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Premium and luxury segment (5 star deluxe and 5 star hotels) Mid-market segment (3 and 4 star hotels) Budget segment (1 and 2 star hotels) Heritage hotels
In recent years, budget hotels have become more popular as they offer cost effectiveness (Corporate Catalyst India (n.d.)). 1.2.3 Top Players in the hotel industry 1. Amanresorts Amanbagh, Alwar
2. Oberoi Udaivilas, Udaipur 3. Taj Mahal Palace & Tower, Mumbai 4. Oberoi Rajvilas, Jaipur 5. Oberoi Amarvilas, Agra 6. Taj Lake Palace, Udaipur 7. The Four Seasons, Mumbai 8. The Imperial, New Delhi 9. The Leela Palace Kempinski, Bangalore 10. Devi Garh, Delwara Near Udaipur (Le Draoulec (2007)).
1.3 Opportunities
1.3.1 Economic potential One of the most important growth drivers in the Indian hotel industry is the fast growing economy. Businesspeople from all over the world are attracted by India and invest in the country. Therefore, also the Government invest in the development of e.g. infrastructure to attract businesspeople to invest in the country and tourists to explore the cultural diversity. 1.3.2 Cultural heritage India is a country of cultural diversity and due to its size there are many places to explore. Travellers will find everything they desire within one country: beaches, mountains, rural areas etc. combined with unique traditions. 1.3.3 Rural tourism Due to the size of the country there are still many unexplored places that can become tourist attractions. Campaigns are undertaken to develop rural tourism. At the moment many regions are not reachable due to lack of infrastructure (Corporate Catalyst India (n.d.)). 1.3.4 Health tourism Health tourism has increased tremendously in the last years. It is said that India will become a hub of medical tourism. Packages are offered including flight, identified hospital and hotel (Technopak (2008)). Many people are also attracted by yoga and meditation.
1.4 Challenges
1.4.1 Poor infrastructure The poor infrastructure in many parts of the country is a big problem. Although many projects were done to improve the situation, there are still many places above all in rural India that are nearly unreachable, and therefore not visible to tourists (Corporate Catalyst India (n.d.)). Security and terrorism Another problem that faces the Indian hotel industry is security and terrorism. Cities like Mumbai, Delhi, and Bangalore are in the centre of attention of terrorists and recently leisure destinations are also likely to become affected (Technopak (2008)). 1.4.3 Lack of skilled labour As estimates show, the hotel sector in India shows a great amount of growth. Shortage in skilled manpower could affect the quality of the hotel service sector. It is said that 25 Institutes of Hotel Management and 180 Institutes providing degree in e.g. F&B production and Housekeeping. In total around 10,500 students
graduate per year to become employed in the hotel industry. They are more likely to work in the upper hotel star categories but there is still a gap between demand and supply (Technopak (2008)). 1.4.4 High tax rates Due to high tax rates and different taxes in different states of India, costs increase and have an impact on profits. Compared to other countries in the Asia Pacific region, India has a high tax rate (Technopak (2008)).
1.5.1 Foreign direct investment (FDI) The Government of India introduced a Foreign direct investment (FDI) policy. With the help of foreign direct investment, non residents can invest in organizations or projects of other countries (Foreign Direct Investment (2011)). In India non residents are now allowed to invest up to 100% in projects of the Indian hotel industry ranging from construction developments of e.g. hotels and restaurants as well as airport development projects (Department of Industrial Policy & Promotion (2003)). 1.5.2 Open Skies Policy In 2005 the Indian Government introduced the so-called Open Skies Policy. With the help of the policy more tourists can be brought to India, especially from the USA and Europe as the Government gave the permission to unlimited flights between the countries. This also led to the fact that e.g. Lufthansa and British Airways established new routes to India. As more passengers come to India, more hotels are needed (Corporate Catalyst India (n.d.)). 1.5.3 Foreign Trade Policy In 2006, the Indian Government announced certain incentives for the hotel industry. Paid with foreign exchange earnings, hotels have the permission to import duty free items including liquor. In total 5% of foreign exchange earnings can be spent in those items by all classified hotels (Corporate Catalyst India (n.d.)). 1.5.4 Medical visa As India is expected to become a hub of medical tourism, an additional visa category was introduced: the M-Visa that stands for Medical Visa (Technopak (2008)). Some organizations sell visa packages, selling flight, identified hospital and hotel stay in one. 1.5.5 Rural tourism Rural tourism seems to grow significantly in the future. Governmental promotions to increase the number of tourists coming to India focus now on rural areas as a great potential has been identified. Therefore the Government organises additional promotions and projects with the United Nations Development Program to improve infrastructure in those areas and show socio economic benefits (Technopak (2008)). 1.5.6 Incredible India Incredible India has become a famous slogan that is known all over the world. The campaign started in 2002 to create a distinctive identity for India. The idea was to attract people from all over the world and encourage them to visit India. In the same year, the tourist traffic increased by 16%. Until then, a campaign was launched every year with a different slogan (Ministry of tourism (2002)).
One famous campaign started in 2004 under the name Atithi Devo Bhavah. The aim was to make Indians aware of the great potential of tourism and let tourists feel more welcomed. Training and orientation was provided to e.g. taxi drivers, police, and immigration officers who interact directly with tourists from all over the world. The motto was: Our guest is equal to God (Ministry of tourism (2004a). 1.5.7 Other initiatives taken by the Indian Government Friendly visa regime: Tourists coming from certain countries can issue their visa on arrival Focus on infrastructure development Focus on domestic tourism as a major driver of tourism growth Make land available for construction of hotel (Corporate Catalyst India (n.d.))
1.6 Outlook
To sum it up, Indias outlook is fabulous. There are still many parts unexplored that have the power to become important locations for both the hotel industry and the tourist sector -. Many projects are still in progress and others are planed. Investors are more and more interested in unexplored opportunities that still exist in Indian the hotel industry (Thomas Cook (n.d.)). The World Travel Organization (WTO) estimates that India will welcome 25 million tourists by 2015. There is still more demand then hotel rooms are available. According to FHRAI, the Indian hospitality trade association, there exist around 200,000 hotel rooms in India but still 100,000 hotels are needed (H&F Hosts (n.d.)). The gap between demand and supply leads to high occupancy rates. Many investors are attracted by the potential of the hotel industry, and among others the construction of additional hotels is planed also in other than metro cities such as Hyderabad, Jaipur and Pune. Additionally, hotel chains or companies built hotels in different locations within India, what is known as development of micro markets. Use of technology is also increasing, improving service quality and efficiency. It is said that India will become [] a major hub for medical tourism [] Dewan P.N. Chopra Consultants Private Limited (n.d.)). Also the rural tourism shows great potential, and it will not be the last opportunity that is detected within the country. The topics covered in this study focus only on 5 star hotels in India.