West Asia conflict disrupts aviation, leads to 15–20% dip in inbound tourist traffic; Rs. 18,000 crore net loss for industry: PHDCCI report

A report released by the PHD Chamber of Commerce and Industry (PHDCCI) on Thursday highlights a 15–20% dip in inbound tourist traffic, significant disruptions in aviation due to rerouting and airspace restrictions, and an estimated Rs 18,000 crore net loss for the industry due to the West Asia conflict. It also notes a sharp impact on the hospitality sector, with nearly 10% of restaurants shutting down and monthly business losses pegged at Rs 79,000 crore.

PHDCCI stated that India’s tourism and hospitality sector, which contributes nearly 8% to GDP and supports over 40 million jobs, is once again facing external shocks due to escalating geopolitical tensions. The industry body's report notes that while the sector had witnessed a strong V-shaped recovery in 2025, with branded hotel inventory nearing 200,000 rooms and domestic aviation traffic crossing 5 lakh passengers per day, the West Asia conflict in early 2026 has introduced fresh volatility.

The aviation sector has emerged as 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, leading to a sharp rise in fuel consumption and operating costs.

Industry estimates indicate that fuel accounts for 35–40% of airline operating costs, and the ongoing situation has further strained airline profitability. The disruption of Middle East air corridors, which is among the busiest global transit routes, has also reduced connectivity efficiency and increased airfares. The PHDCCI report also highlights a 15–20% decline in inbound tourist traffic, particularly in leisure travel, as global travellers adopt a cautious approach amid geopolitical uncertainty. 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 report notes that despite stable occupancy levels driven by domestic tourism, profitability remains under pressure for the hospitality sector.

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%, driven by higher prices of imported ingredients, logistics, and energy.

To mitigate the impact and strengthen sector resilience, the report outlines some policy recommendations. These include diversifying international air routes and reducing dependence on conflict-prone regions, enhancing bilateral air service agreements to improve connectivity, and rationalizing 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.

Further, it recommends accelerating infrastructure development, improving multimodal connectivity, and promoting domestic tourism circuits to sustain demand. Strengthening digital travel facilitation, visa processes, and destination marketing in alternative global markets is also highlighted as critical to offset declines in traditional inbound segments. For the restaurant sector, the report emphasizes the need to stabilize supply chains, reduce compliance burdens, and support local sourcing ecosystems.

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