Is it the right time to “CHECK IN”!

Submitted by: Aayushi Tulsiyan (20121002), Kinnari Pandya (20121026) School of Petroleum Management, Gandhinagar 11/1/2012

capital and knowledge across borders. restaurants. top talent from the developed countries is increasingly considering working for the Indian hospitality industry.2% to its GDP.Abstract Name of the Journal: International Journal of Culture. It is second only to the oil industry. and additional fields within the tourism industry. While on one side there has been an immense advancement in technology and global capital market. which is around 8. theme parks. The hospitality industry is a cluster of fields within the overall service sector that includes lodging. It contributes around 2. Hotels and restaurants would be the key focus of the article revolving around the phenomenon of the liberalization. transportation. the tangible trends it has adopted and intangible prospects it has provided. cruise line. hospitality industry has emerged as one of the largest employers in the world. The numerous initiatives taken by the government to unlock the potential has helped to prevent the brain drain to an extent. on the flip side even a microscopic change in other economies has a cascading effect to the industry. 2|Page . operating performance and hotel classifications will be supplementing the fundamentals. in terms of turnover and exchange of foreign currency. The Indian hospitality industry is growing at a rate of 6% and is expected to reach INR 230 billion by 2015. According to The Federation of Hotel and Restaurant Association of India (FHRAI). This makes it one of the most sought after industry for the cross fertilization of cultures. event planning. this industry employees 24 lakh people. Tourism and Hospitality Research (eJournal by Emerald Insight) Hospitality is the defining feature of India and Indians. with globalization and liberalization. In the era where national boundaries are fading fuelled by rapid movement of culture.78 % of the total employed population in India. Information like sector status. In fact.

00 1. Figure 1: FDI inflow in the hospitality sector in India 4.00 1.00 2.000. of India. March. Today the industry is growing at a flat rate of 5.” says Chris Moloney.00 500. because there isn’t one. Chief Operating Officer.00 2. the inflow of FDI in the hospitality industry has been negligible accounting of about only 1.00 4.5-6% and is contributing about 2. June 2012 3 World Bank. and other services like event planning fall under the territory of hospitality industry.2% to the annual GDP of India2.500. Other regulatory drivers like that of abolition of 1 Department of Economic Affairs. The three major political drivers that led to the formation of a liberalized sector were grant of 100% FDI under automatic route. after which the industry showed a remarkable growth of 10. theme parks. Need for liberalization was noticed due to the under-performing government run hotels which were then privatized and Foreign Direct Investment (FDI) was let in.00 2008-09 2009-10 2010-11 2011-12 (Apr-Jan) FDI (in crore) Source: Ministry of State for Tourism. cruise line. Govt. Competing in today’s global market is intimidating.00 3.000. India has reformed itself into a polish of global attraction.000. approval of hotels in the project stage and tax holidays in respect of hotels.Is it the right time to “Check In”! “You will not get a doomsday story from the hospitality sector. after much debate. In 2001.500.00 3.00 0. FDI in this industry was increased from 74 per cent to 100 per cent through the automatic route. Several drivers like the strong economic recoveries coupled with several initiatives taken by the government have led the industry to sustain this growth. Since the new liberalized economic policies were introduced. and India head at IHG. resorts. 2004 3|Page . Feb 2012 2 The Federation of Hotels and Restaurants Association of India(FHRAI).500. 2012 Liberal Growth Hotels. restaurants. Although after this major reform.1% in 19923.500.000.5% per cent of the total FDI of $50.8 billion accrued by the country1. South West Asia.

with many international brands making their presence in the country in the next few years6. technology. At the end of 2010 the Indian hotel industry’s worth was estimated around US$ 17 billion. The path to a liberalized industry was not just achieved by the regulatory drivers but were coupled with various external and internal drivers such as strong GDP growth and tourist arrival statistics. the hotel industry is setting up a place for itself. and beverages. use of hotel. festival celebration. R. Umbrella of Hotels The hotel industry in India can be divided into segments namely Star rated hotels. etc and exemption of Luxury Tax and Sales Tax for 5-7 Years for new projects. result of which the domestic hospitality sector is expected to see investments of over Rs 26. The star hotels are further classified into six categories: Five star deluxe. Three star. Two star. However. owing to various factors. with only a few companies owning hotels in India. East India Hotels-Oberoi Group.000 crore by 2017. Budget hotels. aircraft.a lot of major hotels have announced their plans to expand their footprints in India. Resorts and Clubs and unclassified hotels. ‘Commonwealth Games’. as other services which it gathers are generally brief and discontinuous. D. Heritage hotels. India in its journey of two decades since liberalization has come a long way and has bought itself second in Asia-Pacific only to China in terms of successful hospitality although it is ranked as 12th in AsiaPacific in terms of the world’s attractive destinations4. tourism campaigns led by government like that of ‘Incredible India’. Hotel industry: A Glance In the world of emerging business and corporate culture. Five star. Today this industry thrives on the booming market of hotels and restaurants. international events like that of ’Indian Premier League’. One star. 2011 Department of Industrial Policy and Promotion July 2012 FDI data 6 The Federation of Hotel and Restaurant Association of India (FHRAI). With Foreign Direct Investments (FDI) inflows marked at US$ 3450 million from April 2000 to July 2012 towards the hotel industry’s contribution to the Indian economy5. whereas. 2star. such as The Taj Group-Indian Hotel Company (owned by J. Fringe Benefit Tax exempted on sales promotion including publicity. mid market and heritage categories are highly structured. with its budding appeal and string of career-building opportunities. Tata) and Faletti's Hotel. during which most hotels in India were developed in locations that were frequented by the British and Indian aristocracy. During this period major development can be acknowledged to individual entrepreneurs. 1star and unclassified hotels in India are spread across the country and are highly dispersed in nature. the 3-star. Moreover Travel is not anymore limited to the elite since it has opened up to anyone and everyone due to 4 5 Travel and Tourism Competitiveness report. The Hotel Industry has come a long way from then to now. Four star. ‘Indian Grand Prix’. and the rising disposable income of the economies at large. the upscale. June 2012 4|Page . The history of Indian Hotel Industry dates back to the era of World War II. boarding. most importantly the various changes in policies by the government.Customs Duty on import of capital infrastructure.

3 and 4 star hotels and proposal has been made to extend it to 5 star hotels as well. Earlier. some international players have taken the inorganic route to strengthen their presence in the country. This benefit is currently limited to only 2. lot of foreign players brought diverse culture. the government has made many positive reforms under the category of tax holidays to absorb the capacity expansion in the hotel infrastructure. The booming industry has been successful in attracting many international players as well. Inc has acquired the remaining 60 per cent stake in Choice hospitality India Ltd8. Marriott Executive Apartments. However. A number of well established players include Hilton. spas and medi-cities in order to generate additional revenue. 2. theme based resorts. there has been increased diversification into niche segments like wildlife lodges. Provision of tax rebate equal to 100% of the profit and gain for the first 5 consecutive years to an hotel located in the specified district having a World Heritage Site and has started functioning before 31st March. Also. environment-friendly services and pocket friendly pricing. Mangalore etc has led to increased demand of budget hotels in these cities. Grand Hyatt Residences and Seasons can be quoted as few examples of serviced apartments. but also enhanced its popularity in other nations. Consistent change has made a positive impact on the productivity of this industry as it not helped in improving the functionality. while Accor has announced plans to introduce its budget hotel brand. Jaipur. Carlson Hotels Worldwide increased its stake in RHW Hotel Management Services. 4.apartment concept is gaining ground in India with increasing number of expatriates and travelers staying for long durations. EIH. recently. The serviced. which has proposed to abolish Fringe Benefit Tax with effect from 1st April 2009. 2010 5|Page . This new set of travelers’ is not necessarily looking for a hotel experience but for a comfortable place to stay overnight which has given a rise to the concept of Budget hotels. Inflow of Players With the liberalized reforms and prominent globalization. 2013 has encouraged many people to set up hotels which will lead to creation of more quality jobs as well. owners of Radisson brand in India. Bhubhaneshwar. Hotel Leela Ventures. Star City. intercontinental players pierced the country by creating alliances with the national hotel chains. For instance. In the past one decade. Also. while Choice Hotels International. The major players in this industry are Indian Hotels. 3. Formule1. 5 Star Hotels and Heritage Basic Category. ITC hotels. and ideas with them. in the country. Shangri-La. Also. expansion of business activity in Tier II & Tier III cities like Pune. Finance Bill 2009. new technologies. ITDC and Orient Hotels Ltd. 7 8 Project approval is given to a 1. the services offered and also the standards of facilities in hotel industry have undergone a complete makeover with the help of latest technology. has become major advantage to the hospitality industry.improved standard of living and increase of leisure time. multi-cuisine. Homestead Serviced Apartments. IHCL has already launched budget hotels in India. Bharat Hotels and Asian Hotels. The government policy of single window clearance for any hotel project under which The Ministry of Tourism approves hotels at project stage 7 based on documentation has resulted into a positive achievement for this industry. Taj Wellington Mews. January 24. The Economic Time.

business hotels. “The first opportunity may not always be the best opportunity. on the contrary today it runs 14 hotels in India. Figure 2: Key players in the Indian Market Company Indian Hotels ITC Welcomgroup EIH Type of properties Luxury. insisting that India is the world’s second-fastest growing hospitality market after China. budget and heritage hotels Business hotels. The global chains continue to be optimistic. One of the key difficulties is the demand supply gap. including one bearing its ultra-luxury Pullman brand in Gurgaon. Park Inn InterContinental. Holiday Inn Express. demand growth still outpaced supply. at perhaps the worst possible time: August 2008. Mariott.7 percent over the year prior. economy and cruises Luxury. mid-segment and budget Luxury. Nationwide. Scandium by Hilt and Mandarin Oriental are planning to infiltrate in the Indian hospitality industry in joint ventures with domestic hotel majors. Satinwoods. after which many countries issued travel advisories against visiting India.952 by 2015. Vivanta and Ginger ITC Hotel—Luxury Collection.” says Jean-Michel Cassé. leisure hotels and cruises Luxury.Radisson. Another two months and the 26/11 terror attacks occurred. Welcom Hotel—Sheraton. Meridian. Holiday Inn. Gateway. Accor’s Senior Vice President and India chief. Fortune and Welcom Heritage Oberoi and Trident Radisson Hotels and Resorts. Hotel Carlson InterContinental Source: Indian Brand Equity Foundation The global players are learning new tricks to sustain in the Indian economy and trying to grow aggressively to combat heavy demands. Accor opened its first hotel in Gurgaon. Hampton Inns. Holiday Inn. mid-segment and business hotels Brands Taj. occupancy grew by 1. Park Plaza. The following month Lehman Brothers collapsed in the US. InterContinental and Crown Plaza. New brands such as Amanda. Sheraton. Hyatt. The growth in 6|Page . Crowne Plaza. Although hotel room supply in the country grew by nearly 15 percent in 2010/2011. It intends to increase the number of rooms it is managing from 2. Banana Tree. Country Inns & Suites. triggering the global downturn. Major Challenges Although the industry is growing at respectable rate but still has a lot of opportunities in front of it India’s potential for hotel growth is unmistakable. But the chain has had no second thoughts.519 at present to 13.

making India a more affordable tourist destination. which may be a solution to the demand supply gap. Way Forward Indian hospitality industry has shown a grand evolution in the course of time and has led to being an integral part of the overall service sector economic activity. Also.000 and with around 38 million population unemployed this industry holds a great responsibility for the country. with the rebounding of global economy and purchasing power back with people. This in return will also be a major help in lowering room tariffs. the hotel industry said there is a huge requirement for quality rooms in India. Hoteliers feel infrastructure status will give a boost to companies to re-invest profits into the hotel sector. up from the earlier 25%. The industry is still recovering in terms of occupancy blow suffered in 2008 due to meltdown in America and then due to the terrorist attack in Taj and Oberoi. 2011 Hotels in India Trends & Opportunities 7|Page . Mumbai before which it was hovering around 71%. This is an industry where the investment required to create one job is only INR 11. 9 HVS. Owing to the massive development FHRAI has been demanding infrastructure status for the industry. Figure 3: Occupancy rate expressed as percentage in each financial year ending on March 31. The rapid expansion and global opportunities creates greener pastures for the more experienced ones in the sector and triggers the high attrition rates. The huge expansion in an around middle east and Europe has created a demand for skilled personnel result of which the attrition rate in the hospitality industry has been doubled to nearly 50% by the end of 2010.occupancy in the face of double-digit supply growth shows the strength of the hospitality industry in India9. as the demand fails to meet the supply five star hotels in India will have to work hard to live up to the “service with a smile” belief. 80 75 70 65 60 55 50 45 40 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Occupancy Another major challenge is that increased talent attrition rates. For the time being.200 while that in manufacturing is around INR 79.

Journal of Services. (2012) Journal of Indian Brand Equity Foundation(IBEF). Confederation of Indian Industry (CII). (2011) 8|Page .Bibliography      Anand J. (2012). 1. Tourism Finance Co-operation of India Limited. (2012) Volume 1. Business Today. (2007) Hospitality Insights from the Indian CEO’s desk. Business Today Capital Subsidy report. Room for Optimism. No.

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