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Hotel Industry of India

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Essay title: Hotel Industry of India

The travel and hospitality industry continues to be the sector, which has largely profited from the fast growing economy of India. This has largely been due to the 4.4 m tourist arrivals in Financial Year 2007 (13% growth) over the previous period. The compounded growth in tourist inflow over the last ten years (FY97-FY07) has been 4.3%, while in the last five years, growth stands at 11.6% per annum. The hotel industry went through a rough patch between FY00 to FY04 owing to factors like the Asian financial crisis, Afghan war, Middle East unrest, September 11 attacks, SARS and domestic riots

India occupies the forty-sixth position among the sixty tourist destinations in the world. The flourishing economy helped boost the demand for the industry. Also, Efforts to diversify tourist attractions by offering new products such as adventure tourism, wellness tourism, medical tourism and golf tourism are expected to have a positive effect on both foreign tourist arrivals and domestic tourism.

As per the 2004 findings, the total number of approved rooms by the Government of India stands at around 99,000 (estimated). These rooms are further classified into various segments out of which, Five star and Five star deluxe hotels account for around 27% of the total capacity, three star hotels (22%), four star (8%), two star (9%), one star and Heritage hotels (2% each) and the rest is divided between unclassified and unapproved hotels

The five star hotel segments have grown the fastest during the last five years at a CAGR of 12%. Further this segment can be divided into 3 sub-segments namely Luxury, Business and Leisure. The growth in this segment indicates the genre of travelers coming into the country. Over the last few years the country has witnessed a large influx of business travelers in the country owing to relaxation of the government’s stand on Foreign Direct Investments (FDI) for most of the sectors in the country.

Financial Year 2007

With the foreign traffic in the country touching 4.4 m mark in 2006, the hotel industry reached new heights this year. With disposable incomes having gone up, the leisure destinations have benefited and with the heightened industrial activities, business destinations have witnessed a healthy surge in the tourist traffic. Though both leisure and business travel was in upswing this year, it was the foreign business travel which grew the fastest.

Due to the favorable demand supply gap prevailing in the country, the average room rates (ARRs) and occupancy rates witnessed an increase for the third year in a row. The all-India occupancy mark touched the 70.8% mark for the first time and many cities were completely sold out on a number of weekday nights, resulting in hotels hiking their rates sharply.

India is no longer a city of metros with the growth having spread to newer regions. On the back of the service sector spreading its reach to smaller towns, clusters of manufacturing hubs emerging across the country and large SEZs being established across states, the demand for hotels in these regions have increased. Over the last 2 years, IT cities like Pune and Hyderabad, satellite towns of Faridabad, Gurgaon, Noida and Ghaziabad and tourist destinations like Jaipur and Goa are witnessing faster growth in room rates and occupancy than the metros.

Around 25,000 total rooms across different segment categories are present in Mumbai, Jaipur, NCR, Bangalore and Pune among other cities.

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