATIONS:
SWOT of Tourism Industry of India:
Strengths:
In Travel and Tourism Competitiveness report published in 2007 India was ranked 6th for its price competitiveness.
India attracts people from different parts of the world because of its rich cultural heritage and history.
People also come to India to visit the important religious buildings.
Because of its geographical location India’s a tourist country offers a lot to the visitors.
It is ranked as 11th most eye-catching destinations in Asia Pacific region.
According to WTTC it is one of the most preferred destinations for tourists.
Weaknesses:
Excessive traffic jam in India causes disturbance for tourists.
Another problem is the corruption because of which people are reluctant and hesitant to invest in such countries.
Opportunities:
The tourism industry of India and other industries related directly and indirectly to it would grow because of the increasing number of foreign tourist.
India is visited by more than 5 million visitors annually and there would be more opportunities as this number is expected to grow; mainly opportunities in hotels.
More foreign visitors come for meeting experts in the IT field of the country as IT industry of the country has made a mark in the international market.
The growth in the India’s medical tourism industry is expected to continue and currently it is growing at a rate of 30%. So, for economic healthcare operations more visitors would come to India.
As more tourists coming to India because of which other related businesses are also expected to grow.
100% foreign investment in hotel and tourism industry has been allowed by the government of India.
During 2007 to 2016, hospitality industry of India is also expected to grow at a rate of 8.8% and this would be 2nd highest growth rate in the international tourism market.
Threats:
One of the major threats faced by the Indian tourism industry is terrorism. Foreign visitors feel a little cautious and hesitant to visit India because of the several bomb blasts including Mumbai blast.
Another threat to the tourism industry of India is political instability.
SWOT of Tourism Industry of Indonesia:
Strength:
The government of Indonesia is actively taking part for the promotion of the tourism industry of the country.
Ministry of culture and tourism of Indonesia is providing ongoing support for promoting and projecting the competitiveness of the industry. In order to encourage and increase the competitiveness among different tourism destinations six rewards were presented by the ministry of culture and tourism of Indonesia.
Indonesia’s rich and strong cultural heritage is the main source of attraction for the international visitors and tourists.
Weaknesses:
As the country is located far away from the potential markets such as Japan and Europe so the geographical location of Indonesia makes it complex to promote and project the country as a market for short vacation.
As the country is in its developing phase so its tourism industry faces the problem of limited funding.
Low quality of the available human resource is another weakness of the tourism industry of Indonesia.
Opportunities:
Increasing number of the foreign visitors and the tourists and increasing awareness about the rich culture and beautiful nature of the country.
In order to build an investment friendly environment and increase the foreign and local investment in tourism industry government support is increasing.
Threats:
The ongoing cultural and ethnic conflicts in the country.
Another threat is Tsunamis and earthquakes threat.
The sectarian and separatist conflicts in the country are another threat.
The threats of terrorists and concerns after the 2002 Bali bombing in the country.
Recommendations:
After analyzing and evaluating the data, statistics, and trends it is clear that although the tourism industry of Indonesia is growing and showing progress and there are profitable opportunities for the investors but the natural factors and geographical location of the country makes it difficult to reap high returns on the investments.
The market of India is best at the moment in order to invest and start a business. The country is reporting high number of international tourists and it is expected that this number will further grow in future. The market is also reflecting high growth potential for hotels and restaurants as it is evident from the fact the on different international events there is always shortage of availability of rooms. The macroeconomic and other socio cultural factors are also supportive and are facilitating the growth of the industry.
REFERENCES
Anand, M. (1976). Tourism and hotel industry in india: a study in management. New Delhi: Prentice-Hall of India.
Connnell, J. (2006). Medical tourism: sea, sun, sand and & #8230; surgery. Tourism Management, 27(6), 1093-1100.
Walpole, M, & Goodwin, H. (2000). Local economic impacts of dragon tourism in indonesia. Annals of Tourism Research, 27(3), 559-576.
Nenad. (2011, Februray 14). Investment in bali’s tourism industry on the rise in 2011. Retrieved April 5, 2011, from
UNWTO. (2009, June). Unwto world tourism barometer. Retrieved April 5, 2011, from
UNWTO. (2010). Unwto aisa pacific newsletter. Retrieved April 5, 2011, from
IBEF. (2011, January). Tourism and hospitality. Retrieved April 5, 2011, from
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