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Hotels Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

New: A Potential 10x Opportunity in the Long Term

  • The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country.
  • The World Travel & Tourism Council (WTTC), the global authority on travel and tourism, has done a research study called ‘India 2019 Annual Research’, which shows that travel and tourism in India contributed 9.2% of the GDP and provided 42.7 million jobs or 8.0% of the total employment.
  • Total contribution by travel and tourism sector to India’s GDP is expected to increase to US$ 275.2 billion in 2025. Travel and tourism is the third largest foreign exchange earner for India.
  • India is the most digitally-advanced traveler nation in terms of digital tools being used for planning, booking and experiencing a journey, India’s rising middle class and increasing disposable incomes has continued to support the growth of domestic and outbound tourism.
  • During the period, April 2000-March 2019, the hotel and tourism sector attracted around US$ 12.35 billion of FDI, as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

How to Research the Hotels Sector (Key Points)

  • Supply
  • It is expected that the hotels industry is expected to fall short of meeting the long term demands of an economy growing at about 7% p.a. Regarding the supply from foreign nations, around 40 international brands are said to enter the country in the next five years (as per Cygnus estimates).
  • Demand
  • Largely depends on business travelers but tourist traffic is also on the rise. Also, there is seen an increasing demand for medical tourism. Demand normally spurts in the peak season between November and March.
  • Barriers to entry
  • Economic risks, high capital costs, competition in the industry, poor infrastructure facilities and scarcity of land.
  • Bargaining power of suppliers
  • Limited due to higher competition, especially in metros.
  • Bargaining power of customers
  • Higher in metros due to increasing room supply.
  • Competition
  • Intense in metros, slowly picking up in tier-2 and tier-3 cities. Competition has picked up due to the entry of foreign hotel chains. Also, there is an increasing competition from the startups/online industry due to the increasing penetration of the internet.

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Financial Year '19

  • Travel and tourism has become a significant industry in the country over the last few years, thanks to the government initiatives and policies along with increasing foreign tourist arrivals. The World Trade and Tourism Council ranked India 18th in business travel and predicted that it climbs up soon to be amongst the top 5 ranks.
  • The Government has also been making serious efforts to boost investments in tourism sector. In the hotel and tourism sector, 100% FDI is allowed through the automatic route. A five-year tax holiday has been offered for 2, 3 and 4-star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai). The investment in tourism sector is expected to be US$ 12.4 billion in the 12th Five Year Plan.
  • As per the Ministry of Tourism of the Government of India, 10.5 million foreign tourists visited India this year which represents a 5% increase over the previous year.
  • The World Travel and Tourism Council has released a detailed study on the Economic Impact of the Travel and Tourism Industry of India in the last year. Their research shows that the largest number of visitors to India came from residents of the US (9%) followed by Bangladesh (9%) and the UK (7%). The rest came from various countries.
  • Travel and Tourism sector accounted for 9.3% of employment opportunities in India. Accommodation could be hotels & motels, apartments, camps, guest houses, lodge, bed & breakfast establishments, house boats, resorts, cabins & hostels.
  • As per a report by World Economic Forum (WEF), India ranks 34th in the list of the world’s attractive destinations. Further, India has better air infrastructure (33rd) and ground and port infrastructure (28th), international openness (51st) and natural (14th) and cultural resources (8th).

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  • The research has determined that Travel and Tourism contributed 9.2% of the total economy of India last year. Moreover, this sector which includes hotels provided 42.6 million jobs or 8.1% of the total employment in India.
  • Although domestic tourism is a large factor in India’s travel and tourism industry, projections for international arrivals will increase to 17.8 million next year. The Ministry of Tourism has already set a target of doubling the foreign tourist arrivals in 5 years.
  • In the long term, the demand-supply gap in India is very real and that there is need for more hotels. The shortage is especially true within the budget hotels and the mid-market hotels segment. There is an urgent need for budget and mid-market hotels in the country as travelers look for safe and affordable accommodation.
  • Various domestic and international brands have made significant inroads into this space and more are expected to follow as the potential for this segment of hotels becomes more obvious.
  • As per a study conducted by a leading firm of hotel consultants, the 5 Star Deluxe hotels in India recorded the highest increase in RevPAR since 2008 despite doubling of room inventory. This is a good sign for the future of our hotels sector. The Government needs to concentrate on attracting affluent tourists.

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Related Links for Hotels Sector
Quarterly Results | Sector Quote | Over The Years

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MAHINDRA HOLIDAYS Announces Quarterly Results (1QFY21); Net Profit Up 47.4% (Quarterly Result Update)

Aug 24, 2020 | Updated on Aug 24, 2020

For the quarter ended June 2020, MAHINDRA HOLIDAYS has posted a net profit of Rs 268 m (up 47.4% YoY). Sales on the other hand came in at Rs 2 bn (down 29.4% YoY). Read on for a complete analysis of MAHINDRA HOLIDAYS's quarterly results.

THE INDIAN HOTELS Announces Quarterly Results (4QFY20); Net Profit Down 42.9% (Quarterly Result Update)

Jun 11, 2020 | Updated on Jun 11, 2020

For the quarter ended March 2020, THE INDIAN HOTELS has posted a net profit of Rs 668 m (down 42.9% YoY). Sales on the other hand came in at Rs 11 bn (down 14.6% YoY). Read on for a complete analysis of THE INDIAN HOTELS's quarterly results.

MAHINDRA HOLIDAYS 2018-19 Annual Report Analysis (Annual Result Update)

Oct 18, 2019 | Updated on Oct 18, 2019

Here's an analysis of the annual report of MAHINDRA HOLIDAYS for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of MAHINDRA HOLIDAYS. Also includes updates on the valuation of MAHINDRA HOLIDAYS.

EIH 2018-19 Annual Report Analysis (Annual Result Update)

Jul 24, 2019 | Updated on Jul 24, 2019

Here's an analysis of the annual report of EIH for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of EIH. Also includes updates on the valuation of EIH.

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Jan 29, 2019

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