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Indian Hospitality Sector

The growth story of India augurs well for the Indian hospitality sector. The sector is witnessing an all time high tourist influx from across the world. What is more encouraging for the industry is spurt in foreign visitors who have been frequently coming to India for business and leisure travel.

In 2006, as many as 4.5 million tourists flocked Indian hotels from abroad. It’s a historic high. In 2003-04, this number was around 2.93 million. That means a growth of more than 53 per cent in three years.

Hotels in India: Average occupancy rates in Hotels

The occupancy rates in Indian hotels hover between 70-80 per cent. Major cities of the country have been posting record growth in the past three years. On an average, the occupancy rate on all India basis rose from 54.8 to 63.6 per cent. The occupancy rates in Mumbai and Delhi hotels went up from 62.6 and 58.3 per cent of 2002-03 to 74.9 and 76.6 per cent, respectively. (See Chart)

Foreign exchange earnings in the first five months of 2007 showed a growth rate 17.4 per cent over the same period, earning USD 3.07 billion as against USD 2.61 billion.

There are more than 1800 hotel properties in India with a total capacity of about 1, 10,000 rooms. However, 60 per cent of the market is unorganized and highly fragmented.

Thus, there exists a considerable room for growth in the industry while the sector goes organized.

Meanwhile, the industry is undergoing phases of consolidation as it continues growing at a considerable pace. Established players are strengthening their roots while foreign majors are also foraying aggressively into the sector. 

Segments of Indian hotel industry

The hotel industry in India is broadly classified into five segments.

1. Luxury hotels: The category comprises 5-star and higher-end hotels. Almost 70-80 per cent revenue of these hotels comes from metropolitan cities of Mumbai, Delhi, Kolkata, Chennai, Bangalore and Hyderabad.

2. Budget hotels: Hotels from 4 to 1 star facilities form the segment, catering a substantial part of the travelers in the country.

3. Resorts: This category is more of a luxury one. Facilities vary from place to place. It’s is mostly the tourists who opt for resorts.

4. Heritage hotels: One of the most popular segments in hotels. Heritage hotels are the palaces, forts or havelis are being converted into hotels. This has recently been the smartest trend the heritage properties are preserved while being into use for commercial purposes.

5. Restaurants: The segment comprises branded food chains spread in different parts of the country like McDonalds, Dominos, Pizza Hut, Barista etc and proprietary outlets.

Indian Hotel Industry - A Sneak Peak

The Tata owned Indian Hotels Company Limited (IHCL), which operates under the brand name of Taj, is the largest chain of hotels in the country. The group runs 48 hotels at 34 different locations of South Asia.

The second largest hotel chain of India is the East India Hotels (EIH), promoted by prestigious Oberoi Group. Other top notch hotels include the ITC Hotels (ITCH) of the ITC Group, the Asian Hotels Limited (AHL), Bharat Hotels Limited (BHL), Oriental Hotels and Hotel Leela Venture (HLV).

The AHL owns the Hyatt Regency Hotel in New Delhi. Bharat Hotels Limited (BHL) has a hotel in New Delhi and another in Srinagar.

ITC Hotels are pioneers in the heritage hotels segment. The public sector has a presence in the Hotel Corporation of India and the ITDC Hotels.

Prominent among these are Hotel Ashok at Delhi, Ashok Yatri Niwas, Bharatpur Forest Lodge, Khajuraho Ashok, Temple Bay Ashok Beach Resort at Mamallapuram and Hotel Qutub at Delhi.

Foreign Players in the sector

The Indian government has already allowed 100 per cent Foreign Direct Investment (FDI) in the hotel sector.

With a view to cash in the opportunities in the segment of luxury hotels in India, a number of foreign hotel majors have set themselves up. Besides, Marriott International, international hotel groups like Golden Tulip, Dawney Day, Mandarin Oriental, Whitbread, Jumeirah and Istithmar have plans to launch hotels in India. 

US-based Best Western International has plans to establish 100 hotels across India through a master license agreement with Cabana Hotel Management of India. The company will inject USD 1.2 billion in various phases.

Warburg Pincus recently picked up 27 per cent stake in Delhi-based Lemon Tree Hotels, at a staggering cost of Rs 280 crore.

Le Meridien group that runs three five-star hotels at Delhi, Bangalore and Pune has also laid ambitious plans to set up 17 hotels in the country.

The InterContinental Hotel Group has plans for 20 properties under its brands-InterContinental, Holiday Inn and Crowne Plaza. The company also set up its USD 1-million corporate office at Gurgaon to speed up its hotel projects in India.

Major International Tie-Ups

Most big players in the country, with the exception of IHCL and EIH, have entered into marketing collaborations with major international hotel chains.

For example, ITC has a tie-up with Sheraton. Leela-Kempinski and AHL-Hyatt Regency are the other well-established collaborations, in the Indian hotel landscape.

BHL, also, has a tie-up with the Inter-Continental Hotels Corporation.


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