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Business opportunities in India

According to the World Tourism Organization, India will be the leader in the tourism industry in South Asia with 8.9 million arrivals by 2020. India is gradually emerging as the second most rapidly increasing (8.8 percent) tourism economy in the world over 2005-14 according to the World Travel & Tourism.India has significant potential for becoming a major global tourist destination.


It is estimated that tourism in India could contribute Rs.8,50,000 crores to the GDP by 2020 ( approx. 1800 million USD) if you properly plant develop and invest on Connectivity Infrastructure, Tourism Infrastructure, Tourism Products, CapacityBuilding and Promotion & Marketing (WTTC report). It is estimated there is a need of around 10 Billion US $ required for development of tourism as per the different state tourism estimates for the next five years. When you think about the long term capital requirement of all states, it is estimated around 56billion US $ for the next 20 years.

FDI is allowed into all construction and development of projects including construction of hotels and resorts, recreational facilities, and city and regional level infrastructure. into all construction development projects including construction of hotels and resorts, recreational facilities, and city and regional level infrastructure.

A five year tax holiday has been given to organizations that set up hotels, resorts and convention centers at specific destinations, subject to fulfillment with the agreed conditions

Foreign Direct Investment in Hotel & Tourism Industry is allowed upto 100% through automatic rout.

The term hotels include restaurants, beach resorts and other tourist complexes providing accommodation and/ or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports and health units for tourists and Convention/Seminar units and organizations.

FDI in Hotel and Tourism Industry would continue to be governed by the earlier FDI policy in relation to Hotels and Tourism and not by the new Press Note 2 (2005 series) for construction development activities.

Reasons to invest in this sector

Economic liberalization has given a new impetus to the hospitality industry.

The Indian hospitality industry is growing at a rate of 15 percent annually. The current gap between supply and demand expected to widen further as the economy opens and grows.

The government forecasts an additional requirement of 200,000 rooms by the turn of the century.

• The travel and hospitality industry continues to be the sector, which has largely profited from the fast growing economy of India. This has largely been due to the 3.9 m tourist arrivals in FY06 (15% growth) over the previous period. The compounded growth in tourist inflow over the last ten years (FY96-FY05) has been 8.2%, while in the last five years, growth stands at 9.1% per annum.

• This increase in the number of tourist arrivals in the country lifted the country’s standing in the world of tourist destinations. The country is ranked fourth among the world’s must see countries. Thesector continues to face certain problems.

• The country continues to be marred by poor infrastructure facilities like poor road management, rail,air and sea connectivity. However, the present government in its endeavor has taken a few initiatives like opening of the partial sky policy. This allows private domestic airline operators to fly on theIndian skies. Some states continue to be in political uncertainties.

• As per the 2004 findings, the total number of approved rooms by the Government of India stands ataround 99,000 (estimated). These rooms are further classified into various segments out of which,Five star and Five star deluxe hotels account for around 27% of the total capacity, three star hotels(22%), four star (8%), two star (9%), one star and Heritage hotels (2% each) and the rest is dividedbetween unclassified and unapproved hotels.

• A rapidly growing middle class, the advent of corporate incentive travel and the multinationalcompanies into India has boosted prospects for tourism. India's easy visa rules, public freedoms andits many attractions as an ancient civilization makes tourism development easier than in many othercountries.

• The five star hotel segments have grown the fastest during the last five years at a CAGR of 12%.Further, this segment can be divided into 3sub-segments Luxury, Business and Leisure. The growthin this segment indicates the genre of travelers coming into the country. Over the last few years thecountry has witnessed a large influx of business travelers in the country owing to relaxation of thegovernment’sstandonForeignDirectInvestments(FDI) for most of the sectors in the country.

• Many foreign companies have already tied up with prominent Indian companies for setting up new hotels, motels and holiday resorts. The entry of McDonald’s, Pepsico’s Kentucky Fried Chicken, Domino’s and Pizza Hut has given an international glitz to the hospitality sector.

• It costs an average of US$50-80 million to set up five-star hotels with 300 rentable rooms in India. The gestation period is usually between three and four years.

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