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Indian hospitality sector contributes 8-9 percent of the countrys GDP.

The sector encompasses travel and tourism and major segments that fall under this category include accommodation and catering (hotels, restaurants),

transportation (cruise, railway, rentals, airline companies), travel agencies and tour operators. The tourism and hospitality sector together contributed US $32.7bn in 2011, and registered a CAGR of 13 percent. Currently, India has 114,000 hotel rooms, which stands 150,000 rooms short in meeting the current requirement. Thus, the growth opportunity for this sector is immense, but is tangled with challenges across parallel sectors and the overall economy. According to estimates provided by World Travel & Tourism Council (WTTC), contribution of travel and tourism to nations GDP will grow consistently in the next decade though this growth opportunity will be closely linked to the growth of Indias hotel and restaurant business. Indian aviation sector has witnessed a phenomenal growth chart in the last decade. Today, India is the 9th largest civil aviation market in the world and ranks fourth in domestic passenger volumes with a market worth of US $12bn. As per AAI, passenger handling capacity has risen two-fold from 72 million (FY 06) to 143 million (FY 11), and freight traffic has risen from 1.5 million MT (FY 06) to 2.3 million MT (FY 11). The Airport Authority of India (AAI) was the only major player involved in developing and upgrading airports in India for a long time, but private sector participation has increased post liberalisation. Major private sector players in aviation are GMR Infrastructure, GVK, Siemens, Larsen & Toubro Ltd., Maytas Infra Ltd., and Unique Aviation Services Pvt. Ltd.

Brief Introduction Aviation as an infrastructure segment has played vital role in facilitating the growth of business and economy in India. A robust civil aviation set-up is key to seamless flow of investment, trade and tourism, with significant multiplier effects through the economy. Aviation sector does not only provide air transport for passengers and goods, but also is a strategic element for employment generation. About one-third of world trade (by value) is delivered by air and about half of international tourism is facilitated by air links. Civil aviation industry is an important engine for innovation and technological progress in a world of decreasing barriers to trade. Market Size

Total domestic passengers carried by the scheduled domestic airlines between January and April 2013 were 20.289 million, revealed the official statistics.

No-frill carrier IndiGo lead in terms of market share with 29.8 per cent of the pie, followed by Jet Airways-Jet Lite combine at 22.6 per cent, Spice Jet 19.6 per cent, Air India Domestic 19.2 and Go Air at 8.9 per cent for the January-April 2013 period.

The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 449.26 million from April 2000 to march 2013, as per the data released by Department of Industrial Policy and Promotion (DIPP).

Key Developments and Investments

Jet Airways, India's second largest airline by market share, is in talks with Abu Dhabi-based Etihad Airways for a strategic alliance. In the light of the discussions, the two have been involved in various collaborative agreements. Jet has recently leased a wide body aircraft along with 60 of its cabin crew to Etihad. According to the aviation jargon, a wet lease of an aircraft is an arrangement whereby the lessor (Jet in this case), provides crew, maintenance and aircraft for a consideration. In turn the lessor takes on the responsibility for supplying and operating the aircraft.

Jet Airways, that carried the largest number of international passengers from India in 2012, would also be offering visa procurement services to its passengers who have travel plans for the United Arab Emirates (UAE) and are flying the carrier. It has partnered with Dubai-based travel service firm Dnata wherein the travellers from India to Abu Dhabi, Dubai and Sharjah would have the option to individually secure their visa prior to departure. Passengers would be guided through the visa process by Dnata's travel specialists, who will collect all the necessary documents and submit the visa application to the UAE Government on the passengers behalf.

In a bid to offer a more convenient transit to international passengers, the Rajiv Gandhi International Airport in Hyderabad is set to commence visa on arrival facility, after it gets a nod from the Centre. Visitors from 11 countries will be eligible to get a visa on arrival with effect from May 31, 2013. The tourist visa-on-arrival, with a maximum validity of 30 days and single entry facility, shall be granted by the immigration officers at the airport to the citizens of 11 countries-- Finland, Japan, Luxembourg, New

Zealand, Singapore, Cambodia, Laos, Vietnam, Philippines, Myanmar and Indonesia.

Chhatrapati Shivaji International Airport (CSIA), managed by Mumbai International Airport Pvt. Ltd. (MIAL) has been honoured with ISO 140641:2006 certification for its Carbon Emissions Accounting by Bureau Veritas, a global leader in carbon certification worldwide, for the second year in a row. In 2012, CSIA had become the first ever airport in India and the second in Asia, to be acknowledged for its consistent efforts in reducing its carbon footprint. With the certification in 2013, CSIA is now in the process of upgrading its ACI Airport Carbon Accreditation Rating from Mapping (Level 1) to Reduction (Level 2).

CSIA has introduced a variety of measures to reduce carbon emissions from its operations. CSIA was the first airport in India, to initiate the mapping process voluntarily and submit emission levels to Directorate General of Civil Aviation (DGCA), in 2012. Government Initiatives The Indian Government is dedicated to the development of the Indian aviation industry and has introduced several policies and regulatory reforms to boost private participation and investments in the same. Recently, the Government allowed 49 per cent FDI by foreign airlines in the sector. Some of the deals like Tata-Air Asia and Jet Airways Etihad have already been announced and are likely to boost civil aviation in a big way. Moreover, in order to fuel growth in maintenance, repair and operations (MRO) business and to make it competitive, the Government has made several

concessions in the Union Budget for 2013-14 including extension of time period allowed for utilisation of aircraft parts and equipments from three months to one year, exemption of custom duty on parts, equipment, accessories, spares required for MRO purposes to private category aircrafts also and inclusion of foreign airlines for the purpose of duty-free imports of parts, etc as applicable for scheduled air transport services. The industry has widely welcomed these concessions. The Indian government has also proposed investment of US$12.1 billion in the airport infrastructure during the 12th Plan period, of which US$ 9.3 billion is anticipated to come from the private sector. The scope of development would include construction of new airports, expansion, modernisation of existing airports and development of low cost airports to keep the tariff at its minimal at smaller airports, improvement in connecting infrastructure, and

development of world class Air Navigation Services infrastructure. The Government has also made significant initiative to spur development of the aviation industry by privatising five major airports under public-private partnership (PPP) model and endorsing emergence of Greenfield airports which envisages synergy between the public and private sector. Road Ahead Private participation in expanding air transport network and related infrastructure has propelled growth of air traffic in a big way in India. Industry analysts estimate that India would be the third largest aviation market by 2020, whereby it would be well-equipped to handle 336 million domestic and 85 million international passengers

Mr Ajit Singh, the Minister for Civil Aviation, has further revealed that in order to enhance air connectivity, airlines are expected to add around 370 aircrafts, worth US$ 27.5 billion, to their fleet by the year 2017. Moreover, it is estimated that commercial fleet size would reach 1, 000 by 2020 from 400 today, and 1, 000 General aviation aircrafts by 2020 including fleet renewal. Estimated investment requirement for the General aviation aircrafts alone is to the tune of US$ 4 billion. Exchange Rate Used: INR 1 = US$ 0.01719 as on June 10, 2013 Challenges Hotel industry is prone to hurdles like poor infrastructure, high cost of land procurement and multiple licences as well as levies. High inflation, high interest rates and absence of policies being issued by the government is hampering growth prospects. Slow economic growth in developed countries like US and Euro zone will greatly impact the travel and tourism sector, and consequently, also the hospitality sector. Talent management is a major challenge for this sector. Inadequate supply of talent coupled to increased competition within the sector for available resources has made attrition a cause of concern. Government initiatives driving this sectors growth Governments collective investment on tourism and hospitality sector has risen at a CAGR of 15.4 percent during 2005-11. Ministry of Tourism set up a Hospitality Development and Promotion Board to monitor and facilitate hotel project clearances/approvals.

Government of India (GOI) continues its focus on airport infrastructure development as part of the 11th Five Year Plan (2007-12). Liberalisation and Open Sky Policy has led to increased traffic rights under bilateral agreements with foreign countries. Encouragement towards 100 percent FDI in aviation. Tax exemption for airport projects for a period of ten years. Policy support and demand growth is increasing investment potential. Emerging trends in the sector High disposable incomes and growth of low-cost airlines in India will lead to a rise in domestic travel. This growth will be closely linked to the growth of Indias hotel and restaurant business. Niche offerings like medical tourism and eco tourism are expected to create more demand. Increase in the number of people travelling by air, both for business and travel, along with new trade opportunities has led the Governments focus on infrastructure, which has resulted in various development projects. Indian aviation sector is likely to see investments of up to US $150bn. Increasing liberalisation in aviation policies is leading to greater private sector participation. Private operators are expected to contribute more than three-fourth of total investments in the next five years, says a FICCIKPMG report.