West Asia conflict disrupts aviation, leads to 15–20% dip in inbound tourist traffic

New Delhi: PHD Chamber of Commerce and Industry (PHDCCI) has released its report, ‘Impact of the West Asia Conflict on India’s Tourism, Aviation & Hospitality Sectors’, highlighting major disruptions across aviation, inbound tourism, hospitality and restaurants, even as strong domestic demand continues to support overall sector stability.

India’s tourism and hospitality industry, contributing nearly 8% to GDP and supporting over 40 million jobs, is facing fresh external pressures due to escalating geopolitical tensions. The report notes that after a strong V-shaped recovery in 2025—with branded hotel inventory nearing 200,000 rooms and domestic aviation traffic crossing 5 lakh passengers daily—the West Asia conflict in early 2026 has reintroduced volatility.

The aviation sector has been the most affected. Airlines are dealing with cancellations, airspace restrictions and significant rerouting of international flights. These changes have increased flight durations by 2–4 hours on key routes, sharply raising fuel consumption and operating costs. With fuel accounting for 35–40% of airline expenses, profitability has come under added strain. Disruptions in Middle East air corridors, among the world’s busiest transit routes, have reduced connectivity efficiency and pushed up airfares.

The report points to a 15–20% decline in inbound tourist arrivals, particularly in leisure travel, as global travellers adopt a cautious approach. Outbound travel trends have also shifted, with Indian travellers preferring short-haul destinations such as Thailand, Singapore and Vietnam, while long-haul and transit-dependent routes witness moderation.

The hospitality sector remains comparatively resilient due to strong domestic travel demand. However, rising energy costs, higher input prices and fluctuating international demand—especially in premium and business hotel categories—are putting pressure on margins. Occupancy levels remain stable, but profitability is affected.

The restaurant and food services segment is witnessing a mixed impact. Industry estimates aligned with insights from the National Restaurant Association of India indicate input cost inflation of 10–15%, driven by higher prices of imported ingredients, logistics and energy. Premium dining and hotel-based restaurants in key tourism hubs have seen a decline in international customer footfall. Domestic demand and food delivery, contributing 20–30% of revenues for many organized players, continue to provide some stability. However, margin compression remains a serious concern, particularly for small and mid-sized operators.

Despite these challenges, domestic tourism continues to act as the primary growth engine, cushioning the sector from global disruptions. Trends such as revenge travel, staycations, bizcations and experiential dining are sustaining demand across hotels, airlines and restaurants.

To reduce the impact and strengthen resilience, the report recommends diversifying international air routes, enhancing bilateral air service agreements, and rationalizing taxation across ATF, hospitality and F&B sectors. It also calls for targeted financial support and easier credit access for MSMEs that form a significant part of the ecosystem.

Further suggestions include faster infrastructure development, improved multimodal connectivity, promotion of domestic tourism circuits, stronger digital travel facilitation, streamlined visa processes, and destination marketing in alternative global markets. For restaurants, the report emphasizes stabilizing supply chains, reducing compliance burdens and promoting local sourcing.

The report concludes that while the West Asia conflict has created short-term disruptions, it also presents an opportunity for India to build a more resilient, diversified and self-reliant tourism ecosystem capable of sustaining long-term growth.