HOTEL INDUSTRY IN INDIA

The Indian hotel market presents a mixed picture. With a broad range of
domestic and international hotel groups catering to a healthy cross section of
peoples budgets, the market is well developed in established tourist
destinations including major cities and coastal resort regions. The hotel
sector is still less developed in small towns and remote areas. Through
investments this mid-range market portrays immense potential. Thus, India
has immense potential in its domestic market which is complemented with
the growing international arrivals.
In recent years, India has established itself as a key market in the Asia Pacific
region with huge well development in the accommodation sector. Most of the
established destinations in India offer a range of hotel options, including
airport suits, luxury suite hotels and resorts, apartment hotels, resort hotels,
casino
hotels,
timeshare
hotels,
extended
stay
hotels
and
conference/convention hotels. For example, Goa, a prime tourist location
provide mid-range options, budget hotels along with several high-end luxury
hotels. New Delhi, the nations capital, has well over 700 hotels catering to
various segments while other major cities like Mumbai, Bangalore, Kolkata
etc. offering many accommodation types.
The Indian hospitality industry is among the third largest segment of the
services sector contributing approx. US$ 187.9billion or 12.5% to the Indian
GDP in 2014-15. This industry has experienced one of its fastest growth of
11.9% CAGR over the period 2011-12 to 2014-15.
The tourism industry which is closely knit to hospitality industry is expected
to generate 13.45 million jobs across sub-segments like restaurants, hotels,
travel agents or tour operators etc. The Ministry of Tourism intends to help
the industry by providing certified hospitality education to students to meet
the demands of skilled and trained manpower.

Market Size
The number of Foreign Tourist Arrivals (FTAs) has grown steadily in the
last three years reaching around 7.103 million during January
November 2015 (4.5 per cent growth).
The number of FTAs in November 2015 was 815,000, an increase of
6.5% over previous year.
During the month of October 2015, the number of tourists arriving on
e-Tourist Visa reached a total of 56,477 registering a growth of 1987.9
per cent or ~21 times as compared to 2,705 tourists in October 2014.
Online hotel bookings in India are expected to double by 2016 due to
the increasing penetration of the internet and smart phones.
Investments
The tourism and hospitality sector is among the top 15 sectors in India to
attract the highest Foreign Direct Investment (FDI). As per data released by
Department of Industrial Policy and Promotion (DIPP), during the period April
2000-September 2015, the hotel and tourism sector attracted around US$
8.48 billion of FDI. With consistent rise in the number of global tourists and
on realizing Indias potential many companies have started investing in the
hospitality and tourism sector, Some of the well-known recent investments in
this sector are:

Swiss tour operator Kuoni Group's business in India and Hong Kong
acquired by Thomas Cook for about Rs 535 crore (US$ 80.3 million) to
scale up inbound tour business

US-based Vantage Hospitality Group signed a franchise agreement with

India-based Miraya Hotel Management to establish its mid-market
brands in the country.
Thai firm Onyx Hospitality and Kingsbridge India hotel asset
management firm have set up a joint venture (JV) to open seven hotels
in the country by 2018 for which the JV will raise US$ 100 million.
ITC is planning to launch five other hotels - in Mahabalipuram, Kolkata,
Ahmedabad, Hyderabad and Colombo - by 2018. For this ITC intends to
invest about Rs 9,000 crore (US$ 1.35 billion) in the three to four years
inorder to expand its hotel portfolio to 150 hotels..
Goldman Sachs, New-York based multinational investment banking
fund, has invested Rs 255 crore (US$ 38.3 million) in Vatika Hotels.
Soft Bank, a Japanese conglomerate will lead the Rs 630 crore (US$
94.5 million) funding round in Gurgaon based OYO Rooms.
MakeMyTrip acquired the travel planning website Mygola for an
undisclosed amount, and will together look to focus on innovating the
online travel segment.

Government Initiatives
Realising the countrys potential in the tourism industry, the Indian
government has taken several steps to make India a global tourism hub.
Some of the major initiatives taken to boost the tourism and hospitality
sector of India are as follows:
The Union Cabinet approved the signing of Memorandum of
Understanding (MOU) between the Ministry of Tourism of India and the
Ministry of Trade Industry and Tourism of Colombia to boost
cooperation and bilateral tourism between the two countries.
The Ministry of Tourism has sanctioned Rs 844.96 crore (US$ 142
million) to States and Union Territories for developing tourism
destinations during FY 2014-15, which includes projects relating to
Human
Resource
Development
(HRD),
Product/Infrastructure
Development for Destinations and Circuits (PIDDC), Fairs and Festivals
and Rural Tourism.
The Heritage City Development and Augmentation Yojana (HRIDAY)
action plans has been enacted for eight missions cities including
Varanasi, Mathura, Dwaraka, Badami, Ajmer, Vellankini, Warangal and
Amaravati. These have been approved by HRIDAY National Empowered
Committee for a total cost of Rs 431 crore (US$ 64.7 million).
Government of India is planning to cover 150 countries under e-visa
scheme by the end of the year. They even have plans of opening an
airport in the NCR region to ease the pressure on Delhi airport.

Project Mausam the Government of India initiative proposes to

establish cross cultural linkages and intends to revive cultural and
economic ties with 39 Indian Ocean countries.

Thus, India's hotel sector is relatively well developed especially in the main
cities and in the main beach holiday destinations. The country has providing
new opportunities for investment as it is beginning to implement new
tourism policies aimed at developing more niche markets (spiritual travels
across the country, yoga retreats, cruises, golf tourism). This development is
complemented by the improvement in railway transportation (already well
developed but set to be expanded through special trains developed for
tourism) as well as an increasing number of domestic low-cost flights,
assisting in smooth movement around the country.
PORTERS ANALYSIS
1. Threat of New Entry High This is majorly because of the identification
of immense potential for growth in India. Complementary factors like
ease in government regulations in form of FDI etc, along with huge
growth opportunities in mid-market segment that are now becoming
accessable due to infrastructural development have made the market
even more lucrative.
2.
3.
4.
5.

Threat of Substitution
Buyer Power
Supplier Power
Competitive Rivalry There are several major hotel groups established
in India which are expanding rapidly. Starwood for eg. is a group with
50 hotels at present, with 32 currently under development. Carlzon
Rezidor is another global competitor currently having 70 hotels in its
portfolio but planning to grow to 200 hotels by 2024.
Among the domestic hotel groups, there is immense competition from
Mahindra Holidays and Resorts India Ltd., Sterling Holiday Resorts, The
Leela Group, The ITC Hotels etc. all growing at an alarming rate.

References:

http://www.ibef.org/industry/tourism-hospitality-india.aspx
https://bmo.bmiresearch.com/reports/view?
productid=786&issue=20160701&service=12&active_pillar=Analysis&name
=India%20Tourism%20Report&widget=Related
%20Reports&page=Analysis&url=https://bmo.bmiresearch.com/article/view&
clickId=1469731588
http://info.shine.com/industry/hotels-hospitality/12.html

Opportunity - One area that is perhaps less well developed is the

mid-market segment, offering hotels somewhat above budget but
not at the extreme high end of the market.