Research Paper

Volume : 2 | Issue : 3 | Mar 2013 ISSN No 2277 - 8179

Management

Hospitality Industry: a Key Revenue

Generator to Indian Economy as a Part of
Tourism Industry

Dr. Anupama Sharma

Ms. Sumita Kukreja

ABSTRACT

KEYWORDS: Hospitality- Industry,

Occupancy-Rate, Demand & Supply,
Hotel- Classification

Asst. Professor, Department of Business, Administration, Maharaja Surajmal Institute

Asst. Professor, Department of Business, Administration, Maharaja Surajmal Institute

Hotel Industry is one of the important component of tourism industry. The definition of tourism industry
cant be completed without mentioning the presence of a hotel. A hotel is a place which provide a space to stay
, some food & beverages to eat and drink , and some facilities to enjoy . Hotel industry is playing a vital role in earning millions of
dollars from foreigners and thus contributing towards revenue generation and increasing employment opportunities to the host
community. Present paper highlights the significance of hotel industry in Indian economy, their demand and supply scenario ,various challenges before hotel Industry and Government efforts to remove the problem associated with this industry. To obtain all said
objectives data has been gathered through secondary sources specially with the help of books, magazines, e-journals, and websites .
After analyzing all the facts it may be concluded that the Indian Hospitality sector is expected to show a healthy growth in the coming
years. Strong economic growth, increased FDI, greater emphasis on tourism development, favorable Government policies, impending
2010 Commonwealth games, 2011 Cricket World Cup and other international events, have proved as a major drivers for the growth
of this sector.

INTRODUCTION:-HOSPITALITY INDUSTRY AS A KEY REVENUE GENERATOR

Hotel Industry is witnessing continued momentum due to the
increased number of foreign tourist arrivals together with the
growth of domestic tourism in the country.The Indian Hospitality industry contributes around 2.2 percent of Indias GDP. The
Indutsry is expected to reach INR 230 billion growing at a compound growth rate of 12.2 percent. The Industry also witnessed
an increase in the number of hotel rooms with a growth 5%
during the last three to four years. In the next two years, a total investment of US$12.2 billion (INR545.2 billion) is expected
that will add over 20 new international brands in the hospitality
sector. To attract budget tourist in india government is planning
to develop budget hotels in the country. In this series various
budget category hotels like Ginger Hotels, Lemon Tree Hotels,
Sarovar Hotels, and Fortune hotels have been established.
The growth of the Hotel Industry is largely due to the rising
business opportunities, strong economic performance and
cross border investments. India has currently base of 110,000
hotels rooms and still face the shortage of 150,000 rooms. There
is a mismatch between demand and supply, leading to higher occupancies and average room rates. Occupancy rates across India
have improved from 52 percent in 2005 to 67 percent in 20092010. Average Room Rates across cities have improved from
USD 51.6 to USD 76.4 in the same period. Over the years the
demand for the five stars- deluxe hotels have been increasing.

OBJECTIVES OF THE STUDY

To analyze all the relevant facts related to hotel industry certain
objectives has been laid down which are as follows:1. To study the growth of visitors and increasing demand of
rooms and beds.
2. To explore the demand & Supply scenario of hotels in India.
3. To know the role of hotel- industry in revenue generation
4. To find out the challenges before hotel-industry.
RESEARCH METHODOLOGY
Research methodology is partly descriptive, partly exploratory
and partly casual .For this study data and information has been
collected with the help of Books, Magazines, Newspapers, Research Articles, Research Journals, E-Journals, UNWTO Report,
Report of Ministry of Tourism, Report of World Travel and Tourism Council.

ANALYSIS AND DISCUSSION

Hospitality industry in India is gradually gaining importance
as employment provider industry and attracting thousands of
young people to be a part of this glamorous industry . To tap the
potential of this industry as a foreign exchange earner Indian
Government is launching various mega-projects in different
states of India to improve the infrastructure, in order to attract
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IJSR - INTERNATIONAL JOURNAL OF SCIENTIFIC RESEARCH

millions of international tourist. Further government of India is

granting various rebates and tax exemptions to various foreign
and private investors to invest in developing numerous private
hotels and restaurant in India.

As Tourism Industry is flourishing day by day the importance

of hotel term in tourism literature is increasing simultaneously
and the need for more and more hotels room and hotels chain
is taking place to meet the required demand of beds for national
and international tourists. The arising demand for hotels and
rooms is clear from the following table.
TABLE- 1: DEMAND FOR HOTELS AND ROOMS WITH THEIR
CLASSIFICATION (2010)
Star Category

No. of Hotels

No. of Rooms

5-Star Superior

92

11332

5-Star Deluxe
5-Star
4-Star
3-Star
2-Star
1-Star

Heritage

To be Classified
Total

82

132
132
704
587
212
83
50

1934

Source- Report of Ministry of Tourism

18764
9401
9401

31039
19031
695

2216
5127

103973

Various International companies are coming forward for making collaboration with Indian hoteliers to enhance the standard
of service industry and to fill the gap of rooms and beds in different hotels to meet the demand and supply ratio of them for
the tourist. Currently, according to an industry estimates, there
are only 1,05,000 hotel rooms in India. The growth for hotels
is also likely to come from proliferation of Special Economic
Zones.

According to ICRA it is expected that the shortage of rooms in India

will remain same atleast for next five years due to higher occupancy
levels and increase in Average Room Rates (ARR). As the number of
visitors in Indian hotels is increasing day by day the Government
of India is planning to develop several budget hotels and heritage
hotels to meet the required demand of beds and rooms to satisfy
our visitors. The following table-2 and table-3 rightly depicts the
growth of visitors and available number of hotels in India.

Research Paper
TABLE- 2: GROWTH OF VISITORS IN HOTELS
Year
International Visitors
Domestic Visitors
2007
9.1
9.2
2008
6.1
5.0
2009
-1.3
0.8
2010
1.9
7.2
2011
5.7
9.1
2021F
7.1
8.3
Source- Report of Ministry of Tourism, 2007-2011

In the above table it is rightly depicted that the growth of visitors in hotels is increasing gradually. In the year 2011 an average ratio of international tourist arrival in a hotel was 5.7%
which is expected to rose upto 7.1% by the year 2021, and in
the same year the domestic visitors arrival was 9.1% which is
expected to fall upto 8.3% by the year 2021 due to some external forces.
FIGURE-1

Figure:2

Figure: 3

Volume : 2 | Issue : 3 | Mar 2013 ISSN No 2277 - 8179

crore in the year 2011. The reasons which are responsible for
increasing foreign tourist traffic and foreign exchange business
cum pleasure destination, opening of the sectors of economy to
private sectors, attracting foreign investment, open skies policies of aviation sector which has led to better connectivity with
many countries with India, liberal government policies and
tourism promotion measures initiated by tourism organizations. earnings in India may be described as, India is considered
as a economical as well as

Not only foreigners but also millions of domestic tourist are attracted towards different tourist destinations of India and are
travelling to different states and union territories to explore culture, to seek knowledge and for medical treatment. In the year
2009 about 668.8 million domestic tourist have visited different
states of India. This figure has rose up to 740.21 million in the
year 2010. In the year 2010 the state Maharashtra is visited by
maximum number ( 28.5% ) of total foreign tourist. Then Tamil
Nadu and Delhi have received 15.7% and 10.6% of total foreign
tourist respectively. In the case of domestic tourist arrival the
state Andhra Pradesh has received 21.0% of total domestic
tourist arrival. Then comes the Uttar Pradesh and Tamil Nadu
which has received 19.6% and 15.1% of total Domestic tourist arrival in the year 2010 respectively. This increase has been
seen as a direct outcome of rapidly increasing purchasing power
of the middle class , better road connectivity, evolving life style,
hike in salaries and liberal government policies.

Further reforms in aviation industry has helped in having better connectivity with many countries (such as ASEAN) and created additional capacity on existing routes (for e.g. USA, Middle
East).The aviation sector has undergone a significant structural
transformation over the past decade,with the birth of a new
airline model,the low-cost carrier(LCC).With their focus on nofrills, point-to-point services, LCCs have had a significant impact
on the demand for airline travel, making it affordable for a much
wider segment of the population in all key world regions. To
make Tourism sector in India more attractive the Government
has launched a scheme of Visa on Arrival from January 2010
for citizens of five countries, namely Combodia, Indonesia, Vietnam Philippines, Laos and Myanmar from January 2011.
The Readers Travel Awards 2006 has placed India at number
four (from number nine in 2003) among the worlds must-see
countries which has helped boost its image as a pleasure destination. This is clear from the following table :TABLE-3

In the figure-1 and figure- 2, the trends show that the total number of rooms and the total number of hotels are maximum at the
three star classifications i.e. 704 and 31039. The same is minimum in the one star hotel i.e.212 and 695 and heritage hotel
classification i.e. 83 and 2216.

The above figure shows the growth and demand for hotels in
India. These visitors are inclusive of international as well as domestic tourists. The figure shows the contribution of the hotel
industry to the GDP of India. The Indian Hospitality sector is
expected to show a healthy growth in the medium term. Strong
economic growth, increased FDI, greater emphasis on tourism
development, favourable Government policies, impending 2010
Commonwealth games, 2011 Cricket World Cup and other international events, have been a major drivers for the growth. There
exists a lot of scope for growth in tourism sector. According to
the Ministry of Tourism, the contribution of tourism to Indias
GDP is only 5.9 per cent as compared to the worldwide average
of 11 per cent.
DEMAND & SUPPLY SCENARIO
FOREIGN AND DOMESTIC TOURIST ARRIVAL
The Foreign tourist arrival and Foreign exchange earning is increasing day by day in India. In the year 2009 the total foreign
tourist arrival was 516 million which has reached up to 629 million in the year 2011.Whereas the foreign exchange earning in
the year 2009 was 54960 crore which has reached up to 77591

FOREIGN TOURIST ARRIVALS (FTAS) AND FOREIGN EXCHANGE

EARNINGS (FEE) FROM TOURISM IN INDIA DURING 2011 AND
COMPARATIVE FIGURES OF 2010 AND 2009
Month
Foreign Tourist Arrivals (Nos.)
Percentage Change
2009
2010 (R ) 2011
2010/09 2011/10
January
481308
568719 623885 18.20% 9.70%
February
489787
552152 635527 12.70% 15.10%
March
442062
512152 550051 15.90% 7.40%
April
347544
371956 437792 7.00%
17.70%
May
305183
332087 355333 8.80%
7.00%
June
352353
384642 412336 9.20%
7.20%
July
432900
466715 513853 7.80%
10.10%
August
369707
422173 444548 14.20% 5.30%
September 330707
369821 401995 11.80% 8.70%
October
458849
507093 562873 10.50% 11.00%
November 541524
608178 636762 12.30% 4.70%
December 615775
680004 715364 10.40% 5.20%
Total
5167699 5775692 6290319 11.80% 8.90%
Foreign Exchange Earnings (in Rs. Crore)
Foreign Exchange Earnings (in
Month
Percentage Change
Rs. Crore)
2009 #
2010 #
2011 #
2010/09 2011/10
January
4598
5593
5777
21.60% 3.30%

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Volume : 2 | Issue : 3 | Mar 2013 ISSN No 2277 - 8179

February
4547
6646
7653
March
4437
5507
5522
April
4061
4518
5724
May
3249
4358
5047
June
3801
4751
5440
July
4983
5444
7116
Foreign Exchange Earnings( in US$ million)

46.20%
24.10%
11.30%
34.10%
25.00%
9.30%

Research Paper
15.20%
0.30%
26.70%
15.80%
14.50%
30.70%

Foreign Exchange Earnings (in US$ million) Percentage

Change
2009 #
2010 #
2011 #
2010/09
January
941
1215
1273
29.1%
February
923
1434
1684
55.4%
March
867
1209
1227
39.4%
April
811
1013
1290
24.9%
May
669
951
1124
42.2%
June
796
1020
1213
28.1%
July
1028
1163
1603
13.1%
August
851
992
1264
16.6%
September 785
1015
1208
29.3%
October
1028
1175
1424
14.3%
November 1185
1448
1566
22.2%
December 1510
1558
1688
3.2%
Total
11394
14193
16564
24.6%
Month

@ Provisional Estimates # Advance Estimates R: Revised

The above table shows that the number of international and

domestic tourist arrival is increasing day by day which is giving birth to the increasing demand for more hotels and rooms
in India.According to an estimates around 10,856 hotel rooms
in 2006, 9,318 rooms in 2007, 7,794 rooms in 2008 and 7,408
rooms in 2010 have been added to meet the required demand
of tourist, as the rate of tourist arrival in India is increasing
rapidly due to various events like commonwealth games, AutoExpo and Trade- Fair. This ratio has been increased from 8.7%
in 2006 to 13.6% in 2010.

India in world is known as a land of charismatic heritage . Here

one not only enjoy the culture and spiritual values but also hospitality which motivates them to visit India again and again. As
the movement of travelers is increasing rapidly into India, the
demand for rooms, across segments, has skyrocketed. Hotels in
the luxury and business traveler segment are recording nearly
100 per cent occupancy. Acknowledging the increasing demand
of more rooms and hotels Government of India has made provisions to add around 10,856 hotel rooms in Delhi, 9,318 rooms
in Mumbai, 7,794 rooms in Bangalore and 7,408 rooms in Hyderabad by the end of 2012.
MARKET TRENDS:
Table-4 : Hotels Classification Occupancy
2005 06

Particular
Overall
Average

69.0

Five Star Deluxe

Five Star

Four Star

71.5

200708
71.4

2009-10

68.8

60.3

73.8

73.0

71.7

62.3

71.8

72.7

71.7

68.9

59.5

56.7

70.4
65.9

70.2
68.9

Source: www.ministryoftourism.com
248

200809

71.4
71.1

Three - Star

200607

67.2
64.7

59.9
57.5

IJSR - INTERNATIONAL JOURNAL OF SCIENTIFIC RESEARCH

FIGURE-4

Source: www.ministryoftourism.com

Above bar graph showing the change in occupancy rate of the

hotels room of the different classified hotels. In the year 200910, five-star deluxe had the highest occupancy rate. The lowest
occupancy rate was in the year 2005-06, in the three star classifications.
TABLE-5 HOTEL CLASSIFICATION AVERAGE RATE (US
DOLLARS)
Particular

Overall
Average
Five Star Deluxe
Five Star
Four Star
Three - Star

2005 - 2006-07 2007-08 2008-09 200906

10
95.73

122.34

162.17

198.52

170.71

86.79
68.78
40.71

112.03
86.45
49.71

149.22
117.23
69.09

190.16
142.20
86.67

165.29
126.35
79.83

124.86 161.08

224.26

Source: www.ministryoftourism.com

278.33

241.05

FIGURE:5

Source: www.ministryoftourism.com

The above bar graph shows the change in the average rate of the
different classified hotels. In the year 2008-09, five-star deluxe
had the highest change in the average rate. The lowest was in
the year 2005-06, in the three star classifications.
FIGURE-6

Research Paper
It is clearly stated in the above bar graph that the demand for
5-Star deluxe hotel room was highest in the year 2008-09 and
was lowest in the 2005-06.The reason responsible for increasing this is that earlier only aristocrat class was able to go for a
pleasure trips and to avail the facility of 5-Star Hotel, but now
liberal government policies regarding granting leaves and a
hike in salary has made budgetary class more affluent, mobile,
internet savvy and more sophisticated. Now they are capableenough to hire expensive goods and services, and to afford high
standard facilities including comforts of 5-Star category hotels.
To tap this opportunity Government of India is launching several tax exemption schemes, and granting permission for availing
more and more bar and liquor -licenses to private and foreign
investors, to develop high standard as well as budget category
hotels in India. Indian Government in its Union-Budget 2011-12
have made various provisions to exempt this sector from various kind of direct and indirect taxes.

FINDINGS OF THE RESEARCH

The growth of the Hotel Industry is largely due to the rising
business opportunities, strong economic performance and
cross border investments. India has currently base of 110,000
hotels rooms and still face the shortage of 150,000 rooms. There
is a mismatch between demand and supply, leading to higher
occupancies and average room rates. The key findings of the
research are as follows:-

1. Occupancy rates across India have improved from 52 percent in 2005 to 67 percent in 2009-2010. Average Room
Rates across cities have improved from USD 51.6 to USD
76.4 in the same period. Over the years the demand for the
five stars- deluxe hotels have been increasing.
2. Despite the global economic recession, foreign tourist arrival increased to 5.37 million in 2010 from 4.98 million in
2009.
3. Sports events like IPL and the Commonwealth games have a
potential to create demand for both Tourism and Hospitality industry in India.
4. Acknowledging the increasing demand of more rooms
and hotels Government of India has made provisions to
add around 10,856 hotel rooms in Delhi, 9,318 rooms in
Mumbai, 7,794 rooms in Bangalore and 7,408 rooms in Hyderabad by the end of 2012.
5. The growth of visitors in hotels is increasing gradually. I n
the year 2011 an average ratio of international tourist arrival in a hotel was 5.7% which is expected to rose upto 7.1%
by the year 2021, and in the same year the domestic visitors
arrival was 9.1% which is expected to fall upto 8.3% by the
year 2021 due to some external forces.

Volume : 2 | Issue : 3 | Mar 2013 ISSN No 2277 - 8179

6. In the year 2009-10, five-star deluxe had the highest occupancy rate. The lowest occupancy rate was in the year
2005-06, in the three star classifications.
7. In the year 2008-09, five-star deluxe had the highest change
in the average rate. The lowest was in the year 2005-06, in
the three star classifications.
8. The Indutsry is expected to reach INR 230 billion growing
at a compound growth rate of 12.2 percent.
9. The Industry also witnessed an increase in the number of
hotel rooms with a growth 5% during the last three to four
years.
1. In the next two years, a total investment of US$12.2 billion
(INR545.2 billion) is expected that will add over 20 new international brands in the hospitality sector.
11. To attract budget tourist in india government is planning
to develop budget hotels in the country. In this series various budget category hotels like Ginger Hotels, Lemon Tree
Hotels, Sarovar Hotels, and Fortune hotels have been established.
CHALLENGES BEFORE HOSPITALITY INDUSTRY
Hospitality is growing day by day in the world and India is
sharing a major part of world tourism receipts and world tourism traffic and has proved successful in maintaining its place
on world tourism map. Though India shares only 1.24 % of international tourist receipts and 0.59% of international tourist
traffic but this contribution can not be neglected. Hospitality
Industry is sharing a large portion in total tourist receipt. But
still we are lacking behind in gaining expected foreign exchange
and international tourist traffic from this sector. The major constraint in the expansion of international tourist traffic to India is
non-availability of adequate infrastructure including adequate
air seat capacity, accessibility to tourist destinations, accommodation and trained manpower in sufficient number.Poor visitor
experience, particularly, due to inadequate infrastructural facilities, poor hygienic conditions and incidents of touting and harassment of tourists in some places are factors that contribute to
poor visitor experience.

The biggest challenge before hospitality industry is the entry

of new players, difficulty in getting approval of the licenses,
and poor demand and supply ratio of hospitality facilities. As
the entry of international players like Aman Resorts, Shangri-la
Hotels, Four Seasons Hotels and The Hilton group is increasing
rapidly, leading to an increase in competitive intensity in this
sector.

REFERENCE

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Published by Ane Books Pvt. Ltd. | 4. Report of Ministry of Tourism 2011-12 | 5. Report of Ministry of Tourism 2011-12 | 6. Report of
Ministry of Tourism 2011-12 | 7. Report of Ministry of Tourism 2011-12 | 8. Report of World Travel and Tourism Council on Economic
Impact of Tourism in India 2011-12 | 9. Report of World Travel and Tourism Council on Economic Impact of Tourism in India 2011-12
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14. Report of World Travel and Tourism Council-Travel and Tourism 2011. | 15. UNWTO Report 2009-10 | 16. UNWTO Report 2010-11
| 17. UNWTO Report Tourism Highlights 2011 Edition |
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