TOURISM AND HOSPITALITY - IBEFhospitality industry has widened. • For instance, the demand for hotel rooms is about 240,000 rooms, while the current supply of hotel rooms is around

TOURISM AND HOSPITALITYNovember 2010

2

Contents

Advantage India

Market overview

Industry Infrastructure

Investments

Policy and regulatory framework

Opportunities

Industry associations

TOURISM AND HOSPITALITY November 2010

3

Advantage India

Advantage

India

Increased inbound

tourist arrivals

Foreign tourist arrivals (FTAs) in India have increased as India continues to be a favoured tourist destination for leisure, as well as

business travel. FTAs have increased at a CAGR of 8.1 per cent between 2004 and 2009.

Favourable

government

policies

The Government of India has introduced various initiatives and campaigns such as Incredible India!, Colors of India, AtithiDevo Bhavah and the Wellness Campaign to promote the Indian tourism and hospitality industry.

High demand

for quality

rooms

Increased medical

tourism

India’s well-equipped hospital infrastructure and the low cost of treatment, compared to developed countries, make it a

preferred destination for medical tourism, which is expected to grow at 29 per cent to reach US$ 2.4 billion by 2012.

Rising domestic

leisure travel

Increased

business travel

due to growing

economy

Strong growth in the services

industry in the past few years

has led to increased corporate

spending on business travel.

Sources: ―Statistics,‖ Ministry of Tourism (Government of India) website, http://tourism.gov.in, accessed 2 December 2010; ―Travel and tourism

economic impact: India, 2010,‖ World Travel and Tourism Council website, www.wttc.org, accessed 2 December 2010; ―Medical tourism defies

decline in FTA: study‖ Trade India website, http://smetimes.tradeindia.com/smetimes/news/indian-economy-news/2010/Apr/12/medical-tourism-defies-

decline-in-fta-study555117.html, accessed 23 September 2010, © 2010, Trade India.

Increasing income and affordability

have increased domestic leisure

travel in the country.

Currently, the demand for

hotel rooms is about 240,000

rooms, while the current

supply of hotel rooms is

around 100,000.

Tourism and Hospitality November 2010

ADVANTAGE INDIA

http://tourism.gov.in/

http://www.wttc.org/

4

Contents

Advantage India

Market overview


Investments


Opportunities



5

Market overview

India is one of the fastest-growing travel and tourism markets in the world.

• The demand for travel and tourism in India is expected to increase at a compound annual growth rate (CAGR) of 11.8 per cent between 2005 and 2010, to reach US$ 144.4 billion (INR 6,778.2 billion).

• The demand for travel and tourism is expected to reach US$ 431.7 billion (INR 24,252.4 billion) by 2020.

• The Indian hotel industry, being a direct beneficiary of the growth in the economy and the tourism industry, has also recorded strong growth over the past few years.

Source: ―Travel and tourism economic impact: India, 2010,‖ World Travel and Tourism Council website, www.wttc.org, accessed 2 December 2010.

E: Estimate; F: Forecast

MARKET OVERVIEW

Indian travel and tourism demand

US$

bill

ion

88.2 98.8119.4

142.4124.3

144.4

431.7

0

50

100

150

200

250

300

350

400

450

500

2005 2006 2007 2008 2009E 2010F 2020F


http://www.wttc.org/

6

Growth drivers

Source: ―Tourism statistics at a glance, 2009,‖ Ministry of Tourism (Government of India) website, http://tourism.gov.in/statistics/statE09.pdf,

accessed 2 December 2010; ―Statistics,‖ Ministry of Tourism (Government of India) website, http://tourism.gov.in/statistics/Oct2010.pdf, accessed 2

December 2010.

Domestic tourism

has grown

• Rising affordability and affinity for leisure travel are driving domestic tourism in India.

• Domestic tourist visits in India were estimated at 650 million in 2009, a growth of 15.5 per cent over the previous year.

India has emerged

as a popular

destination for

foreign tourists

• International tourist arrivals in India have increased at a CAGR of 8.1 per cent between 2004 and 2009 to reach 5.1 million. During the same period, foreign exchange earnings from tourism increased by more than 13 per cent to reach US$ 11.4 billion.

• In addition, between January and October 2010, international tourist arrivals were 4.3 million, compared to 3.9 million during the same period in 2009, reflecting a y-o-y growth of 9.9 per cent. Between January and October 2010, foreign exchange earnings from tourism increased by 28.6 per cent to US$ 11.2 billion.

Outbound travel is

becoming

increasingly

affordable

• The increasing affluence of the Indian middle-class population and easy availability of attractive tour packages have increased outbound leisure travel from India.

• Globalisation is driving outbound business travel.

• The number of Indian nationals on outbound tours increased from 6.2 million in 2004 to 11 million in 2009.

Infrastructure

is being augmented

• The Ministry of Tourism is upgrading infrastructure facilities at important tourist destinations, which has improved accessibility to these places.

• Moreover, reduced airfares and better infrastructure (new airports in various cities) are expected to improve connectivity between major cities in the country and create more demand for hotels.

MARKET OVERVIEW


7

Key trends … (1/2)

Serviced

apartments are

becoming popular

• Driven by an increasing inflow of expatriates and travellers staying for long durations, the serviced apartment concept is gaining ground in India.

• Some examples of serviced apartments in India include Taj Wellington Mews, Homestead Serviced Apartments, Marriott Executive Apartments, Star City, Grand Hyatt Residences and Seasons.

Budget hotels have

witnessed strong

growth

• Budget hotels have witnessed robust growth in India, driven by the growth in domestic travel.

• Expansion of business activity to tier-II and tier-III cities has created demand for such hotels in these locations.

• Both domestic and international hotel chains have significant plans for this segment.

Niche segments

are experiencing

growing demand

• With India emerging as a preferred destination for medical treatment, medical tourism in the country is expected to grow at 29 per cent to reach US$ 2.4 billion by 2012.

• Several hotel-cum-hospitals and medi-cities are being developed in the country.

• With more than 70 national parks and 400 wildlife sanctuaries, other niche segments such as eco-tourism, wildlife tourism and adventure tourism are gaining popularity in India.

MARKET OVERVIEW

Sources: ―Medical tourism defies decline in FTA: study‖ Trade India website, http://smetimes.tradeindia.com/smetimes/news/indian-economy-

news/2010/Apr/12/medical-tourism-defies-decline-in-fta-study555117.html, accessed 23 September 2010; ―Wildlife,‖ Incredible India website,

www.incredibleindia.org, accessed 21 September.


8

Key trends … (2/2)

Source: ―Hotel Chains Carlson, Choice Take M&A Route To Expand In India,‖ VC Circle website, http://www.vccircle.com, accessed 29 January 2010.

International

players are

strengthening their

presence in India

• Several international players in the hospitality industry are expanding their presence in the country, driven by India’s fast-growing hospitality industry.

• Previously, international players entered the country by establishing alliances with local hotel chains or real estate players. However, recently, some global players have taken the inorganic route to strengthen their presence in the country.

• For instance, Carlson Hotels Worldwide increased its stake in RHW Hotel Management Services, owners of Radisson brand in India, while Choice Hotels International, Inc has announced plans to acquire the remaining 60 per cent stake in Choice Hospitality India Ltd.

Demand in smaller

cities is increasing

• Business travel to smaller cities (such as Bhubaneswar, Pune, Jaipur, Mangalore and Kochi) has increased, with IT/ITeS companies expanding operations in these cities.

• India has emerged as a popular tourist destination, and many smaller cities (Udaipur, Thiruvananthapuram and Kochi) are witnessing a greater influx of foreign tourists, resulting in an increased demand for hotels in these cities.

MARKET OVERVIEW


http://www.vccircle.com/

9

Key players … (1/2)

• The Indian Hotels Company Ltd (IHCL) is the largest player in the industry, while East India Hotels (EIH), ITC, Bharat Hotels, Asian Hotels and Hotel Leelaventure are among the other key players.

• Several international players, including InterContinental, Marriott, Starwood and Accor have also entered the Indian hospitality space.

MARKET OVERVIEW


10

Key players … (2/2)

Company Type of properties Brands

Indian Hotels

Company LtdLuxury, mid-segment and budget Taj, Gateway, Vivanta and Ginger

ITC Welcomgroup Luxury, budget and heritage hotelsITC Hotel — Luxury Collection, WelcomHotel —

Sheraton, Fortune and WelcomHeritage

EIH Business hotels, leisure hotels and cruises Oberoi and Trident

CarlsonLuxury, business hotels, economy and

cruises

Radisson Hotels and Resorts, Park Plaza, Country Inns &

Suites, Park Inn

InterContinental Luxury, mid-segment and business hotels

InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn

Express, Hotel Indigo, Staybridge Suites, Candlewood

Suites

Sources: Indian Hotels Company Ltd website, www.tajhotels.com, accessed 29 January 2010; ITC-Welcomgroup website, www.itcwelcomgroup.in,

accessed 29 January 2010; EIH website, www.oberoihotels.com, accessed 29 January 2010; Carlson website, www.carlson.com, accessed 29 January

2010; InterContinental website, www.intercontinental.com, accessed 29 January 2010.

MARKET OVERVIEW


http://www.tajhotels.com/

http://www.itcwelcomgroup.in/

http://www.oberoihotels.com/

http://www.carlson.com/

http://www.intercontinental.com/

11

Contents

Advantage India

Market overview


Investments


Opportunities



12

Industry infrastructure

Sources: ―Statistics,‖ Ministry of Tourism (Government of India) website, http://tourism.gov.in, accessed 21 September 2010; ―Hotel industry in

India to see addition of 15,600 rooms in 2010,‖ HospitalitybizIndia.com website,

http://www.hospitalitybizindia.com/detailNews.aspx?aid=7110&sid=1, accessed 29 January 2010.

E: Estimates

• Over the years, demand-supply gap in the Indian hospitality industry has widened.

• For instance, the demand for hotel rooms is about 240,000 rooms, while the current supply of hotel rooms is around 100,000.

• This gap is expected to reduce in the future as several hotel projects are in the pipeline.

• Over 15,600 rooms are expected to be added in 2010 alone.

INDUSTRY INFRASTRUCTURE

Growth in the number of hotel rooms

95,087

110,687

85,000

90,000

95,000

100,000

105,000

110,000

115,000

2008 2010E

No o

f ro

om

s


http://www.hospitalitybizindia.com/detailNews.aspx?aid=7110&sid=1

13

Contents

Advantage India

Market overview


Investments


Opportunities



14

• Both domestic and international players have planned large-scale investments in the hospitality industry.

• Investment in travel and tourism in India is expected to reach US$ 34.7 billion in 2010 and US$ 109.3 billion by 2020.

• Some of the recent investment plans include:

Sources: ―Tata Group plans 50 Ginger hotels in India,‖ Rediff Business website, http://business.rediff.com/report/2009/dec/14/tata-group-plans-50-

ginger-hotels-in-india.htm, accessed 25 January 2010; ―Carlson bets big on India,‖ The Hindu website,

http://beta.thehindu.com/business/companies/article80951.ece, accessed 25 January 2010; ―Marriott plans to introduce mid-market brand Fairfield

Inn in India,‖ HospitalitybizIndia.com, http://www.hospitalitybizindia.com/detailNews.aspx?aid=7221&sid=1, accessed 25 January 2010; ―Travel and

tourism economic impact: India, 2010,‖ World Travel and Tourism Council website, www.wttc.org, accessed 21 September 2010.

Investments … (1/2)

Company Planned investment Details

IHCL NAIHCL plans to construct 50 budget hotels under the

Ginger brand between 2009 and 2013.

EIH NAEIH plans to develop 750 additional hotel rooms under the

Trident brand in the next 2.5 years, starting 2010.

Carlson US$ 35 millionCarlson plans to increase its presence in India to 78 hotels

by 2012, from 28 in 2009.

Marriott NA Marriott plans to open 30 hotels in India by 2013.

ITC NA

ITC plans to construct 60 new hotel properties by 2013 –

2014. The company is likely to prefer investment in high-

end luxury hotels.

INVESTMENTS


http://business.rediff.com/report/2009/dec/14/tata-group-plans-50-ginger-hotels-in-india.htm















http://beta.thehindu.com/business/companies/article80951.ece

http://www.hospitalitybizindia.com/detailNews.aspx?aid=7221&sid=1

15

• Cumulative FDI inflows into the tourism and hospitality sector have been estimated at US$ 2,178.9 million between April 2000 and September 2010.

• The largest deal announced in the sector was the divestiture of EIH Ltd’s stake in EIH Holdings Ltd British Virgin Islands.

• Reliance Industries Investment and Holding PvtLtd, a wholly owned subsidiary of Reliance Industries Ltd, has acquired a 14.1 per cent stake in EIH Ltd.

• Carlson, an international player, has announced its acquisition of the majority stake in RHW Hotel Management Services Ltd (RHW).

Investments … (2/2)

Deal type No of deals Deal value (US$ million)

Inbound 7 6.3

Outbound 2 45.0

Domestic 28 258.8

INVESTMENTS

M&A scenario (from 1 January 2009 to 8 November 2010)

Sources: ―RIL acquires 14.1% stake in EIH for Rs 1,021 cr,‖ Business Standard website, http://www.business-standard.com/india/news/ril-acquires-

141-stake-in-eih-for-rs-1021-cr/107037/on , accessed 23 September 2010.


http://www.business-standard.com/india/news/ril-acquires-141-stake-in-eih-for-rs-1021-cr/107037/on





















16

Contents

Advantage India

Market overview


Investments


Opportunities



17

Regulatory framework

• The Indian hotel industry is required to comply with a number of regulations related to the preparation and sale of food and beverages, and various laws and regulations governing employee relationships.

• Hotel owners and operators need to obtain multiple licences, permits and authorisations, including local land-use permits, building and zoning permits, environmental, health and safety permits and liquor licences.

Hotel classification

• Hotels in India are broadly classified into two categories — approved and unapproved.

• The Department of Tourism (DoT) grants approval and classifies hotels into seven categories — heritage hotels, 5-star deluxe, 5-star, 4-star, 3-star, 2-star and 1-star.

• The DoT reclassifies hotels every three years and provides reclassification to 5-star deluxe, 5-star and 4-star hotels. The state governments reclassify the 1-star, 2-star and 3-star hotels.

Source: ―Annual report,‖ Ministry of Tourism (Government of India) website, http://tourism.gov.in, accessed 23 January 2010

POLICY AND REGULATORY FRAMEWORK


http://tourism.gov.in/

18

Contents

Advantage India

Market overview


Investments


Opportunities



19

Opportunities … (1/2)

OPPORTUNITIES

Investment in

smaller cities

Acquisitions,

strategic alliances

and partnerships

Source: ―Hotel chains Carlson, choice take M&A route to expand in India,‖ Reuters website, http://in.reuters.com/article/idINIndia-

45420220100115, accessed 6 December 2010; ―Intercontinental chooses Amrapali as partner for six corporate hotels,‖ The Economic Times

website, http://economictimes.indiatimes.com/features/financial-times/Intercontinental-chooses-Amrapali-as-partner-for-six-corporate-

hotels/articleshow/6922615.cms, accessed 6 December 2010.


• Rising business and leisure travel to smaller cities such as Udaipur, Thiruvananthapuram,

Bhubaneswar, Pune, Kochi and Chandigarh, have increased demand for quality hotel rooms in these

cities.

• Hospitality chains are expected to increase their presence in smaller cities to leverage this

opportunity. Further, they are likely to plan a suitable project mix (more budget/business hotels

compared to luxury hotels) for these cities.

• For instance, Carlson has announced its plans to set-up mid-segment hotels in tier II and tier III cities.

• International hospitality chains are expected to acquire local players to increase their presence in the

country.

• For instance, in early 2010, Carlson increased its stake in RHW Hotel Management Services Ltd

(RHW) from 13% to 87%. RHW has been managing hotels under Carlosn’s brands since 1998.

• Both domestic and international players are expected to form strategic alliances and partnerships

with regional players / developers to expand in the country, reduce risk and optimise resources.

• For instance, InterContinental has tied with Amrapali Group to develop six hotels in India.

http://economictimes.indiatimes.com/features/financial-times/Intercontinental-chooses-Amrapali-as-partner-for-six-corporate-hotels/articleshow/6922615.cms



















20

Opportunities … (2/2)

OPPORTUNITIES

Diversification into

new segments

Increasing availability

of cost-effective bed

& breakfast options


• Many hospitality chains that were earlier focused only on the luxury segment are now diversifying into

new product segments, such as budget hotels and serviced apartments, in order to reduce risks.

• IHCL has already launched budget hotels in India, while Accor has announced plans to

introduce its budget hotel brand, Formule 1, in the country.

• Moreover, hotel chains are diversifying into niche segments such as medi-cities, wildlife lodges and

spas to establish additional revenue-generation streams. These segments also help hotel chains retain

customers and provide them with value-added services.

• For instance, IHCL operates wildlife lodges under the brand Taj Safari , a JV between IHCL

and &Beyond, an Africa-based safari and ecotourism company

• ITC-Welcomgroup and IHCL operate spas at some of their luxury properties.

• The Ministry of Tourism has recently simplified the guidelines and amended some norms for bed &

breakfast units that operate in the country under the Incredible India bed & breakfast scheme in order

to encourage the growth of such establishments.

• These units offer foreign and domestic tourists clean affordable homestay facilities.

21

Contents

Advantage India

Market overview


Investments

Regulatory framework

Opportunities



22


Federation of Hotel & Restaurant Associations of India (FHRAI)

B-82, 8th Floor, Himalaya House,

23, Kasturba Gandhi Marg,

New Delhi–110001

Phone: 91-11- 40780780

Fax: 91-11- 40780777

Hotel Association of India (HAI)

B 212–214

Som Dutt Chamber-I,

Bhikaji Cama Place,

New Delhi–110 066

Phone: 91-11-2617 1110/14

Fax: 91-11-2617 1115

INDUSTRY ASSOCIATIONS


23

Note

Wherever applicable, numbers in the report have been rounded off to their nearest whole number.

Conversion rate used: US$ 1= INR 48.

INDUSTRY ASSOCIATIONS


24

India Brand Equity Foundation (IBEF) engaged Ernst &

Young Pvt Ltd to prepare this presentation and the same

has been prepared by Ernst & Young in consultation with

IBEF.

All rights reserved. All copyright in this presentation and

related works is solely and exclusively owned by IBEF. The

same may not be reproduced, wholly or in part in any

material form (including photocopying or storing it in any

medium by electronic means and whether or not

transiently or incidentally to some other use of this

presentation), modified or in any manner communicated

to any third party except with the written approval of

IBEF.

This presentation is for information purposes only. While

due care has been taken during the compilation of this

presentation to ensure that the information is accurate to

the best of Ernst & Young and IBEF’s knowledge and belief,

the content is not to be construed in any manner

whatsoever as a substitute for professional advice.

Ernst & Young and IBEF neither recommend nor endorse

any specific products or services that may have been

mentioned in this presentation and nor do they assume

any liability or responsibility for the outcome of decisions

taken as a result of any reliance placed on this

presentation.

Neither Ernst & Young nor IBEF shall be liable for any

direct or indirect damages that may arise due to any act

or omission on the part of the user due to any reliance

placed or guidance taken from any portion of this

presentation.

DISCLAIMER


Documents

TOURISM AND HOSPITALITY - IBEFhospitality industry has widened. • For instance, the demand for hotel rooms is about 240,000 rooms, while the current supply of hotel rooms is around