April 30th, 2008 
Tushar Mathur
The spurt in India’s tourism industry growth has had a ripple effect on its hospitality sector. Rising income levels and spending power combined with the governments open sky policy have provided a major thrust.
India’s booming hospitality industry has transformed into a veritable basket of the choicest of rooms, food and beverage, health and business facilities, travel packages and everything that you can think of. New global entrants are vying with existing local players to provide world-class services at prices suited to every pocket. Here’s a look at the hospitality sector.
Have you considered investing in an Indian hotel chain or a stand-alone property? What factors made you pick the location and property? Do you think NRI hoteliers with their overseas experience can help bring significant changes to the sector in India?
India’s hotel industry comprises the following four main categories.
Star hotels: They form 30% of the industry size. The star ratings are Five Star Deluxe, Five Star, Four Star, Three Star, Two Star and One Star. The first 2 types are usually located in business areas of metro cities and cater to foreign tourists, business travelers, top government officials and political brass, offering luxury at a high price.
You’ll find the next 2 types in tier II cities and tourist destinations, preferred by mid-level executives and leisure tourists. The last 2 types are found in smaller cities and around tourist spots, preferred by domestic tourists. Reputed Indian veterans include ITC, Indian Hotels Company (Taj group), East India Hotels (Oberoi group), Hotel Leela Venture and ITDC hotels. Foreign hospitality players include Marriott, Radisson, Sheraton, Meridien, Hyatt, Four Seasons Regent, Carlson group, Jumeirah and Mandarin Oriental and Dubai’s Istithmar luxury hotels,
Heritage hotels:They operate from forts, palaces, castles, jungle and river lodges and heritage buildings. These are ideally suited for vacations, relatively affordable and fun places. The classification includes Heritage Classic, constructed between 1920 and 1935, Heritage Grand, existing before 1920, and Heritage, set up around 1935 to 1950. Most Indian hotel groups mentioned above operate Heritage hotels at historical sites across India.
Budget hotels: They’re usually preferred by domestic travelers seeking economical accommodation. These are reasonably priced, offer limited luxury, seasonal discounts and decent services. Some new global entrants include UK’s Dawnay Day and Whitbread Premier Travel Inn, Shangri-la, Aman resorts, Golden Tulip budget hotels, Fairfield inn, Country inns and suites, Courtyard by Marriott, Hometel, Ibis and Kamfotel among others. Budget hotels are preferred by business travelers contributing to greater ARR (average room rate) than leisure travelers. Increased demand and healthy occupancy has fueled the growth of budget hotels in a short time.
Unclassified hotels: They’re motels spread across the country. They form 19% of the industry size. Low price is their only USP.
Changing Trends
The key factors spawning India’s hospitality industry growth are a booming economy and steady political scene, soaring service industry, FDI inflow, infrastructure growth and a boost for the tourism sector due to government funding. An estimated 4.4 million tourists are expected to visit India with an annual average growth rate of 12% in the next few years. The domestic tourist market is also flourishing. The commonwealth games in 2010 will add to the demand for quality accommodation.
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