Tourism and Hospitality

Investment Opportunity>>Tourism and Hospitality

Sector Overview
The Indian tourism and hospitality industry experienced a growth of 24.6% during 2009–2010 timeframe. The industry is the third-largest foreign exchange earner, accounting for 6.2% of India’s GDP and 8.8% of India’s total employment, according to a report by the Planning Commission. It has significant linkages with other sectors such as agriculture, horticulture, transportation, handicrafts and construction. The tourism industry includes travel agencies, tour operating agencies and tourist transport operating agencies; units providing facilities for cultural, adventure and wildlife tourism; surface, air and water transport facilities for tourists; and convention/seminar units and organizations.

According to the Planning Commission, the sector creates more jobs per million rupees of investment than any other sector of the economy and is capable of providing employment to a wide spectrum of job seekers, from the unskilled to the specialized, even in the remote parts of the country. The sector’s employment-generation potential has also been highlighted by the World Travel & Tourism Council (WTTC), which says India’s travel and tourism sector is expected to be the second-largest employer in the world, employing 40,37,000 people, directly or indirectly, by 2019.

Travel and tourism is a USD 32 billion business in India, according to industry estimates; in addition, the hospitality sector is sized at USD 23 billion and it is expected that this sector will witness an inflow of USD 12.17 billion in investments over the next two years, according to market research company Technopak Advisors. It is expected that the hospitality sector is expected to see an additional US$12.17 billion in inbound investments over the next two years, based on their estimates.

The size of the Indian hospitality industry is estimated as a sum of revenues of two segments — revenues generated from travel (business, leisure, visiting friends and relatives, religious, meetings and conferences) and revenue generated by consumers eating out at any form of outlet (restaurants, fine dining, quick service restaurants (QSRs), takeaways, or any other form of unorganized eateries).

The Indian tourism sector includes medical and healthcare tourism, adventure tourism, heritage tourism, ecotourism, rural tourism and pilgrimage tourism. Medical tourism also known as health tourism has emerged as an important segment, owing to India’s skilled healthcare professionals and the lower cost of healthcare facilities in the country. Wellness tourism is regarded as a sub-segment of medical tourism and it involves the promotion and maintenance of good health and well being. India, with its widespread use of Ayurveda, Yoga, Siddha and Naturopathy, complemented by its spiritual philosophy, is a well-known wellness destination.

Heritage tourism is oriented towards exploring the cultural heritage of a tourist location. India is well known for its rich heritage and ancient culture. The country’s rich heritage is amply reflected in the various temples, majestic forts, gardens, religious monuments, museums, art galleries and urban and rural sites.

Due to its varied topography and distinctive climatic conditions, India is endowed with various forms of flora and fauna, and it has numerous species of birds, mammals, reptiles, amphibians and plants life on offer for tourism. Wildlife tourism includes wildlife photography, bird watching, jungle safari, elephant safari, jeep safari, jungle camping, ecotourism, etc.

MICE (meetings, incentives, conferences and exhibitions) tourism is also one of the fastest-growing in the global tourism industry. It caters largely to business travelers, mostly corporates. It caters to various forms of business meetings, international conferences and conventions, events and exhibitions. The Ashok, New Delhi; Hyderabad International Convention Centre, Hyderabad; and Le Meridian, Cochin, are forerunners in the Indian MICE tourism industry, facilitating domestic and international business meetings and conferences.

Policy and Promotion
Cumulative foreign direct investment (FDI) inflows into the tourism and hospitality sector have been estimated at USD 2.37 billion between April 2000 and March 2011. According to the Ministry of Tourism, foreign exchange earnings from tourism during 2010 were estimated at USD 14.19 billion. The government has permitted 100% FDI in the sector under the automatic route, FDI into all construction and development projects including construction of hotels and resorts, recreational facilities, and city and regional-level infrastructure.

In terms of incentives, a five-year tax holiday is extended to organizations that set up hotels, resorts and convention centers at specific destinations. Besides this, the government has initiated measures to bolster the sector, such as provision of visa on arrival for tourists from Finland, Japan, Luxembourg, New Zealand and Singapore, and launch of several schemes that promote rural tourism and infrastructure related with the sector. The government has also launched campaigns such as Incredible India!, Colors of India, Atithi Devo Bhavah and the Wellness Campaign to promote the Indian tourism and hospitality industry.

For instance, the government has introduced a new category of visa, ‘medical visa’ (‘M’-Visa), to promote medical tourism. Further, it has tied up with the United Nations Development Program (UNDP) to promote rural tourism. The ministry has sanctioned 102 rural tourism infrastructure projects to spread tourism and socio-economic benefits to identified rural sites with tourism potential.

During the 11th Five-Year Plan, the tourism ministry had sanctioned an amount of Rs. 31.13 billion for 991 tourism infrastructure projects, including rural tourism and human resource development projects. Some other schemes introduced by the Government of India include:

  • Scheme for product/infrastructure and destination development
  • Scheme for integrated development of tourist circuits
  • Scheme of assistance for large revenue generation projects
  • Scheme of capacity building for rural tourism

Several other initiatives undertaken to promote different tourism products include the following:

  • Rural tourism: Rural tourism showcases rural life, art, culture and heritage at rural locations. The existing scheme for destination development supports the development of infrastructure in rural areas. Under this scheme, the thrust is on promotion of village tourism as a primary product to spread tourism and its socio-economic benefits to rural and new geographic regions. The Ministry of Tourism has joined hands with the UNDP for capacity building — around 153 rural tourism projects have been sanctioned in 28 states/Union Territories including 36 rural sites where UNDP offers support in capacity building. Under the ‘Visit India 2009’ scheme, around 15 rural tourism sites were selected as rural eco-holiday sites.
  • Adventure tourism: Measures to promote adventure tourism include financial assistance to state governments/Union Territory administrations for development of adventure tourism destinations and granting of exemption from customs duty on inflatable rafts, snow-skis sail boards and other water sports equipment. Adventure tourism activities in India include mountaineering, trekking, mountain biking, river rafting and rock climbing. In July 2009, the Ministry of Defence gave permission for opening of 104 additional peaks in Leh area of Jammu & Kashmir for adventure tourism.
  • Medical tourism:
  • This segment has emerged as an important component of the Indian tourism industry; initiatives taken for promoting medical tourism include financial assistance to service providers under the Market Development Assistance Scheme and issuance of medical visas for patients and their attendants coming to India for medical treatment. In addition, the government has also requested state governments to promote medical tourism by offering suitable packages of identified hospitals and price banding for specific treatments.

Major Players
Several international players, including Inter Continental, Hilton, Accor, Marriott International, Berggruen Hotels, Amanda, Satinwoods, Banana Tree, Hampton Inns, Scandium by Hilt, Mandarin Oriental, Cabana Hotels, Premier Travel Inn (PTI), Marriott, Starwood and Accor have established a presence in the Indian hospitality space. The prominent Indian companies in the hospitality industry include Indian Hotels Company Ltd (IHCL), East India Hotels (EIH), ITC, Bharat Hotels, Asian Hotels and Hotel Leelaventure.

In the restaurant space, some of the more prominent foreign players include Domino’s Pizza, McDonalds, Pizza Hut, US Pizza, KFC and Costa Coffee. Most of these players have seen significant expansion in recent years and further expansion in smaller towns and cities is on the cards.

Sector Outlook
WTTC has named India as one of the fastest-growing tourist destinations in the world for the next 10-15 years. From 11 million travelers in 2008, the figure in expected to touch 29 million visitors by 2018. There is an opportunity in the inbound MICE sector, which has already registered a growth of 15% to 20% during the last five years.

Useful Links