Determining Interrelationship Between Factors Impacting Foreign Direct Investment in Tourism: An ISM-based Approach

Abstract

The burgeoning spectrum of tourist demand and changing tastes and preferences calls for developing the nation’s tourism profile. India, one of the fastest-growing economies and a potential attractor of tourists, is estimated to be the world’s third-largest tourism economy by 2028 (as per World Tourism and Travel Council [WTTC] estimates) and is expected to draw massive investment in this sector. Thus, the present study aims to analyse various factors impacting foreign flows in the tourism sector and develops a hierarchical structure among the identified factors through the interpretive structural modelling (ISM) technique. A MICMAC (Matrix of Cross-Impact Multiplications Applied to Classification) analysis is performed to categorise the identified factors based on the driving power and dependence level. The interrelationships among the variables were derived from the opinion gardened from 50 research and industry experts. The results showed that political stability plays a critical component in driving other variables in the system. Also, a stable system is likely to impact the economic environment of a nation positively, thus, creating a desirable profile for investors to invest in tourism businesses or the development of destinations.