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Private Limited (eRPl) . This snapshot is intended to provide the reader a flavour of the hospitality sector in India and has been prepared based on secondary research supported by an analysis at eRPl. Prior to undertaking any business or investment decisions, further detailed investigations / studies are recommended. eRPI does not accept any direct or indirect legal liability of any kind. This note remains eRPIs intellectual property and no part may be reproduced or circulated without the prior permission of e-Research and Publications India Pvt. Ltd., 2nd Floor, MN Plaza, 15/16, 3rd Cross Street, Kasturibai Nagar, Adyar, Chennai 600020, India. For queries or comments, please email to office@eresearchglobal.com

Snapshot: Hospitality Sector in India

Introduction
India is ranked 11th among attractive destinations in the Asia Pacific region according to World Economic Forum. The country is witnessing buoyant domestic as well as foreign tourist arrivals. Foreign tourist arrivals increased from 2.4 million to 5.1 million during 2002 to 2009 despite a minor dip of 3.3% during 2008-09. The

organised in the country have helped to bring in business delegates from across the world. India is now an established hub for medical tourism owing to world-class service at affordable costs. In order to encourage medical tourism, the Government has introduced a new category of Medical Visa for patients and their attendants coming to India for medical treatment.

domestic hospitality sector accounts for about 2% of the countrys GDP.

The countrys rich heritage, traditions and diverse cultures together with varied landscapes and delectable cuisines are major tourist attractions. Over the recent years, a range of niche tourism products such as heliport tourism, wellness tourism, adventure tourism and cruise tourism have been introduced and wellreceived.

Foreign exchange earnings from the tourism sector reached INR 55 billion in 2009 registering a CAGR of around 20% since 2002. Publicity campaigns such as Incredible India launched by the Ministry of Tourism along with the Governments thrust on the aviation sector and implementation of green-field and brown-field airports across the country have had a positive impact on the tourist arrivals.

Apart from leisure tourism, business travel to India is also on the rise owing to the robust economic growth. The rise of IT/ITES sector is seen as the key driver for increase in business travelers. Large number of conferences, seminars and trade events being Several International hospitality majors have entered into the Indian market through alliances with existing players or through acquisitions. Going forward, the hospitality industry is set to expand in tier II & III cities with suitable project mix to leverage opportunities.

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Sector Classification Based on the facilities and services offered, the hospitality sector can be classified as:

Hospitality Sector

Hotels

Service apartments/ time share & beach resort

Restaurants

Star Category Hotels

Heritage Hotels

Boutique hotels

Full Service

Quick service

Dhabas/ street kiosks

Cafes/ bars

Source: eRPI

Overview The hospitality industry is broadly classified as hotels and restaurants and overall industry was valued at INR1,255 billion (2009-10) Hospitality Sector: Market break-up, 2009-10
*Others 2.2%

Total INR 1,255 billion

Restaurants 33.3%

Hotels 64.5%

*Others include serviced apartment, time share& beach resort, etc. Source: eRPI estimate

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Hotels and restaurants together have a significant presence in the hospitality sector The domestic restaurant sector is growing steadily and multi-cuisine restaurants, kiosks and food joints and sprawling food courts are popular formats in urban areas Serviced apartments, time share and beach resorts are the emerging hospitality formats and currently has a small market share

Segment details Hotels Hotels offer rooms and food & beverage facilities and the domestic hotel sector was valued at around INR 810 billion in 2009-10 The sector is fragmented and has a large presence of unorganized sector o The unorganized sector is prevalent in a variety of formats such as low-priced motels, guesthouses, lodges, etc., and offer services comparable to 1,2 & 3 star category hotels o The organised sector accounts for about 30% of the total hotel market (INR 810 billion) and comprise of star category hotels along with heritage and boutique hotels

Organised hotels market: Breakup by value, 2009-10

Total INR 243 billion
Heritage & Boutique 1% 2&1 Star 23%

5 Star 55% 3 Star 13%

4 Star 8%

Source: eRPI

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Upscale hotels including 5-star hotels, heritage hotels and boutique hotels account for over 55% of the total market for hotels Budget hotels, usually the 1 & 2 star category hotels, are popular among businessmen and domestic travelers for their quality service at affordable price and seasonal offers o Budget hotels are also popular among domestic pilgrims and are widely present across pilgrimage locations in India

Hotel room occupancy rates vary on a seasonal basis and the May- August period usually has lower occupancy; the average annual occupancy rate across the country was estimated at around 63.1% in 2008-09

Delhi-National Capital Region (Delhi-NCR), Mumbai, Bangalore, Pune, Goa, Ahmedabad, Kolkata, Hyderabad, Chennai and Jaipur are the traditional hubs for the hotel sector in India With the opening of the economy, emergence of the service sector and improvements in the infrastructure, the hotel industry has expanded into secondary locations including Ahmedabad, Chandigarh, Coimbatore, Kochi, Shimla, Thiruvananthapuram, Vadodara and Vishakapatnam

There are over 160,000 hotel rooms and guesthouses spread across the country and the room supply is expected to grow at over 15% during 2011-13

Hotels : List of approved hotel rooms across India, 2010 Category 5 Star Deluxe 5 Star 4 Star 3 Star 2 & 1 Star Heritage Others* Total No of Hotels 71 76 73 304 128 48 8 708 No of Rooms 16,105 9,261 6,176 13,955 1,833 1,454 577 49,361

* Others include guest houses and apartment hotels Source: Ministry of Tourism

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India is currently facing a short fall of over 100,000 rooms across all hotel segments leading to a steep rise in the average room rent Delhi-NCR and Mumbai together account for close to 50% of the total demand for hotel rooms across the country

Hotels: Average Room Rent across top 7 cities, 2007 - 09 (INR / room) Occupancy (%) 2008-09 Bangalore Chennai Goa Kolkata Mumbai NCR Pune
Source: FHRAI

Average Room Rent (INR) 2008-09 9757 4678 5378 5342 6822 6087 4951 2009-10 6766 4083 4757 4880 5833 6985 3921

2009-10 52.6 65.6 63.1 64.5 67.2 64.6 53.2

56.5 64.6 61.7 69.6 71.2 64.8 65.5

Hotels sector: Projects planned Name of the Company Lemon Tree Hotels Hyatt Hotels Corporation Royal Orchid Hotels Indian Hotels Company Indian Tobacco Company
n.a. not available source: secondary sources

Details To open seven hotels across India by 2013 To open about 30 hotels across India in tier II and III cities by 2015 To add seven hotels in India to its present 15 properties by 2011 To set up 50 Ginger brand hotels by 2014 To invest in hotel sector in India during 2010-20

Investment (INR billion) 51.6 n.a. 2 n.a. 90

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Key Players The Indian hotels market has a significant presence of large domestic players such as The Indian Hotels Company Ltd., ITC Welcome Group, The Leela, Oberoi Group, Lemon Tree Hotel Chain and Ashok Group of Hotels Hotels sector: Key players, 2008-10 No of Hotels 100 11 100 6 16

Company The Indian Hotels Company Ltd. East India Hotels (Oberoi Group) ITC Ltd. Hotel Leela Venture Ltd. Indian Tourism Development Corporation Ltd.
Source: company websites, annual reports

Brands Taj Hotels, The Gateway Hotels, Ginger Hotels, Vivanta The Oberoi Hotels Welcome Hotels, Sheraton Hotels, Fortune Hotels The Leela The Ashok Group of Hotels

Multinational hotels with a strong presence in India are Hyatt, Carlson group, Hilton Hotels, Mariott International Inc, Wyndham Hotels & Resorts and Intercontinental Hotel Groups. Around 20 new international hotel brands are expected to venture into India during 2009-11.

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Restaurants Restaurants - Overview

The restaurant market in India is estimated at around INR 418 billion and accounts for around 33% of the hospitality industry in the country; the sector is witnessing a growth of around 12-13% per annum

The restaurant sector is labour-intensive and provides direct employment to around 5 million people The sector is fragmented and organised sector accounts for less than 20% of the overall restaurant market in value terms and is witnessing a high growth of around 20-25%

The restaurant sector operates in a number of formats ranging from fine dining and gourmet food restaurants, food courts, cafes, lounges and bars to fast food restaurants, take-away kiosks and roadside joints called dhabas

The domestic restaurant sector largely comprises of stand-alone/ independant restaurants offering full range of services with dine in format Restaurant chains are entirely in the organized sector and are slowly gaining popularity

Restaurant chains maintain similar ambience, menu and quality and standard of service across all their outlets Popular domestic restaurant chains across formats include Barista, Mocha, Rajdhani Group, Speciality Restaurants Pvt. Ltd. and BJN Group

Caf Coffee Day, a caf chain established by the Amalgamated Bean Company, has the highest number of outlets in the restaurant sector in India

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Restaurant Market: Break up by format type, 2009-10 Total: INR 418 Billion

Others** 19%

Cafes/ Bars 11%

Quick Service Restaurants* 14% Full Service Restaurant 56%

Source: eRPI *includes fast food and pizza **includes dhabas, street stalls and kiosks, retail, home delivery and, take aways

With integration into global markets, the Quick Service Restaurant (QSR) format has witnessed the entry of many multinational players; these include McDonalds, KFC, Subway, Dominos Pizza and Pizza Hut

Services offering take away/ home delivery options are expected to witness growth of around 15% per annum over the next two years

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Given below are some of the organised players across formats and their number of outlets:

Organised Restaurant sector: No. of outlets/ Players, 2010 Player Caf Coffee Day Baskin Robbins Dominos Pizza Barista McDonalds Subway Pizza Hut Kentucky Fried Chicken Speciality Restaurants Pvt Ltd BJN Group Encore Hospitality
Source: NRAI

Format Caf Ice Cream Parlours QSR Caf QSR QSR QSR QSR Full Service Restaurants Full Service Restaurants Full Service Restaurants

No. of Outlets 845 350 296 232 169 151 147 72 48 40 32

Restaurants - Recent Developments

Name of the Company Yum Restaurants Specialty Restaurants Pvt. Ltd. Cocoberry, New Delhi Kentucky Fried Chicken McDonalds
Source: secondary sources

Details To open 100 Taco Bell restaurants in metros, tier II and tier III cities by 2015 Plans to expand of its flagship brand Mainland China to 100 outlets in the next two years from the present 32 To expand into metro and tier-1 cities by 2012 at an investment of around INR 1.2 million To expand to 500 outlets by 2015 at an investment of around INR 142.23 million To open around 180-190 restaurants by 2015 at an investment of around 7.5 - 8 billion

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Other segments - Serviced apartments and Timeshare resorts

Serviced apartments are furnished apartments that provide temporary accommodation with full-range of amenities and are popular among the business travelers and medical tourists who stay over prolonged periods of time

Serviced apartments are relatively cheaper by around 20% compared to hotels for longer stay periods Premium brands like Marriott, Oberoi, Oakwood and Leela are entering the luxurious serviced apartments market in major metropolitan cities o Taj Wellington Mews, Lakeside Chalet Marriott Executive, Apartments, Star City, Blossoms and Seasons Apartments are some of the noted players in the serviced apartment sector

Time share resorts are gaining in popularity with rise in domestic tourism; the market is currently estimated at around INR 5 billion The domestic time share sector is organised with the presence of around 45 players; RCI India is the leading player in the segment with 90 hotels and resorts across the country; Club Mahindra is the other noted player

Key Trends and Drivers Integration with global markets and rising disposable income are the key drivers of the hospitality industry. Some other drivers and trends include: Increase in per capita disposable income Robust economy stimulating business related travel across the country Growth in media leading to increasing awareness about diverse tourist locations Availability of well-connected travel & tour service providers offering a wide range of services Improved infrastructure and accessibility to tourist destinations and pilgrimage centres Easy holiday financing and attractive tour packages Improved aviation infrastructure and attractive air fares Large population in the 18-24 age groups leading to rising trends in socializing and eating out Large scale events like the recent common wealth games held in New Delhi

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Future Outlook Despite a slowdown due to economic recession in 2008-09, the hospitality sector is set to witness an upward trend in growth in the coming years. Meeting, incentives, conferences and events (MICE), a concept of combining work with pleasure, is a trend that can be seen more in the hotel industry in the coming years Star hotels accommodating external brands of restaurants, spas, lounges are some of the innovative methods that can be seen common in the future to boost the occupancy rate The economically feasible mixed-use hotel development and green hotels are going to prevail more in the hotel industry in the future Governments initiatives like allowing 100% foreign direct investment in the real estate and infrastructure is expected to drive the hospitality industry Budget hotels and serviced apartments are expected to witness a robust growth in the future More unorganised restaurant players are expected to move into the organised segment in the coming years Traditional Indian concepts of Yoga, Arurveda, Siddha and Homeopathy are being promoted and health tourism is expected to witness high growth

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