The hospitality sector of India is growing tremendously and is considered as one of the highly lucrative industries, contributing substantial amount of foreign exchange to the economy. The World Travel and Tourism Council (WTTC) has predicted that India has the potential to become number one tourist destination in the world with the demand growing at 10.1 per cent per annum,. The size of the hospitality sector of India is considered as a sum of market share of two segments. The first segment is revenue obtained from travel businesses while second is revenues acquired from hotel businesses.
India has a strong presence of several foreign players in the country’s hospitality spaces. Some foreign companies include IHG, Accor, Starwood, Marriott, and Carlson Hospitality.
Government initiatives to encourage foreign direct investment in Indian Hospitality Sector
- 100 percent Foreign Direct Investment in Hospitality and Tourism sector under Automatic route.
- Announced drives like Atithi Devo Bhavah, Colors of India, the Wellness and Incredible India in order to promote Indian hospitality and tourism.
- The Indian government is planning to streamline the taxation charged on hospitality industry and follow the single tax structure across the whole country. The provision of single window clearance at Central, State and local government level will help to reduce the bureaucracy and procedural delays in the sector.
- Relaxation in tax will encourage FDI in the hospitality sector, as more brands will try to penetrate the industry in order to bridge the current gap of availability of rooms and services.
Opportunities available for foreign investors to invest in Indian Hospitality industry
- The Cumulative Annual Growth Rate of the Indian hospitality sector has been growing at 14% every year. The industry has projected an asking room inventory of more than 200,000 rooms by the end of this year. This is where a real opportunity lies for foreign investors to invest in the Indian hospitality sector.
- Most of the reputed foreign players have already collaborated with Indian companies which are into hospitality business. The entry of famous foreign players like Kentucky Fried Chicken, McDonald’s, Pizza Hut and Domino’s has offered a global glamor to Indian hospitality sector.
- Indian Five Star hotel segment has grown very rapidly in the last few years at a growth rate of 12 percent. This segment can be categorized into three sub segments which are Business, Luxury and Leisure.
- Meetings, Incentives, Conferences and Exhibitions (MICE) group has also played an important role in Indian tourism and hospitality industry.
- The constant interest of foreign players in Indian hospitality market demonstrates its potential as a strong sector in times when other sectors are facing the heat of Euro zone crisis.
-Ms. Bindu Menon,
Senior Faculty, INLEAD