Opportunities in Hospitality and Tourism Sector in India

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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

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implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed

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Opportunities in Hospitality and Tourism Sector in India

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Gyan Research and Analytics Pvt. Ltd., 2013

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




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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: 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.


*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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Opportunities in Hospitality and Tourism Sector in India

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