India's hospitality sector bears serious watching these days – if not with a jaundiced eye, then certainly with a critically analytical one. But first, the good news.
There has been an unprecedented influx of business travellers into the country over the past few years, and India continues to be a hotbed for international tourism. The industry is growing at an average annual rate of 10-12 per cent, and the stakes will rise in the future.
One need not dig too deep for the genesis of this phenomenon. In terms of business in almost every sector, India now enjoys an unshakable reputation as investment destination par excellence. The country's rising GDP, increased pace of global business alliances and amenability to foreign investment are the primary market drivers in the hospitality sector. Thanks to promotional exercises such as the Incredible India campaign, India also features high on the global leisure traveller's priority list.
Now for the bad news.
One sees no letup in the demand for rooms at every budget level – however, the most spectacular crunch is at the luxury and business travel level, where 100 per cent occupancy is almost the constant norm. The tariffs are skyrocketing and hotels are chronically short of staff in this sector. Delhi, Mumbai, Bangalore and Hyderabad are in the process of beefing up their room reserves – however, considering the current scenario and rate of development, it seems improbable that these cities will match the demand before 2010-11.
True, the sector is not limited to just its own resources, enterprise and initiative. The Government of India's Tourism Policy aims to harness the hospitality and tourism sector's considerable revenue-generating capabilities to the hilt, in recognition of the fact that it is a major economic driver. Moreover, the Government cannot ignore the sector's immense potential for generating badly needed employment.
Yet, there is a marked lack of progress in the hospitality sector. One of the main bottlenecks would seem to be the current tax rates. These need to be rationalised across the board, and not just in certain locations and in response to a one-off event such as the upcoming Commonwealth Games. Yet another stranglehold on overall progress in the hospitality sector is the chronic non-availability of land at strategic locations for establishing hotels. This limitation can only be resolved if the Government introduces proactive procedural changes in this regard.
Diversification is often the root of survival in a business sector. While alleviating the crunch in the business hospitality sector as a complex logistical task, the Indian Ministry of Tourism is now thinking out of the box in terms of the tourism segment. It has currently short-listed a number of villages across India that it intends to develop as new tourism nexuses. The states that will see this kind of rural edification include Himachal Pradesh, Gujarat, Maharashtra, Bihar, Karnataka, Madhya Pradesh, Andhra Pradesh, Kerala, Tamil Nadu, Orissa, Assam, Sikkim, Rajasthan and West Bengal.
The advent of medical tourism – a US$ 299 million industry – is another clarion call for serious reforms in the hospitality sector. This emerging industry brings over 1,00,000 patients to Indian shores each year. Helping this sector to thrive involves striking a tricky balance – one needs to provide excellent medical facilities at internationally competitive rates as well as high-grade accommodation. Is the Indian hospitality industry equal to this task?
There have certainly been progressive policy reforms in aviation. The Government's Open Skies policy is surely boosting international and domestic tourism, and the liberalised visa regime is definitely helping. However, the continuing challenge for the hospitality sector lies in accommodating the vast numbers of business, leisure and purpose-specific international and domestic travellers at appropriate levels and budgets.
There is no doubt that tourism of every description is on a roller coaster rise in India – however, tourism must work hand in hand with hospitality in order for both to be sustainable.
Chairman & Country Head Jones Lang Lasalle Meghraj