Tourism has become a significant but problematic industry, providing socio-economic benefits while also leading to environmental degradation and infrastructural strain. In the Himalayan region, Nainital, a popular lake town in Uttarakhand, exemplifies the challenges of overtourism, with 3,000–4,000 tourist vehicles entering daily during peak seasons. This influx surpasses the town's carrying capacity and puts immense pressure on city’s infrastructure. Current management strategies, such as vehicle barricades and “Nainital Housefull” boards, have proven inadequate. To address these challenges, this research paper proposes the integration of Artificial Intelligence (AI) and smart design strategies for Sustainable Tourism Management. It aims to identify the causes, impacts, and indicators of overtourism in Nainital while analyzing international best practices using AI. The methodology of the study includes primary survey that was carried out with local residents and Key Informant Interviews to assess social, environmental, and economic impacts. The research proposes an AI-based monitoring framework featuring solutions that includes sensor-based crowd control, Tourist Cards, AI-enabled parking systems, and mobile applications. This approach aims to better manage tourist flow and mitigate the adverse effects of overtourism, laying the groundwork for future research in the area.