opportunities in hospitality and tourism sector in india
TRANSCRIPT
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Opportunities in Hospitality andTourism Sector in India
Disclaimer:All information contained in this report has been obtained from sources believed to be accurate by Gyan Research and
Analytics (Gyan). While reasonable care has been taken in its preparation, Gyan makes no representation or warranty, express or
implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed
without notice. All information should be considered solely as statements of opinion and Gyan will not be liable for any loss incurred by
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Table of Contents1. Tourism in India ............................................................................................................................. 3
2. Nature of Tourism in India ............................................................................................................. 4
3.International Tourism ..................................................................................................................... 7
4. Domestic Tourism ........................................................................................................................ 11
5. Growth Drivers ............................................................................................................................ 12
6. Hospitality Industry ..................................................................................................................... 15
7. Upcoming Investments Plans ....................................................................................................... 19
8. Economic Impact of Tourism........................................................................................................ 20
9. Government Initiatives ................................................................................................................ 21
10.Financials of Major Companies ................................................................................................... 23
11. Outlook ..................................................................................................................................... 24
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1. Tourism in India
As Mark Twain said, "...nothing so liberalizes a man and expands the kindly instincts that nature put
in him as travel and contact with many kinds of people". Man s instinctive wanderlust takes him
from deserts to mountains and from rivers to monuments to satiate not only his physical, but also
his psychological needs. Recognizing in this an opportunity, the Indian government has formulated a
policy to promote India as a global tourism brand, based on the central theme of Atithi Devo Bhava
- the Sanskrit phrase that translates as Guest is God. In its National Tourism Policy, 2002, the
Ministry of Tourism has outlined seven key factors that will encourage tourism development in India.These are Swagat (Welcome), Soochana (Information), Suvidha (Facilitation), Suraksha (Safety),
Sahyog (Cooperation), Samrachana (Infrastructure Development) and Safai (Cleanliness). The
purpose of the government is to ensure that every tourist visiting the country is physically
invigorated, mentally rejuvenated, culturally enriched and spiritually elevated.
The key objectives of this policy are:
Positioning and maintaining tourism development as a national priority activity
Enhancing and maintaining Indias competitiveness as a tourism destination Improving Indias existing tourism products and expanding them to meet new market
requirements
Creation of world-class infrastructure Developing sustained and effective marketing plans and programmes Developing human resources and building capacity of service providers
The tourism sector has the potential to encourage other industries through forward and backward
integration with several allied sectors like hospitality, aviation, railways, banking, manufacturing,
health and education, among others. The expenditure of tourists generates more employment,
especially in the unorganized sector, and causes a multiplier effect on the economy. Hence, the
growth and enhancement of the tourism sector will in turn help the country to alleviate poverty and
work toward economic development.
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The number of Foreign Tourist Arrivals (FTAs) in India reached 6.29 million in 2011, registering a
growth of 8.9 percent over FTAs of 5.78 million in 2010. Interestingly, Indias FTA growth rate was
double the global tourist arrival rate of 4.4 percent.
2. Nature of Tourism in India
Indian tourism embraces a vast array, with each state offering unique features. However, tourism in
the country is seasonal, owing to extreme climatic conditions during different parts of the year. The
boom months are from October to February, which are the winter months.
Though each state in India is endowed with one or another attractive feature, the attitude toward
tourism varies greatly from state to state. Consequently, despite having huge natural and historical
beauty, many Indian states have not been able to exploit their tourism potential to the fullest.
Foreign tourists are primarily attracted toward Indias cultural and spiritual heritage and eco-
tourism. Another interesting aspect of Indian tourism is that foreign tourists spend the highest
average time in India as compared to other nations.
In 2011-2012,a market survey was conducted by HVS Hospitality Services in collaboration with The
Federation of Hotel and Restaurant Associations of India. The outcome of the survey presented a
clear picture of the composition of Indian tourist for that year. The highest percentage of tourists
corresponded to the domestic business travelers, followed by tourists who travelled for leisure. The
survey brought forth the overall performance of the hotel industry wherein the national occupancy
declined by 1.9 percent in contrary to the average rate which increased by 2.2 percent over the
previous year.
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Gyan Research and Analytics Pvt. Ltd., 2013Source: www.cultureholidays.com
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Source: HVS
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3.International Tourism
The Incredible India Campaign launched last decade resulted in a noticeable surge in the foreign
tourists flow into India, thereby increasing the foreign exchange earnings therefrom. The financial
crisis in 2008 had adversely affected this growing trend and the FTAs decreased to 5.17 million in
2009 from 5.28 million in 2008.The growth trend was recommenced after a couple of years
recession in 2008. In 2011, the World Travel and tourism council(WTTC) predicted that the FTAs in
India will be more than 11 million by 2021.
A steady rise in Tourist Visa on Arrival (T-VoA) has boosted the growth in FTAs. According to a report
by Federation of Indian Chambers of Commerce and Industry (FICCI), the number of TVoA issued in
February 2013 registered a growth of 54.6 percent as compared to the TVoA issued in February
2012.
Source: Ministry of Tourism, Government of India &
Various Published Sources.
*2012 values are for the calendar year.
Source: Gyan Research & Analytics
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FTAs - Mode of Travel in India
In 2011, the most preferred mode of transport was airways; 6.31 million foreign tourists used this
mode. The next most popular mode was land, with the same trend continuing in 2010. During the
year, 91.8 percent, 7.5 percent and 0.7 percent people arrived by air, land and sea, respectively.
Land routes were used by tourists mainly from Bangladesh and Pakistan. According to a report by
the Indian Tourism Statistics, 2011, the percentage of arrival through land routes was more than 10
percent from 2001 to 2008. This trend has been is steadily declining over last three years. The report
also shows that travelling by air was the preferred mode of transportation during this period, with
more than 80 percent of the FTAs coming by air.
Source: Ministry of Tourism, Government of India
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Source: Ministry of Tourism, Government of India Source: Ministry of Tourism, Government of India
Source: Ministry of Tourism, Government of India
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Source: Ministry of Tourism, GOI
Month-wise FTAs in India (in thousands)
2010 2011 2012*
January 569 623 681
February 552 636 677
March 512 550 623
April 372 438 452
May 332 355 371
June 385 412 432
July 467 514
August 422 445
September 370 402
October 507 562
November 608 636
December 680 715
Total 5,775 6,290 3,237*
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4. Domestic Tourism
Since historic times, Indians, have been passionate travelers, with the firm beliefs of Panch-Tirtha
before death. The trend continues even today with even lower income households allocating
budgets for short trips and pooling in their resources to spend the holiday at new places. Tourism for
middle income groups, specially the city inhabitants, has become important as a getaway from the
hectic schedule of urban lifestyle. The increase in disposable incomes and the adaptation of
modernized lifestyle has led to the growth in the leisure and recreation sector in domestic tourism.
The socio-educational dimension of domestic tourism has also contributed to its growth.
According to Ministry of tourism, Government of India the year on year growth in domestic touristvisits (DTVs) was 13.8 percent in 2011 ,the total number of tourists being 851 million. Uttar Pradesh
ranked one in terms of DTVs followed by Uttarakhand and Tamil Nadu.
Source: Ministry of Tourism, GOI
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5. Growth Drivers
i. Rise in Income and Shift in DemographicsThe domestic tourism market in India is
being driven by a steady growth in per
capita income. According to data published
by The World Bank, Indias per capita GDP in
2008 was USD 1,028, which rose to USD
1,509 in 2011, at a Compound Annual
Growth Rate (CAGR) of 14 percent. Further,
changing demographics along with a change
in lifestyles have also led to the increase in
leisure expenditure.
ii. Increasing Domestic ExpenditureThe domestic expenditure on tourism in
India has undergone exceptional growth.
According to a report by Indian Brand Equity
Foundation (IBEF) the estimated
expenditure in 2012 was USD 89.1 billion.
From 2008 to 2012, tourism expenditure
demonstrated a CAGR of 14 percent.
Source: The World Bank
Source: IBEF
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iii. Rising Domestic TourismThere has been a phenomenal rise in
domestic tourism thanks to the
countrys economic development.
Increase in disposable income coupled
with changing lifestyles has chiefly
fuelled the growth of domestic travel.
The number of domestic tourists during
2011 was 851 million as compared to
748 million in 2010, implying an
increase of 13.8 percent. For the year,
Uttar Pradesh was the number one
destination for domestic tourists,
followed by Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.
Another trend observed in the last few
years is that an increasing number of
Indians are going abroad for holiday and
leisure. Indias outbound traffic has
been increasing steadily despite the
global recession. Apart from increasing
disposable income and changing
lifestyles, the significant factors
contributing to this trend are ease of
procuring travel documents such as
passport and visa, relaxation in foreign
exchange regulations, better awareness
of different destinations and benefits of
travel, among others.
Source: Ministry of Tourism, Government of India
Source: Bureau of Immigration, Government of India
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iv. Rising Capital Investment and CollectiveGovernment Spending
Indias capital investment in the tourism sector
stood at approximately USD 32.4 billion in
2008. However, there was a sharp drop to USD
19.5 billion 2009, due to the financial crisis
during the year. While this disturbed the
steady growth of the earlier years, a rise was
observed from the very next year onwards.
IBEF further reports that the total estimated
capital investment in 2012 stood at USD 31.3
billion.
The Indian Government is taking an active
interest in promoting tourism in the country
with collective spending on a steady rise. It
spent USD 1.1 billion in 2008. The
governments expected collective spending
would cross USD 2.0 billion in 2012.
Source: IBEF
Source: IBEF
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6. Hospitality Industry
The Indian Hospitality Industry has emerged as one of the major industries in India which is driving
the growth of Indias services sector and thereby providing a thrust in the overall economys growth.
The year 2011-2012 was a tough year for the Indian Hotel industry. Depressed global economic
conditions along with a slowing national economy posed a threat to the industry. The average
occupancy rate observed a marginal decline of 1.9 percent in 2011-2012 in comparison with the
occupancy rate of 2010-2011. According to the estimates provided by HVS Hospitality Services, hotel
supply across major cities observed a growth of 15 percent in 2011-2012 along with a increase of 12percent in the demand for hotels during the same period. The country recorded an inflation of 8.8
percent in 2011-12 which has posed a serious challenge to the industry. The overhead costs
increased due to the high inflation resulting in a decline in the net income percentage by 3.1
percent.
Source: MOSPI
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Source: Various Published Sources, Gyan Research & Analytics
Segment-Wise Estimated Cost of Construction per Room (INR million)
Budget Mid-Scale Upscale Luxury
Category
City Hotels 2.5-3.0 5-7 7-10 9-15
Resorts 2.5-3 5-7 7-9 9-15
Service Apartments 4-6 - - 8-10
Common Additional Expenses
Furniture, fixtures &
Equipments
1 - 1.5 1.5 - 2 2 - 2.5 3.5 - 4
Pre-Opening Expenses 0.1 0.15 0.2 0.25 0.3 0.35 0.35 0.4
Source: MOSPI
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Rising Capacity of Hotel Rooms and Beds
In 2008, the capacity of hotel rooms and beds stood at 87,000 and 185,000, respectively. It is
expected to grow to 227,000 and 520,000, respectively, by 2017. The former is expected to
demonstrate a CAGR of 11 percent, while the latter would post 12 percent. The Ministry of Tourism
has now adopted a system of approving hotels and classifying them on the basis of the services and
amenities provided by them. The total number of approved hotels in 2009 was 1,829, which rose to
2,483 in 2010, according to Indian Tourism Statistics, 2011.
Source: IBEF Source: Gyan Research & Analytics
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The World Travel and Tourism Council forecasts that India s tourism sector would peak in 2018.
Though the country is progressing towards that goal, there has been significant delay in the
achievement of this potential due to the recession in 2008. India has once again emerged as one of
the most preferred travel destinations, world-wide. The country was conferred three awards by the
World Travel Award Organization at the World Travel Market 2012. In the Twelfth Five Year Plan the
government has included special provisions for the promotion and creation of infrastructure that
would support tourism.
Source: Ministry of Tourism, 2012
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7. Upcoming Investments Plans
Hotel Expansion Plans in India
Group Existing
Hotels
Planned
hotels
(Estimated)
Estimated
Time Frame
Development partners
for India
Expansion
category
InterContinental
Hotels Group
12 150 2020 Deut Hotels (with equity
infusion), Nama Hotels
Mid Market
Wyndham Hotels 14 60-70 2017 Chatwal group Mid Market
MarriottInternational 18 80-100 2015 SAMHI Hotels PrivateLimited Across Segment
Hilton
Worldwide
8 50-60 2016 Eros Resorts & Hotels Luxury/ premium
and mid market
Accor Group 13 90-100 2015 Interglobe Enterprises
Limited (Naman
developers and Brigade
group
Luxury, mid scale
and budget
Choice Hotels
International
27 100 Next 5-7
Years
Royal Indian Raj
International Corporation
(RIRIC)
Mid
Market
Best Western
International
34 66 2017 - 3/ 4 and 5
Star
Starwood
Hotels
33 55-60 2015 D.I.H (Cyprus) Limited JHM,
Interstate Hotels India Pvt.
Ltd, Jaguar, Buildcon
Private Limited
Across
Segments
Carlson group 46 100 2015 Country Development and
Management Services
(CDMS), a joint
venture between Carlson
and Chanakya Hotels;
Pioneer Urban Land and
Infrastructure
Mid Market and
premium
Hyatt Hotels
Corporation
8 50 - - Premium
Source: Cushman and Wakefield & ICRA Estimates
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8. Economic Impact of Tourism
The tourism industry in India has become a
key growth driver of the countrys socio-
economic development. According to
government statistics, the contribution of
tourism to the GDP was 6.23 percent in
2011. It also generated 9.24 percent
employment. Foreign Exchange Earnings
(FEE) from tourism amounted to USD
16.56 billion in 2011, registering a growth
of 16.7 percent over the previous year.
Further, tourism has also helped in
preserving national heritage sites such as
the Taj Mahal, the Ajanta and Ellora caves,
the Qutub Minar, among many others.
Similarly, several natural habitats of
endangered species have also been
conserved by the efforts of the tourism
department.
The Indian government is placing emphasis
on promoting the tourism sector by
increasing the budgeted outlay. The
Ministry of Tourism plans to continue its
efforts to explore and promote the huge
untapped potential of India as a world-class
tourist destination.
Source: Ministry of Tourism, Government of India
*2012 figures are upto June 2012
Source: Various Published Sources
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9. Government Initiatives
The Indian government recognizes the need to build infrastructure in order to develop the tourism
sector. Therefore, it has expended more than half the allotted tourism budget on developing quality
infrastructure at tourist destinations and circuits across the nation. The Ministry of Tourism has
sanctioned 1,165 projects worth INR 38,726.7 million for tourism infrastructure development.
Some of the initiatives are:
The Incredible India campaign that approaches consumers through electronic and printmedia
FDI of upto 100 percent is permitted in hotels and tourism sites through the automatic route A five year tax holiday has been given to organizations that set up hotels, resorts and
convention centers at specific destinations, subject to fulfillment of agreed conditions
The Ministry has launched a scheme for the development of nationally and internationallyimportant destinations and circuits through Mega Projects. These projects are a mix of
culture, heritage, spiritual and eco-tourism and give tourists a holistic experience. Until now,
53 mega projects have been identified, of which 35 have already been sanctioned
The Ministry provides financial assistance of upto INR 50 million for tourist destinations andINR 80 million for tourist circuits. The upper limits of financial assistance for development of
identified mega destinations and circuits are INR 250 million and INR 500 million,
respectively
For rural tourism infrastructure development, the maximum amount sanctioned is INR 5million per project
The government has announced a scheme of granting Tourist Visa on Arrival (VoA) forcountries which it has identified as high potential tourist source markets and where there
have been no security related issues in the past or are likely to be in future. The scheme is
valid for citizens of Finland, Japan, Luxembourg, New Zealand, Singapore, Cambodia,
Indonesia, Laos, Myanmar, Philippines, and Vietnam. It is applicable on single entry, strictly
for the purposes of tourism, and for a short period of upto a maximum of 30 days
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In order to overcome Indian tourisms seasonality obstacle, the Ministry of Tourism has devised
strategies to promote some niche areas that have tourism potential. The following areas have been
identified for development and promotion:
Cruise Tourism Adventure Tourism Medical Tourism Wellness Tourism Golf Tourism Polo Tourism Meetings, Incentives, Conferences and Exhibitions (MICE) Film Tourism
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10.Financials of Major Companies
Sales
Revenue
(INR
million)
Profit After
Tax (PAT)
(INR million)
Net Profit
Margin(%)
Return on
Capital
Employed(%)
Debt
Equity
ratio
P/E
Ratio
Earnings
Per
Share (in
INR)
India Hotels
Company limited18,758.6 -2,878.3 -- 5.11 1.18 -- 1.91
Mahindra Holidays
and Resorts India
Limited
6,585.4 1,069.8 16.25 8.28 2.54 20.17 12.05
EIH Limited 11,335.0 509.6 4.50 4.85 0.31 60.90 0.89
Taj GVK Hotels &
Resorts Limited2,542.4 87.8 3.45 6.52 0.95 42.93 1.40
Oriental Hotels
Limited2,900.3 143.0 4.93 6.99 0.83 21.31 0.80
Asian Hotels(North) Limited
2,158.3 294.5 13.64 6.16 1.19 7.92 15.14
TGB Banquets and
Hotels limited1,575.1 29.6 1.88 8.20 0.78 48.51 1.01
Advani Hotels and
Resorts (India)
limited
354.4 26.3 7.42 12.76 0.32 50.53 0.57
Howard Hotels Ltd 84.7 2.0 2.36 11.22 -- 50.68 0.22
Radford Global Ltd 213.4 4.6 2.16 -- -- 1,331.67 0.06
Source: Annual Report of the Companies
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11. Outlook
Indias tourism sector has emerged from a mere luxury and sightseeing option to a key growth driver
of socio-economic development through the creation of jobs and industries, infrastructure
development and foreign exchange earnings.
The Asian subcontinent continues to be the new powerhouse of the global economy and India is one
of its key players. However, Indias share in world tourist arrivals remains a poor 0.6 percent. This
indicates that the country is yet to achieve its optimum potential as a tourist destination, inspite of
its vast tourism resources.
The Indian government is playing a crucial role in promoting the country as a brand in the global
tourism market. Through its Incredible India campaign, it has established the country as a
destination with Something for Everyone. The campaign includes wide-ranging print, television
and online advertisement promotions to augment the countrys visibility on the global map.
To harness the real potential of the sector, the government has initiated an integrated approach of
improving tourism infrastructure and promoting niche products. However, to adequately realize the
full prospective of the countrys tourism, the government needs to address few issues and
challenges. These constraints include inadequate transportation infrastructure, unsatisfactory
accommodation, poor safety and hygiene conditions, burden of multiple taxes, and lack of skilled
human resources.
To increase international tourist arrivals by at least 1 percent by the end of the Twelfth Plan (2012 -
2017), the tourism industry has to grow by a minimum of 12 percent per year. This would require a
persistent and concentrated effort. Therefore, the Government of India needs to devise strategies
and policies to integrate all stakeholders and create a congenial environment in which the industry
can prosper.
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