INDIAN HOSPITALITY INDUSTRY

Indian hospitality sector falls within the spectrum of travel and tourism which is estimated to
contribute between 8-9% towards Indias GDP.According to the estimates of World Travel &
Tourism Council (WTTC), the direct and indirect contribution of travel and tourism to GDP is
expected to grow consistently in the next decade. Past indicators in Foreign Tourist Arrivals
(FTAs) as well as domestic travel in 2010 suggest that the number of travelers have almost
doubled since 2005. However with around 6 million FTAs, India accounted for only about 0.6% of
the global tourist arrivals indicating a huge area of untapped opportunities in travel. Growth
opportunities in travel & tourism cannot be realized without the development of the hospitality
sector. India presently has an estimated 114,000 hotel rooms spread across various hotel
categories. This is around 150,000 rooms short from what is required. While the opportunities are
immense, there are also challenges associated with it. The Hotel industry universally is sensitive
to economic cycles and does face its troughs as well as highs based on the supply and demand
of rooms at any point. Specific India issues like poor infrastructure, high cost of land procurement
and multiple licenses as well as levies accentuates the challenge of development. India, presently
coming from a period of high growth, has hit a low point with persistent high inflation, high interest
rates and policy paralysis in the government leading to reduced growth prospects. In addition,
major developed economies like US, UK and Euro zone which have been our major
Inbound customers in the past, have either decelerated or have had no growth which could lead
to reduced travel. On the positive side though, domestic tourism In India has come of age with
better connectivity and is likely to counter any downfall in the international tourist arrivals.
However, the increased domestic demand rides on the back of different consumer choices and
the future investment plans by the global and domestic players will have to take into account
these evolving choices.
Recent Developments:
The Federation of Hotel and Restaurant Association of India (FHRAI), an apex body in the
hospitality industry, has said that the industry is set to see an investment of about Rs 26,000
crore by 2017.The sector will witness and investment boom soon. According to estimates, we will
require an additional 1,88,000 rooms by the end of the Twelfth Five Year Plan Period. We expect
an investment of about Rs 26,000 crore by then, said president, FHRAI. The industry currently
employs 24 million people and by 2017 it is expected to add another 44 million employees. From
the present 26 lakh rooms, the industry is likely to double its number of rooms by 2017.
Meanwhile, FHRAI has said that the hotel tariffs may go down by 2 to 3 per cent, if the
infrastructure status demand made by FHRAI in its post-budget memorandum submitted to the
Government, is extended to below three star hotel categories and the threshold of location
outside cities with population of more than one million is removed, in the near future.
Infrastructure status to hospitality industry under the RBIs Infrastructure lending list would mean
bank loan repayment periods will be extended to 10 -15 years and the interest rate would settle
around 3-4 per cent compared to 12-13 per cent now. When interest rates will come down, more
in tune with international hotel lending rates, it would translate into our input costs getting
lowered. If the interest burdens are reduced, tariffs may come down by 2-3 per cent. he said
According to FHRAI, though the industry was given infrastructure status, it excludes majority of
hotels in the country. It covers only 5 per cent of hotels. The remaining 95 per cent will not enjoy
infrastructure status. We have requested the Government to provide this status to the entire
segment. We will then be able to compete with the rates at which foreign hoteliers operate, he
added. President of FHRAI said that the hike in service tax from 10 to 12 per cent during the last
Budget has also affected the sector negatively.

Source: 1) http://www.business-standard.com, Kolkata Jun 18, 2012

2) Price Waterhouse Coopers

KEY POINTS - THE EXPONENTIAL GROWTH FOR HOSPITALITY SECTOR.

1. The Indian hospitality sector is expected to witness high growth over the long term. The next
one or two years may be a phase of building before the high growth trajectory emerges.
2. Domestic travel is expected to be the primary driver of the sectors growth. High disposable
income and the advent of better locations are driving this growth.
3. Business travel and MICE are expected to be the possible growth segments.
4. Evolution into a multi-location and multi-format player is emerging as the most preferred
strategy for players in the sector.
5. Maximum investments are expected to take place in the Tier I towns followed by the Tier II
towns.
6. Budget and mid-market segments have emerged as the most preferred investment categories.
7. Managing costs better is on the top of the agenda for CEOs, in the operational effectiveness
space. Companies are looking at reducing energy consumption, investing in technology to reduce
costs and making higher proportion of costs variable.
8. Potential synergies in operations exist in multiple functions including IT, procurement and sales
and marketing. Over 80% of the CEOs believe they will undertake centralization in procurement.
9. The hospitality sector has unanimously voiced the need for gaining an infrastructure status.
10. Effective single window clearance for obtaining licenses has been identified as a key sector
requirement.
11. Rationalization of the number of tax levies and implementation of single tax regime will benefit
the hospitality industry.
12. Talent management is a major challenge for the sector. Inadequate supply of quality talent
and increased Competition for talent within the sector and from competing service sectors has
made attrition a significant issue for the industry.

LIST OF HOSPITALITY EXHIBITIONS IN INDIA

1. AAHAR INTERNATIONAL FAIR
http://www.aaharinternationalfair.com/introduction-aahar-international.html
2.HOSPITALITY INDIA
http://thehospitalityindia.com
3.HOSTS INDIA
http://www.hostsindia.in/
3.Food Hospitality World
http://www.fhwexpo.com/
4. FOOD & GROCERY FORUM INDIA http://www.foodforumindia.com/
Source: 1) http://www.business-standard.com, Kolkata Jun 18, 2012
2) Price Waterhouse Coopers

5.INTERNATIONAL FOOD TEChttp://www.foodtecindia.com/

6.INDIAN HOSPITALITY EXPO-

http://www.ih-expo.com/
http://www.trinityworld.biz/
7.HOSPITALITY BUSINESS FAIR

http://hbf.co.in/

Source: 1) http://www.business-standard.com, Kolkata Jun 18, 2012

2) Price Waterhouse Coopers