Hospitality sector: Present tense, future uncertain

The hospitality sector, which began the year with uncorking of champagne, is closing 2008 on a dry note, jolted not only by the global economic downturn but also to a great extent by the Mumbai terror attacks.

Looking back, the year had a perfect start with the then Finance Minister P Chidambaram announcing special five-year tax holidays for setting up of two, three and four-star hotels in his Budget speech.

What followed was investments worth Rs 34,000 crore by as many as 25 companies -- existing hospitality groups and new real estate player entrants -- through the course of the year, not only for lower segment hotels but also for five-stars and luxury hotels.

The happy state of affairs for the sector in the start of the year was also reflected by the increase in the number of foreign tourist arrivals in India. According to the Ministry of Tourism, January saw a rise of 10.4 per cent, February 11.9 per cent and March 14.6 per cent in foreign arrivals.

The party was, however, short-lived as the global financial crisis cast its long shadow over the industry thereafter. In April itself, the arrivals came down to 9.6 per cent and got worse with each passing month to an all-year low of 1.8 per cent in October, though slightly improving to 2.1 per cent in November.

Adding to the problems was the 60-hour siege of Mumbai by terrorists, in which three of the city's top hotels -- Taj Mahal Palace & Towers, The Oberoi and The Trident -- turned into battlefields.

Even travel advisories by various countries, including Canada, Australia, Israel and the US, after the attacks did little to help the sector which was already shaken.