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Tourism and Hospitality

April, 2012


The hospitality sector in India is witnessing stable occupancy levels and steady increase in demand from domestic travellers. A steady rise in domestic tourist spending has also brought cheer to the industry with a 13.7 per cent compound annual growth rate (CAGR) from 2010 to 2012, according to a report by World Travel and Tourism Council (WTTC).

India had 740 million domestic travellers across segments in 2011 and the figure is expected to increase in the years to come. Younger demographics of the travellers and their changing preferences have also resulted in creating many opportunities for the hospitality sector.

"For India, the broad trends for 2012 are strikingly similar to the US. Around 53 per cent of Indian travellers claimed they travelled more in 2012, with 20 per cent more travellers planning to take an international holiday. Also, 44 per cent of Indian travellers are looking at spending more on their holidays in 2012 than last year", Stephen Kaufer co-founded TripAdvisor.

Growth Trends

Tourism is not only a growth engine but also an export growth engine and employment generator. According to the Economic Survey 2011-12, the sector has capacity to create large-scale employment both direct and indirect, for diverse sections in society, from the most specialized to unskilled workforce.

In India, the tourism sector has witnessed significant growth in recent years. During the period 2006 to 2011, the CAGRs of foreign tourist arrivals (FTA) and foreign exchange earnings (FEE) from tourism (in rupee terms) were 7.2 per cent and 14.7 per cent, respectively. FTAs in India during 2010 were 5.78 million compared to 5.17 million during 2009, posting a growth of 11.8 per cent, much higher than the growth of 6.5 per cent for the world in 2010. FEEs from tourism in rupee terms during 2010 were Rs 64,889 crore (US$ 12.08 billion) compared to Rs 54,960 crore (US$ 10.22 billion) during 2009 with a growth rate of 18.1 per cent.

Ministry of Tourism compiles monthly estimates of FTAs and FEE from tourism on the basis of data received from major airports. Following are the important highlights regarding FTAs and FEE from tourism in India for the month of February 2012.

Foreign Tourist Arrivals (FTAs):

FTAs during the month of February 2012 was 6,77,000 as compared to FTAs of 6,36,000 during the month of February 2011 and 5,52,000 in February 2010

There has been a growth of 6.6 per cent in February 2012 over February 2011 as compared to a growth of 15.1 per cent registered in February 2011 over February 2010

FTAs during the period January-February 2012 were 13,59,000 with a growth of 7.9 per cent as compared to the FTAs of 12,59,000 with a growth of 12.4 per cent during January-February 2011 over the corresponding period of 2010

FEE during the month of February 2012 were Rs 8,502 crore (US$ 1.58 billion) as compared to Rs 7,653 crore (US$ 1.42 billion) in February 2011 and Rs 6,646 crore (US$ 1.23 billion) in February 2010

The growth rate in FEE in rupee terms in February 2012 over February 2011 were 11.1 per cent as compared to 15.2 per cent in February 2011 over February 2010

FEE in US$ terms during the month of February 2012 were US$ 1729 million as compared to FEE of US$ 1684 million during the month of February 2011 and US$ 1434 million in February 2010

Investment Trends

Hotel and Tourism sector is declared as high priority sector and Foreign Direct Investment (FDI) upto 100 per cent, under the automatic route is permitted in ‘Hotels Tourism Sector’, subject to applicable laws/regulations, security and other conditionalties.

As per report received from Department of Industrial Policy Promotion (DIPP), the sector received Rs 11,110.98 crore (US$ 2.07 billion) FDI investments during April-January 2011-12.

India's growth story still seems very credible to global corporations looking to grow beyond their borders. The world's largest hotel chain Best Western International Inc, USA, has taken up new strategies to expand its presence in the country in the hospitality sector.

"If you look at the rates charged at the five or six-star luxury hotels, you can say that India is among the most expensive in the world. But if you look at the mid-scale and up-scale hospitality segments, India is quite affordable. I think growth is going to come from tier-2 and tier-3 cities. The 45 cities of India that have more than a million population have the most growth potential in the hospitality sector and we will perform best in these emerging markets”, David T Kong, president and CEO, Best Western International Inc.

Following the success of religious and medical tourism in India, the domestic travel industry is seeing a surge in a new set of tourists: Executives who travel to upgrade their skills while on a holiday in the country.

Mr Iqbal Mulla, President, Travel Agents' Association of India says that there has been a rise in the number of corporate houses sending their executives, especially mid-level and above, to India for management programmes offered by top B-schools, chiefly because it means huge cost savings for them. “The courses and accommodation charges are 50-60 per cent less in India, and the courses offered are on par with those offered by universities in the US and Europe.” The educational tourism sector in India is gaining ground due to the cost-effectiveness of courses and for offering higher level of training standards, agrees Mr Ravi Kaklasaria, Director, SpringPeople Software Pvt Ltd.

Starwood Hotels Resorts plans to open 20 new Hotels across all its brands by 2015. The company which is the largest operator of four and five star hotels in India currently operates 33 hotels in the country under management contracts. The hotel chain also plans to launch its brands W and St. Regis in the country in the next three to four years. With the debut of the W and St. Regis brands, Starwood will fly eight of its nine brand flags in India including W, St. Regis, The Luxury Collection, Le Meridien, Westin, Sheraton, and Four Points by Sheraton and Aloft.

Taj group of hotels will be opening its doors in Yunnan Province of China. The Indian Hotels Company Ltd on Monday signed a memorandum of co-operation for a joint venture with Yunnan Tourism Co Ltd to engage in the development, construction, operation and management of two hotels in Kunming Expo Garden situated in Yunnan province. Taj already has management contracts in place for the Taj Temple of Heaven, Beijing. Besides, Taj will also manage a 300-room key luxury resort in Hainan Island.