Backwater tourism is the leading tourist product in Kerala that attracts a large number of tourists. Traditionally it was used only for the purpose of transportation. But nowadays it is one of the leading tourist destinations. The most popular backwater tourism is Vembanad backwater tourism in Alappuzha district, Kerala. The major attraction of backwaters is houseboat tourism. Here the study is conducted to know the tourism potential of Vembanad backwaters with special reference to Alappuzha district. This chapter focuses on studying the psychographic and demographic profile of respondents, the level of satisfaction with services offered in houseboats, and also discusses the related environmental issues. Primary data has been collected from tourists and employees through the interview method with a structured questionnaire. Convenient sampling technique was used for the data collection process. Statistical Package for Social Science (SPSS) was used for analysis. Tests such as the coefficient of variation (CV), mean percentage, chi-square and one-way ANOVA were used.