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Industry Analysis - Business Information Services 1
DisclaimerThis note entitled Snapshot: Hospitality Sector in India has been prepared by e-Research and Publications India Private Limited (eRPl) .This snapshot is intended to provide the reader a flavour of the hospitality sector in India and has been prepared based on secondaryresearch supported by an analysis at eRPl. Prior to undertaking any business or investment decisions, further detailed investigations /studies are recommended. eRPI does not accept any direct or indirect legal liability of any kind. This note remains eRPIs intellectualproperty and no part may be reproduced or circulated without the prior permission of e-Research and Publications India Pvt. Ltd., 2nd Floor,MN Plaza, 15/16, 3rd Cross Street, Kasturibai Nagar, Adyar, Chennai 600020, India. For queries or comments, please email [email protected]
Snapshot: Hospitality Sector in India
Introduction
India is ranked 11th
among attractive destinations in the
Asia Pacific region according to World Economic Forum.
The country is witnessing buoyant domestic as well as
foreign tourist arrivals. Foreign tourist arrivals increased
from 2.4 million to 5.1 million during 2002 to 2009
despite a minor dip of 3.3% during 2008-09. The
domestic hospitality sector accounts for about 2% of the
countrys GDP.
The countrys rich heritage, traditions and diverse
cultures together with varied landscapes and delectable
cuisines are major tourist attractions. Over the recent
years, a range of niche tourism products such as
heliport tourism, wellness tourism, adventure tourism
and cruise tourism have been introduced and well-
received.
Apart from leisure tourism, business travel to India is
also on the rise owing to the robust economic growth.
The rise of IT/ITES sector is seen as the key driver for
increase in business travelers. Large number of
conferences, seminars and trade events being
organised in the country have helped to bring in
business delegates from across the world.
India is now an established hub for medical tourism
owing to world-class service at affordable costs. In order
to encourage medical tourism, the Government has
introduced a new category of Medical Visa for patients
and their attendants coming to India for medical
treatment.
Foreign exchange earnings from the tourism sector
reached INR 55 billion in 2009 registering a CAGR of
around 20% since 2002. Publicity campaigns such as
Incredible India launched by the Ministry of Tourism
along with the Governments thrust on the aviation
sector and implementation of green-field and brown-field
airports across the country have had a positive impact
on the tourist arrivals.
Several International hospitality majors have entered
into the Indian market through alliances with existing
players or through acquisitions. Going forward, the
hospitality industry is set to expand in tier II & III cities
with suitable project mix to leverage opportunities.
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Sector Classification
Based on the facilities and services offered, the hospitality sector can be classified as:
Source: eRPI
Overview
The hospitality industry is broadly classified as hotels and restaurants and overall industry was valued
at INR1,255 billion (2009-10)Hospitality Sector: Market break-up, 2009-10
*Others
2.2%
Restaurants
33.3%
Hotels
64.5%
*Others include serviced apartment, time share& beach resort, etc.Source: eRPI estimate
Total INR 1,255 billion
Hospitality Sector
RestaurantsHotels Service apartments/ timeshare & beach resort
Star
CategoryHotels
Heritage
Hotels
FullService
QuickserviceBoutique
hotels
Dhabas/street
kiosks
Cafes/bars
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Hotels and restaurants together have a significant presence in the hospitality sector
The domestic restaurant sector is growing steadily and multi-cuisine restaurants, kiosks and food joints
and sprawling food courts are popular formats in urban areas Serviced apartments, time share and beach resorts are the emerging hospitality formats and currently
has a small market share
Segment details
Hotels
Hotels offer rooms and food & beverage facil ities and the domestic hotel sector was valued at around
INR 810 billion in 2009-10
The sector is fragmented and has a large presence of unorganized sector
o The unorganized sector is prevalent in a variety of formats such as low-priced motels,
guesthouses, lodges, etc., and offer services comparable to 1,2 & 3 star category hotels
o The organised sector accounts for about 30% of the total hotel market (INR 810 billion) and
comprise of star category hotels along with heritage and boutique hotels
Organised hotels market: Breakup by value, 2009-10
2&1 Star
23%
Heritage &
Boutique
1%
4 Star
8%
3 Star
13%
5 Star
55%
Source: eRPI
Total INR 243 billion
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Upscale hotels including 5-star hotels, heritage hotels and boutique hotels account for over 55% of the
total market for hotels
Budget hotels, usually the 1 & 2 star category hotels, are popular among businessmen and domestictravelers for their quality service at affordable price and seasonal offers
o Budget hotels are also popular among domestic pilgrims and are widely present across pilgrimage
locations in India
Hotel room occupancy rates vary on a seasonal basis and the May- August period usually has lower
occupancy; the average annual occupancy rate across the country was estimated at around 63.1% in
2008-09
Delhi-National Capital Region (Delhi-NCR), Mumbai, Bangalore, Pune, Goa, Ahmedabad, Kolkata,
Hyderabad, Chennai and Jaipur are the traditional hubs for the hotel sector in India
With the opening of the economy, emergence of the service sector and improvements in the
infrastructure, the hotel industry has expanded into secondary locations including Ahmedabad,
Chandigarh, Coimbatore, Kochi, Shimla, Thiruvananthapuram, Vadodara and Vishakapatnam
There are over 160,000 hotel rooms and guesthouses spread across the country and the room supply
is expected to grow at over 15% during 2011-13
Hotels : List of approved hotel rooms across India, 2010
Category No of Hotels No of Rooms
5 Star Deluxe 71 16,105
5 Star 76 9,261
4 Star 73 6,176
3 Star 304 13,955
2 & 1 Star 128 1,833
Heritage 48 1,454
Others* 8 577
Total 708 49,361
* Others include guest houses and apartment hotelsSource: Ministry of Tourism
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India is currently facing a short fall of over 100,000 rooms across all hotel segments leading to a steep
rise in the average room rent
Delhi-NCR and Mumbai together account for close to 50% of the total demand for hotel rooms acrossthe country
Hotels: Average Room Rent across top 7 cities, 2007 - 09 (INR / room)
Occupancy (%)Average Room Rent
(INR)
2008-09 2009-10 2008-09 2009-10
Bangalore 56.5 52.6 9757 6766
Chennai 64.6 65.6 4678 4083
Goa 61.7 63.1 5378 4757
Kolkata 69.6 64.5 5342 4880
Mumbai 71.2 67.2 6822 5833
NCR 64.8 64.6 6087 6985
Pune 65.5 53.2 4951 3921
Source: FHRAI
Hotels sector: Projects planned
Name of the Company DetailsInvestment(INR billion)
Lemon Tree HotelsTo open seven hotels across India by2013
51.6
Hyatt Hotels CorporationTo open about 30 hotels across India intier II and III cities by 2015
n.a.
Royal Orchid HotelsTo add seven hotels in India to its present15 properties by 2011
2
Indian Hotels Company To set up 50 Ginger brand hotels by 2014 n.a.
Indian Tobacco CompanyTo invest in hotel sector in India during
2010-20
90
n.a. not availablesource: secondary sources
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Key Players
The Indian hotels market has a significant presence of large domestic players such as TheIndian Hotels
Company Ltd., ITC Welcome Group, The Leela, Oberoi Group, Lemon Tree Hotel Chain and Ashok Group
of Hotels
Hotels sector: Key players, 2008-10
Company BrandsNo ofHotels
The Indian Hotels Company Ltd.Taj Hotels, The Gateway Hotels, Ginger Hotels,Vivanta
100
East India Hotels (Oberoi Group) The Oberoi Hotels 11
ITC Ltd.Welcome Hotels, Sheraton Hotels, FortuneHotels
100
Hotel Leela Venture Ltd. The Leela 6
Indian Tourism DevelopmentCorporation Ltd.
The Ashok Group of Hotels 16
Source: company websites, annual reports
Multinational hotels with a strong presence in India are Hyatt, Carlson group, Hilton Hotels, Mariott
International Inc, Wyndham Hotels & Resorts and Intercontinental Hotel Groups. Around 20 new
international hotel brands are expected to venture into India during 2009-11.
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Restaurants
Restaurants - Overview
The restaurant market in India is estimated at around INR 418 billion and accounts for around 33% of
the hospitality industry in the country; the sector is witnessing a growth of around 12-13% per annum
The restaurant sector is labour-intensive and provides direct employment to around 5 million people
The sector is fragmented and organised sector accounts for less than 20% of the overall restaurant
market in value terms and is witnessing a high growth of around 20-25%
The restaurant sector operates in a number of formats ranging from fine dining and gourmet food
restaurants, food courts, cafes, lounges and bars to fast food restaurants, take-away kiosks and road-
side joints called dhabas
The domestic restaurant sector largely comprises of stand-alone/ independant restaurants offering fullrange of services with dine in format
Restaurant chains are entirely in the organized sector and are slowly gaining popularity
Restaurant chains maintain similar ambience, menu and quality and standard of service across all
their outlets
Popular domestic restaurant chains across formats include Barista, Mocha, Rajdhani Group,
Speciality Restaurants Pvt. Ltd. and BJN Group
Caf Coffee Day, a caf chain established by the Amalgamated Bean Company, has the highest
number of outlets in the restaurant sector in India
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Restaurant Market: Break up by format type, 2009-10Total: INR 418 Billion
Quick Service
Restaurants*
14%
Full Service
Restaurant
56%
Others**
19%
Cafes/ Bars
11%
Source: eRPI*includes fast food and pizza**includes dhabas, street stalls and kiosks, retail, home delivery and, take aways
With integration into global markets, the Quick Service Restaurant (QSR) format has witnessed the
entry of many multinational players; these include McDonalds, KFC, Subway, Dominos Pizza and
Pizza Hut
Services offering take away/ home delivery options are expected to witness growth of around 15% per
annum over the next two years
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Given below are some of the organised players across formats and their number of outlets:
Organised Restaurant sector: No. of outlets/ Players, 2010
Player Format No. of Outlets
Caf Coffee Day Caf 845
Baskin Robbins Ice Cream Parlours 350
Dominos Pizza QSR 296
Barista Caf 232
McDonalds QSR 169
Subway QSR 151
Pizza Hut QSR 147
Kentucky Fried Chicken QSR 72
Speciality Restaurants Pvt Ltd Full Service Restaurants 48
BJN Group Full Service Restaurants 40
Encore Hospitality Full Service Restaurants 32
Source: NRAI
Restaurants - Recent Developments
Name of the Company Details
Yum RestaurantsTo open 100 Taco Bell restaurants in metros, tier II
and tier III cities by 2015
Specialty Restaurants Pvt. Ltd.
Plans to expand of its flagship brand Mainland China
to 100 outlets in the next two years from the present
32
Cocoberry, New DelhiTo expand into metro and tier-1 cities by 2012 at an
investment of around INR 1.2 million
Kentucky Fried ChickenTo expand to 500 outlets by 2015 at an investment of
around INR 142.23 million
McDonalds To open around 180-190 restaurants by 2015 at aninvestment of around 7.5 - 8 billionSource: secondary sources
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Other segments - Serviced apartments and Timeshare resorts
Serviced apartmentsare furnished apartments that provide temporary accommodation with full-rangeof amenities and are popular among the business travelers and medical tourists who stay over
prolonged periods of time
Serviced apartments are relatively cheaper by around 20% compared to hotels for longer stay periods
Premium brands like Marriott, Oberoi, Oakwood and Leela are entering the luxurious serviced
apartments market in major metropolitan cities
o Taj Wellington Mews, Lakeside Chalet Marriott Executive, Apartments, Star City, Blossoms
and Seasons Apartments are some of the noted players in the serviced apartment sector
Time share resortsare gaining in popularity with rise in domestic tourism; the market is currently
estimated at around INR 5 billion
The domestic time share sector is organised with the presence of around 45 players;
RCI India is the leading player in the segment with 90 hotels and resorts across the country; Club
Mahindra is the other noted player
Key Trends and Drivers
Integration with global markets and rising disposable income are the key drivers of the hospitality industry.
Some other drivers and trends include:
Increase in per capita disposable income
Robust economy stimulating business related travel across the country
Growth in media leading to increasing awareness about diverse tourist locations
Availability of well-connected travel & tour service providers offering a wide range of services
Improved infrastructure and accessibility to tourist destinations and pilgrimage centres
Easy holiday financing and attractive tour packages
Improved aviation infrastructure and attractive air fares
Large population in the 18-24 age groups leading to rising trends in socializing and eating out
Large scale events like the recent common wealth games held in New Delhi
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Future Outlook
Despite a slowdown due to economic recession in 2008-09, the hospitality sector is set to witness an
upward trend in growth in the coming years.
Meeting, incentives, conferences and events (MICE), a concept of combining work with pleasure, is a
trend that can be seen more in the hotel industry in the coming years
Star hotels accommodating external brands of restaurants, spas, lounges are some of the innovative
methods that can be seen common in the future to boost the occupancy rate
The economically feasible mixed-use hotel development and green hotels are going to prevail more in
the hotel industry in the future
Governments initiatives like allowing 100% foreign direct investment in the real estate and
infrastructure is expected to drive the hospitality industry
Budget hotels and serviced apartments are expected to witness a robust growth in the future More unorganised restaurant players are expected to move into the organised segment in the coming
years
Traditional Indian concepts of Yoga, Arurveda, Siddha and Homeopathy are being promoted and
health tourism is expected to witness high growth