Business travel continues to be mainstay - Views on News from Equitymaster

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Business travel continues to be mainstay

Mar 16, 2000

As per a survey done by HVS International for Federation of Hotels and Restaurant Association of India (FHRAI), business travellers continue to be the mainstay of five star deluxe hotels. Domestic business travellers account for 38% of five star hotels while foreign business travellers comprise 21%. However this does not hold true for the tourist destinations of Goa and Jaipur where foreign leisure travellers dominate the market. In Mumbai and Delhi, the foreign business traveller continues to be the main contributor to their hotels, however on an average on an all India basis this is a lower figure as domestic business travellers are more dominant.

In a related news article the net inflows from foreign travel saw a dip in 1999, mainly because of a fall in business and tourist traffic coming into India. On the other hand foreign travel by Indians to other countries for both leisure and business rose substantially in the past three years. This lead to a surge in expenditure on foreign travel under balance of payments and the growth in expenditure in rupee terms was more significant due to the depreciation of the rupee in the past couple of years.

Foreign travel - invisibles on current account

While dollar payments grew at a CAGR of 25% in the past two years, receipts in dollar terms grew by a CAGR of only 1.9% over this period. This can be attributed to the slowdown in foreign business travel over the last couple of years due to the domestic economic slowdown and the political instability. As business travellers continue to be the mainstay of five star hotels, this resulted in poor performance of the hotel industry.

However as the economy is now picking up and the political situation has stabilised business travel is expected to start showing signs of improvement in the coming years. The major hotel chains will benefit from this as they derive 70%-100% of their profits from their business hotels located in Mumbai and Delhi. In future India's long term potential for tourism will add to the growth of the hotel industry

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