Depreciation of rupee: A double-edged sword for the hospitality and tourism industry

A weaker rupee is a double-edged sword for the hospitality and tourism industry. While on the one hand, a depreciating rupee makes India a cheaper destination for foreign tourists to vacation in India, thereby making it more attractive for travellers from developed economies, the import of capital goods and consumer goods will increase in price adding to the costs of the F&B and hospitality industry. 

“Import of alcohol and liquor will go up, for instance, and a lot of the revenues of the F&B industry depend upon that,” says Pradeep Shetty, Joint Honorary Secretary, Federation of Hotel and Restaurant Associations of India (FHRAI). 

However, industry observers believe that there is unlikely to be much of an impact on inbound tourists. 

“Normally inbound tourism would increase with a depreciating rupee, but it is unlikely to happen this year as we have not promoted India at all globally,” says Rajiv Mehra, President, IATO. 

He adds that if more steps were taken to promote India as a destination globally, we could have attracted the tourists who would have typically gone to Sri Lanka but are now going to Thailand and not India. 

On Tuesday, the rupee plunged to a record low of Rs 80 against the dollar. It has fallen nearly 7 per cent in the year to date.  

With shopping and hotel tariffs becoming more expensive, outbound tourism gets impacted. However, Mehra believes that those who want to travel will continue to do so especially since the world has opened up only now post the pandemic. 

“Outbound tourism will become more expensive and there will be a 5-10 per cent decline in numbers over the next few months,” says Mehra. Studying abroad will become more expensive. 

Adds Rajeev Kale – President & Country Head, Holidays, MICE, Visa – Thomas Cook (India) Limited, “The rupee movement is not a new phenomenon, and despite depreciation against the US dollar, travel is clearly non-negotiable for Indians – more so with strong pent up demand this year. Indians are smart travellers and managing their travel budget involves a mere readjustment: curtailing expenses on shopping and dining in favour of must-do experiences/sightseeing.” 

For the hospitality sector, a depreciating rupee will add to their costs. “We are just about recovering from Covid, add to that inflation and now this. It may lead to the industry to increase prices,” says FHRAI’s Shetty. He also points out that a weaker rupee will lead to an increase in price of fuel, energy etc and all this will lead to an increase in prices of food items that will finally trickle down to the customer. 

“Hotels will have to look for some revenue to offset all these costs, or an increase in costs for the consumers will be inevitable.”

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