The Indian hospitality industry has emerged as one of the key industries driving the growth of the

services sector and, thereby, the Indian economy. According to IBEF, the tourism & hospitality
sector’s direct contribution to GDP surged by 23.6% in 2017, raising the share of the industry
(direct & indirect) was Rs 5.9 trillion (US$ 91.3 billion). Also, tourism in India accounts for 9.4% of
the GDP & is the 3rd largest foreign exchange earner for the country and ranked 7th in terms of
tourism total contribution to GDP in 2017.

At the close of 2018, the country saw macroeconomic stability owing to a decline in inflation,
current account deficit etc. The Union Budget FY19 had identified some major pillars that will
support economic growth for the country that includes tax reforms, fiscal discipline, investment in
infrastructure, ease of doing business, agriculture and farmer welfare, rural sector, social sector,
education and job creation. This is said to have translated into an overall pick up in economic
activities, thereby having a positive impact on the demand for hotels industry in the country.

In the long term, the demand-supply gap in India is very real and that there is need for more
hotels. The shortage is especially true within the budget hotels and the mid-market hotels
segment. There is an urgent need for budget and mid-market hotels in the country as travelers
look for safe and affordable accommodation. Various domestic and international brands have
made significant inroads into this space and more are expected to follow as the potential for this
segment of hotels becomes more obvious.

The past year saw the start of an uptrend in the hospitality sector but was also marked by multiple
challenges like curbs on liquor sale and the GST rollout. With these issues behind them, hotel
operators expect business growth to pick up momentum in 2018. The growth is expected to come
from the rise in online bookings. Hotel bookings is one of the least penetrated segments in the
travel categories in India.

With a rise in online competition, popular models have come up with online travel agents (OTAs)
offering a single marketplace for all travel-related needs. There are also seen meta search engines
like TripAdvisor and MakeMyTrip, that operate like travel discovery platforms. Further, online
accommodation reservation services like Oyo Rooms have gained popularity. Apart from this,
branded hotels are seen operating direct bookings through their websites.

Apart from the above, the Indian government has realised the country's potential in the tourism
industry and has taken several steps to make India a global tourism hub. The "Clean India"
campaign and development of inland waterways for transport and tourism are projects that have
gained momentum over the previous year. Additionally, programmes such as "Make in India" and
the "Smart Cities" initiative have highlighted the Government's support to skill development and
investments in Hospitality and Tourism.