Tourism is a rapidly expanding industry that plays a pivotal role in the socio-economic development of many regions. However, unplanned tourism can lead to environmental degradation, resource depletion, and social imbalances, making sustainable destination management a necessity. This research explores the significance of destination management in ensuring the sustainability of tourism, with a specific focus on Bhavani Island, Vijayawada, India. The study examines how strategic planning, infrastructure enhancement, policy interventions, and stakeholder engagement can transform Bhavani Island into a sustainable and economically viable tourism destination. Bhavani Island, a 133-acre river island located on the Krishna River, is a significant tourist attraction in Andhra Pradesh, offering various recreational activities and accommodation facilities. Despite its potential, the island faces numerous challenges, including limited infrastructure, accessibility constraints, environmental concerns, and a lack of comprehensive destination management strategies. The primary objective of this research is to assess the Tourism Potential Index (TPI) of Bhavani Island and develop recommendations for its sustainable tourism development. A comprehensive literature review was conducted to understand the global and local perspectives on sustainable tourism. The study examines the principles of sustainable tourism outlined by the United Nations World Tourism Organization (UNWTO) and the relevance of Sustainable Development Goals (SDGs) in tourism management. The literature also reviews best practices in destination management and sustainability assessment frameworks, including the Travel and Tourism Development Index (TTDI) and the Tourism Potential Index (TPI). The research framework includes a mixed-methods approach, incorporating both qualitative and quantitative data collection techniques. The site selection for this study was guided by Dickman’s 5-A framework, which evaluates tourism destinations based on Attraction, Accessibility, Accommodation, Amenities, and Activities. Primary data collection involved tourist perception surveys, expert interviews, and on-site assessments, while secondary data was gathered from government reports, tourism development plans, and academic literature. The study employed the Delphi technique to incorporate expert opinions in evaluating the physical and operational aspects of Bhavani Island. A crucial aspect of the study was the formulation of the Tourism Potential Index (TPI) to evaluate Bhavani Island’s tourism capacity. The TPI is structured around four primary drivers: socio-economic conditions, travel and tourism policy and enabling conditions, infrastructure conditions, and natural and cultural resources. Each driver consists of multiple sub-indicators measured using a Likert scale ranging from 1 (poor) to 5 (excellent). The data was normalized using the Max–Min Normalization technique to ensure consistency across variables. The final TPI score of Bhavani Island was calculated as 0.556, indicating moderate tourism potential with significant scope for improvement. Findings from the study highlight key challenges limiting Bhavani Island’s tourism potential. The island’s socio-economic conditions, including the local business environment, safety measures, and human resource availability, require enhancement to support sustainable tourism. The absence of adequate policy interventions and international marketing strategies has limited the island’s global reach. Infrastructure constraints, particularly poor connectivity, limited accommodation options, and inadequate sanitation facilities, negatively impact the visitor experience. Environmental concerns such as improper waste management, deforestation, and seasonal flooding pose additional risks to the island’s sustainability. Based on the TPI assessment, the study proposes a series of strategic interventions to enhance destination management and tourism sustainability at Bhavani Island. These include: The implementation of these strategies requires a coordinated effort between government authorities, private investors, tourism stakeholders, and local communities. Public–Private Partnerships (PPPs) can play a crucial role in funding infrastructure projects and improving service quality on the island. Additionally, regulatory frameworks must be established to monitor environmental impact, ensure compliance with sustainability standards, and enhance the overall visitor experience. The study emphasizes the importance of adopting a holistic approach to destination management, where economic growth, environmental conservation, and socio-cultural sustainability are prioritized equally. The findings suggest that Bhavani Island has the potential to become a model for sustainable tourism development in India if appropriate management strategies are implemented effectively. In conclusion, this research underscores the significance of destination management in achieving sustainable tourism. By addressing infrastructure deficits, policy gaps, and environmental concerns, Bhavani Island can become a thriving, environmentally responsible, and economically sustainable tourism destination. The study contributes to the broader discourse on sustainable tourism by providing a structured approach to assessing tourism potential and offering practical recommendations for enhancing destination management. Future research can explore the long-term impact of these interventions and develop adaptive strategies to respond to emerging tourism trends and environmental challenges.