The Rise of the Hospitality Sector in India
India has been a large market for travel and tourism for quite some time. The country has been recognized as a travel destination, especially for medical and spiritual tourism for both domestic and international tourists. In fact, India was ranked 34th in the Travel and Tourism Competitive Report 2019 by the World Economic Forum. Indeed, the travel and hospitality sector in India have been witnessing a healthy growth, accounting for 7.5% of the country’s GDP. It is only expected to grow with time.
Economically, the tourism sector is of major importance to the country. It attracts the maximum Foreign Direct Investment inflow and is the most important net foreign exchange earners for the country. At the same time, it is one of the most heavily taxed sector with layers of taxes such as VAT, service tax, luxury tax ranging from 20% to 30%. The hotel industry in India thrives largely due to the growth in the tourism sector. We also see a rise in the number of business travelers in the country. As a result, we see the emergence of a large number of hotel chains in India. A number of international companies are also looking at setting up hotels in the country.
When we talk about the hospitality sector, we see a large number of barriers to entry, for example economic risks, high capital costs, competition in the industry, scarcity of land among many others. We observe a growth in competition not only in the metros, but also in the tier I and tier II cities of the country. With digitalisations, we see the rise of online travel agents or OTAs, that are changing the landscape of this sector. We also have a large number of meta-search engines such as MAkeMyTrip and TripAdvisor that operates like travel discovery platforms. Moreover, Airbnb and Oyo rooms have also gained momentum. Branded hotels are seen operating direct bookings through their websites.
Hence, we see that the trends for the hospitality sector has been optimistic so far, both for business and leisure segments. The sector has immense potential for growth and the long term outlook for the Indian hospitality sector looks positive.
Economically, the tourism sector is of major importance to the country. It attracts the maximum Foreign Direct Investment inflow and is the most important net foreign exchange earners for the country. At the same time, it is one of the most heavily taxed sector with layers of taxes such as VAT, service tax, luxury tax ranging from 20% to 30%. The hotel industry in India thrives largely due to the growth in the tourism sector. We also see a rise in the number of business travelers in the country. As a result, we see the emergence of a large number of hotel chains in India. A number of international companies are also looking at setting up hotels in the country.
When we talk about the hospitality sector, we see a large number of barriers to entry, for example economic risks, high capital costs, competition in the industry, scarcity of land among many others. We observe a growth in competition not only in the metros, but also in the tier I and tier II cities of the country. With digitalisations, we see the rise of online travel agents or OTAs, that are changing the landscape of this sector. We also have a large number of meta-search engines such as MAkeMyTrip and TripAdvisor that operates like travel discovery platforms. Moreover, Airbnb and Oyo rooms have also gained momentum. Branded hotels are seen operating direct bookings through their websites.
Hence, we see that the trends for the hospitality sector has been optimistic so far, both for business and leisure segments. The sector has immense potential for growth and the long term outlook for the Indian hospitality sector looks positive.
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| Source: People Matters |
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