The hospitality industry in India has seen significant growth in recent years and is poised for further expansion. Some key points: 1) India's travel and tourism sector contributed $234 billion to GDP in 2018 and is projected to contribute $492 billion by 2028, growing at a CAGR of 7.11%. 2) Foreign tourist arrivals in India grew from 10.56 million in 2018 to 11.8 million in 2019, with earnings from tourism increasing from $28.59 billion to $34.03 billion. 3) Segments with good growth opportunities include medical tourism, cruise tourism, rural tourism, and ecotourism, leveraging India's diverse attractions and resources. 4

1. Hospitality Industry
Overview
Date: 23rd JULY 2019

2. Overview
 Electronic tourist authorisations, known as E – Tourist Visa, launched by the Government
of India have resulted in increase in number of tourist visa issued in the country. The
facility has been extended to citizens of 166 countries, as of December 2018.
New Visa Reforms
 India ranked 7th among 184 countries in terms of travel & tourism’s total contribution to
GDP in 2017. During 2018, FEEs from tourism increased 4.70 per cent* year-on-year to
US$ 28.59 billion. FEEs during January 2019 was US$ 2.55 billion.
Contribution to GDP
above world average
 Travel & tourism’s contribution to capital investment in India is projected to grow 6.7 per
cent per annumduring 2018–28.
Higher investments
 As of 2017-18, 81.1 million people were employed in the tourism sector in India which was
12.38 per cent of total employment in thecountry.
Creating higher
employment
 Contribution of visitor exports to total exports is estimated to increase 5.5 per cent per
annum during 2018– 2028.
Increasing visitor
exports

3. Classification of Hotels
Source : CARE Ratings

4. Classification of Customer segments
Customer segments
Business Traveller
It is a businessman or a corporate executive
travelling for business purposes. This segment
includes corporates, both domestic and foreign.
This practice is on a rise due to the economic
upswing in India.
These travellers can be divided into two
categories based on their duration of stay; first,
the one who travels for a short duration usually
come for a meeting or a conference, Such
customers are ready to pay higher price in
exchange for flexibility of being able to book a
room at the last minute. The other category is
the mid-to-long-term duration. They travel
mostly for working on a project. therefore, they
may or may not be price sensitive.
Leisure Travellers
The leisure traveller could either be a
foreigner or a domestic traveller whose
primary purpose of visit is holiday or site
seeing. Among non-business foreign
tourists, the primary motivation for visiting
India is largely cultural attraction followed
by conferences and conventions, tourist
attractions like beaches, wild life, hill
resorts, etc.
Airline Cabin Crew
They forms another important segment
because of the repetitive and guaranteed
nature of the business that they provide.
Usually, these are a part of an annual
contract whereby, in return for a fixed
rate, a certain number of rooms are
provided on demand for cabin crews with
discount rates in the range of 40% and
50%, this represents a low-yield segment
for hotels in general.

5. Industry characteristics
1. Cyclicality : The hospitality industry is cyclical in nature. i.e., during positive cycles the industry witnesses periods
of sustained growth and sees healthy average room rates (ARRs) and occupancy rates (ORs). Until the economy
goes through a downturn or if there is excess supply, the trend continues.
2. Seasonality : The hotel industry demand is seasonal in nature. Though the peak season for both business and
leisure destinations is the same (January – March), during the remaining year both demonstrate different
behaviours. While the business destinations maintain constant ORs (5-10% lower than Jan-Mar period) from April
– November. However, in December, a sharp correction is witnessed in the business destinations as it coincides
with the international holiday period. Leisure destinations on the other hand register lower ORs during May -
October period, while the occupancy rates improve in December on account of holiday season.

6. Industry characteristics
3. Average length of stay (ALOS) : The demand for hotel rooms in business destinations is usually concentrated
around weekdays, i.e., the ORs are generally lower on weekends. The ALOS for business hotels is usually in the
range of 2-2.5 nights with low levels or double occupancy (fewer occasions where more than one person shares the
room). While the hotels in leisure destinations the ORs are higher during the weekends and have ALOS of around 2-
3 days. The occurrence of double occupancy is also typically higher in leisure destinations.
4. Upcoming Supply : The future supply landscape is ever-changing and subject to several external forces that may
often delay project openings. It is noteworthy that the pipeline for proposed supply totaled 114,466 rooms back in
FY08 – the highest in a decade, whereas in FY18 it contracted significantly to just 49,380 rooms.
5. Occupancy rates (OR): ORs for 5 star hotels witnessed the sharpest growth of about 240 basis points y-o-y during
FY18. This was followed by 3 star hotels that registered a growth of about 200 basis points and 4 star hotels that
registered a growth of 180 basis points during FY18 while the 5 star D hotels witnessed lower growth of only 110
basis points y-o-y. 2 star hotels however, witnessed a decline of about 10 basis points in their occupancy rates
during the year.
6. Average Room Rates (ARR): Despite registering a decline in occupancy rates, 2 star hotels witnessed the maximum
growth in the group in average room rates increasing by about 8.5% y-o-y during FY18. This was followed by 3 star
hotels that registered a growth of about 5% y-o-y in FY18. 4 star and 5 star D hotels recorded a growth of 3% y-o-y
each in average room rates. 5 star hotels, however, registered the lowest growth about 1.8% y-o-y in the group
during the year.

7. Industry characteristics
7. RevPAR: Each star category witnessed a y-o-y increase in RevPAR in FY18, with the 3 star category
leading the pack, recording a 8.2% growth during the year. The improvement in RevPAR across all star
categories can be attributed to both occupancy and average rate, with the exception of 2 star hotels.
ARR, RevPAR and OR (FY17) ARR, RevPAR and OR (FY18)

8. Performance of Hotels – Overall average

9. Top Brands in Hotel Industry in India

10. Major Companies across Segments

11. Advantage India
 By 2020, medical tourism industry
of Indiais expected to touch US$ 9
billion.
 During 2018, 10.56 million foreign
tourists arrived in thecountry.
 Internationaltourist arrivals are
expected to reach 30.5 million by
2028.
 India has a diverse portfolio of niche
tourism products – cruises, adventure,
medical, wellness, sports, MICE, eco-
tourism, film, rural & religious tourism.
 In January 2017, Federation of Indian
Chambers of Commerce & Industry
(FICCI) announced the launch of India
TravelTech Launchpad.
 India offers geographical
diversity, attractive beaches,
30 WorldHeritage Sites and
25 bio-geographiczones
 The country’s big coastline
isdotted with a number of
attractivebeaches
 A 5-year tax holiday has been offered for 2,3
and 4 star category hotels located around
UNESCO World Heritage sites (except Delhi &
Mumbai)
 Under the Swadesh Darshan scheme, 15
thematic circuits in the country have been
selected for development of tourism
infrastructure.
 E-visa facility offered to 166 countries, as of
December 2018.
ADVANTAGE
INDIA

12. Rising Contribution to India’s GDP63.73
67.77
72.74
79.56
87.17
91.27
98.17
194.690.00
50.00
100.00
150.00
200.00
2012 2013 2014 2015 2016 2017 2018E 2028F
Visakhapatnam port traffic (million tonnes)
Direct Contribution of Travel and Tourism to GDP at Real 2017
Prices (US$ billion)
250.00 CAGR 7.23%
163.99
174.22
187.18
204.01
223.20
234.03
251.64
492.21
0.00
100.00
200.00
300.00
400.00
2012 2013 2014 2015 2016 2017 2018E 2028F
Visakhapatnam port traffic (million tonnes)
Total Contribution of Travel and Tourism to GDP at Real 2017
Prices (US$ billion)
600.00 CAGR 7.11%
500.00
 India ranked 8th in the world in 2017 in terms of absolute direct contribution of travel & tourism sector’s to its GDP.
 It is the 3rd largest foreign exchange earner for the country.
 The tourism & hospitality sector’s direct contribution to GDP in 2017, was Rs 5.94 trillion (US$ 91.27 billion). This is
expected to reach Rs 12.68 trillion (US$ 194.69 billion) in 2028, implying a CAGR of 7.23 per cent during 2012-28.
 According to 2018 report of the World Travel and Tourism Council (WTTC), India was ranked third in the tourism sector
 India generated revenue of about US$ 234 billion in 2018.

13. Rise in Foreign Travels and Foreign Exchange
10.70
11.80
11.40
14.20
16.60
17.70
18.40
20.20
21.10
23.15
27.69
28.59
2.55
15
10
5
0
20
25
30
35
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Visakhapatnam port traffic (million tonnes)Foreign Exchange Earnings from tourism in India (US$ billion)
3.90
4.40
5.10
5.30
5.20
5.80
6.30
6.60
7.00
7.40
8.00
8.80
10.18
10.55
20.00
0
5
10
15
20
25
Visakhapatnam port traffic (million tonnes)
Foreign tourists arriving in India(million)
CAGR 7.96%
Source: IBEF

14. Market Size and Sector Composition
Source : IBEF

15. Key Trends and Government Initiatives
Source : IBEF

16. Segments offering Good Opportunities
 The presence of world-
class hospitals &
skilled medical
professionals makes
India a preferred
destination for
medical tourism
 India’s earnings from
medical tourism could
exceed US$ 9 billion by
2020
 Tour operators are
teaming up with
hospitals to tap this
market
 Foreign tourist
arrivals for medical
purpose increased
from 427,014 in 2016
to 495,056 in
2017(P).
Medical tourism
 Cruise shipping is one of
the most dynamic &
fastest growing
segments of the global
leisure industry
 Government of India
has estimated that
India would emerge
with a market size of
1.2 million cruise
visitors by 2030 – 31
 Moreover, India is
looking to take
advantage of its 7,500Km
coastline to tap growth
potential of the cruise
tourism segment.
 India is also expected
to receive around
950 cruise liners
annually by2022.
Cruise tourism
 The potential for the
development of rural
tourism in India is high
as most of its population
resides in rural areas
 This can benefit the
local community
economically & socially,
and facilitate
interaction between
tourists & locals for a
mutually enriching
experience
Rural tourism
 India is often termed as
hotspot of bio-diversity
& this rich natural
heritage is
unparalleled in many
ways.
 Such valuable resource
base gives impetus for
the practice of variety
of alternate tourism
forms & many of which
are already in
existence.
 For example: The
national parks,
wildlife sanctuaries &
biosphere reserves
Ecotourism

17.  Competitive Rivalry
 Bargaining Power of
Customers
 Threat of New Entrants
 Threat of Substitute
Product
 Bargaining Power of
Suppliers
Porters Five Force Analysis

18. FDI In Hospitality Sector

19. Leading States/UTs in terms of Tourists
Uttar Pradesh – Attracted 237.53 million total tourists
(14.14 per cent) in 2017
Domestic Tourists: 233.98million
Foreign Tourists: 3.56 million
Major attractions– Taj Mahal, Agra Fort, Fatehpur
Sikri & Sarnath
Karnataka – Attracted 180.48million
total tourists (10.75 per cent) in2017
Domestic Tourists: 179.98 million
Foreign Tourists: 0.50 million
Major attractions - MysorePalace,
Hampi, Coorg, Jogfalls
Maharashtra – Attracted 124.27 million
total tourists (7.40 per cent)in 2017
Domestic Tourists: 119.19million
Foreign Tourists: 5.08 million
Major attractions – Ajanta& Ellora
Caves, Shirdi, Ashtavinayak & Matheran
Tamil Nadu – Attracted349.92 million total tourists (20.84 per
cent) in 2017
Domestic Tourists: 345.06million
Foreign Tourists: 4.86 million
Major attractions – Meenakshi Temple, BrihadeeswararTemple,
Yelagiri Hills, Hogenakkal Falls & VivekanandaMemorial
Andhra Pradesh – Attracted 165.71million
total tourists (9.87 per cent) in2017
Domestic Tourists: 165.43million
Foreign Tourists: 0.27 million

20. Future Hospitality Trends

21. Vision 2020: What future holds for Hospitality Sector
• Faster growth of Indian
Markets
• Increase in RevPAR
• Increase in Average
Room Rates
• Domestic giants going
asset light
• Expansion by foreign
players
• Increase in demand of
domestic leisure
• Increasing occupancy

22. Disclaimer
Prepared By:
Research Intern (Sagnik Monga, BBA (Financial Investment Analysis))
Phone Number: 0120-4550300
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