An average year; not much to cheer for hospitality industry

The sector was up in arms when FM , in the Budget, announced that service tax will be imposed on all air-conditioned restaurants

For a country aspiring to be one of the sought-after global tourist destinations, the Indian hospitality industry witnessed an 'average' year in 2013 as slowdown in Europe and other nations hurt tourist arrivals, while taxation issues continued to plague the sector.

The natural calamity that struck Uttarakhand badly hurt tourism in pilgrimage locations in the state.

However, considering the overall long term potential of the country, several companies went ahead with their expansion plans

Be it from global hospitality chains such as Starwood, InterContinental and Kempinski, or domestic players like Apeejay Surrendra Park Hotels and Lalit Suri Hospitality, the announcements kept coming.

This was also a year in which the Indian hospitality sector saw a change of guard with the old generation -- Capt Nair (founder Leela Hotels), PRS Oberoi ( Oberoi Hotels) and R K Krishna Kumar (Indian Hotels Company) -- checking out from their respective active roles.

Significantly for the Tatas, this was the year when they decided to give up their 7-year-old chase of Bermuda-based Orient Express Hotels as Indian Hotels Company Ltd announced it was not pursuing its $1.86 billion bid after earlier two failed attempts.

"This was not a very good year for the hospitality industry, it was an average year. There was dearth of travel as slowdown in Europe and other countries affected foreign tourist arrivals. Domestic tourists were the saving grace," Federation of Hotel and Restaurant Associations of India (FHRAI) President S M Shervani told PTI.

 Also, the occupancy levels hovered around 50-65% depending on locations and properties, he added.

The sector was up in arms when Finance Minister Finance Minister P Chidambaram, in the Budget, announced that service tax would be imposed on all air-conditioned restaurants.

Looking back, Shervani said taxation structures made Indian hospitality sector uncompetitive against its global peers, saying domestic firms face anywhere between 19-25% of overall taxes as against 8% on an average in international markets.

However, there was a reason for cheer for the sector as the government decided to include hotel projects of over Rs 200 crore each, anywhere in India, irrespective of star rating, in the infrastructure lending list of RBI.

The roadblocks notwithstanding, hospitality companies were looking to tap the potential of India, where as per the 12th five year plan 11.24 million foreign tourist are expected to arrive in 2016 along with a whopping 1,451.46 million domestic tourist visits during the period.

To host them, according to Planning Commission estimates, 49,72,330 rooms will be required by 2016 in India, which is an additional 22,60,040 rooms from the 2010 level.

In this direction, global hospitality major InterContinental Hotels Group (IHG) said it planned to open 135 new hotels in India in the next 10-15 years, taking its total tally to 150 properties.

Likewise, Starwood Hotels and Resorts will open up to 12 new hotels under its various brands across India by next year end. Carlson Rezidor Hotel Group also said it would hire around 9,000 people for its expansion in India, and would have 100 properties by end of 2015.

While Europe's oldest luxury hotel chain, Kempinski, plans to operate two new hotels in India by end of 2015, AirAsia promoter Tony Fernandes' Tune Group announced plans to to open 100 budget hotels across India by 2020.

Bangkok-based hospitality chain Lebua Hotels and Resorts is eyeing 1,660 rooms through 7 properties across India in five years.

Not to be left behind, domestic groups also announced expansion plans. Apeejay Surrendra Park Hotels earmarked Rs 1,200 crore to be invested over the next 4-5 years on four new properties while InterGlobe Hotels charted plans to open 13 new hotels under economy brand 'ibis' across India by 2015.

Lalit Suri Hospitality Group, a Bharat Hotels enterprise, also announced plans to open two new hotels in the luxury segment.

It was clear from the announcements that the mid-scale segment and domestic tourists were the targets of most of the hospitality chains.

 While it was good for the sector that there was investor confidence in the Indian market, the floods and landslides triggered by cloudbursts in Uttarakhand in June that killed thousands came as a grim reminder that some of the best destinations could be vulnerable to natural disasters.

"Unfortunately, 2013 also witnessed devastation of one of the most popular pilgrimage and tourism spots in India the Uttarakhand circuit, including Badrinath.

"We are working along with our partners in that region to build awareness for the areas that continue to be safe and secure to visit in order to support local economy," said MakeMyTrip Co-Founder and CEO-India Rajesh Magow.

 With an average year for hospitality on the way out, the sector is hoping for a brighter 2014.

 "2014 looks bright as the long-term growth perspective for India's travel market remains robust. Indian aviation market will see new airlines launching operations - Tata-SIA, AirAsia India and Etihad-Jet Airways. These new investments will definitely have a positive impact on the landscape of Indian travel and tourism industry," Magow said.

The hospitality industry is hoping that as the sun sets on 2013 and 2014 knocks at its door, things will be brighter.