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Tourism & Hospitality Industry in India

May, 2014


The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sectors in India. Tourism in India is an employment generator and a significant source of foreign exchange for the country, apart from being an economic activity that helps local and host communities. In 2013, the travel and tourism industry contributed Rs 2.17 trillion (US$ 36 billion) or 2 per cent to the country's gross domestic product (GDP). This is expected to rise to Rs 4.35 trillion (US$ 72.17 billion) in 2024.

The tourism industry in India is thriving due to an increase in foreign tourist arrivals (FTA) and a greater number of Indians travelling to domestic destinations than before. The revenue from domestic tourism is likely to grow by 8.2 per cent in 2014 as compared to 5.1 per cent a year ago, according to the World Travel and Tourism Council (WTTC). Hotels are also an extremely important component of tourism industry. The Indian hospitality sector has been growing at a cumulative annual growth rate of 14 per cent every year adding significant amount of foreign exchange to the economy.

The Government of India has contributed significantly to the growth and development of the industry by providing policy and infrastructural support such as simplification of visa procedures and tax holidays for hotels. Further, the tourism policy of the government aims at speedy implementation of tourism projects, development of integrated tourism circuits, special capacity building in the hospitality sector and new marketing strategies.

Market Size

India's travel and tourism industry is expected to grow by about 7.3 per cent in 2014, according to WTTC. The total market size of tourism and hospitality industry in India stood at US$ 117.7 billion and is anticipated to touch US$ 418.9 billion by 2022.

FTAs during the period January–March 2014 stood at 21.27 lakh as compared to FTAs of 20.27 lakh during the corresponding period of 2013, registering a growth of 4.9 per cent. FTAs during March 2014 were 6.69 lakh as compared to 6.40 lakh during March 2013, a growth of 4.5 per cent.

Foreign exchange earnings (FEE) during January–March 2014 stood at Rs 32,809 crore (US$ 5.44 billion) as compared to FEEs of Rs 30,270 crore (US$ 5.02 billion) during the corresponding period of 2013, registering a growth of 8.4 per cent. FEEs during March 2014 were Rs 10,257 crore (US$ 1.70 billion).

The number of tourists availing of the tourist Visa on Arrival (VOA) Scheme during January–February 2014 have recorded a growth of 6.8 per cent. During the period, a total number of 3,883 VOAs have been issued as compared to 3,637 VOAs during the corresponding period of 2013.


The foreign direct investment (FDI) inflows in hotel and tourism sector during April 2000 to January 2014 stood at US$ 7,013.29 million, as per the data released by Department of Industrial Policy and Promotion (DIPP).

The following are some of the major investments and developments in the Indian tourism and hospitality sector:

  • Hilton Worldwide has signed a management agreement with Palm Grove Beach Hotels Pvt Ltd, hospitality arm of K Raheja Constructions Group, to open the first Conrad hotel in India. Conrad – the luxury brand of Hilton Worldwide – will be launched in Pune, Maharashtra next year.
  • Indian hotel chain Lemon Tree Hotels is planning to enter the luxury segment. The company is in talks with two luxury brands in the US) and Asia. Lemon Tree is keen on acquisitions to expedite its growth.
  • Thomas Cook (India) announced a part-cash part-equity merger deal with Sterling Holidays to create India's largest holiday company. "The merger aims at building a holiday behemoth which will take holidays to a larger population," as per Mr Ramesh Ramanathan, Managing Director (MD), Sterling Holidays.
  • Marriott International plans to open a dozen hotels in India by 2015, adding to its existing count of 23 properties. "Currently we have about six to eight definite openings in 2014 and 2015 is going to be a very strong year for us," as per Mr Rajeev Menon, Area Vice President – South Asia and Australia, Marriott Hotels.
  • Muthoot Leisure and Hospitality Services, the hospitality division of the Muthoot Group, has announced the acquisition of Costa Rica’s high-end property – Xandari Resort & Spa. This is the first acquisition by an Indian hospitality company in Central America.

Government Initiatives

The Government of India has allowed 100 per cent FDI under automatic route in the hotel and tourism sector, according to the consolidated FDI Policy, released by DIPP. Aimed at liberalising the visa regime and putting India high on the tourism map, the government is also looking at introducing electronic visa facility later this year, according to a Tourism Ministry official.

The Ministry of Tourism has launched a Campaign Clean India to sensitise all sections of society on the importance of cleanliness and hygiene in public places, particularly monuments and tourist destinations. The campaign is a blend of persuasion, education, training, demonstration and sensitisation of all sections of the society.

The Ministry of Tourism has been making efforts to develop quality tourism infrastructure at tourist destinations and circuits. It has sanctioned Rs 4,090.31 crore (US$ 678.54 million) for a total number of 1,226 tourism projects, which includes projects related to Product/Infrastructure Development for Destination and Circuits (PIDDC), Human Resource Development (HRD), Fairs and Festivals, and Adventure and Rural Tourism for infrastructure augmentation.

The Ministry of Tourism has a Rural Tourism Scheme with the main objective of showcasing rural life, art, culture and heritage in villages, which have core competence in art and craft, handloom, textiles, natural environment, etc. Under this scheme, Central Financial Assistance (CFA) up to Rs 5 million (US$ 82,937) for infrastructure development and up to Rs 2 million (US$ 33,174) for capacity building is provided to State Governments/Union Territory Administrations for each identified site by them.

Road Ahead

India is perceived as one of the fastest growing medical tourism destinations. According to a recent RNCOS report ‘Booming Medical Tourism in India’, Indian medical tourism industry is anticipated to register a compound annual growth rate (CAGR) of more than 20 per cent during 2013–15, therefore creating a huge scope for investments.

The domestic hospitality sector expects 52,000 new hotel rooms to be added in five years (2013–17), according to a survey by real estate consultancy, Cushman & Wakefield. This will lead to a rise of over 65 per cent in total hotel inventory in India. The National Capital Region (NCR) is expected to contribute around one-third to the total expected hotel rooms supply during the period.

Further, the Working Group on Tourism for the 12th Five-Year Plan, set up by the Planning Commission, has estimated the generation of additional employment of 24.5 million (direct and indirect) in the sector during 2010–16.

Exchange Rate Used: INR 1 = US$ 0.01659 as on April 11, 2014

References: RNCOS Report, Media Reports, Ministry of Tourism, Press Releases, Department of Industrial Policy and Promotion (DIPP)