Online Tutoring on Crisis Assessment

Introduction

Glaesser (2006) has defined a crisis as a critical change in important areas that endanger or destroy the image and competitive advantage of an establishment.

The image of a destination is defined as the sum of beliefs and ideas that tourists have of that place (Kotier & Haider & Rein 1993), while competitive advantage is the value created from the strategy that is not simultaneously being implemented by another organization.

The Tourism sector is the first to get affected by any crises, be it natural or human induced, as the image and competitive advantage of the destination as a whole is hampered. Hospitality industry serves as a supporting factor to the destination (Ritchie and Crouch 2003).

 

Crisis Management has become an integral part of the Government and numerous organizations, wherein an attack causing damage to life and property threatens the credibility and safety perception of the tourist destination, leading to short and long term repercussions on tourist’s destination choices. According to the Phases of Crisis Management by Glaesser (2006), Mumbai was thrown into the crisis coping stage, wherein there was little that could be done at the time. In retrospect to the incidents, the learning outcomes got them to implement a number of changes and reforms throughout the country.

 

The Incident

Mumbai, one of India’s most vibrant cities as well as the entertainment capital with an urban population of 32.7% of India’s total population of 1,251, 695,584 (CIA 2015). City life being extremely fast paced, intense and still developing, makes it a good tourist destination[1] and a more probable attack destination for terrorists[2].

The 26/11 terrorist attacks on Mumbai has been called India’s 9/11, as no one would have imagined that a set of planes could be used as giant flying bombs. Similarly, no one in India thought of a sea-borne invasion of Mumbai. This human-induced crisis rattled people’s faith in humanity.

The targets were two high-profile hotels: The Taj Mahal Palace & Towers and The Oberoi – Trident, the renowned Leopold Café in Colaba, the forever-packed CST Railway station and Nariman House. The objective, like all other terrorist activities[3] since 1999; was to cause destruction and mayhem in a way that captures the world’s attention.

The Belvedere (Taj Mahal Hotel) and The Chambers (The Oberoi -Trident) are the exclusive clubs frequented by Mumbai’s elite. According to estimates by the business magazine “Business Today” (2008), the members of the Belvedere alone account for more than 80% of the market capitalization of India’s publicly listed companies. Both these clubs were victim to the 26/11 terror attacks that left people around the world in shock.

During the 60-hour siege at the two hotels and other locations, the terrorists shot down numerous innocent people, took hostages and ran riot with grenades, assault rifles and bags of RDX, a powerful explosive. This resulted in 170 deaths severe destruction to the properties.

 

The overall effect of the crisis

Impact of the attacks on the destination

The immediate impact of large-scale acts such as terrorism is the loss of life, destruction of property and hampering the destination’s reputation and competitive advantage. These attacks were classified as an acute crisis, wherein countermeasures were taken the moment the effects were visible (Glaesser 2006) causing a ripple effect.

The number of FTAs dropped by 13.75% from 1.69 million in 2008 to 1.46 million in 2009. This dip in tourist arrivals has affected the major domestic tourist markets marked by a 20-25% drop in the number of FTAs. States like Goa, Kerala, Tamil Nadu, Rajasthan, Mount Abu and Himachal Pradesh, which are popular tourist destinations were also adversely affected (Awasthi 2009).

 

Economic Impact

The overall damage to India’s economy was believed to have been significant. Analysts’ estimates had suggested the loss in business to be about a hundred billion dollars, with a loss of twenty billion dollars in terms of Foreign Direct Investment.

Mumbai contributes heavily to the country’s GDP by bringing in 40% of foreign trade, 60% of customs duty collections, 40% of income tax collections, 20% of central excise collections and $10 billion in corporate taxes (The Times of India, 2008). The attacks in Mumbai attracted attention worldwide, adversely affecting India’s image and people’s perception of its safety and security (Wharton School 2008).

A drop in tourist influx, resulted in foreign exchange earnings dropping by 13% from Rs. 15,655 crores in 2008 to Rs. 13,583 crores in 2009 while the GDP dropped from a rise in 0.31% to 0.2%[4]. The hospitality industry was then forecasted to witness a combined revenue loss of approximately Rs. 9,000 crores over 2009/10 (Awasthi R 2009).

 

Impact on the Hospitality and Tourism sector

Terrorist activities such as these primarily affect the hospitality and tourism industries.  In the wake of the attacks, there were massive cancellations of hotel bookings of about 60 % across the country.

The ripple effect of these attacks was also seen in holiday destinations such as Goa. Tourist contribution to Indian GDP is 5.92% providing 9.24% employment to people. The attacks got arrivals in Western India to drop by approximately 25%, resulting in hotels dropping their rates.

Trend analysis of occupancy and average rates for the industry over the last ten years[5] shows the impact of a Global Economic slowdown of the Mumbai terror attacks in the form of increasing hotel average rates and reducing occupancy.

International tourist arrivals[6] have shown steady growth from 1950, with a 2.1% drop[7] in 2008/09. They did however, account for less than 5% of the total travel and tourism market across 5 star hotels in India. Hotel rates were dropped in numerous places around the country, which served as an impetus for domestic leisure travel.

As evident from Appendix 1.9[8], international visitors to India began to decline from 2004, while the number of domestic visitors showed a sharp rise in 2006, leaving a big window of opportunity for hotels to target the domestic market.  The UNWTO (2012) revealed the average increase of 13.5% of domestic tourism recording a figure of 740.2 million visits.