Tourism Sector in India

As per the World Economic Forum's Travel and Tourism Competitiveness Report 2009, India is ranked
11th in the Asia Pacific region and 62nd overall on the list of the world's attractive destinations.
According to this report, the contribution of travel and tourism to the country's GDP is pegged at USD
187.3 billion by 2019. The Department of Industrial Policy and Promotion (DIPP) has also reported
that the hotel and tourism industry's contribution to the Indian economy by way of FDI inflows were
pegged at US$ 2.1 billion from April 2000 to March 2010.
In line with this growth, the country is expected to double the number of branded hotel rooms in the
next three years. The leader among these would be global hotel chains that plan to add an estimated 300
hotel properties (or an estimated 55,000 rooms) in this period.
According to the Consolidated FDI Policy, released by DIPP, Ministry of Commerce and Industry,
Government of India, the government has allowed 100 per cent foreign investment under the automatic
route in the hotel and tourism related industry. The Government of India has also announced a scheme
of granting Tourist Visa on Arrival (T-VoA) for the citizens of Finland, Japan, Luxembourg, New
Zealand and Singapore.

Ecotourism

Ecotourism (also known as ecological tourism) is responsible travel to fragile, pristine, and usually
protected areas that strives to be low impact and (often) small scale. It is held as important by those who
participate in it so that future generations may experience aspects of the environment relatively
untouched by human intervention.
Ecotourism also endeavors to encourage and support the diversity of local economies for which the
tourism-related income is important. With support from tourists, local services and producers can
compete with larger, foreign companies and local families can support themselves. Besides, the
revenue produced from tourism helps and encourages governments to fund conservation projects and
training programs.
This segment is considered the fastest growing market in the tourism industry. According to the World
Tourism Organization, it experiences an annual growth rate of 5% worldwide and represents 6% of the
world gross domestic product.
Eco Tourism in India is a growing field where different locations like the Himalayas, the backwaters of
Kerala, the wildlife sanctuaries are likely destinations.

BUY SIDE PLAYERS

A. Foxwood Properties India Private Limited

Foxwood Group is a chain of hotels, resorts, spas and holiday properties that operates through
franchisees in 50 countries across 5 continents. Their primary business activities are centered in the
United States of America though they started exploring opportunities in Europe and Asia as early as
1983.
· The group (in the name of a subsidiary Foxwood Properties Private Limited in India)
established its first franchise in India in 1996 in Mumbai. They expanded into New Delhi,
Mount Abu, Bangalore and Chennai soon after.
· The hotel typically attracts many tourists due to its close proximity to the city centre.
· The company is at present among the top 3 players in the hospitality industry in the country and
there exists intense rivalry by way of advertising and sales promotion among the top players
· Foxwood is looking at expanding into 4 more locations within the next 5 years. Talks are on to
zero in on the best locations
· The company shares are closely held and ~95% stakes are held by the promoters alone
· A 3% stake is held by a domestic hotel management company that handles administrative affairs
of the company in India
· The company plans to IPO in 2011 or 2012 depending on market conditions and use the funds
for its expansion plans
· 55% revenues are from room rents and the balance equally divided among restaurant income
and other services
· EBITDA margins on each of these are 85%, 65% and 75% respectively
· Net Sales and PAT are expected to grow at a CAGR of 18% and 15% respectively
· The company experienced a slowdown in 2008 during the financial crises, as did many of its
counterparts worldwide but is on a recovery path since late 2009.

Key risk associated with the business

Any future global crisis similar to that experienced in 2008-09 has the potential to topple the
industry into a position that might take at least half a decade to recover from.
The financial statements of the company as at March 31, 2010 and 2009 are given below: (Amounts
in Rs Crores)

Financial Highlights 2009-10 2008-09

Gross Revenue 2680 2367

Profit Before Tax 602 483

Profit After Tax 406 326

Dividend 198 163

Net Worth 1496 1478

Borrowings 10 18
B. The Baron Group

The Baron group and its subsidiaries are collectively known as Baron Hotels, Resorts and Palaces.
Incorporated in the early part of the 20th Century in Mumbai (then Bombay), the group has
expanded into more than 60 destinations and 70 hotels in India and also has international hotels in
Sri Lanka, Singapore, Malaysia and Thailand.
The hotels operate in the luxury, premium, mid-market and value segments of the market through
various offerings that include exotic palaces, full service hotels catering to the business traveler,
wildlife lodges for the adventurous as well as economy hotels.
Throughout the expansion phase, the group has kept in consideration the need to infuse a sense of
Indian culture and tradition within each property and at the same time anticipate the needs of the
sophisticated traveler, Indian or otherwise.
The group also operates Baron Air and Baron Yachts for its guests in the luxury segment.
Additionally, the Hotel Management Institute started by its founder offers a three year diploma that
has affiliations with multiple American and European programs.

Management estimates are as follows:

· Demand is likely to improve in 2010/11 as economic growth gathers momentum and
companies increase their spending on travel
· The group is in the final stages of completion of the Vishwakrama Palace near Jaipur and
the hotel (with 72 keys) is slated to open by December 2010
· There is continued efforts to grow internationally and arrangements have been entered
into for hotels to be opened in the Middle East and South Africa.

The group's (Company and subsidiaries) consolidated financial statements as on June 30, 2010 and
2009 stood as given below: (Amounts in Rs. Crores)
 Financial Highlights 2009-10 2008-09

Gross Revenue 1400 1800

Profit Before Tax 215 355

Profit After Tax 146 229

Dividend 69 84

Net Worth 2750 2987

Borrowings 2600 1750

Significant business risks

The luxury segment contributes significantly to the group's revenue and this segment is the most easily
affected by the economic upturns and downturns.
Competition from International hotel chains poses a threat to the growth of domestic hospitality groups
that like this one
More than 60% of the revenues are from Indian guests. However, these levels have fallen in the light of
increased outbound travel to Asian, African and European destinations.
C. Laya Ventures
Established in 1957 by Capt. Krishnan, the small hotel that began in the suburbs of Mumbai has now
grown into a multi-crore venture. Mr. Balan Krishnan, the present Managing Director, took over from
his father in the late 90's has focused in making the group internationally acclaimed for its service
quality.
The company has hotels and resorts in 15 locations across the country with another 4 upcoming within
the next two years. The company's USP has been providing world class technology to guests while at
the same time maintaining the all pervasive Indian tradition of hospitality. The company has
popularized its brand with the slogan “Live the Laya”
The financial performance of the company as at March 31, 2010 and 2009 has been given below:
(Amounts in Rs. Crores)
 Financial Highlights 2009-10 2008-09

Gross Revenue 460 580

Profit Before Tax 65 190

Profit After Tax 41 144

Dividend 9 18

Net Worth 2050 2034

Borrowings 2875 2450

The company has gradually recovered from the slowdown in 2009. It hopes to regain the pre-crisis
volumes of business by the end of 2011.
Significant Business Risks
· General economic conditions: Sector easily affected by economic recession and revival. Victim
of business cycles.
· Socio Political Risk: Terrorism, occurrences of infectious diseases and natural calamities
restrict the number of tourists – both domestic and foreign
· Competition from international hotel chains and increasing outbound travel plans of Indian
tourists
· Foreign currency exposure risks

SELL SIDE PLAYERS

A. Ecolodgers

Established in 1989 by a group of youngsters who were enthusiastic and creative enough to provide a
new dimension to tourism as was popularly known in those years, Ecolodgers has grown over the
years, initially by word of mouth and later on through advertising over the internet and with travel
agents.
The company owns boat houses and tree houses mainly close to the backwaters in Kerala – one of the
states that attracts the maximum tourist crowds annually. Some of their boats, known for richness of
history are extremely popular with tourists with rentals as expensive or more than that of a seven star
luxury stay.
A significant portion of the company's revenue also comes from rain forest eco-lodges that provide stay
and guided tours to the adventurous lot. Of late, they have become a popular destination for corporate
gatherings that are arranged for ice breaker sessions amongst top management / new employees.
The company owns close to 300 houseboats, 4 eco-lodges and more than 50 tree houses that are
occupied almost throughout the year.
The financial statements of the company for the year ended March 31, 2010 are given below:
(Amounts in Rs. Lakhs)

Financial Highlights 2009-10 2008-09

Gross Revenue 3245 3458

Profit Before Tax 532 642

Profit After Tax 365 426

Net Worth 4230 3975

Borrowings 2540 2680

B. Jungle Resorts Limited

Born in 1980 as an effort to promote wildlife destinations on Karnataka, JRL is today a leading chain of
resorts with 16 properties across the country. Incorporated as a joint venture, M/s. Trekkers' Heaven
Ltd. Sold their stake to the Government in 1997 after which the company is fully owned by the
Government of Karnataka.
The company offers guided tours of wildlife safaris, trekking, bird watching, nature walks, rafting,
snorkeling etc. The management of the company claim that they are the market leaders in eco tourism.
JRL also offers Ecotourism consultancy for various state governments and private property owners.
Recently, in March 2009, the company launched a Naturalist Training Institute for people passionate
about nature and wildlife and strongly believes in eco principles and in converting its guests into
ambassadors of conservation.
The company though operating at a very small scale now, believes that its business is set to grow two
fold in the next couple of years.
The financial highlights for the year ended March 31, 2010 are given below: (Amounts in Rs. Lakhs)

Financial Highlights 2009-10 2008-09

Gross Revenue 985 764

Profit Before Tax 302 216

Profit After Tax 205 159

Net Worth 3024 2752

Borrowings 1056 1025

C. India Rangers
Established in 1996, India Rangers specializes in adventure and eco tourism in northern and north
eastern India offering guided tours of river rafting on the Ganga, trekking in the Himalayas, cycling on
forest trails and wildlife treks in the famed national parks of the north east.
Over the last decade, their revenue stream has steadily increased on account of package corporate tours
termed as Outbound Training Programs and Adventure Conferences.
With a 50 member team comprising experienced rafters, climbers and naturalists, they have one of the
most experienced guide teams in the country. They also run the Ganges First Aid Care catering to the
basic health requirements of local villagers in the areas that they operate out of.
The financial highlights of the company for the year ended March 31, 2010 are given below: (Amounts
in Rs. Lakhs)

Financial Highlights 2009-10 2008-09

Gross Revenue 1950 2055

Profit Before Tax 965 1022

Profit After Tax 632 701

Net Worth 6050 6076

Borrowings 4500 4200

Conclusion
The hotel industry in India is on the brink of colossal growth. The World Travel and Tourism Council
(WTTC) estimates that the Indian hospitality industry to grow at 15 per cent annually which translates
to close to a requirement of about 200,000 rooms. With travel and tourism expected to continue its
boom in the years to come, larger players are on the prowl for absorbing any known opportunity at the
earliest chance available. However, strategic planning is of essence to ensure that the not so good odds
are let go of to ensure that a killing is made at the right time when the industry is about to touch its peak.