Tamil Nadu's Tourism Boom: 127 Private Partnerships Worth ₹22,700 Crore Signed
Tamil Nadu is experiencing a significant surge in tourist arrivals, prompting the state government to actively engage private players to scale up the tourism sector. In a major strategic move, the state is now experimenting extensively with the public-private partnership (PPP) model to drive growth and innovation in tourism.
Massive Private Investments and Global Interest
In line with this initiative, the Tamil Nadu government recently signed 127 Memoranda of Understanding (MoUs) with private players, totaling more than ₹22,700 crore in investments. These investments are spread across diverse areas including amusement parks, adventure tourism, sports and recreation, ropeway circuits, luxury hotels, and resorts. The potential of Tamil Nadu's tourism sector has piqued global interest, with Vietnam-based conglomerate Vingroup, which manufactures VinFast electric vehicles at Tuticorin, exploring multiple locations in the state to set up amusement parks and resorts.
Coordinated Efforts Across Departments
This development comes as various state departments coordinate efforts to promote tourism. The State Industries Promotion Corporation of Tamil Nadu (SIPCOT), under the industries department, is identifying locations to be developed into well-equipped tourist destinations that can be allotted to investors in hospitality. Simultaneously, the Tamil Nadu Infrastructure Development Board (TNIDB), part of the finance department, is exploring projects with tourism potential.
Pooja Kulkarni, CEO of TNIDB, explains that the government is structuring PPP projects to proactively engage the private sector, starting with the Tamil Nadu Tourism Development Corporation (TTDC). Successful examples include the recently inaugurated Glow Garden in Mamallapuram and a floating restaurant at Muttukadu on the East Coast Road (ECR).
Risk-Sharing and Revenue Models in PPP
The modeling of a PPP project involves risk-sharing between partners in a way that balances the delivery of facilities or services and risk management between the government, authority, and private partner. Kulkarni notes that while many projects in India use the engineering, procurement, and construction (EPC) combined with operations and maintenance (O&M) model, where the private sector merely delivers output, the PPP models in Tamil Nadu include an investment component from the private partner.
This gives the partner a right to project revenues, allowing them to see upsides, while the government also benefits as it takes on much of the initial risk, including investments. Continued engagement drives the private sector partner, fostering long-term collaboration.
Expanding Tourism Initiatives
Bids have been launched for four camping sites at locations such as Yelagiri, Jawadhu, and Kolli hills, with the government welcoming private sector participation. Additionally, steps are being taken to identify five or six heritage buildings under the maintenance of the Public Works Department and explore converting them into heritage hotels with private hospitality players. Kulkarni adds that Guidance Tamil Nadu, the government's nodal agency for investment promotion, is now involved in tourism promotion with a dedicated tourism desk, as tourism has been classified as an industry.
Government Focus and Policy Incentives
Commissioner of Tourism and TTDC Managing Director Innocent Divya emphasizes that the government's focus is on private participation in tourism initiatives, which led to the signing of 127 MoUs. The state is promoting cultural and heritage circuits, adventure tourism, and initiatives by the Tamil Nadu Maritime Board for cruise tourism. The goal is to increase the number of days tourists spend in the state by leveraging private sector expertise.
These efforts are part of the Tamil Nadu Tourism Policy 2023, which offers incentives for investors in projects categorized as A, B, and C, with profit-sharing ratios to be decided accordingly.
Industry Perspectives and Economic Impact
T Nataraajan, honorary secretary of the South India Hotels and Restaurants Association (SIHRA), notes that hotels are witnessing a rise in occupancy and calls for increasing the number of keys to meet demand. He suggests the Tamil Nadu government offer land for tourism projects on a long-term lease of 99 years at concessional rates.
Tourist arrivals to Tamil Nadu stood at 28.7 crore in 2023, including both domestic and international travelers, increasing to 30.8 crore in 2024, with the state ranking second in domestic tourist arrivals.
Vikram Cotah, CEO of GRT Hotels & Resorts, observes that PPP models should be viewed as destination-making models involving the government, private players, and local communities. He highlights that tourism creates indirect jobs in areas like arts and crafts, street food, and entertainment, and suggests exploring PPP in sustainable eco-tourism projects.
P Asoka, president of the Approved Tour Guides Association in Chennai, points to successful PPP models in Rajasthan and Goa for hospitality and chartered flights. He notes that foreign tourists in groups stay an average of nine days, spending $200-$250 daily, while backpackers explore for a month, spending about $50 a day. With tourism dominated by the private sector at nearly 90% share, expanding PPP can generate significant revenue and employment opportunities.
