Tourism and Hospitality AUGUST. For updated information, please visit

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2 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 2

3 Advantage India Growing demand Foreign tourist arrivals increased by about 61per cent during Domestic spending on tourism is growing due to rising income and changing lifestyles (especially among young people) Attractive opportunities Diverse offerings such as adventure, rural and wildlife tourism Medical tourism is expected to bring India USD2.2 billion worth of revenues in 2022F Market size: USD418.9 billion Advantage India 2011 Market size: USD117.7 billion Diverse attractions India has 28 world heritage sites and 25 bio-geographic zones The Taj Mahal attracted over 600,000 foreign visitors in 2011 The country s big coastline provides a number of attractive beaches Policy support Various marketing initiatives such as Incredible India have been undertaken Central government has been increasing spending on tourism infrastructure; tourism has also emerged as a key focus area for individual state governments Source: WTTC, Aranca research Note: F stands for forecasts, WTTC World Travel and Tourism Council, Market size forecasts by WTTC ADVANTAGE INDIA 3

4 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 4

5 Evolution of the Indian tourism and hospitality sector 2005 onwards Pre Various states in India declare tourism as an industry Government National Tourism stresses on privatepublic partnership in Policy announced in 1982 the sector The government Government formulated a policies give fillip to comprehensive plan the hotel industry to promote tourism in 1988 A national policy on tourism is announced in 2002 with focus on developing robust infrastructure Online travel portals and low-cost carrier airlines boost domestic tourism The government undertakes various marketing initiatives to attract tourists Domestic spending on tourism made up over 82 per cent of total tourism revenues in 2011 Foreign tourists visiting India per year rose to 6.3 million in 2010 against 3.9 in 2005 MARKET OVERVIEW AND TRENDS 5

6 Segments of tourism and hospitality Accommodation and catering Includes hotel and restaurant businesses Transportation Comprises airline companies, cruise services, railways, car rentals and more Tourism and hospitality Attractions Constitutes historical monuments, beaches, sanctuaries, mountains, festivals and more Travel agents A fragmented sector with a number of independent travel agents and many online businesses Tour operators Offers customised tours, including travel and accommodation, and sightseeing Source: Dun and Bradstreet s report on tourism in India MARKET OVERVIEW AND TRENDS 6

7 Strong growth in tourism revenues; direct segment is the biggest grosser (1/2) The tourism and hospitality sector s direct contribution to GDP in 2011 was USD35.2 billion and is expected to rise to USD40.4 billion in Over the period , direct contribution is expected to register a CAGR of 14.6 per cent Note: GDP stands for gross domestic product; the definition of direct, indirect and induced contribution is specified in the Glossary on Slide 38; CAGR Compound annual growth rate Direct contribution of tourism and hospitality to GDP (USD billion) CAGR: 14.6% E Source: WTTC, Aranca Research MARKET OVERVIEW AND TRENDS 7

8 Strong growth in tourism revenues; direct segment is the biggest grosser (2/2) In addition to a direct component, tourism s total contribution to GDP also comprises indirect and induced ones Total contribution to GDP increased to USD117.7 billion in 2011 from USD99.3 billion in 2009; the figure is expected to reach USD134.7 billion in Note: The definition of direct, indirect and induced contribution is specified in the appendix Tourism s total contribution to GDP (USD billion) CAGR: 13.9% E Source: WTTC, Aranca Research MARKET OVERVIEW AND TRENDS 8

9 Foreign arrivals are rising; foreign exchange earnings increase (1/2) Over 6.3 million foreign tourist arrivals were reported in 2011 Foreign tourist arrivals expanded at a CAGR of 8.2 per cent during Foreign tourists arriving in India (million) 4.4 CAGR: 8.2% Source: Ministry of Tourism, Aranca Research MARKET OVERVIEW AND TRENDS 9

10 Foreign arrivals are rising; foreign exchange earnings increase (2/2) The total foreign exchange from tourism in India was estimated at over USD16 billion in 2011 Foreign exchange earnings from tourism in India (USD billion) Foreign exchange earnings from tourism increased at a CAGR of 14.1 per cent during CAGR: 14.1% Source: Ministry of Tourism, Aranca Research MARKET OVERVIEW AND TRENDS 10

11 Major companies across segments Company Segment Revenue* Other major players Online booking USD124.7 million Yatra.com, cleartrip.com, travelocity.com, travelchacha.com Hotel USD359.4 million ITC, Oberoi, Marriot Airlines USD2.6 billion Kingfisher, Spicejet, Indigo, Indian Airlines Tour operators USD83.8 million SOTC, Raj Travels Source: Respective company websites Note: *Revenue figures for Thomas Cook is for 2011, rest all are FY11 figures MARKET OVERVIEW AND TRENDS 11

12 Domestic consumers drive market (1/2) Domestic travel spending is expected to reach USD89 billion in Share of tourists by expenditure (2011) Domestic travellers contributed over 82 per cent of total revenues earned by the tourism sector in % Domestic spending 82.2% Foreign visitor spending Source: WTTC, Aranca Research MARKET OVERVIEW AND TRENDS 12

13 Domestic consumers drive market (2/2) Leisure travel constitutes over 70 per cent of the total spend on tourism in India Share of spending on tourism by type of tourism (2011) Leisure travel spending was USD69.5 billion in % Leisure spending Business spending 73.8% Source: WTTC Aranca Research MARKET OVERVIEW AND TRENDS 13

14 Hospitality sector sees upward trend (1/2) The Indian hotel industry grossed revenues of over USD3.8 billion in 2009 Over , the industry recorded a strong CAGR of 11 per cent Revenues of India s hotel industry (USD billion) CAGR: 11.0% Source: Datamonitor, Aranca Research MARKET OVERVIEW AND TRENDS 14

15 Hospitality sector sees upward trend (2/2) Domestic consumers are the biggest source of revenue in the Indian hospitality sector with a share of over 52 per cent of the total revenues Various segments revenue share in Indian hotels (2009) Foreign tourists contribute about 23 per cent to the total revenues 22.7% Domestic consumer 52.9% Domestic business 24.4% International Source: Datamonitor, Aranca Research MARKET OVERVIEW AND TRENDS 15

16 Notable trends in the tourism industry in India Online travel operators Over 70 per cent of air tickets are now being booked online in the country A number of online travel and tour operators, which provide better prices and options to consumers, have emerged in India Wellness tourism The widespread practice of Ayurveda, Yoga, Siddha and Naturopathy that is complemented by the nation s spiritual philosophy makes India a famous wellness destination Casinos Goa has seven casinos and six floating casinos, which attract a large number of tourists every year Cruises India attracted 163,000 cruise visitors in 2011 The country s cruise market is estimated to be worth USD300 million MARKET OVERVIEW AND TRENDS 16

17 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 17

18 Growth drivers of the tourism market Growing demand Domestic expenditure on tourism is expected to rise due to the growing income of households A number of niche offerings such as medical tourism and eco tourism are expected to create more demand The tourism and hospitality sector attracted investments of over USD26 billion in 2011 Investments Growth drivers Policy support 100 per cent FDI allowed through automatic route in the hotel and tourism sector Campaigns such as Incredible India and Athithi Devo Bhavah were launched to harness the tourism industry s potential Note: FDI stands for Foreign Direct Investment GROWTH DRIVERS 18

19 Steady rise in income and changing demographics boosting domestic demand Strong growth in per capita income in the country is driving the domestic tourism market 2500 Per-capita income in India 30% A shift in demographics with rising young population (coupled with changing lifestyles) is leading to greater expenditure on leisure services % 20% 15% % 5% 0% E 2013F 2015F 2017F -5% Per capita income, USD, LHS Annual growth rate, RHS Source: IMF, Aranca Research GROWTH DRIVERS 19

20 Increasing spending on tourism Domestic spending on tourism has seen a phenomenal growth with market size expected to touch USD89.1 billion in As a result, the market would have experienced an eight-year CAGR of 14.8% by end of Domestic expenditure on tourism (USD billion) CAGR: 14.8% E Source: Ministry of Tourism, Aranca Research Note: E- Estimate GROWTH DRIVERS 20

21 Tourism policy and initiatives provide a boost to the industry (1/2) The government passed the Tourism Policy in 2002 based on the seven pillars shown in the diagram Various facets of the Tourism Policy 2002 It is aimed at speedy implementation of tourism projects, development of integrated tourism circuits, special capacity building in the hospitality sector and new marketing strategies Samrachna (infrastructure) Safai (cleanliness) Swagat (welcome) Atithi Devo Bhavah is one of the successful initiative taken by the Ministry of Tourism to create awareness about the effects of tourism and sensitise people about our country s rich culture Sahyog (cooperation) Tourism Policy 2002 Soochna (information) Source: Ministry of Tourism, Aranca Research Suraksha (security) Suvidha (facilitation) GROWTH DRIVERS 21

22 Tourism policy and initiatives provide a boost to the industry (2/2) Other government initiatives Five Year Plan During the 11th Five Year Plan, the Ministry of Tourism sanctioned USD648.5 million for 991 tourism infrastructure projects, including rural tourism and human resource development projects Special boards The ministry set up a Hospitality Development and Promotion Board, which will monitor and facilitate hotel project clearances/approvals Tourist police The ministry in consultation with state/ut administrations has proposed to employ tourist police at prominent tourist spots Allocation for underdeveloped areas The ministry earmarked 2.5 per cent in the plan outlay for tourism development in tribal areas for GROWTH DRIVERS 22

23 Continued growth of investments in the tourism sector (1/2) Capital investment in the tourism and hospitality sector has been rising consistently Capital investments in the tourism sector (USD billion) Investment increased at a CAGR of 13.5 per cent during CAGR: 26.5% E Source: WTTC Aranca Research GROWTH DRIVERS 23

24 Continued growth of investments in the tourism sector (2/2) The government s collective spending on the tourism and hospitality sector is expected to touch USD2.0 billion in 2011 By end-, it would have risen at a CAGR of 17.4 per cent over an eight-year period Collective government spending on tourism (USD billion) CAGR: 17.4% E Source: WTTC Aranca Research Note: E- Estimates GROWTH DRIVERS 24

25 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 25

26 Kerala: blend of good marketing and natural beauty (1/2) Kerala Revenue generated from tourism in Kerala (USD million) Kerala is on the Malabar coast of Southwest India 3,614 In the early 1990s, the Indian state was known as a single beach destination 1,612 1,901 2,382 2,735 2,756 The state successfully marketed its serene backwaters, wildlife sanctuaries, ayurvedic treatments and temple festivals The revenue from tourism rose at a CAGR of over 17.5 per cent during Foreign exchange earnings Total revenue generated Source: Kerala s Ministry of Tourism, Aranca Research SUCCESS STORIES: KERALA, MAKEMYTRIP.COM, IHCL 26

27 Kerala: blend of good marketing and natural beauty (2/2) Important figures on tourism in Kerala Annual number of tourists visiting Kerala (million) In 2010, tourism contributed over 9 per cent of the state s total output The share of foreign tourists in the total number of tourists increased from 5.5 per cent in 2005 to 7.1 per cent in The average per day spending by a foreign tourist in Kerala stands at USD75 compared to the estimated USD37.5 by a domestic tourist Domestic tourists Foreign tourists Source: Kerala s Ministry of Tourism SUCCESS STORIES: KERALA, MAKEMYTRIP.COM, IHCL 27

28 Private sector pioneers: makemytrip.com Makemytrip.com Revenues (USD million) Conceived and founded by Deep Kalra in 2000 Offerings: Airline tickets, hotel booking, domestic and foreign packaged tours, bus tickets, corporate travels, visa assistance, foreign exchange, travel insurance, and more Revenue: USD196.5 million in FY Market capitalisation: USD800 million The company expanded at a CAGR of over 50 per cent during FY08 12 FY2008 FY2009 FY2010 FY2011 FY Source: SUCCESS STORIES: KERALA, MAKEMYTRIP.COM, IHCL 28

29 Private sector pioneers: IHCL Indian Hotel Company limited (IHCL) Revenues (USD million) The company was incorporated in 1902 and launched the first hotel in India, The Taj Mahal Palace & Tower, in Mumbai in 1903 Taj Hotels Resorts and Palaces comprises 66 hotels in 42 locations across India and 16 hotels around the world IHCL operates in the luxury, premium, mid-market and value market segments through various brands such as Taj, Taj Exotica, Taj Safari, Vivanta, Gateway Hotel and Ginger FY07 FY08 FY09 FY10 FY11 It operates Taj Air, a luxury private jet operation IHCL also operates Taj Sats Air Catering Ltd, the largest airline catering service in South Asia Source: IHCL s website The company generated revenues of USD331 million and posted a net profit of USD31.8 million in FY10 SUCCESS STORIES: KERALA, MAKEMYTRIP.COM, IHCL 29

30 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 30

31 Niche segments offer good opportunities Medical tourism Cruise tourism Rural tourism The presence of world-class hospitals and skilled medical professionals make India a preferred destination for medical tourism Medical tourism could earn India USD2.2 billion per year by Tour operators are teaming up with hospitals to tap this market Cruise shipping is one of the most dynamic and fastest growing components of the global leisure industry India with a vast and beautiful coastline, virgin forests, and undisturbed idyllic islands can be a fabulous tourist destination for cruise tourists India has potential to develop the rural tourism industry as most of its population resides in rural areas This can benefit the local community economically and socially, and enable interaction between tourists and locals for a mutually enriching experience Source: Ministry of Tourism, BMI, Aranca Research OPPORTUNITIES 31

32 Leading states/ UTs in terms of foreign Growth drivers of the tourism market tourists Delhi- Attracted 10.6 per cent of foreign tourists visiting India in 2010 Major attractions- Qutub Minar, Red Fort, Humayun s Tomb, India Gate, Jantar Mantar, Jama Masjid Uttar Pradesh- Attracted per cent of foreign tourists and 19.6 per cent of domestic tourists in 2010 Major cities to visit- Agra, Allahabad, Ayodhya, Lucknow Fathehpur, Meerut Major attractions- Taj Mahal, Agra Fort, Fatehpur Sikri, Sarnath Maharashtra- Attracted 28.5 per cent of foreign tourists visiting India in 2010 Major cities to visit- Amravati, Kolhapur Mumbai, Nashik Major attractions- Ajanta and Ellora Caves, Shirdi, Ashtavinayak, Matheran Tamil Nadu- Second most frequented state by foreign visitors; attracted 15.7 per cent of total foreign tourists visiting India in 2010 Major cities to visit- Chennai, Coimbatore Kanniyakumari, Madurai, Ooty, Rameswaram, Salem Major attractions- Meenakshi Temple, Brihadeeswarar Temple,Yelagiri Hills Hogenakkal Falls, Vivekananda Memorial OPPORTUNITIES 32

33 Foreign tourist arrivals are set to rise (1/2) Foreign tourist arrivals are expected to increase at a CAGR of 10.3 per cent during 15 Forecasts of foreign tourists arriving in India (million) The number of foreign tourists arriving in India by 2015 is anticipated to be over 8.5 million 6.3 CAGR: 10.3% F 2013F 2014F 2015F Source: BMI, Aranca Research Note: F stands for Forecasts OPPORTUNITIES 33

34 Foreign tourist arrivals are set to rise (2/2) Foreign exchange earnings from tourism is expected to rise at a CAGR of 6.1 per cent during 15 Forecasts of foreign exchange earnings from tourism in India (USD million) Foreign exchange earned is forecast to cross USD21 billion in 2015 CAGR: 6.1% 20,183 21,265 19,177 17,812 F 2013F 2014F 2015F Source: BMI, Aranca Research Note: F stands for Forecasts OPPORTUNITIES 34

35 Hotel capacity set to increase The number of hotel beds in the nation is expected to rise to 456,000 by 2015 from a capacity of 269,000 in 2011 Capacity of hotels in India ( 000) F 2013F 2014F 2015F Number of hotel rooms Number of hotel beds Source: BMI, Aranca Research OPPORTUNITIES 35

36 Airlines industry set to fly Airline industry Growth in low-cost carrier airlines is expected to bring down tourism costs and lead to increased domestic spending on tourism. Over 480 flights worth USD30 billion have been ordered by low-cost carriers; this would boost capacity More international flight operators are likely to enter the market making it more competitive; these operators would offer tourists better services Delhi Airport has a new terminal, which would help cope with increasing traffic The government has planned to add capacity to existing facilities at 35 airports in Tier II cities; this is expected to improve accessibility of these cities for tourists OPPORTUNITIES 36

37 Contents Advantage India Market overview and trends Growth drivers Success stories: Kerala, makemytrip.com, IHCL Opportunities Useful information 37

38 Glossary Direct contribution: Spending on accommodation, transportation, attractions and entertainment Indirect contribution: Travel and tourism investment spending, and government collective travel and tourism spending Induced contribution: Spending of direct and indirect employees GOI: Government of India INR: Indian Rupee USD: US Dollar Conversion rate used: USD1 = INR48 Wherever applicable, numbers have been rounded off to the nearest whole number USEFUL INFORMATION 38

39 Industry associations Federation of Hotel & Restaurant Associations of India (FHRAI) B-82, 8th Floor, Himalaya House, 23, Kasturba Gandhi Marg, New Delhi Phone: Fax: Hotel Association of India (HAI) B Som Dutt Chamber-I, Bhikaji Cama Place, New Delhi Phone: /14 Fax: USEFUL INFORMATION 39

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