Investment Opportunity in Tourism Sector of India

Indian Tourism Industry
India is a huge country with lots of scope in investment in tour and travel sector. The total size of tour and travel industry of India is $32 billion that is 5.3% of GDP. Government has launched various programmes and has taken many initiatives to boost this sector. Incredible India is one of the programme which aims to popularize India as a hot destination for tourism.

Facts and Figure

• Total size of the industry- $32 billion
• In 2004, total number of tourist arrival in India- 3.3 million an increase of over 20% from the previous year
• Total domestic tourist in 2004- 270 million
• Domestic market growth in the last 4-5 years- 20% p.a.
• Number of hotels across the country- 1,800 Number of hotel rooms- 100,000 (Five star hotel rooms constitute
• 27%, four-star 7.5% and three-star 22%)
• Rooms occupied in 2004-05- 70%
  
  

Industry Structure

• The hotel industry in India is dominated mainly by large Indian groups like The Taj Group, Oberoi, ITC, Leela and Bharat Hotels.
• Apart from Indian ownership, there are lots of international like Sheraton/Starwood, Inter Continental, Hyatt, Marriott, Hilton, Le Meridian, and Carlson. These chains are either represented by management or franchise contracts
• Some other international players like Shangri-La, Four Seasons, Ritz Carlton and Mandarin are also in the process to establish their presence in India, primarily through management contracts
• 30,000 rooms are represented by the branded segment that is 30% of the total hotel stock. In the last five years, there was Compounded growth
• Three star hotels grew at about 11% whereas the four star segment grew at about 9%
  
  

Government Policy
Government has permitted 100% FDI in Hotels and Tourism, through the automatic route

Investment Opportunity and Potential

• There is a huge opportunity in this sector. As per estimates, by 2007, foreign tourist arrival may grow to 5 million by 2007 which could double to 10 million by 2010-12
• Over next five years, domestic tourism is also expected to increase by 15% to 20% p.a.
• Average room rate is also expected to grow rapidly until sufficient new supply comes on stream
• In 2005, the average room rates increased by 21% as compared to 2004. The maximum growth was registered in 4-star and 5-star segments
• Rapid growth of population, good demography, and rapid growth of economy ensures uptrend in the domestic demand for hotels – for business and leisure
• Trade activity and investment is increasing in India that would increase International inbound traffic
• India is a home of cultural diversity and natural beauty that will attract the foreign tourists
• Travel will bee further boosted due to the coming of more budget airlines/lower air-fares, open sky policies and expected improvements in travel infrastructure such as roads, airports and railways
• Over 100,000 hotel rooms need to be added over the next five years which presents opportunities in all price and value chain segments
• There is also an opportunity in hotel-asset construction and ownership
• Since the there is low penetration of brands in this sector. Hence there is an opportunities for management contracts and franchising with local hotel owners/ developers
• The sector offers investment opportunity of about $8-10 billion in the next 5 years