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Prepared By: Deepika Garg Anup Simplepreet Aishwarya

The Indian hotels industry is still in the nascent stages of recovery and is yet to make the transition from an occupancyled cycle to one supported by rising average room realizations (ARRs)

Visitors are sub-divided into two categories: tourists and same day visitors It is boom time for Indias tourism and hospitality sector. The focus of the industry is on the Atithi Devo Bhavah campaign, targeted at the inbound foreign tourists in countey. Translated literally it means Guest Is god. Tourism in India is the third largest foreign exchange earner, accounting for 2.5% of GDP.

The World travel and Tourism Council (WTTC) has named India along with China as one of the most fastest growing tourism industries for the next 10-15 years. Despite lagging in the basic infrastructure, Indian Tourism Industry has been showing an impressive double- digit growth. In order to sustain this growth, the Government should invest in infrastructure such as transport and accommodations. According to Global hotel and hospitality consulting firms, HVS International, the strong performance in the tourist arrivals can be attributed to a strong sense of business and investment confidence in India inspired by :

Indias strong GDP performance Strengthening of ties with the developed world, and Opening of sectors of the economy to private sector/ foreign investment. The efforts made by the Ministry of Tourism And Culture in the last few years have had a salutary effect on Indias tourism industry.

The Hotel Industry comprises a major part of the Tourism Industry Prior to 1980s, the Indian Hotel industry was a slow-growing industry, consisting primarily of relatively static, single-hotel companies. In 1982s, after partial liberalization of the Indian economy, it generated tourism interest in India, with significant benefits accruing to the Hotel And Tourism sector, in terms of improved demand patterns. Growth in the demand for hotels was particularly high during the early 1990s following the initiatives taken to liberalize the Indian Economy in FY1991.

The global hotels industry appears to be now on a path of slow recovery, having coming out of two exceptionally bad years (2009-10) In India, the demand - or occupancy led recovery that started with the return of domestic travellers late in calendar 2010, received a boost with foreign tourist arrivals (FTAs) picking up in the subsequent months. The latter half of 2010-11 saw the industry push for higher tariffs, although pricing recovery for the whole of 2010-11 stood at a tepid 5-8%.

The Indian hotels industry appears to have embarked on a recovery cycle, triggered largely by the revival in domestic travel (both leisure and business) since the second half (H2) of fiscal 2009-10; FTAs have also improved since December 2009, and were up 7.9% to 55.8 lakh travelers during CY2010. Although the October 2010 Commonwealth Games were expected to provide a strong demand push to the Indian hotels industry, weak planning and execution diluted the benefits to hotels in the NCR and the rest of the country. On the other hand, the Cricket World Cup in the fourth quarter (Q4) of 201011 provided a much stronger demand impetus, with hotels reporting high occupancies in Chandigarh, New Delhi and particularly Mumbai (during the Finals in early April 2011).

Despite the worrying signals from the global economy, ICRA expects demand in several Indian markets to report healthy growth during 2011-12, supported both by domestic and foreign travellers. The Formula 1 racing event scheduled to be staged in the NCR in October 2011 is an enabling factor in this regard.

Market

Demand Drivers

Prospects

Outlook

Mumbai

Gateway city and financial capital

Supply likely to be absorbed

Although there is supply lined up in North Mumbai and Navi Mumbai, being a gateway city and the countrys financial centre, demand is likely to be robust. Bangalore has seen significant room additions in 2009-11 and is likely to see more over the next few years, which

Bangalor Foreign e IT/ITES business travellers

Oversupply likely in the near term

Market

Demand DriversGateway city

ProspectsOversupply likely in the near term

OutlookWhile supply is still spilling over from the Commonwealth Games period, the NCR is expecting to add around 5,000 rooms over the next three to four years. This is likely to suppress pricing power. However, over a longer period, growing demand should absorb the supply.

NCR

Market Pune

Demand DriversForeign IT/ITES business travellers

ProspectsHeavy oversupply likely

OutlookWith supply additions still on, the outlook for the next two years is subdued. Pune is one of the few markets that saw occupancies and ARRs decline in Q1, 2010-11 because of supply addition. With a strong supply pipeline for 2012 and 2013, the city is likely to experience significant pricing pressure over the next two years.

Chennai

Manufacturin g and services sectors

Oversupply likely in the near term

MarketHyderab ad

Demand DriversManufacturin g and services sectors

ProspectsOversupply likely in the near term

OutlookThis market still has a large supply pipeline and hence recovery is likely to be slow till 2013. Incumbents and new developers with lower cost structures/breakeven are likely to benefit.

Goa

Domestic and foreign tourists

Supply limited and demand growing

Demand remained strong during the October-May 2011 peak season. Limited supply and foreign tourists are likely

(a) (b) (c) (d) (e)

The Hotels in India is broadly classified into 7 categories (five star deluxe, five star, four star, three star, two star, and heritage hotels) by the Ministry of Tourism, Government of India based on the general features and facilities offered. The ratings are reviewed every five years. Premium and Luxury segment mid-market segment Budget segment Heritage Hotels Others

Hotel Chains Small Chains Public Sector Chains International Hotel Chains Localized Hotel Chains

Tourism being a concurrent subject under the indian constitution, both the state and central governments regulates the hotel industry. (a)Tourism policy The national tourism policy was formulated in the year 2002, the policy attempts to: Position tourism as a major engine of economic growth. Harness the direct and multiplier effects of tourism for employment generation, economic development and providing impetus to rural tourism Focus on domestic tourism as a major driver of tourism growth Position India as a global brand to take advantage of the burgeoning global travel trade and the vast untapped potential of india as a destination.

Acknowledges the critical role of private sector with government working as a pro-active facilitator and catalyst. Create and develop integrated tourism circuits based on Indias unique civilization, heritage and culture in partnership with states, private sector and other agencies. Ensure that the tourist to India gets physically invigorated, mentally rejuvenated, culturally enriched, spirtually elevated and feel India from within

The governments major policy initiatives include: Liberalization in aviation sector Pricing policy for aviation turbine fuel which influences internal air fares. Rationalization in tax rates in the hospitality sector Tourism friendly visa regime Immigration services Procedural changes in making available land for construction of hotels Allowing setting up of Guest Houses.

Allows domestic airlines to commence international flights, start-up of various low- cost carriers and fleet expansion Booming aviation business is bringing an ever increasing number of passengers to India(c) foreign trade policy

FTP policy announced in 2006 offered following incentives to the hospitality industry Hotels and restaurants are allowed to import duty free equipment and other items

100% FDI is permissible in the sector on the automatic route. Tourism related industries provide facilities for cultural adventure and wild life experience. (e) Other government initiatives Incredible India Atithie Devo Bhawa (guests are equal to God) Various infrastructure building initiatives. Encourage religious tourism Other projects are the rupees, 5400 million National Highway Development Project, the, 5846 Km Golden Quadrilateral and the, 7300 Km northsouth and east-west corridors.

There is vast room for growth in tourism industry The expected growth of the industry in future provides various opportunities to invest in new technologies. (a) Health Tourism A heart surgery in the US costs USD 30,000 as compared to USD 6,000 in India. A bone marrow transplant in the US costs USD 2,50,000 and USD 26,000 in India.

The key success factors for the hotel industry are mentioned as folllows: Site and location Positioning Financial flexibility Brand equity

Threat of losing foreign tourists to other competing countries. India is highly prone to prevailing socioeconomic and political conditions, which in the long run, is going to negatively impact the tourism industry in India. The biggest challenge in the Indian Tourism Sector is that of entry of new players like Aman Resorts, Shangri-La Hotels, Four Seasons Hotels and The Hilton Group. As the number of players increases, the competitive intensity in the sector is likely to increase.

Whats new ???? Infrastructure Airports Fast trains Hotels and resorts Recreation facilities Eg: golf

5th largest Economy (PPP)

High Growth -250 Middle Classhuge Outbound Market -Growth huge Infrastructure Investment OpportunitiesTax Incentives Available

Reduction in entry fee and p