India is fast growing as an attractive tourist destination. The Indian tourism and hospitality sector is an important source of earning precious foreign exchange for the country. India's foreign exchange earnings through tourism increased by 32 per cent year-on-year to touch US$ 2.278 billion in April 2017, as per Ministry of Tourism, Government of India.It is one of the largest employment generator in the service sector. The country is endowed with rich cultural and historical heritage whose tourism potential remains not fully utilised till date. All the stakeholders of the tourism and hospitality sector are not just making efforts to attract foreign nationals to visit India and enjoy the warm and gracious hospitality but also making way for domestic tourists to spend time and money touring India. The rising middle class with increase in disposable income is fast becoming one of the important growth drivers for the industry. Sandeep Sharma takes a look at the sectoral potential and growth opportunities for the business….
Facts & Figures
As per the Ministry of Tourism, Domestic Tourist Visits (DTVs) to the States/Union Territories (UTs) grew by 15.5 per cent y-o-y to 1.65 billion (provisional) during 2016 with the top 10 States/UTs contributing about 84.2 per cent to the total number of DTVs. The number of Foreign Tourist Arrivals (FTAs) in July, 2017 were 7.88 lakh as compared to FTAs of 7.34 lakh in July, 2016 and 6.28 lakh in July, 2015. The growth rate in FTAs in July, 2017 over July, 2016 is 7.4% compared to 16.8% in July, 2016 over July, 2015. FTAs during the period January- July 2017 were 56.74 lakh with a growth of 15.7%, as compared to the FTAs of 49.03 lakh with a growth of 9.6% in January- July 2016 over January- July 2015. During the month of July, 2017 total of 1.19 lakh tourist arrived on e-Tourist Visa as compared to 0.68 lakh during the month of July 2016 registering a growth of 73.3%. During January-July 2017, a total of 8.36 lakh tourist arrived on e-Tourist Visa as compared to 5.40 lakh during January-July 2016, registering a growth of 54.7%.
The efforts to spruce up railway, road, and air transport infrastructure is likely to drive the growth of the Tourism and Hospitality sector in India. Regional Connectivity Scheme, ‘UDAN’ is an innovative scheme launched by the Government to develop the regional aviation market. It is a market-based mechanism in which airlines bid for seat subsidies. This first-of-its-kind scheme globally will create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in small towns. UDAN is likely to reap profits for the tourism and hospitality sector as now even the common man can afford air travel at reasonable rates and visit places in the country. The citizens would get the benefit of affordability, connectivity and more jobs. Development of Indian Waterways Transport System and opening up of Cruise Tourism on a higher scale is likely to drive growth of the tourism sector.
The tourism and hospitality sector is one of the top 10 sectors in the country attracting the highest Foreign Direct Investment (FDI). Around 10.14 USD billion of FDI was received during April 2000-March 2017, as per the data released by Department of Industrial Policy and Promotion (DIPP). 100% FDI is allowed under the automatic route in tourism and hospitality, subject to applicable regulations and laws.100% FDI allowed in tourism construction projects, including the development of hotels, resorts and recreational facilities.
‘The proactive policies of the Government helped in projecting the immense business potential of the country through programmes like ‘Make in India’ and ‘Smart Cities’. The country is attracting lot of business travellers and is expected to move up five spots to be ranked among the top five business travel market globally by 2030. The business travel spending in the country is expected to treble until 2030 from US$ 30 billion in 2015.
According to new report released by World Travel and Tourism Council (WTTC) in April 2017, India's travel and tourism sector ranks 7th in the world in terms of its total contribution to the country's GDP. The sector generated Rs 14.1 trillion (USD 208.9 billion) in 2016, which is world's 7th largest in terms of absolute size; the sum is equivalent to 9.6 per cent of India's GDP. Additionally, the sector created 40.3 million jobs in 2016, which ranks India 2nd in the world in terms of total employment generated. The sector accounts for 9.3% of the country's total jobs. India’s Travel & Tourism sector was also the fastest growing amongst the G20 countries, growing by 8.5% in 2016. A further 6.7% growth is forecast for 2017. Domestic travel & tourism accounts for 88% of the sector’s contribution to GDP in 2016.
International hotel chains like Accor, The Four Seasons Group, Marriott Hotels, Hyatt Hotels and many others are going ahead with their expansion and investment plans in India. Global players are likely to account for 50 per cent share from the current 44 per cent in the Indian hospitality industry by 2022. Marriott, Hyatt Hotels, ITC and Carlson Rezidor are going ahead with their plans to set up high end, mid-segment budget hotels in various cities of the country. JW Marriott aims to have 175-200 hotels over the next four years. AccorHotels India plans to increase its hotel count from 45 to 55 hotels by 2017. Chaudhary Group (CG) Hotels & Resorts is targeting 200 hotels by 2020.
To promote India as a global tourism hub, the Government of India is leaving no stone unturned. The initiatives announced in the Union Budget 2017-18 include setting up of five special tourism zones, special pilgrimage or tourism trains and worldwide launch of Incredible India campaign among others. The Centre is keen to open up the 7,500 km long coastline for developmental activities like tourism and real estate. Programme like Swachch Bharat, Make in India and E-Tourist visa facility would go a long way in making the tourism and hospitality segment become a ‘Rising Star’ in the time to come. With renewed focus on meeting the skilled human resource for the tourism and hospitality sector, around 21 government-run hotel management and catering technology institutes have been set up along with 10 food craft institutes, to impart specialised training in hoteliering and catering.
To promote medical tourism in the country, the Government of India has also released a medical visa or M visa in addition to the e-visa facility extended to tourist.. Short term medical visa under existing E-Tourist scheme is included. The availability of world class medical facilities at reasonable rate in India is driving the medical tourism segment to a greater extent.
The Ministry of Tourism has proposed to accord infrastructure status to hotel projects costing in excess of Rs 50 crore. The proposal if approved by the Government, would lower the threshold limit from the current Rs 200 crore for hotel projects and qualify for priority lending. Smaller players will be encouraged to set up hotels with this move.
National Tourism Policy
A National Tourism Policy (NTP) was formulated in 2002. A new draft National Tourism Policy has been formulated and the same is yet to be approved. The new policy takes into account the changing market dynamics worldwide, interrelated global developments and advancements having a strong influence on the growth of the Tourism sector. The new policy is an all-encompassing Policy involving linkages with various Ministries, Departments, States/Union Territories and Stakeholders.Some of the salient features of the new draft National Tourism Policy include:
Deals and Acquisitions
According to JLL's report titled 'Hotel Investment Outlook 2017', the total global expectation for hotel real estate transactions in 2017 is $60 billion, mirroring the level recorded in 2016. Due to attractive valuation, India is likely to experience increase number of deals in 2017. In the current year, the majority stake in domestic hotel management company, Sarovar Hotels, was acquired by The Louvre Hotel Group. According to industry sources and media reports, around 70-80 hotel assets across India are available for sale.
Staywell Hospitality Group operates and develops 30 hotels globally. The group is on an expansion spree and aims to expand in Ahmedabad, Mumbai, Hyderabad, Vizag and Raipur by 2018. Prince Hotels, subsidiary of a Japanese group, Seibu Holdings has acquired StayWell Hospitality Group including all the business operations of StayWell Group. The acquisition is likely to strength the expansion move of the Staywell group.
The Bengaluru-based hospitality company, Windflower Resorts and Spa operates a chain of boutique resorts in locations such as Puducherry, Coorg, Bengaluru, Vythiri and Bandipur. HDFC Property Fund is selling its stake in this company for about Rs 100 crore. As per media reports, the deal is likely to close in the next 12-18 months.
Due to exorbitant hike in Goods and Services Tax (GST) amounting to 28 per cent applicable to the hotel industry, MICE events are shifting to neighbouring countries like Sri Lank and Thailand. The Government should take a note of this as this could impact the growth of the hospitality segment.
Many of the industry players are going ahead with their expansion plans across the length and breadth of the country. Some of these plans and projects are listed below:
To accelerate the expansion plan across the country, Budget hotel aggregator FabHotels has raised $25 million in a Series B investment round led by Goldman Sachs Investment Partners. Existing investor Accel Partners also participated in this funding round. FabHotels operates more than 225 franchise hotels in over 20 major cities in India with over 5,000 rooms.
Hospitality major Louvre Hotels Group aims to add 12 properties across India by the end of 2018 as part of its expansion plans. The hotels will be in cities such as Delhi, Mumbai, Goa, Bengaluru, Hyderabad, Chennai, Lucknow, Rajkot and Amritsar among others.
Indian-American hotelier Sant Singh Chatwal is going ahead with his expansion plans in the hotel segment. He has signed an agreement with Viiking Ventures chairman Sachiin Joshi to open the Dream Hotel in New Delhi.
Lords Hotels & Resorts operates 26 hotels with an inventory of 1,544 rooms. The hospitality firm plans to open one hotel each in Goa and Bengaluru city this year.
Mahindra Holidays and Resorts India Ltd (MHRIL) has got a total inventory of 3,152 rooms across 49 resorts by the end of 2016-17 as per its annual report 2016-17. MHRIL is looking forward to add around 600 rooms as part of its expansion plans over the next two to three years. The projects are coming up at Naldhera and Kandaghat in H.P., Ashtamudi in Kerala and Assanora in Goa.
Ginger Hotels has recently announced the launch of its seventh hotel named Ginger Hotel Gurugram with 77 smartly-designed comfortable rooms in Delhi NCR. The property is in close proximity to Indira Gandhi International Airport, Domestic Airport and just 3 km from the HUDA Metro Station. The connectivity to Delhi and NCR region is excellent.
K Raheja Corp's Chalet Hotels owns several hotel properties, including Marriott and Renaissance. The hospitality firm plans a capex of Rs 3,000 crore over the next 4-5 years and aims to double its room portfolio. The company plans to add around 1,500-2,000 keys through acquisitions to its current portfolio of around 2,800 rooms. Around 1,000 rooms would be added through greenfield developments.
The tourism and hospitality sector is moving a rapid pace with the increased number of tourist inflow in the recent times.The spurt in online transactions mainly mobile based have boosted the fortunes of the sector. Industry sources estimates the India's online hotel market will grow to $4 billion at a CAGR of 25 per cent. Study titled 'Demystifying the Indian Online Traveller', by Boston Consulting Group and Google India predicts the Indian passenger travel market to grow at 11-11.5 per cent to $48 billion by 2020. The report also projects the hotel industry growth at 13 per cent to $13 billion by 2020.