West Asia Conflict: Inbound tourism dips 15-20 per cent

India’s inbound tourist traffic declined 15-20 per cent since the West Asia crisis broke out, while the aviation industry is staring at an estimated net loss of Rs 18,000 crore following disruptions caused by the conflict, according to a report on the impact of the West Asia conflict released on Thursday.

The report, titled “Impact of the West Asia Conflict on India’s Tourism, Aviation & Hospitality Sectors”, highlighted that the aviation sector was the most impacted, with airlines facing flight cancellations, airspace restrictions and significant rerouting of international flights. These disruptions have increased flying time by 2-4 hours on key routes, resulting in a sharp rise in fuel consumption and operating costs.

Industry estimates indicate that fuel accounts for 35-40 per cent of airline operating costs, and the ongoing situation has further strained airline profitability. The disruption of West Asia air corridors, which is among the busiest global transit routes, has also reduced connectivity efficiency and increased airfares, the report said.

The overall industry impact, including the estimated Rs 18,000 crore net loss, has been assessed by rating agency Icra by examining stakeholder feedback with sectoral trends, booking patterns, cancellations and operational cost pressures (particularly aviation-related), PHDCCI said.

India’s inbound tourist traffic declined 15-20 per cent, particularly in leisure travel, as global travellers adopt a cautious approach amid geopolitical uncertainties, according to the report.

The findings are based on industry inputs collected through structured interviews and questionnaires with key stakeholders. The assessment covers the period from 28 February 2026 onwards, marking the onset of the West Asia conflict and its subsequent impact on travel sentiment, flight operations and inbound tourism flows. The restaurant and food services sector is also experiencing a mixed impact. According to industry estimates aligned with insights from the National Restaurant Association of India (NRAI), the sector is facing input cost inflation in the range of 10-15 per cent, driven by higher prices of imported ingredients, logistics and energy.

Sagar Daryani, President, National Restaurant Association of India (NRAI), said the scale of the disruption has now become a nationwide operational challenge.

“The ongoing LPG supply disruption has created a serious operational crisis for the restaurant industry. Nearly 10 per cent of restaurants have temporarily shut down, while 60-70 of establishments have shifted to induction cooking, alternate fuels, reduced menus or shorter operating hours to manage limited supplies,” Daryani said. According to the report, the economic implications of the disruption are substantial.

Citing industry estimates, it said the Indian food services market, valued at Rs 5.69 lakh crore in 2024, projected to reach Rs 7.76 lakh crore by 2028, is expected to reach an estimated Rs 6.46 lakh crore in 2026, translating into approximately Rs 17,700 crore in daily economic activity across the sector. A 15-20 per cent slowdown in throughput, as currently observed, corresponds to an estimated Rs 2,650 crore reduction in daily economic activity, or nearly Rs 79,000 crore per month, representing a significant economic shock to the food services ecosystem, the report stated.

Beyond operational and financial challenges, the disruption also raises concerns about employment stability across the sector.

The restaurant industry directly employs over 8.5 million people, making it one of the largest job creators in India’s service economy.

“Prolonged supply disruptions could therefore result in 5-7 lakh potential job losses, alongside hiring freezes and delayed expansion plans, particularly among small and medium-sized operators who are more vulnerable to cost and supply volatility,” it added.

To mitigate the impact and strengthen the hospitality sector’s resilience, the report outlines several key policy recommendations.

These include diversifying international air routes and reducing dependence on conflict-prone regions, enhancing bilateral air service agreements to improve connectivity and rationalising taxation across aviation turbine fuel (ATF), hospitality and F&B sectors to reduce cost pressures.

The report also calls for targeted financial support and easier credit access for MSMEs, which form a significant part of the tourism and restaurant ecosystem.

Outbound travel patterns have also shifted, with Indian travellers increasingly preferring short-haul destinations such as Thailand, Singapore and Vietnam, while long-haul and transit-dependent routes have seen moderation due to geopolitical risks, the PHDCCI report observed.

The report calls for developing a coordinated tourism communication framework involving industry bodies and government agencies that can help deliver unified messaging to international markets during disruption.

The country’s hospitality sector continues to remain resilient, supported by strong domestic travel demand. However, the report notes 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.

Despite stable occupancy levels driven by domestic tourism, profitability remains under pressure, it noted.

International tourism demand is expected to gradually stabilise over the next 6-12 months, particularly as aviation networks adjust to evolving global conditions and airlines restore capacity on long-haul routes, the report observed.