Hospitality Industry

Topics: Hotel, Hotel chains, Hospitality industry Pages: 7 (2506 words) Published: December 19, 2012
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Submitted by: Aayushi Tulsiyan (20121002), Kinnari Pandya (20121026) School of Petroleum Management, Gandhinagar

Name of the Journal: International Journal of Culture, Tourism and Hospitality Research (eJournal by Emerald Insight) Hospitality is the defining feature of India and Indians. In the era where national boundaries are fading fuelled by rapid movement of culture, capital and knowledge across borders, hospitality industry has emerged as one of the largest employers in the world. It is second only to the oil industry, in terms of turnover and exchange of foreign currency. The Indian hospitality industry is growing at a rate of 6% and is expected to reach INR 230 billion by 2015. It contributes around 2.2% to its GDP. According to The Federation of Hotel and Restaurant Association of India (FHRAI), this industry employees 24 lakh people, which is around 8.78 % of the total employed population in India. This makes it one of the most sought after industry for the cross fertilization of cultures. The hospitality industry is a cluster of fields within the overall service sector that includes lodging, restaurants, event planning, theme parks, transportation, cruise line, and additional fields within the tourism industry. Hotels and restaurants would be the key focus of the article revolving around the phenomenon of the liberalization, the tangible trends it has adopted and intangible prospects it has provided. While on one side there has been an immense advancement in technology and global capital market, on the flip side even a microscopic change in other economies has a cascading effect to the industry. Information like sector status, operating performance and hotel classifications will be supplementing the fundamentals. The numerous initiatives taken by the government to unlock the potential has helped to prevent the brain drain to an extent. In fact, with globalization and liberalization, top talent from the developed countries is increasingly considering working for the Indian hospitality industry.

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“You will not get a doomsday story from the hospitality sector, because there isn’t one,” says Chris Moloney, Chief Operating Officer, South West Asia, and India head at IHG. Competing in today’s global market is intimidating. In 2001, after much debate, FDI in this industry was increased from 74 per cent to 100 per cent through the automatic route. Although after this major reform, the inflow of FDI in the hospitality industry has been negligible accounting of about only 1.5% per cent of the total FDI of $50.8 billion accrued by the country. Figure 1: FDI inflow in the hospitality sector in India

Source: Ministry of State for Tourism, March, 2012
Liberal Growth
Hotels, resorts, restaurants, theme parks, cruise line, and other services like event planning fall under the territory of hospitality industry. Today the industry is growing at a flat rate of 5.5-6% and is contributing about 2.2% to the annual GDP of India. Several drivers like the strong economic recoveries coupled with several initiatives taken by the government have led the industry to sustain this growth. Need for liberalization was noticed due to the under-performing government run hotels which were then privatized and Foreign Direct Investment (FDI) was let in, after which the industry showed a remarkable growth of 10.1% in 1992. Since the new liberalized economic policies were introduced, India has reformed itself into a polish of global attraction. The three major political drivers that led to the formation of a liberalized sector were grant of 100% FDI under automatic route, approval of hotels in the project stage and tax holidays in respect of hotels. Other regulatory drivers like that of abolition of Customs Duty on import of capital infrastructure, technology, and...
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