The hotel industry in India, partly organized and primarily unorganized caters to approximately 1.8 Billion national tourists and 9-9.5 Million foreign tourists. About 55% of planned hotels in India belong to the 3-star or advanced categories. Tamil Nadu and Uttar Pradesh account for more than 35% of all domestic tourist who visits in India internally.
Air traffic reform in India which was initiated in 2005 with the rise of low-cost transporters had a very major role in lashing the hotel industry growth in India. As an outcome, the tourism industry in India has been rising and has massive potential for generating employment and receiving foreign exchange. The hospitality sector, being a fragment of the travel and tourism business, is greatly affected by the expansion of the industry. The government has taken numerous steps to make India a global hub for visitors to boost the Indian hospitality industry.
Based on type, the hotel industry in the nation can be segmented into independent or unbranded hotels, substitute accommodations, new-age hotel chains, and branded or traditional chains. The independent/unbranded section encompasses more than 70% of the total existing hotel rooms. Alternate accommodation is the second largest segment, owing to the growing popularity of homestays among travelers.
In recent years, another group emerged within the hospitality industry in India, that is the serviced apartment sector. These apartments typically include two to three fully-furnished bedrooms with all the modern apparatus such as washing machines, refrigerators, microwave oven, housekeeping, etc. Even after providing quite a few services, these serviced apartments offer only 30-35 per cent tariffs to the business class than the 5-star hotels in case of longer stays.
Over the past five years the 2-3-star hotel occupancy has grown at the highest rate, year on year. A large portion of that can be attributed to the growth in organized hotel business in India. In the organized hotel business in India, the Indian customer internet market is largely focused in urban and affluent cities. As a result of that, most of the online bookings for hotels are done by inhabitants of tier-1 and tier-2 cities.
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The government has been making several efforts to increase investments in the Indian tourism sector. India received Foreign Direct Investment of INR 4,30,000 Cr in 2016-2017. Free FDI inflows are permissible in the majority of sectors by the government except for major sectors such as Defense or Atomic Energy. The 100% FDI in the hotel and tourism segment is paving its way to more funds in the country through the automatic route. A 5-year tax holiday has also been presented by government for 2-4-star category hotels that will be located around UNESCO World Heritage sites, except for metro locations like Delhi and Mumbai.
Special Tourism Zones (STZ) will be offered a 100% tax exemption for a period of 10 years. STZ is planned to be established where there will be a provision for 2,000 to 3,000 hotel rooms, either existing or to be constructed, facilities for entertaining, amusement parks, shopping, etc. There will also be an exclusion from import duty on different capital goods, followed by removal of luxury tax, etc.
The COVID 19 epidemic has led to demand demolition in excess of 90 per cent for the tourism and hospitality sector which provides employment to nearly 4.5 Crore people. It provides living to around 16 crore people, and contributes at least 9 per cent to India’s GDP. A recent study by McKinsey recognized Airlines and Hotels as the worst impacted sector in India; with around 75 per cent output decline in 2020. Same has been projected for2021. Also, the hotel segment features in the list of strained segments on Debt Service Coverage Ratio. The revenue loss to the hotel’s industry is expected to be to of Rs. 90,000 crores in the year 2020.
However, India, known for its ancient custom of Atithi Devo Bhava or ‘guest is god’ has been holding foreigners for ages. From Kashmir to Kanyakumari and from Guhar Moti to Kibithu, the nation offers an enormous opportunity to the hospitality industry. From stunning snow-capped mountains to desserts, from plateaus to beautiful ocean beaches, the hospitality industry in India is definitely an enriched one.