'Hospitality And Tourism Sector Likely To Grow To $48 Billion By 2020'

At a time when Narendra Modi‘s government is being criticized for abysmal job creation, hospitality and tourism sector can be the silver lining amidst the dark clouds of joblessness. According to a recent report released by India Brand Equity Foundation (IBEF), the industry is expected to create 13.45 million jobs across sub-segments such as Restaurants (10.49 million jobs), Hotels (2.3 million jobs) and Travel Agents/Tour Operators (0.66 million).

Pradip K Das, Director Finance and CFO, India Tourism Development Corporation (ITDC) Ltd told BW Businessworld, “Hospitality industry is evolving at a faster pace as compared to recent years. With the growth of tourist inflow, the hospitality industry has become one of the main sectors to increase foreign direct investment (FDI) influx. As more people come online, smartphone penetration increases and use of digital payments go up, the report estimates that India’s online hotel market will grow to $4 billion with 31 per cent penetration at a CAGR of 25 per cent.

According to another report by Boston Consulting Group and Google India titled ‘Demystifying the Indian Online Traveller’ has predicted the Indian passenger travel market to grow at 11-11.5 per cent to $48 billion by 2020. The report also projects the hotel industry growth at 13 per cent to $13 billion by 2020.

“The inbound tourism industry in India is in a great shape currently. The rising interests of travellers from across the world indicate a healthy shift and a positive growth in Indian inbound tourism sector. Unlike the past, there is an increase in the share of visitors looking to spend their vacations or explore exotic Indian destinations. This growth can also be attributed to the introduction of e-visas to many countries coupled with decreasing airfares. The numbers of FTAs (foreign tourist arrivals) in January 2017 were 9.83 lakh as compared to 8.44 lakh FTAs in January 2016. The government has taken series of proactive steps to promote India as a great round the year tourist destination for the international tourists,” added Das.

With an expanding middle class, better infrastructure, extension of e-tourist visa to 150 countries and several initiatives by the government such as Incredible India and Atithi Devo Bhava, the country is witnessing a phase of incremental growth in the sector.

Last year, the unexpected storm of demonetization stymied the onset of winter travel season. However, the organized hospitality sector has somewhat come to terms with the situation. The sector also looks at goods and services tax expectantly as in the long run business would start moving from unorganized to organized sector.

Das doesn’t think negatively of demonetization for the organized sector hotel industry. He explains, “Majority of our clients are from organised corporate sector where cash transactions are very low. November - December being peak season for hotels most of the bookings were in any case made well in advance and payments were already settled. Therefore there was no visible impact on our business. Even if there was any short-term impact on a particular segment that was very temporary and did not have any major effect. So the hit has mostly been confined to the unorganized sector.”

According to the data released by Department of Industrial Policy and Promotion (DIPP), during the period April 2000-December 2016, the hotel and tourism sector attracted around $9.93 billion of FDI.

Das appreciates government’s effort to boost the sector saying, “There is a great opportunity for tourism in India. The government has already given high priority to tourism as a contributing segment for economic growth. The target is to achieve the 16-million-tourist mark by 2020. This will give a lot of opportunities to tour operators, tourist guides, hoteliers, and transporters. It will also give an opportunity to the government to collect more taxes.”

India is expected to move up five spots to be ranked among the top five business travel market globally by 2030, as business travel spending in the country is expected to treble until 2030 from $30 billion in 2015.

However, with growth come challenges too. “The biggest challenge being untrained efficient workforce. Though many institutions provide knowledge, lack of practical training has hit the industry hard. But soon this issue would be resolved as the government is taking special initiatives under Skill India to promote practical exposure,” said Das.

International hotel chains will likely increase their expansion and investment plans in India and are expected to account for 50 per cent share in the Indian hospitality industry by 2022, from the current 44 per cent.

The sector is also looking at goods and services tax expectantly. Das said, “GST is the need of the hour! India needed to be unified under taxation system. Some teething problems are there for the adoption of GST especially for our procurement from vendors. We are very closely monitoring those issues in detail and we are confident that those would be addressed in time. We are also sharing knowledge with our business partners to ensure compliance of GST and en-cashing the benefits of GST.”

The sector will have to counter stiff competition from nearby destinations like Singapore, Dubai, Malaysia, Thailand, China, and others to stay in the bright spot for a long time.