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Service sector 2016-03-16

Business that assures comfortable returns

Government of India's initiative for branding and marketing of Indian tourism like Incredible India! and Athiti Devo Bhava have ushered in great opportunity to the hospitality industry. Let’s find out the impetus to growth focused by the hotel chains.

Business that assures comfortable returns

The Indian tourism and hospitality industry is one of the fastest emerging services sector. As per the ‘Indian Tourism and Hospitality Industry Analysis’, conducted by India Brand Equity Foundation (IBEF), hotels and restaurants are amongst the major contributors that comprises the third largest sub-segment of the services sector. It has contributed nearly US$ 187.9 billion or 12.5 per cent to the Gross Domestic Product (GDP) in 2014-15, while growing the fastest at 11.7 per cent Compound Annual Growth Rate (CAGR) over the period 2011-12 to 2014-15.

“There are many positive factors that instill confidence in India’s growth story - growing special economic zones, improved connectivity, push for urbanisation and an emerging class of millennial travelers. These create a strong platform for travel and hospitality. Indeed we at Carlson Rezidor believe in India and continue to further fortress our leadership position in this country,” says Raj Rana, Chief Executive Officer, South Asia -Carlson Rezidor Hotel Group.

Market at a glance

The tourism and hospitality sector is among the top 15 sectors in India to attract the highest Foreign Direct Investment (FDI). During the period April 2000-September 2015, the hotel and tourism sector attracted around US$ 8.48 billion of FDI, according to the data released by Department of Industrial Policy and Promotion (DIPP), reports IBEF.

“The India hospitality industry has made rapid strides in the last two decades, however, we have been facing headwinds in the last two years due to supply outpacing demand. Nevertheless, the country’s potential is huge as there are still many cities and towns that have no branded hotels. We are seeing a tightening of new supply which is helping to restore the equilibrium. Also, occupancy is on the rise with rate gains bound to follow,” adds Rana.

Key Players

Ginger Hotels, a TATA enterprise is amongst the key players in the services industry that has expanded tremendously, recently. With launching of its first hotel in Katra at the foothills of the holy shrine of Shri Mata Vaishno Devi, last year, Ginger Hotels, has just strengthened the chain’s robust pan-India presence, brand value and strong operational model, which is been well received and accepted by discerning travellers.

Starwood Hotels and Resorts are largely a hotel management company but also has a few franchise hotels like Aloft and Four Points. The brand works closely with franchise partners to support them to ensure consistency of standards and brand experience.

Hyatt, Wyndham Hotel Group, and Citrus Hotels are amongst other big giants in the industry that has grown their hotel chain the franchising way in India.

Growth drivers

The Government has also been making serious efforts to boost investments in tourism sector. 

  • In the hotel and tourism sector, 100 per cent FDI is allowed through the automatic route. 
  • A five-year tax holiday has been offered for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai). 
  • The investment in tourism sector is expected to be US$ 12.4 billion in the 12th five year plan; of these, private investments are likely to total US$ 9.2 billion.

Online partner

As per IBEF, online hotel bookings in India are expected to double by 2016 due to the increasing penetration of the internet and smart phones. Online players including-, and OYO Rooms have scaled up the hotel industry in India.

Moreover, Morgan Stanley ranked online hotel-booking engine and air aggregator at No.1 position. According to Morgan Stanley It had been rated on top by hoteliers across parameters like confirmed bookings, higher booking volumes, backend and IT support, last-minute bookings, insights and market intelligence.

As per the reports, the hotel booking portal is also the fastest-growing hotels' OTA (online travel agency) in India. Goibibo's hotels facing technologies is also the most used amongst hoteliers.

Ashish Kashyap, founder of ibibo (comprising Goibibo, redBus and Ryde) said that the company is excited for the No.1 position in India in the hotels category. Goibibo has been able to achieve the same by strengthening network effects, providing superior user experience on mobile and delivering powerful tools and technologies to thousands of hotels. 

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