23-26 February 2009, BIEC, BengaluruOrganized by Knowledge Partner Indian Hospitality Industry Outlook Acknowledgement We are thankful to Confederation of Indian Industries (CII) for giving us the opportunity to be the Knowledge Partner for the International Hospitality Fair 2009 being organized at BIEC, Bengaluru from 2326 February 2009. We thank Mr. Gurpal Singh, Deputy Director General, CII and his team for making this effort successful. We would also like to express gratitude to the members of the Hospitality Industry for sharing their ideas and knowledge and making their important contribution in preparation of this report. Overview 03 Chapter 3 Indian Restaurant Sector .Overview 02 Chapter 2 Indian Hotel Sector .Contents Executive Summary 01 Chapter 1 Indian Hospitality Industry .Overview 04 Chapter 4 Phases of the Indian Hospitality Industry 05 Chapter 5 Comparisons with Retail & Healthcare 07 Chapter 6 The Key Growth Drivers • Regulatory • External • Internal 08 Chapter 7 The Key Emerging Trends • Hotels • Restaurant • Technology 11 Chapter 8 The Key Challenges • Regulatory • External • Internal 14 Chapter 9 The Key Opportunities 16 Chapter 10 Technopak Recommendations 17 . 44360 crore in 2007. Following are the important highlights as regards these two important indicators of tourism sector. Therefore. poultry. The lower growth rate in 2008 as compared to 2007 may be mainly due to lower growth rate of FTAs in 2008 as compared to 2007 and exchange rate variation. Therefore. • FEE from tourism in December 2008 were Rs. horticulture. According to 81 per cent of the surveyed CEOs in a study. Tourism has the potential to stimulate other economic sectors through its backward and forward linkages and cross-sectoral synergies with sectors like agriculture.7 per cent in last three years is expected to deteriorate down to below the 9 per cent growth rate mark. adventure. 1 . the service sector .Indian Hospitality Industry Outlook Executive Summary Although many of us have been “tourists” at some point in our lives. employment. 4935 crore in November 2008 and Rs. The consumption demand. number of FTAs has increased in 2008 as compared to 2007. Expenditure on tourism induces a chain of transactions requiring supply of goods and services from these related sectors. buoyancy in central. etc. business or other purposes. aviation.5 per cent for FY 2009-10 Global financial crisis has started to take its toll on the service sector. Tourism is the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure. construction. It identifies the growth drivers & the challenges the industry faces and at the same time highlights the opportunities that exist. • The number of FTAs in December 2008 has risen to 5. The Hospitality Outlook report by Technopak aims to look at the Indian Hospitality industry with a different viewpoint.real estate.37 million as compared to FTAs of 5. additional income and employment opportunities are generated through such linkages. The motivations for tourism also include social. the GDP growth forecast for India has been downgraded to 7. Foreign Tourist Arrivals (FTAs) to India: • FTAs during the year 2008 were 5. • FEE in US $ terms during the year 2008 were US $ 1046 million as compared to US $ 1005 million in November 2008 and US $ 1287 million in December 2007.1 per cent for 2008-09 and predicted to be 6. state and local tax receipts can contribute towards overall socio-economic improvement and accelerated growth in the economy. handicrafts. As the world economy slips into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector. the sector which recorded an average growth rate of 10. as technological advances are overcoming communication barriers. It is motivated by the natural urge of every human being for new experience. The economic benefits that flow into the economy through growth of tourism in the shape of increased national and State revenues. in spite of global financial meltdown and terrorist activities. 5079 crore in December 2007. hotels and tourism are expected to go in a slowdown further while telecommunication and railway transportation are expected to grow at decent pace. emanating from tourist expenditure. Paring under the current crisis. Foreign Exchange Earnings (FEE) from Tourism in Indian rupee terms and US $ terms • FEE during the year 2008 were Rs.22 lakhs as compared to 5. the Indian Scenario (growth rate of 5. 50730 crore as compared to Rs.6%) is much better than the world scenario. Progress in air transport and development of tourist facilities has encouraged people to venture out to the foreign lands. Ministry of Tourism compiles monthly estimates of Foreign Tourist Arrivals (FTAs) and Foreign Exchange Earnings (FEE) on the basis of data received from major airports. The decline in the FEE in US $ term during December 2008 vis-à-vis December 2007 is mainly due to the foreign exchange variations in these months. safety and enjoyment are particularly the focus of tourism businesses. as the customer’s satisfaction. also induces more employment and generates a multiplier effect on the economy. defining what tourism actually is can be difficult. religious and business interests. the expansion of the tourism sector can lead to large-scale employment generation and poverty alleviation.08 million during the year 2007. wages and salary. A significant contribution has been made towards identifying key trends that will drive the industry in near future. Technopak uses its vast experience in this sector to put on board the key recommendations that the industry professionals and key policy decision makers might consider over a period of time. The basic human thirst for new experience and knowledge has become stronger. As a result. Tourism is a dynamic and competitive industry that requires the ability to constantly adapt to customers’ changing needs and desires. 5083 crore as compared to Rs. Thus. UNWTO has predicted a growth rate of 2-3% for international tourist arrivals in the world during 2008. transport. business receipts.21 lakhs in November 2008. financial services. • FEE in US $ terms during for the year 2008 were US $ 11747 million as compared to FEE of US $ 10729 during 2007. The spread of education has fostered a desire to know more about different parts of the globe. education and entertainment. each of which has witnessed a surge in their growth over the past few years. Currently its market size is USD 23 billion. clothes. According to National Council for Applied Economic Research (NCAER) estimates. This is indicative of a rise in spending on consumer durables. The primary research involved extensive in-depth interviews with over 35. religious. We have also adopted expense side approaches to estimate the market size for Eating Outs. there are a number of key industries. To estimate the overall market size in India. Takeaways. This paper is an attempt to present key facts and figures pertaining to these industries. the demand side approach has been used at an overall level. We have used a bottom-up approach to arrive at the total market size. the Indian hospitality market refers to hotels & eating out demand by Indians. Gross Domestic Product USD 1050 Billion Contributes 2. it has emerged as one of the key sectors driving the country’s economy. The size of the Indian hospitality industry is estimated as a sum of revenues of the two segments. Dhabas or any other form of unorganized sector. Visiting Friends and Relatives (VFR). is also contributing to this phenomenon. we have considered the consumption of Hotel services by Indian & Foreign consumers.000 consumers in India to understand their spending pattern on food & beverage and discussions with other relevant industry experts and panel members across the different sectors to understand the market size of Hotels in India and the growth factors. Indians are now spending 30-35% more on their holidays. Chapter 1 For the purpose of this report. An average increase in household income. The revenues generated from travelers for all purposes such as business. which consists of the domestic travel market (Indians travelling in India) and the inbound travel market (foreigners travelling in India). vacations and lifestyle products. electronics.2% of the GDP.6 million in 2000.Indian Hospitality Industry Outlook Indian Hospitality Industry – Overview For the purpose of this report. Riding on the economic growth and rising income levels that India has been experiencing in the past few years. We have estimated the overall market size using a mix of demand-supply approaches. fine dining. Compared to 2002. accounting for 2.2 million in 2007 from 14. leisure.800 a year. meetings and conferences make up the market considering they are using hotels during their stay and similarly the revenue generated by the consumers while they are eating out at any form of outlet – Restaurants. we have calculated the value of the different star category hotels in the country and to validate the estimations. with more and more double income households in the urban areas. entertainment. The hotel market is segmented into star categories.US$21. However. Quick Service Restaurants (QSRs). Furthermore. food & beverage. which is defined as the middle class. Laundry & Car Rental. we have based our valuations on the spending of Indian travel consumers on accommodation. there are 56 million people in households earning USD$4.2% to GDP Hospitality Market Size USD 23 Billion Source: Technopak Analysis and Economic Survey of India 2 . Vacations have emerged as the top priority for disposing of extra money. prominent amongst them are hotels and restaurants. The Indian Hospitality Industry is one of the fastest growing sectors of the Indian economy.400. We have used a two-pronged approach comprising of primary and secondary research. The disposable income of Indians is on the rise. Key Market Facts: Within the hospitality industry. The upper middle and high-income urban households were estimated to have grown to 38. expenses towards minor operating departments like Telephones. India topped the 2006 AT Kearney Global Retail Development Index. for the spending on food & beverage at eating outlets only the Indian Consumer has been considered. an upward trend in growth of overall Hotel Industry is further expected. Market Size & Projections* 40 35 30 USD Bn 25 20 15 10 5 0 2008 Unorganised 2009 1-2 Star 2013 3 Star 2018 4 Star 5 Star 16. and an addition of over 20 new international hotel brands by 2011.Indian Hospitality Industry Outlook Indian Hotel Sector . Of this.Overview As per an analysis by the Economy Survey of India and Technopak (2008). Despite a dip in the year 2009. whereby it is expected to grow to USD 36 Billion Organised market. On the demand side. over the past few years there has been a consistent increase in the number of hotel rooms which is close to 5 % in the last 3-4 years.7 30. Industry Reports * Overall market size (organised & unorganised) 3 .6 12% 2&1 Star (USD Bn) 1.17 billion in the next 2 years.7 Breakup of Organised Market (2008) 3 Star (USD Bn) 0. The investment scenario however looks positive.08 Billion) comes from the organized Chapter 2 sector.7 35. and requires further investment in this sector to meet the increased demand.7 14.1 22% 5 Star (USD Bn) 2. 70% (USD 11.4 8% Source: Technopak Analysis.9 58% 4 Star (USD Bn) 0. 30% Unorganised market. The Hospitality sector is expected to see an estimated investment of USD 12. the Hotel industry is a USD 17 Billion industry. A break up of the organized hotel industry indicates that the foremost contribution is coming from 5 star rated hotels. However the rate of increase is still not enough to meet the rising demand. 70% Source: Technopak Analysis by 2018.85 Billion) contribution comes from the unorganized sector and the remaining 30% (USD 5. quick service restaurants (QSRs) will flourish further. The organized sector is in fact expected to grow faster. Domino’s Pizza. QSRs Café Coffee Day Domino’s Pizza Barista McDonalds Pizza Hut US Pizza Nirula's KFC Costa Coffee Yo-China Total * As of January 2009 No. Along with the entry of new international brands transactional QSRs are expanding their presence in the country.6 8. 12 10 USD Bn 8 6 4 2 0 2008 2009 2013 2018 * Overall market size (organised & unorganised) Market Size & Projections* 9. Café Coffee Day.8 6. with each having further expansion plan.25%. the unorganized sector is expected to grow at 5% plus through until 2011. Despite slow down. of Outlets 718 220 189 155 137 60 60 59 43 30 1671 Expansion Plans 20-25 cafes every month 300 outlets by 2010-11 300 outlets by 2009 205 outlets by Dec-09 175 outlets by 2010 500 outlets by 2011 140 outlets by 2010 1000 outlets by 2014 75 outlets by 2009 200 outlets by 2009 4 .Overview Chapter 3 The Indian Restaurant sector is a USD 6 billion industry and is expected to be a USD 10 billion market by 2018.Indian Hospitality Industry Outlook Indian Restaurant Sector . at 20% .1 5.8 Organised Unorganised Within restaurant category. As high as 90% of the industry is unorganized and the remaining 10% is organized and is more of a metro urban phenomenon. KFC are some examples. Indian Hospitality Industry Outlook Phases of the Indian Hospitality Industry A look at the hospitality industry over a period of time will indicate a shift in focus. Mumbai. Phase III 2010 . Hampton Inns and Scandic 5 . Bangalore & Chennai Tier II & III cities Promotion of ‘Gateway’ Cities Only ~27% hotels approved in Tier 1 cities Tier II & III cities Promotion of ‘Gateway’ Cities Only ~27% hotels approved in Tier 1 cities PROPOSITION Overall the growth story started in the 80’s when the development of various hotels kicked off for the Asiad Games in New Delhi. In terms of operational aspects. Hotel industry in the past used to be polarized into two extremes – Luxury hotels on one end and unclassified hotels on the other. But it’s not just the development that has happened over a period of 3 decades. Any recession or downturn first affects the travel and hotel budgets of companies & the vacation plans of the leisure traveler. while initially the focus was very metro centric. spanning different geographies.2020 Phase II 2002 .2010 Phase I 1991 . IHG is also moving to only management contracts Management models to continue GEOGRAPHIC PENETRATION Phase III 2010 . there has been a shift from ownership and franchise model to handing out management contracts. which has kind of revolutionized the industry.2010 Phase I 1991 .2001 Tier I cities & famous tourist destinations Focus only on markets in Delhi.2001 Ownership & franchise model Emergence of management contracts Sarovar Hotels was master franchisee for Carlson Hospitality Shift towards management contracts Carlson Hospitality now has management tie-ups.2010 Phase I 1991 .2020 Phase II 2002 . Chapter 4 Technopak does an attempt to look at various aspects of this lifecycle and has classified the same as follows: OPERATING MODEL Phase III 2010 . Geographically.2001 Luxury hotels on one end and unclassified hotels on the other Emergence & growth of individual profit centers* Entry of mid-segment chains Taj Group has entered into mid-segment hotels with its Ginger brand Growth of established budget brands for a long term Hilton International plans to introduce mid-segment business brands like Hilton Garden Inns. But now there has been an emergence of mid segment chains of hotels. In future there will be more multi tourism in the offing. the shift is now towards Tier 2 and 3 towns and cities. What it indicates is that Hospitality Economics is kind of an indicator of the overall economy of the country. Hyderabad.2020 Phase II 2002 . This is especially keeping in mind the budget travelers. Looking at the past one will indeed realize that the hospitality industry is the first one to enter recession and the last to come out of it. While the next decade saw a shift of ownership model towards HMC. The growing economy did bring into limelight the advantages that a Tier II & III city had to offer in-terms of lower costs and the more friendly nature the state boards acquired to boost this much wanted development. This saw expansion of existing brands to have a budget segment / mid-market hotel brand to offer and at the same time various new entrants into the business that realized the potential. Existing players in diverse fields ventured into hospitality to take advantage of their brand equity. The value of land towards a hotel project stood at 5-10% of the overall project cost in metros till such times and the debt was primarily raised through conventional methods of approaching banks or Tourism Finance Corporation of India Ltd (TFCI) that was set up on the recommendations of Planning Commission in 1989. The industry is also expected to be matured by this time. 6 . the industry will see a lot of consolidation. The hotel companies moved towards revenue growths on year on year basis and took advantage of the imbalance. While the aggressive and rapid expansion started pushing the real estate costs up. UB Group ventures into hospitality Customer retention Business diversification Loyalty Factor The Tier II and III cities started attracting the eye of a business traveler. construction. real estate companies. This also lead to a creation of a big gap in the mid market segment as the organized sector had nothing to offer in this league. STRATEGIC FOCUS Chapter 4 Phase III 2010 .2010 Phase I 1991 . The over 65% unorganized sector is bound to go through a phase of identification – evaluation – selection wherein the franchisee partner is bound to have its flag hoisted once the evaluation criteria is passed. will see a rebound of the first phase. While the growth of budget brands will continue. it affected infrastructure development.2001 Funded by conventional methods JVs and tie-ups with international brands JVs with engineering. The investment needs for this cycle were achieved by both conventional means and at the same time by forms of Joint Ventures and Private Equity investments. The metros were the most sought after destinations as this is where the development and growth was happening in terms of infrastructure and business. as that has been regarded as the long term area of growth potential. considering that the new brand entrants into the business had by then made some ground in the country and were on an expansion spree. The following year’s post 2010 however.2020 Phase II 2002 .2020 Phase II 2002 . new businesses and at the same time new hotel projects. PE firms Acquisitions Emaar MGF & Accor group. Some of the key highlights are as below. the development was also sought after in the gap that was created in the first half of the cycle.Indian Hospitality Industry Outlook Phases of the Indian Hospitality Industry Strategic focus and investment requirements There have also been changes in their strategic focus as well as investment requirements.2010 Phase I 1991 . it also saw various franchise and hotel management companies (HMC) that came into the business.2001 Revenue growth & maximization Customer acquisition Identifying untapped customer segments Focus on CRM Business diversification Addition of new capacity Reliance Industries. INVESTMENT NEEDS Phase III 2010 . HCC group (lavasa) Refurbishments & Expansions under Brands While the first phase of business in 90s saw an aggressive expansion in the 5 star hotel segment. 2% of the GDP is expected to grow at 6. the future will be different as the market matures During FY2006-2007 and FY 2007-2008. Historically. India will need to add at least 150. A comparison of EBITDA of top three performers within hospitality. increased interest in the Indian markets and improved international access. Technopak however looks at the correction in average rates as much required. retail and healthcare industry indicate that the hotel industry is infact well placed.04 Healthcare USD Bn 0. This makes the hospitality sector as lucrative from investment point of view. the demand fundamentals are very good.2% CAGR USD Bn 50 0 Retail Healthcare Hospitality 7. and almost 20% growth in Bangalore. It will certainly make the destination much more viable to travel and will put in a fresh lease of life even in the current times of global meltdown.1% 34 Y2008 Y2013 Y2018 Source: Technopak Analysis (Healthcare Excludes Pharma Sector) The medium to long term view of fundamentals are very promising. This along with the extremely high tax structure did position the country to be as one of the most expensive tourist destinations. given the size of the economy. By virtue of first hand feedback from industry experts and its inhouse experience. While the business travel was limited to key metro cities and did happen because of the great & promising growth potential the country has to offer. Wockhardt figures for FY 2007 . stifled stock growth over the last five years is leading to a demand-supply crunch. With a current supply of just under 100. Overall the long term view is positive and the occupancies and ADR is expected to make a positive leap from FY 2010-2011. The flip side of the story was the fact that the same hotels went down by over 40-45% in ADRs during the off seasons (primarily the summers) This correction hence is looked at as a silver lining to the long term growth vision of the country. as compared to retail industry.6% 15. Hospitality 0.07 Chapter 5 room rate (ADR) growth of 40% reported in Delhi/NCR and Mumbai. Technopak is projecting an immediate correction of approximately 10% in the occupancy figures and that will be accompanied by 12-14% correction in the ADR. as the retail industry.98 42.2% ~2. and currently most investment opportunities are in assets being developed.03 0.0% 6. in comparison to the other two sectors. the RevPAR is expected to be down by 21% for the next financial year.03 IHCL EIH LEELA Shoppers Stop Pantaloon Retail Vishal Retail 0. Based on the government target for 2010. Technopak expects that continued economic growth. however. very few operating assets have transacted in the market.11 0. might well bring in higher returns.07 0. at 8%. which despite its high contribution of 35. In a global context. However. the population and the future potential of India as a tourist destination. is expected to witness a growth. which is marginally higher than hospitality sector.01 Fortis Source: Annual Reports. The long-term demand for India will mean that the country requires a lot more hotels to service that future demand. With these de-growth figures for the coming year. Hospitality 50 40 USD Bn 30 20 10 0 Y2008 Y2013 Y2018 23 CAGR 6% 38. The total known supply in the pipeline for major Indian cities (as of March 2008) through to 2011 currently stands at just over 29. will boost inbound travel in India.01 Apollo Wockhardt 0.Indian Hospitality Industry Outlook Comparisons with Retail & Healthcare Hospitality sector which is currently contributing 2. combined with the modernization of major airports.000 rooms and some of this supply will be delayed given the turmoil in the global financial markets.000 new rooms in the next four years. The hotel investment market in India will see an increase in volume going forward.3% to the GDP. This only goes to corroborate the fact that investment in the hospitality sector. the five-star deluxe and fivestar hotel segment in key Indian cities recorded strong growth in revenue per available room (RevPAR) with year-on-year average daily 7 Retail USD Bn USD Bn 0.3% ~3. The great Indian imbalance between Demand & Supply had pushed the ADRs to great heights.04 0.6%. the leisure destinations and Meetings-Incentives-Conference-Exhibitions (MICE) business was getting effected to a large extent.17 Retail 1000 800 USD Bn 600 400 200 0 Y2008 Y2013 Y2018 368 552 CAGR 8% 772 Healthcare 150 100 68 CAGR 15% 136 Sector GDP Contribution ~35. such growth levels are not sustainable over the short term & long term as room rates are expected to adjust to more realistic levels as new supply come online and the terror attacks and the global meltdown impacts the industry as a whole.000 rooms. 07 Billion. Industry Reports. A new form of tourism fast catching up is medical tourism. and the Government of India has introduced a new category of visa .44 Source: RBI. Further. Industry Reports.2% to the GDP. Rising GDP Overall there has been a positive growth of the India economy with a growth rate of 9. amounting to USD 1. The Ministry has also sanctioned 102 rural tourism infrastructure projects to spread tourism and socio economic benefits to identified rural sites with tourism potential. several number of incentives have been announced at the Central as well as the State level. rural areas hold great potential and the Ministry of Tourism has tied up with the United Nations Development Program (UNDP) to promote rural tourism. Rising GDP FDI In ow Increasing domestic and international arrivals Changing consumer dynamics Internal Growth Drivers Demand supply imbalance New entrants in the sector Regulatory Growth Drivers Policy & Tax Incentives and Amendments The Department of Tourism. in-line with the past investment trends. employee sports. JLL Report 2008 The hospitality sector requires over USD 10 Billion investment in the next two to three years for which the government is relying on FDI as well. the GDP growth for 2008-09 is projected at 7.‘Medical Visa’ (M’-Visa).56 Elimination of Customs Duty for Import of raw materials. JLL Report 2008 2. recreational facilities and city and regional level infrastructure. the Government of India is recognizing spare rooms available with various house owners by classifying these facilities as the ‘Incredible India Bed and Breakfast Establishments’. Regulatory Growth Drivers External Growth Drivers Policy incentives and amendments Tax incentives New product development Chapter 6 New Product Development A concept which is popular abroad and is fast catching up in India is the “bed and breakfast” concept.Indian Hospitality Industry Outlook Key Growth Drivers The burgeoning growth of India’s hospitality industry can be attributed to a number of factors which may be broadly classified as below. As of date the Government is allowing foreign direct investment (FDI) in all construction development projects including construction of hotels and resorts.56% of the total inflow. equipment. FDI Inflow Of the total FDI inflow between 2000 and 2008.1%. which can be given for specific purpose to foreign tourists coming into India. liquor etc Capital subsidy program for budget hotels Fringe Benefit Tax exempted on crèche. Incentives at Central Level Incentives at State Level External Growth Drivers 1. under Gold’ or Silver’ category In context to the development of tourism in the country. there has been a reduction of expenditure tax for upscale hotels. In adherence to this. Further the Tourism Ministry is planning to permit the issuance of visaon-arrival by 2009 (from specific countries under pilot project) in an effort to foster tourism in the country. The hospitality sector is expected to contribute up to 2. guest house facilities Five year income tax holiday granted to 2-4star hotels established in specified districts having UNESCO-declared 'World Heritage Sites' Exemption of Luxury Tax and Sales Tax for 5-7 Years for new Projects Small capital subsidy for the development of budget hotels Below market rate allotment of land controlled by State for development projects Five year income tax holiday for 2-4 star hotels and convention centers (minimum seating 3. To give a boost to the hospitality industry at the central and the state level.000 people) in NCR In order to increase Built-up area in Delhi. 1.6% and 9% in 2006-07 and 2007-08 respectively. the hospitality sector has contributed 1. zonal auction rate has been brought down Non Hospitality Hospitality 98. 2500 2000 2135 1050 1487 USD Bn 1500 1000 500 0 783 Y2003 Y2008 Y2013 Y2018 Source: RBI. 8 . Government of India has initiated a number of steps to ensure full utilization of the potential which tourism holds in India. Despite slowdown. 7 3.000) 2025 Seekers (200-500) Aspirers (90-200) Deprived (<90) 3.1 106 74.37 million compared to 5.000) 2015 Seekers (200-500) Aspirers (90-200) Deprived (<90) Globals (>1.2 2. Driving this growth is the increased use of credit cards for the purpose of purchasing due to attractive and consumer friendly schemes being offered by various banks.4 5.6 3. Changing Consumer Dynamics & Ease of Finance Nominal per capita income growth averaged around 7. Industry Reports 9 . The Ministry of Tourism’s vision is to achieve a level of 760 million domestic visits by the year 2011.5 33.9 93.4 5. Foreign exchange earnings increased by 8%.8 21.9 91. Industry Reports Credit Cards: India is the second fastest growing financial cards market in the AsiaPacific region.4 14% 15% 3. Industry Reports 25% 20% 15% 10% 5% 7% 2004 2005 2006 2007 2011 400 392 462 366 200 0 309 2003 0% Domestic Travellers (Mn) Growth % Source: Ministry of Tourism.9 30.1% during 2004-08 Household Income Bracket INR ‘000 Globals (>1.000) Strivers (500-1. CitiBank and Kotak Mahindra to offer “holiday now…pay later” schemes like Thomas Cook-Citibank Holiday loans. 35% of those who use credit cards use it for travel. a CAGR of 14%.000) Strivers (500-1.1 9. Increasing Domestic & International Tourist Arrivals There has been an increase of tourist flow.9 13% 12% 4.3 3.3%.7 20.08 million during 2007.8 15. 7% 10% 35% 10% International Foreign tourist arrivals (FTAs) were up by 5. Cox & Kings and SOTC have tie-ups with ICICI Bank.5 billion in 2008 from USD 10.3 5.70 billion in 2007 The Ministry of Tourism aims to achieve a figure of 11 Bn by 2011 International Tourist Arrivals 12 10 25% 30 11 25 20 Travel.4 Globals (>1. Trillion 2 1.6 3. the number rose to 529 million in 2007. These banks also offer products like personal loans for the purposes of travel. Value Retailing – Angel Broking 2008 0 2003 2004 2005 2006 2007 2008 2011 International Travellers (Mn) Growth % Source: Ministry of Tourism.6 Source: Technopak Analysis.6 13.000) Strivers (500-1.7 2.5 55. which was higher than the average inflation rate of 5. to USD 11. with an annual average growth of 12% Domestic Tourist Arrivals 800 600 15% 19% 18% 760 15% 529 12% 3. Domestic From 310 million domestic visits in 2003.1 INR.1 6% 15 10 5 0 35% Source: Technopak Analysis. The Credit Card base in 2008 is estimated at 25 million and this is expected to grow at 20-25% per annum.3 101.0 5.9 6. hotel as well as dining.Indian Hospitality Industry Outlook Key Growth Drivers Chapter 6 Holidays on EMIs: Players like Thomas Cook.1 11.000) 2005 Seekers (200-500) Aspirers (90-200) Deprived (<90) Number of Households Aggregate disposable Income Figs in Mn 1.1 49.1 94. 4. Hotel and Dining Apparel Jewellery Consumer Durables Others 8 6 4 2 2.4 10. both domestic as well as international.2 14.7% during 2008 and clocked 5. 473 84. Regis in India via SPV after acquiring 30% stake in Viceroy Hotels Vijay Mallya owned UB Group diversi ed to set up King sher Airlines and acquired Air Deccan Source: Industry Reports.398 2 & 1 Star 58. Demand Supply Imbalance Statistics on the demand and supply for hotel rooms indicate that India currently has around 114.000 1.000 60. Gap in number of rooms 80.600 315 3 Star 1. of Hotels No. Industry Reports 2.Indian Hospitality Industry Outlook Key Growth Drivers Chapter 6 Internal Growth Drivers 1.200 hotel rooms spread across the various hotel categories and is facing a shortfall of 156. JLL Report 2008 10 .200 17. Provided below is a snap shot of few entrants in the sector.000 0 Total Demand Total Supply Gap No. private equity firms. Example In 2007 DLF ltd.327 114. The transaction is estimated to be valued at USD 360 million IT Companies: IT and ITeS companies are amongst the biggest hospitality clients.200 Need Gap to be lled Approved No. marring the hospitality industry. Wipro has an inventory of 500 rooms Some of these PE investments include Warburg Pincus USD 60 million investment in Lemon Tree Hotels USD 60 million investments by Credit Suisse in the Park Hotels ADAG is in talks with Starwood Hotels & Resorts for bringing their luxury brand.000 hotel rooms resulting in New Entrants in the Sector Real Estate Companies: Real estate companies have the bandwidth to invest high amount of capital required by the hospitality industry the emergence of different players in the industry ranging from real estate companies. New Entrants in the Sector Gap in demand and supply of hotel rooms is one major shortcoming. St.000 204 5 Star 20. FHRAI.000 95 4 Star 71.000 40. The Current Supply 2.000 rooms. announced its equal partnership with Aman resorts. of Rooms Source: Technopak Analysis.500 1. and IT companies.000 500 0 30. In metro cities the room rents have simply sky rocketed. This is especially the case with mid segment and budget hotel categories where exists a large gap in supply. of Rooms 270.400 impact of this demand and supply gap is felt by way of increased room tariff. Ministry of Tourism.000 8. The need of accommodating their clients and visitors luxuriously is prompting them to maintain their own accommodation facilities Private Equity Firms: Many private equity funds are allocating as much as 50% of their planned real estate investments into the sector as hospitality remains a highly under serviced area with a huge demand supply imbalance Internal Diversi cation: Established leaders in various core sectors and at times family owned have diversi ed into hospitality business on a strong nancial backing and an urge to make a mark in this sector Infosys Technologies has a country wide room inventory of 13000. This is likely to be negated as in response to the shortfall the Government of India until December 2007 has approved construction of 85. Heightened awareness of consumers towards their environment has brought into prominence the concept of eco tourism and agri tourism. Similar sentiments seem Hotel Starwood Hyatt Intercontinental Marriott Accor group Hilton Loyalty Program Starwood Preferred Guest Hyatt Gold Passport Priority Club Rewards Marriott Rewards A|Club HHonors No. biotechnology and medical tourism sector. have immense potential to grow. of Members 09 Mn (worldwide) 18 Mn (worldwide) 40 Mn (worldwide) 20 Mn (worldwide) 0. “India’s consumer market is in a transformational state with dynamic changes in the demand pattern. BPO.Indian Hospitality Industry Outlook Key Emerging Trends To round up. Chennai and Bengaluru • Brigade group is focusing on the hotel-cum-mall options with Brigade Metropolis. retail. a trend which has been visible internationally lately. are still offering loyalty programs. This has also brought into limelight Medical Tourism. Cafes.” This was more in context of the retail industry. Emergence of profit sub centers: Diversification holds the key to survival in the long run. retail spaces. • The Leela Kempinski. Asia. Gurgaon is located in a mixed-use complex of luxury residences. regional operating officer. But mid-segments budget hotels. There is an increased flow of people. thereby reducing efficacy of many loyalty programs which Hotels target towards their customers. Their growth is likely to be due to increased demands of the IT. Chapter 7 to echo in the hospitality sector as well. whereby the government should permit mixed-use hotels under the automatic route and facilitate financing through incentives to financial institutions and lenders. Guests today are becoming increasingly unpredictable and quickly switch their patronage for better deals across hotel segments. retail-led mixed-use developments in Mumbai. SPAs are appearing at hotel properties at a remarkable rate & are becoming independent profit centers. Recent trends strongly suggest that the franchise model of business has taken a backseat and the focus is shifting to Management Model. to India for medical services. Some examples are as below: • Kshitij introducing ‘Market Cities’. The hotel industry isn’t behind. Metro Cash & Carry International. Trends in the Hotel Industry 1. Below are a few factors driving this operating model.6 Mn(Worldwide) 17 Mn (Worldwide) 11 . especially those from the west. here are some of the emerging trends witnessed in the hospitality industry – Hotels and Restaurants. 4. • Hotel operation is a critical process where efficiency has to be spot on and this is where the management model stands out • There are a number of properties developing with a fewer number of operators 2. a business hotel being developed at Chennai. had said. III cities. ITES. entertainment and wellness facilities This calls for de classification of hotels as commercial real estate. Current market for Medical Tourism in India is USD 533 million. entertainment. Hong Kong SAR. Changing Consumer Dynamics & Ease of Finance Unlike in the west. franchise model has not been a success in India. expected to grow to USD 3.29 billion by 2018. Emergence of mixed land usage Mixed-use developments incorporating residential. 3. What accounted for its success in the west is a consistency in the product offering along with strict regulations by the government on hygiene and health which has helped the franchise model to flourish. New Avenues of Growth Service apartments. Diminishing Brand Loyalty James Scott. lounges & bars which have high profit margins are increasingly growing in various hotels. hospitality and corporate venues are fast emerging in metros and tier-II. fractional ownership and company hotels or guest houses. time sharing. KPO. Leisure & Entertainment with Eating Out Eating out is an activity closely associated with fun. Name of Company Gammon India Ltd Accor Bessemer & New Vernon Private Equity Lemon Tree Hotels Roots Hotels (Part of IHCL) Berggruen Hotels Istithmar Hotels (Dubai) Golden Tulip Partner Wyndham Hotel Group Emaar MGF Land Ltd Sarovar Hotels Warburg Pincus (PE Firm) Berggruen Holdings easyHotel (UK) Leyland Group Hotel Brand Formule 1 & Ibis Hometel Lemon Tree & Red Foxx Ginger Keys Golden Tulips & Tulip Inns Investment (USD) 75-100 Mn 200 Mn 8. India leisure and entertainment trends 2008-09 – The Knowledge Company 3. Spanish.000 budget rooms while the requirement would be for 40. Some of the popular examples are the Great Kebab Factory.Cochin. Reasons for Eating Out Fun Time with Family Relaxation Mood upliftment Time for Self Refresment 3% Source: Industry Reports.Kolkata • Sports Bars: The All Sports Bar. guests in a specialty restaurant are restricted to order food from just one cuisine. Due to the huge demand-supply gap of middle-level hotel rooms. Ego Thai.originally at Radisson. It is seen as a way of reinforcing the need to be socially active and connected. Hence “multi specialty” restaurants draw a balance by providing choice while maintaining a specialty theme or cuisine and offering wider options to the consumers. which clearly indicates a huge growth potential of budget hotels.Leela Palace Kempinski. and rising “individualism”. Bengaluru. Japanese. Growth of Budget Hotels Leading groups present in this segment are Ginger Hotels. Changing Business Model External Brands: Hotels are bringing in restaurateurs under a management contract or lease to capitalize on a proven restaurant concept that generates substantial revenue by attracting hotel guests and local residents.Indian Hospitality Industry Outlook Key Emerging Trends 5. French.000-50. Monastery of Art . Restaurant Asia 7 Group Lite Bite Specialty Oriental Multi Specialty Burmese. Vietnamese. Thai. Individual Restaurants: Popularity and brand value of certain restaurants within a hotel enables them to become individual profit centers and move out of the hotels. Almost half the Indian eat out regularly.5 Mn 62 Mn 33-44 Mn Aromas of China 100 Mn 80-120 Mn 200 Mn Olive Bar & Kitchen Samarkand BJN Group BJN Group Chapter 7 • Café with Art Gallery: Kashi Art Café. 25% 18% 13% 13% 7% • Café with Library: The Library Bar. Currently 3 & 4 star hotels together account for 22% of the total room supply in India. Sagar Ratna & F Bar at Ashoka Hotel. Korean. and Choice Hotels. even if it might not be an immensely entertaining activity just yet. Italian and Greek Cantonese and Shanghai Mongolian. Further for the Commonwealth games in 2010. Amoeba Sports BarBengaluru 2.New Delhi • Café with Movie screening: The Mocha Film Club 12 .New Delhi. Ibis. Italian and Spanish Fresco & Co Lite Bite Mediterranean Chinese North West Frontier Mediterranean Source: Industry Reports. Fortune Hotels. Increasingly Food and entertainment are being brought together by Indian Entrepreneurs. an investment of 835 million is proposed for these hotels in the next 3 years. Café Coffee Day at Ginger Hotels are some of the examples. Moroccan. News Articles Source: Industry Reports. ITC retailing Bukhara products. They hence leverage by opening chain restaurants outside hotels. India leisure and entertainment trends 2008-09 – The Knowledge Company Trends in Restaurant Industry 1. the government is expected to provide 10. Indonesian.000 rooms in the budget category. Afghani and Samarkand French. Barista Crème at The Leela Palace Kempinski. Malaysia Portuguese. Lemon Tree.Hyderabad.Boutique Art Café. Rise in Multi Specialty Cuisine With higher inclination towards “Fun” and “Time with family”. Sarovar Hotels. Le Cafe De Art Coffee Shop. Bengaluru. Convergence of All Elements Convergence refers to the integration of voice. With the same IP network. but also become accessible to customers by way of extranet. companies can run video over the network for teleconferencing. In the Internet age. Integration of Business and E-Commerce Technologies The development of new technologies has made it possible for businesses to use Internet technologies to transform their old business technology solutions into an integrated system. Disintermediation and Re-Intermediation The process of cutting off the middlemen is what has been referred to as disintermediation and the trend is widely seen today. Pizzas Source: News Articles and Publications Key Technology Trends 1. Bangalore. providing 24/7 customer service. a feature that can potentially accrue tremendous savings in travel 2. Websites like Expedia & Travelocity have taken up the online travel agent role very effectively. and video into a single. With the same Internet Protocol (IP) network. This process is referred to as re-intermediation. Companies are increasingly revamping their brand websites to reach the end consumer directly. Hotels’ Property Management Systems (PMS) are not only transformed by the use of Intranet. Gurgaon. They are also incorporating the loyalty factor and corporate account structure to enable a secured environment The Internet also creates a new platform for introducing new e-commerce businesses to fill the void left by traditional middlemen. Front End and Back End Integration With increased focus on productivity and efficiency level enhancement. customization. New CRM Tools to Meet Expectations New technologies are being used by Online Travel Agents (OTA) companies and hotels to get users to visit their sites. companies are moving towards front end and back end integration. Internet Protocol (IP) based network. Delhi. ‘Farm to Fork’ concept aims at minimizing the steps from the farmer to the final consumer. 13 . Amul Dairy Coop Amul Utterly Delicious Ice creams. a feature that can potentially accrue tremendous savings in travel. and target marketing are in. Sandwiches. Group Alchemist Activity Chicken Processing Restaurant Republic of Chicken Products Chicken Dishes Presence Chandigarh. data. Delhi. Baroda. Hotels are increasingly using 2 way interface Central Reservation Systems that enables complete integration of their systems and helps to manage their inventory and pricing across multiple channels 4. companies can run video over the network for teleconferencing. mass marketing and commercialization are out. Mumbai. Surat Chapter 7 3. and personalization. Milkshakes. It allows customer to easily find and buy the products they need and enable electronic customer relationship management (e-CRM) by customization and personalization.Indian Hospitality Industry Outlook Key Emerging Trends 4. Retailers are in the process of establishing direct consumer points to enable a smooth transition of goods from the farm to the consumer and enhance brand value. travel information distribution and customer service. Destination Management Companies (DMCs) are using Internet as a central platform for streamlining functions of marketing. Faridabad Ahmedabad. Hyderabad. It is expected that average occupancy levels across major cities is likely to decline from the current average of 65-66% to 57-58%. 14 . varying from 5% to 20% on rack rate. The key challenges facing the sector may be broadly classified as below. Land cost as a % of Total Investment in Tier I Cities-1990 ~5% Land cost as a % of Total Investment in Tier I Cities-2000 ~15% Land cost as a % of Total Investment in Tier I Cities-2008 ~25% 10% 12.Indian Hospitality Industry Outlook The Key Challenges The optimism surrounding the Indian Hospitality sector isn’t without glitches. Highest import duty on imported liquor used in hotels • Although the rates of basic duty have been brought down to 182% from 210%. 2. To mitigate the crisis situation leading hotel chains like the Taj & Oberoi have set up a panel to handle security related issues and are investing towards upgrading their existing security infrastructure 3. the same remain at considerably high levels. Taxes (%) Luxury Tax applicable on Room Luxury Tax Value Added Tax-F&B Delhi Published Rates 12. Due to high duties and the imposition of several taxes by the various state governments the industry ends up paying multiple taxes.5% 12% Gujarat Published Rates 6% 15% Maharashtra Actual Rates Goa Actual Rates Kerala Actual Rates Haryana Actual Rates External challenges 1. Leisure destinations like Goa.5% Source: Steering Committee on Tourism of the Planning Commission for the 11th five year plan (2007-2012). Chapter 8 Regulatory Challenges Multitude of Taxes High Taxes External Challenges Economic Slowdown Impact of Terrorism Cost of Land Cost of Debt Internal Challenges Skilled Manpower Shortage Regulatory Challenges 1. Impact of Terrorism Terror attacks have created a sudden shortage of room supply of about 885 rooms from a total of around 2.6% 10% 12. Kerala etc. Its impact can be felt by way of a drop in room occupancies and restaurant customers. impacting their profit. rather than the actual. There has also been a freeze on new recruitment. The service tax levied on tour operators leads to double taxation and increases the burden for the tourists. Cost of Land Land prices in India constitute almost 25% of the cost of the property. Industry Reports Similar challenges also face the restaurant industry some of which are as below. are likely to be affected more than business destinations. adds to the industry’s financial dilemma. whereas it accounts for only 15 -20% of project cost overseas. which need to be overcome to realize its potential to the fullest.5% 15% 12. There are a certain challenges that face the sector. India has the highest tax rate on tourism projects in the Asia Pacific region. No Uniformity in Taxes & High Tax Structures Prime amongst regulatory challenges emanates from the tax structure. The rising land cost and low FSI.238 premium segment hotel rooms in South Mumbai. This cost has only been on the upward side. Average Room Rate has dropped by 10-15%. High Import duty on Kitchen equipment • Current import duty on Kitchen Equipment is 31% + 4% surcharge. Luxury tax on the rack rate increases the effective rate of tax by 25% to 30%. Each state has its own criteria for luxury tax. As cost cutting measures hotels have put on hold their expansion plans for the moment.5% 10% 12. which increases their overall costs by a huge margin. Economic Slowdown The dreaded “R” has cast its gloom over the hospitality industry too. • Even with trained hospitality workers. F&B production. 15 . it has impacted government allocations and subsidies towards the sector. as (a) banks are not looking at funding beyond the period of 7 to 9 years.5: 1 globally. Industry Interaction & Reports 140. Even the RBI has stopped foreign currency loans under its External Commercial Borrowing (ECB) guidelines to the hospitality sector.70 Chapter 8 Internal Challenges 1. However there exist a huge gap in manpower availability.50 234. Housekeeping. Total Employment Generation in Next 5 Years Current Employment bandwidth of Hotels Gap Source: Crisil Report. thereby further choking debt funds. These training facilities produce around 10. and (b) they have made lending norms and process more rigorous. However this doesn’t solve the crisis faced by the budget hotel segment.300 repayment of loans beyond 11 to 15 years. Other reasons contributing to the manpower worries includes: • Bright and educated younger generation has never considered hotel industry as a progressive employment option. Further since the sector has not yet received ‘Infrastructural’ status. Gap in manpower availability 42.19 an ore att Lah nh Ma . given the preference of graduates for the 5 star segments.Indian Hospitality Industry Outlook The Key Challenges 4.100 FSI Comparision in CBD 15 10 10 12 0.500 graduates in various courses every year.8: 1 in India. But the current borrowing and lending scenario is not something to cheer about.75 1. The only silver lining remain in the fact that there has been no major impact on the private equity fund flow into the country as these funds prefer to stay invested for the longer term.05 i-N CR Mu s yo hai Tok ng Sha 1. Industry Reports Currently there are 25 Institutes of Hotel Management with 180 other Institutes providing Degree/ Diploma courses in F&B service. there is more demand overseas.71 3 mb ai 3 i Par . Cost of Debt The industry is capital intensive and has a long gestation period. especially so with the budget hotel segment. compared to 1. Skilled manpower shortage The hotel sector is labor-intensive with an average employee-to-room ratio of 1.64 2. with 20 16 12 8 4 0 g Ban Population 2007 (Cr) .70 1.75 alo re lh De 1.27 1.500 Gap No of Graduates in next 5 years from 105 Institutes Source: Technopak Analysis.900 52. Incentives.000 budget rooms while the requirement would be for 40. Innovative Operating Models Hotels are adapting to innovative modeling by bringing in external brands of restaurants. Mall-hotel a win-win scenario: For the Commonwealth games in 2010.5 years Hotel Operations Management Training – 2 years Source: Technopak Analysis.Indian Hospitality Industry Outlook Key Opportunities New Avenues of Growth MICE: Meetings.56-17.89 1. Kohinoor Group Welcomgroup Taj Program Welcomlegionnaire Program – 4 years Taj Management Training – 1.are a new concept which many hospitality companies including travel trade are adapting to. Based on assumption of 10% of the Market Share and a 2% admin fee GPO revenue potential from FF&E categories would be USD 8 million over the next 5 years. lounges on lease or management contract to benefit from the proven concept that generates substantial revenue.22 5 Star 50 Medium Budget Hotels Convention Centers Low Medium Car Rentals High Price Annual Opex Purchase per Hotel (USD Mn) 0. Housekeeping.78 million (discounting the bigger ready-made market comprising juices. ITC. Together all the institutes produce 10. the country provides opportunities for various International brands to enter India for long term commitment Investment in Hospitality Institutes As mentioned there are 25 Institutes of Hotel Management (IHM’s) and there are about 180 institutes (150 colleges in the private sector) granting certificate/diploma/degree courses in specialized areas like F&B production. Cooperative Research Centre for Sustainable Tourism of Australia. Conventions and Events .22 million). Availability High 5 Star Hotels Chapter 9 Towards achieving this international linkages have been formed for the qualitative growth of these institutes.67 Low Source: Technopak Analysis. like Sabols based in South India. To overcome the shortage of manpower there are scope for more hotel groups can come up with their own institutes or programs to meet the demand for trained personnel in the industry. is repositioning itself. lounges within hotels enables these players to become individual profit centers and move out of hotels as separate chains and thereby expand their presence in the market.500 graduates in various courses every year. Tasty Bite. the National Council has signed a MoU with VATEL International Business School (France). There is also a rising demand for frozen food. Success and popularity of restaurants. spas. Singapore Hotel Schools. There is an annual opex addressable market of USD 1 billion in the current year and by 2010 it will be USD 1. Today.22 million.000 rooms in the budget category.000-50. has ample room for growth. Annual admin fees revenues from opex categories would be USD 2. In this scenario. below. in India there is no major domestic player existing that can leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. Indian market for frozen and processed foods products will be USD 148. Currie Classic. Factors such as increased pressures on time.89 4 Star 22.56 2.96% share of the world’s meetings which although miniscule. The inbound MICE segment is growing at 15 to 20% annually.45 million in 2010 and USD 3 million by 2013. Category Capex Purchase per Hotel (USD Mn) 3 Star 8.2 billion and USD 1. 16 . spas. busy lifestyles and increase in the number of dual income households have lead to a steady growth in sales of ready to eat packaged food. the mall-hotel arrangement is a win-win situation for both hoteliers and developers. Key players MTR. the market is worth USD15. Ministry of tourism Overall opportunity for new hotels exists across all segments or star ratings. Growth of Group Purchase Organizations (GPO) Currently. showing a clear demand-supply mismatch. government is expected to provide 10. which specializes in packaged drinking water. India gets close to 0. F&B service. noodles etc which together put the market cost to USD 222. Ready-to-eat food sector is growing by 20% annually. to tap this growing market. As per industry estimates by year 2009. Crisil Companies currently engaged in a particular product line. Smaller hotels in malls would lead to lesser investment due to decrease in real estate cost and smaller inventory. There will be with a total capex (FF&E) addressable market of USD 4 billion over the next 5 years. Ministry of tourism. With the current growth levels and supply gap and 100% FDI allowed.5 billion by 2013. Countries like Singapore and Malaysia have grown exponentially in the MICE market. Some examples are as Home Meal Replacement Market Market for ready to eat/ make products in India is fast catching up. This was introduced to get more hotel rooms in the city with a clear vision for the 2010 Commonwealth Games. The NE states of Sikkim & Arunachal Pradesh have seen a growth of 20% in tourist arrivals over last year (2007) thanks to primarily the free air fare scheme of the GoI which resulted in approximately 8% of the total work force of central government employees visiting the region. bad roads. It should be given full benefits of concession for infrastructure facilities available to other sectors like airports.Indian Hospitality Industry Outlook Key Recommendations Technopak takes this initiative to re-emphasize the recommendations made earlier on various platforms. The other metro cities are also struggling with the same problem and with an extension of tax holidays to pan India basis. However. increased demand and lack of infrastructure is today leading to a huge shortfall of rooms and this could lead to negative brand image for the region. The major advantages of PPP are: • Acceleration of Infrastructure Provision • Faster Implementation • Value for Money • Partnership Building • Enhanced Public Management • Genuine Risk Transfer • Output Specification • Asset Performance & Reduced Costs • Performance-Related Reward • Private Investment Promotion • Improved Quality of Service With the targets that have been kept for the tourism growth in the country. power projects and gas distribution networks. PPPs enable the public sector to benefit from commercial dynamism. Chapter 10 harnessed through the introduction of private sector investors who contribute their own capital. The special tax holidays were introduced by the GoI for the NCR region of New Delhi. While the airports are now going for an aggressive face uplift. As per the annual Hogg Robinson Hotel survey. growing at 10 per cent per annum. A uniform tax structure for Rooms and Food & Beverage across the country is much required. India is out pricing itself as a holiday destination over other competing destinations like China. However. only a total of 10. in metro hotels. innovation and efficiencies. Technopak proposes in Public Private Partnership (PPP) across various tourism projects in the country. Uniformity in price points across various seasons and a competitive pricing against the SE Asian destinations will definitely help in getting more tourist arrivals in the country in the long run 17 . inadequate water supply and unreliable communications has a direct impact on the growth of the hospitality sector. New York offers up to 15 FSI while NCR offers a dismal 1. Annual demand for trained manpower in hotels and restaurants is likely to touch 29. it’s still has to be ensured that the consumer experience is uniform across the country. the demand supply imbalance is not just limited to NCR. The abolition of service tax on tour packages will also help push tourism in the country. Most comparable cities across the world offer better FSI’s than their Indian counterparts. FSI norms are frozen in India as opposed to the typical practice of raising FSI rates. skills and experience. Section 32 of the IT Act should be amended to restore the depreciation rate to 20%. The Government of India should accord the Infrastructure status for Hotel Industry under Section 80 I/A of the Income Tax Act 1961. The FSI norms need to be rationalized across the country in order to allow maximum utilization of space and thereby making rooms affordable. The additional depreciation applicable to Plant & Machinery u/s 32 1 (ii a) should also be allowed to hotels which have to make heavy investments in plant and machinery Rising land costs coupled with low FSI is making hotel projects appear financially unfeasible as breakeven projections and the stabilization forecast run well beyond the typical ten year cycle.000 by the year 2010. seaports. However. Hotel-run-institutes will also tackle the escalating attrition rates.75 FSI High taxes in the country and a non-uniformed tax structure have been a key challenge when it comes to traveling a trip to the country – be it a leisure tour group or a corporate incentive group. Poor infrastructure including power shortages. Brazil and South Africa which have followed a much better approach of gradual increase in tariff with parallel growth in quality of product and services. Mumbai has seen a growth of 18% in its Average Rates over 2007 and has moved up from 6th most expensive city last year to the 4th position in 2008. it is imperative to ensure that we do have a trained manpower and resources. it will definitely help new hotel development. on a base of 18-25 per cent.500 students are being trained in hotel management and food craft annually. the ability to raise finances in an environment of budgetary restrictions. including SMEs and MNCs. skill development and water. technologically innovative. With 64 offices in India.cii. CII serves as a reference point for Indian industry and the international business community.in Confederation of Indian Industry Reach us via our Membership Helpline: 00-91-11-435 46244 / 00-91-99104 46244 18 . assisting industry to identify and execute corporate citizenship programmes. New Delhi – 110 003 (India) Tel: 91 11 24629994-7 • Fax: 91 11 24626149 email: [email protected] Hospitality Industry Outlook About Confederation of Indian Industries (CII) The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the growth of industry in India. Singapore. livelihood. playing a proactive role in India’s development process. France. 8 overseas in Australia. Complementing this vision. industry led and industry managed organisation. Founded over 113 years ago. Institutional Area. not-for-profit.000 companies from around 380 national and regional sectoral associations. China. partnering industry and government alike through advisory and consultative processes.org • Website: www. with a direct membership of over 7500 organisations from the private as well as public sectors. CII catalyses change by working closely with government on policy issues. Japan. Lodi Road. CII is a non-government. Partnerships with over 120 NGOs across the country carry forward our initiatives in integrated and inclusive development. Austria. socially and ethically vibrant global leader by year 2022. and an indirect membership of over 83. it is India’s premier business association. Major emphasis is laid on projecting a positive image of business. USA and institutional partnerships with 271 counterpart organisations in 100 countries. reflects its aspirational role to facilitate the acceleration in India’s transformation into an economically vital. It also provides a platform for sectoral consensus building and networking. CII’s theme “India@75: The Emerging Agenda”. UK. enhancing efficiency. education. diversity management. which include health. to name a few. competitiveness and expanding business opportunities for industry through a range of specialised services and global linkages. The Mantosh Sondhi Centre 23. Diagnostic Review of existing Customer Relationship Management Strategies • Balanced Scorecard Capital Advisory • Supporting business strategy and execution with comprehensive capital advisory in our industries of focus • M&A. Detailed analysis of market/ industry • Multiple options for possible entry of any firm into the hospitality industry. Technopak is strategic advisors to its clients during the ideation phase. In 2008. Healthcare. Assistance of setting up of international representation offices • Organic growth strategy. Customer Relationship Management • Revenue Management. in 20 countries besides India. Technopak consults with clients across the world. Market Positioning. performance enhancement impetus.facts. • Destination Promotion. it worked with over 170 Clients across 200 projects.Indian Hospitality Industry Outlook About Technopak A leading Management Consulting firm offering strategic advice. operating in Retail. consumer insights and capital advisory. as a Management Consulting firm across diverse industries. Feasibility and Assistance – Government Initiatives 19 Performance Enhancement • Performance Review . Technopak has offered services to have far reaching impact on client businesses. Human Resource Audit. • Real Estate Search – Lease/ Buyout. Marketing and sales implementation • Organization design and creation. This enormous knowledge and talent pool enables Technopak to create special customized teams for each project depending upon the client requirements. Sector specific industry study and analysis Start-Up Assistance • Operations and industry expertise to deliver “turnkey” business incubation and create value for our clients • Market feasibility study. Financial Planning • Organizational Design & Structure. to leading Indian and International companies. strong industry relationships and a global footprint. Consumer Products. implementation guides through start-up and a trusted advisor overall. Partner Search. Due Diligence – commercial & financial. Entertainment and Real Estate sectors Since it’s inception in 1991. Thane (Mumbai) and Bangalore. The team currently comprises 300+ skilled professionals from leading International and Indian engineering and management institutes. Food Processing. Technopak Hospitality Service Offering Business Strategy • A framework to inform and make value creating tradeoffs . Fashion (Textiles & Apparel). across 5 continents. Brand Partner Search • Business Start-up. alternatives and Decisions • Market demand Analysis and Entry Strategy. With a team of established domain experts at work. Education. Over 70% of the projects come from repeat clients. start up assistance. Founded on the principle of “concept to commissioning”. From offices in Gurgaon (National Capital Territory of Delhi). Most of the consultants have hands-on industry experience in their fields of specialization and represent a wide variety of functional backgrounds. Financial Feasibility Studies. Corporate Finance Consumer Insights Holistic consumer understanding implementable business solutions • User Insights • Trend Insights • Design and Innovation Insights applied to offer . Turnaround Strategy • Hotel Project Conceptualization. Manpower Planning. Remuneration Assessment. Service Line Analysis.Brand Audit. Technopak builds and enhances business capabilities for leading Indian and international companies by offering end-to-end solutions that are unique due to its rich experience. Hospitality. Fund Raising. Training.kumar@technopak. sales and revenue optimization with the leading players in tourism and hospitality industry. Prior to joining Technopak.kaur@technopak. Zara Singh Senior Consultant zara. Manpower Management and Budgeting. with expertise in Best Revenue Management Practices. Strategic Planning.com Inderpreet has over 5 years of experience in strategy consulting with domain expertise in retail.com Dhananjay has about 15 years experience in hospitality industry across the most reputed hotel brands with clear expertise in Food & Beverage – Conceptualization.com Zara has over 5 years experience in hospitality and has worked for leading hotel brands.Indian Hospitality Industry Outlook Authors Lokesh Kumar Associate Vice President .com Tarandeep has over 10 years of enriched work experience in areas of marketing. Inderpreet was working with Halifax and Bank of Scotland in UK. 20 [email protected] Lokesh has worked for leading hotel brands such as EIH Hotels . Inderpreet Kaur Senior Consultant inderpreet. Dhananjay Kumar Principal Consultant dhananjay.Hospitality lokesh.singh@technopak. Sydney. Operations .singh@technopak. consumer products and Hospitality. Tarandeep Singh Principal Consultant tarandeep. with the last assignment as Head of Department for Revenue with the Four Points by Sheraton. His last assignment was with The Taj Mahal Hotel. Hilton Hotels & Unison Hotels for over 10 years in strategic capacities. please contact: Mr. Tower [email protected] Technopak Advisors Pvt.technopak.Hospitality Email : [email protected] Fax: +91. Ltd.4541198/99 www.com Mobile : +91.Hospitality Email : tarandeep.124.9873631276 Mr. 4th Floor. Phase II Gurgaon 122002 INDIA Phone +91. DLF Building 8 DLF Cyber City.124. Lokesh Kumar Associate Vice President.com Mobile : +91. Tarandeep Singh Principal Consultant.com .For further information.