Introduction

The hospitality sector is one of the fastest growing industries of the world. It is basically
concerned with those business activities that are primarily related to providing lodging services
and Food & Beverages. There are various other supporting or ancillary activities which act as a
feeder to these primary activities. These activities include Marketing, Management,
Transportation, Human Resource Management, Maintenance, Catering etc.
The industry has not always been the way it is now. Starting from scratch, the industry now
holds a place of vital importance in the world economy. So important it is that it is the highest
employer in the world today and also makes a major contribution to the world GNP, falling
behind only to the global oil industry.
The hospitality industry is a several billion dollar industry that primarily depends on the
availability of leisure time and disposable income with people. This sector observed massive
growth in the recent times as people began to find respite in leisure due to added strains of life.

The Industry has also emerged as an important contributor to the Indian Economy. Provision of
Employment, generation of immense income and contribution to other sectors such as
An Overview of the Secondary activities of
the Hospitality Sector
Marketing
Management
Transportation
Concierge services
Catering
Human Resource Management
Maintenance
construction and agriculture are some of the important economic benefits that the hospitality
sector provides.
Scope In India
The prospects for the Indian Hotel Industry are bright. With revival of the global economy,
inflow of international tourists is expected to rise. International tourist visits into the country are
also estimated to rise because of the fact that the Indian National Rupee is a weaker currency in
global economy. This makes the country a very cheap tourist destination while offering highly
exotic and picturesque places to visit.
What also broadens the scope of the industry in the country is that many western countries find
labor and manpower to be expensive in their home country as compared to India. This results in
outsourcing of many non-core activities such as Human Resource Management and Maintenance
and other smaller activities such as laundry.
The vast geographical territory that is covered by our country can make the hospitality sector of
the country much more valuable than what it is today. A vast coastline provides many beautiful
beaches and so much bio-diversity within the country can provide a great boost to wildlife
tourism. The beautiful lagoons of the south, the mountains of the north and the rich cultural
heritage of the country and the ancient monuments all over the country can greatly expand the
hospitality sector. Cheap availability of human resource is also a plus point that the Indian
hospitality sector enjoys.
Growth In India
The fortunes of the hospitality sector are closely linked with the growth of the tourism industry
and hence, the tourism industry is one of the major growth drivers of the hospitality industry.
The Indian hospitality sector has recorded major growth in the recent past owing to a variety of
factors.
India is one of the fastest growing economies of the world. Despite the economic slowdown,
growth rates of 6.7% and 7.4% were clocked during the financial years of 2010-11 and 2011-12.
Attractiveness of the Indian economy has brought many international players to the country
which has significantly aided the hospitality sectors growth.
Changing consumer dynamics and easier availability of finance has also played a major role in
boosting the growth of this sector. Increased affordability and affinity for leisure travel are
driving tourism in India and in turn driving the hospitality sector of the country. Easier
availability of personal loans has also contributed in growing the countrys the tourism and
hospitality industries.
The hotels form a major part of the hospitality sector. They contribute to the sector by providing
services and facilities of the great standards. All the hotels of the country currently house around
202,963 rooms. This figures is expected to rise by almost 45% with around 114,000 rooms
already under construction.
The hospitality sector is also the third largest foreign exchange earner in the country, accounting
for around 6.83% of Indias GDP. According to the planning Commission, The hospitality sector
creates more jobs per every million rupees of investment than any other sector in the country.
The World Travel And Tourism Council estimates that India is likely to become the worlds
second largest employer in the world, employing around 40,37,000 people, directly or indirectly
by the year 2019.

0
5
10
15
20
25
30
35
40
45
2007 2008 2009 2010 2011 2012 2013
Direct contribution of the hospitality sector
to the Indian GDP
US$(Billions)
Operation
Globally and domestically, the hospitality sector operates in a manner where the industry is
highly fragmented. There are companies that cater only to the higher class society and there are
also the companies which cater to every class of the society. This leads to segmentation of hotels
into Luxury, business and budget.
Furthermore, the operations of each individual organization would depend upon its capabilities
to perform all the functions. If a company is not able to perform all the functions, and provide
only the core facilities, which are generally catering and lodging services, then it will have no
choice but to outsource its non-core business activities. However, if a company is in a capacity to
offer all facilities on its own in an efficient manner, then the need to outsource activities does not
arise.
More and more companies in the hospitality sector, all over the world, are shifting towards
greater use of technology. Use of technology ensures that standardized services are offered to
customers in the most efficient manner.
A new trend of diversification has also been observed. Earlier where companies focused only on
luxury hotels, now it has been observed that companies are diversifying their hotels into luxury
and budget hotels. Luxury hotels continue to offer services of the top grade quality, where as the
budget hotels have stepped in to provide services which can be afforded by all strata of the
society, while ensuring a certain standard of quality.
A determinant of successful operations for a company engaged in the hospitality sector,
particularly those engaged in the business of hotels is the usage rate, or its inverse, called the
Vacancy rate. The usage rate determines how much the rooms of a hotel are used. Obviously, a
company would want that its usage rate is as high as possible and that the vacancy rate is bare
minimum.
Government
The travel and tourism business and hotels are regulated by both, the Central and the State
governments. The government allows 100% Foreign Direct Investment (FDI) for hotels. To aid
tourism, the government has highly liberalized the aviation industry, giving rise to many low cost
carriers.
The government has aptly realized the huge potential of this sector and has taken up various
steps to exploit the same. A cash subsidy of INR 200,000 per room is available for every newly
constructed 1 star hotel. The subsidy increases to INR 300,000 for every 2 star or 3 star newly
constructed hotel. The government also awards a 5 year tax holiday to 2-4 star hotels in certain
districts of the country.
Various massive advertising campaigns have been adopted to boost the business in this sector by
the government, at the State and the Central level. The Incredible India campaign launched by
the Central government is one such great example. Gujarat governments advertising efforts to
boost travel and tourism of the state, Khushboo Gujarat Ki, led to a paradigm shift in how state
travel and tourism is marketed.
The government in regard to a growing number of visitors visiting the country for the purpose of
availing cheaper medical treatments in the country has launched the scheme of medical visa.
This medical visa, (M-Visa) has greatly fostered medical tourism and brought in great figures of
foreign exchange.
A scheme of Visa on Arrival (VoA) has also been launched which extends to a select few
countries like New Zealand, Japan, Singapore, Cambodia etc.
The Ministry of Tourism has tied up with the United Nations Development Programme to
promote rural tourism. 15 key tourist destinations have been identified in rural regions which are
being developed to world class standards, along with 50 other rural regions being promoted fr the
exposition of the handicraft business. A maximum amount of INR 50,00,000 is sanctioned for
each rural tourism project.
During the 12
th
5-year plan, a budgetary support of US$2.8billion has been approved for the
Ministry Of Tourism.
Major Players In The Market and The Key Players
The market for this sector is segmented into 5 categories. Firstly, there is the premium or deluxe
segment, which covers the 5* hotels of the country. These are considered to be the most
expensive. Then there are the mid-players, which cover the 3 and 4* hotels. These generally
cater to the average foreign travelers and mid-level business travelers. Then to follow are the
budget hotels, which are 1 or 2* hotels which offer not as many services as the other segments
do. They are generally meant to provide cheap accommodation to the highly price conscious
travelers.
The Indian Hospitality sector is fragmented into a large number of small and unorganized
players. These small players are mainly engaged into the business of budget hotels. However, the
roost is ruled by the multi-billion dollar companies that have made their mark in the industry
over the years.
There are about 20 hospitality companies in India, which are based in the country. The key
players among these are the Taj Group of Hotels, which is run by the Tata group of Industries.
The Taj Hotels occupy the maximum market share with a staggering 25%. Second to follow are
the Trident hotels, which are run by The Oberoi Group. They occupy a marker share of 17%.
ITC hotels form another major group in the hospitality sector of the country along with the Leela
Group Of Hotels.

The booming industry has also attracted many international players. A number of them have
already established their footing in the country. These include, Hilton, Shangri-La, Radisson,
Marriott, Meridian, Sheraton, Hyatt, Holiday Inn, InterContinental and Crown Plaza.
New Brands such as Satinwoods, Banana Tree, Hampton Inns, Scandium by Hilt and Mandarin
Oriental are planning to enter the Indian hospitality sector with the help of already existing
domestic companies.
Future Prospects: Opportunities and Risks
The upcoming industrial parks, manufacturing facilities and ports across the country provide a
good opportunity for budget and mid-market hotels. Although around 114,000 additional rooms
are expected to come up in India in the next five years, the supply of branded/quality rooms in
India is much lower compared to other countries across the globe. Hence, there exists huge
potential for investors and operators across all the segments of hotel industry in India. The
increase in room inventories is expected to make the hotel industry more competitive and hotels
would be under pressure to maintain quality and service levels at competitive prices. Competitive
pricing amongst the branded hotels along with the addition of more budget and mid-market
hotels would make the hotel industry cost competitive with other destinations.
Indias unparalleled diversity and rich cultural heritage are also to bring a large number of
foreign tourists in the coming year. This sector has the opportunity to put the country to the
forefront with its ability to rake in millions of rupees of valuable foreign exchange. This will
make the country highly viable financially and politically.
Challenges To The Sector
Market Share in the Indian Hospitality Sector
of Indian Companies
Taj Group Of Hotels
Trident
ITC Hotels
Leela
Others
A major challenge that the Indian Hospitality sector faces is that of the infrastructure. The
country currently has around 200,000 rooms which will increase by around 114,000 rooms in the
coming 5 years. However, the rooms that the country currently has are inadequate and not of a
great quality. The fact that the hospitality sector remains an expensive business to enter will
likely affect its growth rate. With a very high requirement of capital expenditure, not many are
willing to enter the hospitality sector.
Another challenge that is subjective to this sector is the great requirement of human resource.
While the Indian Hospitality sector remains the largest employer in the country, the quality of
labour employed in this sector is still not upto the mark. With the number of employees
increasing year by year, it may lead to over employment within the sector. This may lead to
disguised unemployment and may lead to wastage of the highly valuable human resource.

Also, when we look at the growth rate of the Indian Hospitality Sector, it projects quite
impressive figures. However, this can be said only from one standpoint- that is when we look at
these growth figures in absolute terms. In relative figures, However, the figures express the true
story of the sectors growth. The figures may be phenomenal, but looking at the population of the
country, the rate at which the sector is growing is much slower than the pace at which it should
actually grow. With the country having only around 200,000 beds across all categories of hotels,
whether budget or luxury, it is not enough to feed a country with a massive population of 1
billion. Out of these, even if only .1% of the population decides to travel at the same time, the
hospitality sector may fall short in providing adequate services of a standard quality.
Key Learnings and Observations
A careful analysis of the Indian hospitality sector helps us understand its sheer size and vitality
for the Indian economy. Bringing in wide-scale employment for the economy, it contributes to
the development of the population. The hospitality sector also plays a major role in bringing in
financial prosperity for the economy. With the growth of the sector, and more and more foreign
tourist arrivals into the country each year, the sector is bringing in the much needed foreign
exchange, which helps make the country stronger in the international arena.
The sector, directly or indirectly, leads to blossoming of the country which balances the disparity
between the rural and the urban regions. The governments efforts to promote rural tourism
brings about the required state of being in many remote areas. The hospitality sector also greatly
contributes in the expansion of other sectors such as the agriculture and the construction sectors.
Large scale capital expenditure in the sector leads to development of capital assets for the
country, which can be seen in the form of massive development of the infrastructure in the
country.
In a nutshell, the Indian hospitality sector forms a very important part of the Indian economy and
its presence is indispensable.

Bibliography
1) www.ibef.org
2) www.wikipedia.org
3) www.slideshare.net
4) www.hospitalityindia.com