The West Asia conflict has significantly disrupted India’s tourism, aviation, and hospitality sectors, leading to a 15–20% decline in inbound tourist traffic and an estimated net loss of ₹18,000 crore for the aviation industry, according to a report released by the PHD Chamber of Commerce and Industry (PHDCCI).
Titled ‘Impact of the West Asia Conflict on India’s Tourism, Aviation & Hospitality Sectors’, the report highlights how the West Asia conflict has created widespread challenges across aviation, inbound tourism, hospitality, and restaurant segments, even as strong domestic demand continues to provide a degree of stability.
India’s tourism and hospitality sector, contributing nearly 8% to GDP and supporting over 40 million jobs, is once again facing external shocks 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 exceeding 5 lakh passengers per day—the West Asia conflict in early 2026 has introduced fresh volatility.
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West Asia Conflict: Aviation Sector Faces Maximum Impact
The report identifies aviation as the most affected segment amid the West Asia conflict, with airlines grappling with flight cancellations, airspace restrictions, and extensive rerouting of international flights.
These disruptions have increased flight durations by 2–4 hours on key routes, resulting in higher fuel consumption and operating costs. Fuel already accounts for 35–40% of airline operating expenses, and the ongoing West Asia conflict has further strained profitability.
Additionally, disruptions in Middle East air corridors—among the busiest global transit routes—have reduced connectivity efficiency and contributed to rising airfares, impacting both airlines and passengers.
Inbound Tourism Declines Amid Global Uncertainty
The West Asia conflict has led to a 15–20% drop in inbound tourist traffic, particularly in leisure travel, as international travellers adopt a cautious approach amid geopolitical instability.
The report also notes a shift in outbound travel patterns, with Indian travellers increasingly favouring short-haul destinations such as Thailand, Singapore, and Vietnam. Meanwhile, long-haul and transit-dependent routes have witnessed moderation due to risks associated with the West Asia conflict.
Hospitality Sector Shows Resilience Despite Pressures
Despite the disruptions caused by the West Asia conflict, India’s hospitality sector continues to demonstrate resilience, supported by strong domestic travel demand.
However, the report points to mounting margin pressures driven by rising energy costs, increased input prices, and fluctuating international demand. Premium and business hotel segments, which rely heavily on foreign travellers, have been particularly affected.
While domestic tourism has helped maintain stable occupancy levels, profitability remains under strain due to the prolonged impact of the West Asia conflict.
Restaurant Industry Sees Mixed Impact
The restaurant and food services sector is also experiencing mixed effects from the West Asia conflict. Industry estimates, aligned with insights from the National Restaurant Association of India (NRAI), indicate input cost inflation of 10–15%, driven by higher prices of imported ingredients, logistics, and energy.
Premium dining establishments and hotel-based restaurants in key tourism hubs have seen reduced international footfall due to the West Asia conflict. However, domestic demand and food delivery—contributing 20–30% of revenues for many organised players—continue to provide some stability.
Even so, margin compression remains a key concern, particularly for small and mid-sized operators navigating the ongoing challenges of the West Asia conflict.
Domestic Tourism Cushions Impact
Despite global uncertainties linked to the West Asia conflict, domestic tourism remains the primary growth engine for the sector.
Travel trends such as revenge travel, staycations, bizcations, and experiential dining are sustaining demand across airlines, hotels, and restaurants. These trends have helped offset some of the adverse effects of the West Asia conflict on international travel segments.
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Policy Recommendations to Strengthen Sector Resilience
To mitigate the impact of the West Asia conflict, the PHDCCI report outlines several policy recommendations aimed at strengthening sector resilience.
These include diversifying international air routes to reduce dependence on conflict-prone regions, enhancing bilateral air service agreements, and rationalising taxation across aviation turbine fuel (ATF), hospitality, and F&B sectors.
The report also calls for targeted financial support and easier credit access for MSMEs, which form a critical part of the tourism and restaurant ecosystem affected by the West Asia conflict.
Further recommendations include accelerating infrastructure development, improving multimodal connectivity, and promoting domestic tourism circuits.
Strengthening digital travel facilitation, visa processes, and destination marketing in alternative global markets is also highlighted as essential to offset the decline caused by the West Asia conflict.
For the restaurant sector, the report emphasises stabilising supply chains, reducing compliance burdens, and supporting local sourcing ecosystems to navigate ongoing disruptions.
Outlook: Navigating Uncertainty with Domestic Strength
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.
With strong domestic demand and coordinated efforts between government and industry stakeholders, India’s tourism, aviation, hospitality, and F&B sectors are expected to navigate the uncertainties arising from the West Asia conflict and sustain long-term growth.
