Hospitality Industry
 
1.    Overview

The tourism industry in India contributes around 6% (USD 67 billion) of India’s GDP and is expected to rise to USD 190 billion by next10 years. It is the third largest foreign exchange earner. India’s strong economic performance, strengthening of ties with the developing world and opening up of the sector to private and foreign players are some key reasons for the rapid growth of the tourism industry.

The hotel industry comprises a major part of the hospitality industry and can be subdivided into the following categories.

1.1    Premium and Luxury Segments

This segment consists of mainly 5 star hotels and caters to business and upmarket foreign leisure travellers. As the name suggests,
they provide a high quality and range of services.

1.2    Mid-market segment

This segment comprises 3 and 4 star hotels, which cater to the average foreign and domestic leisure traveller and middle level business travellers. It provides a good portion of the same services provided by premium segment at a lower cost, one of the reasons for which is the lower tax component compared to the premium segment.

1.3    Budget Segment

This comprises 1 and 2 star hotels. As the name suggests, this segment does not offer many high-end facilities but provides cheaper
accommodation to the highly price conscious domestic and foreign travellers.

1.4    Heritage Hotels

Certain architecturally distinctive properties such as palaces and forts, built prior to 1950, have been converted into hotels and are
classified as heritage hotels.

1.5    Others

These are basically the hotels which do not come under any of the above classifications.

1.6    The Players 

In India, the hotels are owned by big hotel chains like Taj group, Oberoi group, ITC, relatively smaller hotel chains working with
international players like Leela venture (with Kempinski), Asian Hotels (Hyatt International Corporation), Bharat Hotels (formerly with
Holiday Inn and Hilton and now with Intercontinental), public sector chains like Indian Tourism Development Corporation (ITDC), Hotel
Corporation of India (HCI), International hotel chains like Marriott, Starwood, Berggruen Hotels, Emaar MGF and local hotel
companies.

2.    Policies

To promote tourism in India, the Indian Government formulated a national tourism policy in 2002. The policy took various steps
including the rationalization of tax rates in the hospitality sector, tourist friendly visa regime and immigration services, procedural
changes for making land available for hotel, and allowing setting up of guest houses. Some of the other initiatives taken by the
government to promote tourism are

2.1    Open-Sky Policy

The government has opened the aviation sector to the private players, granted permission to the domestic airlines to commence
international flights which has resulted in increase in the number of domestic as well as international travellers in India.

2.2    Foreign Trade Policy

The policy announced in 2006 offered various incentives to the hospitality industry like i) Hotels and Restaurants are allowed to import
duty free equipment and other items including liquor, against their foreign exchange earnings under the Served from India Scheme.
Service exports in Indian Rupees qualify for benefits under the Served from India Scheme. Benefits of the Scheme earned by one
service provider of a Group company can now be utilised by other service providers of the same Group Company including managed
hotels.

2.3    FDI in Hotel and Tourism Sector

100% FDI is allowed under the automatic route in this sector. The term hotel includes restaurants, beach resorts, and other tourist
complexes providing accommodation and/or catering and food facilities to the tourists. For foreign technology agreement, automatic
approval is granted if up to 3% of the capital cost of the project is proposed to be paid for technical and consultancy service, up to 3%
of the net turnover is payable for franchising and marketing/ publicity support fee.

2.4    Other Government Initiatives

The government has also taken several other initiatives like “Incredible India” (to promote India as a tourist destination through various
marketing initiative), “Atithi Devo Bhava” (to create awareness among Indian people who come in contact with the tourists), various
infrastructure projects like National Highway Projects and Golden Quadrilateral Project.

3.    Medical Tourism

Cheaper medical facilities, availability of latest medical technologies, growing compliance with international medical standards and
virtually no language barriers have attracted foreigner to come to India for short term as well as long term medical purposes. The
segment is growing at a rate of 30% and is expected to reach USD 2 billion by 2012. Cities like Chennai, Bangalore and hospital
groups like Global Hospitals Group, Fortis Healthcare, Apollo hospitals and Max Hospitals are major players in medical tourism.
Besides the modern medicines, traditional medical sectors like ayurvedic therapy and aroma therapy, yoga therapy have become
popular with foreigners seeking medical tourism in India.

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