Inbound tourist traffic, particularly in leisure travel, has been hit as global travellers adopt a cautious approach amid geopolitical uncertainty.

India’s tourism and hospitality sector is facing renewed external pressures following escalating geopolitical tensions in West Asia, the PHD Chamber of Commerce and Industry (PHDCCI) said.

According to a report by the industry body, disruptions have been recorded across aviation, inbound tourism, hospitality and restaurant segments, even as domestic demand continues to provide stability.

The report noted that the sector, which contributes nearly 8 per cent to GDP and supports over 40 million jobs, had witnessed a V-shaped recovery in 2025, with branded hotel inventory nearing two lakh rooms and domestic aviation traffic crossing five lakh passengers per day.

However, the West Asia conflict in early 2026 has introduced fresh volatility.

War impact

The report cited that the aviation sector has emerged as the most impacted, with airlines facing flight cancellations, airspace restrictions and rerouting of international services.

Notably, these disruptions have increased flying time by two-four hours on key routes, raising fuel consumption and operating costs.

Currently, fuel accounts for 35-40 per cent of airline operating costs, “further straining profitability”.

Besides, disruptions in West Asia air corridors have reduced connectivity efficiency and increased airfares.

As per the report, inbound tourist traffic has declined by 15-20 per cent, particularly in leisure travel, as global travellers adopt a cautious approach amid geopolitical uncertainty.

Furthermore, outbound travel trends have shifted, with Indian travellers increasingly opting for short-haul destinations such as Thailand, Singapore and Vietnam, while long-haul and transit-dependent routes have moderated.

On the other hand, the hospitality sector remains supported by domestic travel demand.

Margin pressures

The report highlighted margin pressures due to rising energy costs, increased input prices and fluctuating international demand, particularly in premium and business hotel segments dependent on foreign travellers.

Additionally, the restaurant and food services sector is witnessing mixed trends.

Insights aligned with the National Restaurant Association of India (NRAI) indicate input cost inflation of 10-15 per cent, driven by higher prices of imported ingredients, logistics and energy.

The report pointed out that premium dining and hotel-based restaurants in key tourism hubs have seen a decline in international footfall, while domestic demand and food delivery—contributing 20-30 per cent of revenues for organised players—continue to provide support.

Nevertheless, margin compression remains a concern, particularly for small- and mid-sized operators.

The report further noted that around 10 per cent of restaurants have shut down, with business losses estimated at ₹79,000 crore per month.

Meanwhile, despite these challenges, domestic tourism continues to act as the primary growth driver, sustaining demand across segments.

Policy recommendations

To mitigate the impact, the report outlined policy recommendations including diversification of international air routes, enhancement of bilateral air service agreements and rationalisation of taxation across aviation turbine fuel (ATF), hospitality and food and beverage sectors.

It also called for targeted financial support and improved credit access for micro, small and medium enterprises.

The report recommended accelerating infrastructure development, improving multi-modal connectivity and promoting domestic tourism circuits.

In addition, the report called for strengthening of digital travel facilitation, visa processes and destination marketing in alternative global markets, alongside measures to stabilise supply chains and reduce compliance burdens in the restaurant sector.

Published on April 16, 2026