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The Great Indian Hospitality Boom - Is it for Real?
By Siddharth Thaker, HVS International
Has India reached its peak in terms of hospitality development project potential and are most cities in India now in an oversupply situation? What is a prudent market positioning and entry strategy for India?
A series of ambitious economic reforms aimed at deregulating the country and stimulating foreign investment have moved India firmly into the front ranks of the rapidly growing world economies. Skilled managerial and technical manpower that match the best available in the world and an educated middle class whose size exceeds the population of the USA or the European Union, provide India with a distinct cutting edge in global competition. Today, India is one of the most exciting emerging markets in the world be it aviation, real estate, retail, banking, health care services or hospitality. After a five-year downward spiral starting 1997-98, the hospitality industry in India witnessed a visible revival only by the second half of 2002-03, thanks to strong domestic travel trends and a positive economic and investment environment.
The industry, despite being an important component of the economy, contributed only 2% of the GDP in 2003/04. According to recent estimates of the WTTC Indian tourism demand will grow at 8.8% over the next ten years (from 2005-15), which would place India as the second most rapidly growing tourism market in the world. This is expected to result in a growth of 7.1% in total travel and tourism GDP and an increase of 0.9% in travel and tourism employment. With an estimated 26,000 rooms in the branded hotel segment, the size of the hotel industry continues to represent an abysmal figure for India’s size and growth prospects. Based on the forecasted growth in demand we expect that another 100,000 to 125,000 rooms will need to be added, across the country, in the next five to seven years, to be able to meet the increase in demand. Our preliminary research indicates that, at best, there are currently only 45,000-50,000 rooms under different stages of planning and construction that are expected to enter the market in the branded segment in the next five years.
Often we are asked;
Has India reached its peak in terms of hospitality development project potential? Are most cities in India now in an oversupply situation? What is a prudent market positioning and entry strategy?
The great Indian Hospitality Boom, is it for real?
This seems to be a million-dollar question... my view on key factors that will drive future demand and on niche markets that offer a unique potential for development.
Weekend Getaways and Integrated Travel Circuits
Mixed-Use Development Projects
The economy's buoyancy, initiatives to improve infrastructure, the aviation and real estate boom, easing of restrictions on foreign investment and, perhaps, most importantly, efforts to communicate the Brand India message – will continue to fuel demand for hotels across star categories in the majority of markets. India’s hotel industry is increasingly being viewed as investment-worthy, both within the country and outside. Niche markets such as culture tourism, the Great Indian Temple circuit, health tourism, adventure tourism etc will grow rapidly.
The journey from India versus China to India and China has just begun for India Inc. The outlook for the hospitality market in India is buoyant and will continue to remain so, in my opinion. Over the next three to five years India is all set to emerge as one of the world’s fastest growing tourism markets and will be hard to ignore.
As of now, the great Indian hospitality boom – Is surely for real and here to stay!
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