Rising airfares, hotel cancellations & fuel shortages: Iran war hits Indian tourism & aviation

The escalating conflict involving Iran in West Asia is beginning to generate significant ripple effects across India’s tourism and aviation industry. Disruptions to international flight routes, a sharp rise in aviation turbine fuel (ATF) prices, higher airfares and emerging supply constraints are creating operational challenges for airlines, hotels and travel operators. Airlines have already introduced fuel surcharges to offset rising costs, while travel companies anticipate overall travel expenses could increase by 20–30% in the near term.

At the same time, hotels in major cities are witnessing a surge in room cancellations as international travel slows. The situation has been compounded by shortages of commercial LPG, forcing restaurants and hotels to scale back kitchen operations and menu offerings. With India approaching its peak summer travel season, these disruptions could dampen traveller sentiment and affect tourism revenues across the broader travel ecosystem.

In response, airlines have introduced higher fuel surcharges. Air India imposed a surcharge of ₹399 on all domestic flights and US$ 10 on international routes to SAARC countries, West Asia and Singapore from March 12. IndiGo introduced surcharges of ₹425 on domestic and Indian subcontinent routes, ₹900 on Middle East routes, ₹1,800 on flights to Southeast Asia, West Asia, China and Africa, and ₹2,300 on Europe-bound flights. Meanwhile, Akasa Air implemented surcharges ranging from ₹199 to ₹1,300 per sector, depending on the duration of the flight.

Travel companies and tour operators anticipate overall travel costs to increase by 20–30% in the near term as the ripple effects of the West Asia conflict begin to filter through the sector. International airfares—typically the largest component of travel expenditure—are expected to rise further, which could push up overall customer spending in the coming weeks and months.

Surge in hotel cancellations adds to operational strain

Escalating tensions in West Asia are beginning to weigh on India’s hospitality sector, particularly in major business and tourism hubs such as Mumbai and Delhi. The disruption to international travel has triggered a noticeable surge in hotel room cancellations, reversing what had been a steady recovery in occupancy levels. Hospitality executives indicate that leading chains, including Indian Hotels Company (IHCL), which operates the Taj Hotels brand, and ITC Hotels, are witnessing around 80–100 room cancellations per day across properties in these cities since the conflict intensified earlier this month.

The cancellations are translating into an estimated revenue loss of roughly ₹15–20 lakh per property each day. When considered across multiple properties operated by large hotel groups, the cumulative impact on the industry is significant, with total daily losses potentially reaching close to ₹10 crore.

The timing of the disruption has amplified its impact on the hospitality sector. March is traditionally a slow period for domestic travel as it marks the end of the financial year and coincides with school examinations across several states, reducing both business and leisure trips. This year, the overlap with the month of Ramzaan has further softened domestic travel demand.

In such a scenario, hotels rely more heavily on international visitors to maintain occupancy levels. According to industry sources, the slowdown in travel from West Asia has had a more pronounced impact on the sector, as limited domestic demand has been unable to offset the decline in international arrival.

LPG shortage adds to hospitality sector strain

Maritime traffic through the strategically vital waterway, Strait of Hormuz, running along Iran’s coast and accounting for nearly 20% of global oil and seaborne liquefied natural gas trade—had slowed significantly after the United States and Israel launched  strikes on Iran. The restrictions had left several vessels stranded, including four crude oil tankers, six liquefied petroleum gas (LPG) carriers and one liquefied natural gas (LNG) vessel.

Beyond disruptions to travel flows, parts of the hospitality sector are also facing operational pressures due to shortages of commercial LPG. Tourists in several destinations report hotels expressing regret that they cannot offer full menus, as kitchens struggle to secure sufficient LPG cylinders for regular operations. In some cases, restaurants and smaller eateries have had to scale back menu options or reduce services altogether as gas supplies tighten and prices surge.

Commercial cylinders are in acute short supply and being sold at sharply elevated prices, forcing smaller resorts, boutique hotels and local eateries to scale back services or even temporarily shut down their kitchens entirely. In several cities, buffets have been suspended and menus pared down to essential items only, while restaurants have cut gas-intensive dishes such as roti, dosa and poori to ration scarce fuel. Many street food stalls and smaller food outlets have struggled to stay open at all as free-market prices for commercial gas soar and cylinders become unavailable.

To cope with the shortage, some establishments are turning to alternative cooking methods—shifting to induction cooktops, electric ovens or firewood stoves where possible—and prioritising dishes that require less gas to prepare. In a few areas, cafes and eateries have adopted innovative low-cost stoves to reduce fuel dependency. Others have adjusted operating hours and restricted menus to manage limited fuel allocations, while industry bodies have appealed for clearer policy directives on commercial LPG distribution.

Despite these efforts, the supply strain is disrupting not just hospitality experiences for travellers but also the wider food ecosystem that supports tourism and local livelihoods.

Near term outlook

A prolonged conflict could prompt travellers to postpone international trips, particularly delegates planning to attend conferences and events in India. At the same time, the higher cost of overseas travel during the upcoming summer holiday season—especially to Western destinations—may encourage a shift in demand toward domestic tourism.

However, industry stakeholders indicate that the primary factor affecting summer travel bookings is not merely the rise in airfares but the broader uncertainty surrounding how the conflict may evolve or escalate. This puts a lot of potential strain on the upcoming peak summer season, which is estimated to generate tourist revenue of US$ 45-60 billion as per some estimates.

Travel agents point out that the ongoing commercial LPG shortage has weighed on consumer sentiment, contributing to relatively muted demand even for domestic holiday travel. Concerns about potential disruptions to essential services at destinations are making travellers cautious. Many are reluctant to risk travelling only to face a situation where hotels and restaurants may struggle to provide food due to supply constraints.

Industry sources noted that domestic tourism could have seen significant gains this summer if the commercial LPG crisis had not emerged as a constraint. With international travel—particularly to Europe and west Asia—expected to remain subdued, the season presented a strong opportunity for hill stations and other domestic destinations to capture higher tourist demand.

However, the combined effect of geopolitical uncertainty and operational disruptions has dampened travel sentiment, making the current period one of the most challenging for the industry since the Covid pandemic.

Industry sources noted that nearly 40% of Indians travelling overseas rely on Gulf carriers. With the airlines facing the greatest disruption, both outbound and inbound tourism are expected to be significantly affected unless the conflict eases soon.

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FAQ

1. How is the West Asia conflict affecting India’s aviation sector?
   The conflict has forced Indian airlines to cancel a significant number of international flights due to airspace restrictions and operational risks. At the same time, aviation turbine fuel prices have surged, increasing operating costs and prompting airlines to impose additional fuel surcharges on passengers.
2. Why are travel costs expected to rise in the coming weeks?
   Travel companies expect costs to increase by 20–30% as airlines pass on higher fuel costs to passengers through surcharges and rising international airfares, which form the largest component of overall travel expenditure.
3. What impact is the conflict having on India’s hospitality industry?
   Hotels in major cities such as Mumbai and Delhi are witnessing a spike in cancellations from international travellers. Leading hotel chains are reporting dozens of room cancellations daily, leading to significant revenue losses across properties.
4. How are LPG shortages affecting the tourism and hospitality sector?
   Some hotels and resorts rely heavily on LPG for kitchen operations. Supply shortages have made it difficult for certain properties to maintain restaurant services, forcing them to warn guests that bookings may be cancelled if food services cannot be sustained.
5. What relief has India received regarding shipping disruptions in the Strait of Hormuz?
   Iran has allowed a few Indian vessels to transit the Strait of Hormuz despite the blockade, providing limited relief. However, India is still seeking safe passage for 22 vessels stranded west of the strait.