Indian Hotel Industry
CHAPTER :1 INDIAN HOTEL INDUSTRY OVERVIEW
1.1 INTRODUCTION
Since the opening of the market and the rapid economic development, the travel and tourism industry has blossomed. The hotel industry’s fortunes are closely linked to this sector of the economy. But the availability of hotel rooms has not kept pace with the increasing demand. Moreover, as India accounts for only 0.5% of the global tourist trade, there is immense scope for growth. The World Tourism Organization (WTO) expects the Indian tourism industry to grow by 8.8% in the next 10 years. This will need the creation of even larger number of hotel rooms. As there is already a shortage of hotel rooms and this 9% shortfall is likely to be met only by the 1st half of 2009, the sector players will benefit in near term with higher profits. The importance of the sector has already made the GOI increase the allocation to the tourism ministry significantly.
A large middle class of 300 million people with increasing disposable income, cheaper air fares and better connectivity will also increase travel within the country spurring the demand for economy and budget hotels. The booming IT and ITES sectors, MICEs (Meetings, Incentives, Conferences and Exports), and the lure of key leisure destinations including Agra, Goa, Jaipur and Kerala will continue to strengthen the bottom lines of the players. Occupancy rates too have increased by 15% in the last three years to 75% now.
The Indian hotel sector's profitability has increased sharply over the past two years, and we see no let-up on the horizon. India's economic growth is strong, business-tourist traffic is growing at a double-digit clip, business confidence index is at an all-time high, and FDI into the country is rising. The sector is enjoying strong pricing power, which, along with operating leverage, should drive the sector's earnings growth over the next two years. The rupee is also depreciating, which is positive because forex revenues make up 50-60%
1.1 INTRODUCTION
Since the opening of the market and the rapid economic development, the travel and tourism industry has blossomed. The hotel industry’s fortunes are closely linked to this sector of the economy. But the availability of hotel rooms has not kept pace with the increasing demand. Moreover, as India accounts for only 0.5% of the global tourist trade, there is immense scope for growth. The World Tourism Organization (WTO) expects the Indian tourism industry to grow by 8.8% in the next 10 years. This will need the creation of even larger number of hotel rooms. As there is already a shortage of hotel rooms and this 9% shortfall is likely to be met only by the 1st half of 2009, the sector players will benefit in near term with higher profits. The importance of the sector has already made the GOI increase the allocation to the tourism ministry significantly.
A large middle class of 300 million people with increasing disposable income, cheaper air fares and better connectivity will also increase travel within the country spurring the demand for economy and budget hotels. The booming IT and ITES sectors, MICEs (Meetings, Incentives, Conferences and Exports), and the lure of key leisure destinations including Agra, Goa, Jaipur and Kerala will continue to strengthen the bottom lines of the players. Occupancy rates too have increased by 15% in the last three years to 75% now.
The Indian hotel sector's profitability has increased sharply over the past two years, and we see no let-up on the horizon. India's economic growth is strong, business-tourist traffic is growing at a double-digit clip, business confidence index is at an all-time high, and FDI into the country is rising. The sector is enjoying strong pricing power, which, along with operating leverage, should drive the sector's earnings growth over the next two years. The rupee is also depreciating, which is positive because forex revenues make up 50-60%