Growth of Hotel Industries in India free essay sample

Taking advantage of this opportunity Tata group and another hotel chain called Homotel have entered this business segment. According to a report, Hotel Industry in India currently has supply of 110,000 rooms and there is a shortage of 150,000 rooms fueling hotel room rates across India. According to estimates demand is going to exceed supply by at least 100% over the next 2 years. Five-star hotels in metro cities allot same room, more than once a day to different guests, receiving almost 24-hour rates from both guests against 6-8 hours usage. With demand-supply disparity, hotel rates in India are likely to rise by 25% annually and occupancy by 80%, over the next two years. This will affect the competitiveness of India as a cost-effective tourist destination. To overcome, this shortage Indian hotel industry is adding about 60,000 quality rooms, currently in different stages of planning and development, which should be ready by 2012. Hotel Industry in India is also set to get a fillip with Delhi hosting 2010 Commonwealth Games. We will write a custom essay sample on Growth of Hotel Industries in India or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Government has approved 300 hotel projects, nearly half of which are in the luxury range. The future scenario of Indian hotel industry looks extremely rosy. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years. What is the reason behind this sudden growth in the hotel industry in India? The hotel industry in India is going through an interesting phase. The industry has a capacity of 110,000 rooms. According to the tourism ministry, 4. 4 million tourists visited India last year and at the current rate, the demand will soar to 10 million by 2010 – to accommodate 350 million domestic travelers. The hotels of India have a shortage of 150,000 rooms fueling hotel room rates across India. With tremendous pull of opportunity, India has become a destination for hotel chains looking for growth. Due to such a huge potential available in this segment, several global hotel chains like the Hilton, Accor, Marriott International, Berggruen Hotels, Cabana Hotels, Premier Travel Inn (PTI), InterContinental Hotels group and Hampshire among others have all announced major investment plans for the country. The Governments move to declare hotel and tourism industry as a high priority sector with a provision for 100 per cent foreign direct investment (FDI) has also provided a further impetus in attracting investments in to this industry. It is estimated that the hospitality sector is likely to see US$ 11. 41 billion rise in the next two years, with around 40 international hotel brands making their presence known in the country by 2011. Simultaneously, international hotel asset management companies are also likely to enter India. Already, US-based HVS International has firmed up plans to enter India, and industry players believe others like Ashford Hospitality Trust and IFA Hotels Resorts among others are likely to follow suit. One of the major reasons for the increase in demand for hotel rooms in the country is the boom in the overall economy and high growth in sectors like information technology, telecom, retail and real estate. Rising stock market and new business opportunities are also attracting hordes of foreign investors and international corporate travelers to look for business opportunities in the country. Also India has been ranked as the fourth most preferred travel destination and with Lonely Planet selecting the country among the top five destinations from 167 countries; India has finally made its mark on the world travel map. Thus, the increase in the need for accommodation has hugely increased the demands for hotels which in turn has boosted the growth of the hospitality sector in India especially that of the hotel industry. The hospitality industry witnessed a mixed year in 2008. In this article, we shall examine the factors that contributed to the growth and some of the challenges that this sector faces. The sector began the year 2008 on a strong note. Rising tourist inflow, higher occupancy and room rates continued to benefit the hotel players. In the first four months of the year, the tourist arrivals were higher by 11. 7% YoY. Existing hotel companies, new foreign players and real estate players continued with their expansion plans. Prospects were looking good, until the sector faced a double blow. Double trouble Lower growth During 1HFY09, lower corporate spending, fluctuating dollar and opening of credit crisis did impact occupancy rates in some cities like Bangalore, Pune, Hyderabad and Chennai.