The performance of the hotel industry is directly connected with global and local economic growth and investor confidence. A strong underlying economy is a pre-requisite for sustained recovery. Unfortunately, the year 2011 has not been a year of economic recovery either in India or globally. After two exceptionally bad years, the global hospitality industry was expected to recover in 2011. Despite encouraging signs in the first half of 2011, there was growing uncertainty during the latter part of the year. As a result, recovery has been fragile during 2011.

The situation in India mirrors this overall global trend.  Foreign arrivals to India grew only marginally compared to the previous year. As a result, occupancies were higher than the previous year but room rates have been subdued and it has not been generally possible for hotels to revise room rates upwards. In the near and medium term the Indian hospitality industry is likely to be affected due to lower arrivals from Europe and the United States. Absence of significant economic reforms, inflation and the continued depreciation of the rupee has affected investment.

Year Foreign Tourist Arrival (million) Outbound Tourist (million) Domestic Tourism (million)
2003 2.73 4.50 315.12
2004 3.46 5.40 346.63
2005 3.92 6.18 387.66
2006 4.45 7.00 443.40
2007 5.08 7.97 500.87

Tourism is one economic sector in India that has the potential to grow at a high rate and can ensure consequential development of the infrastructure of the destinations. It has the potential to stimulate other economic sectors through its backward and forward linkages and cross-sectoral synergies with sectors like agriculture, horticulture, handicrafts, transport, construction, etc. The particular significance of tourism industry in India is its contribution to national integration and preservation of natural as well as cultural environments and enrichment of the social and cultural lives of people like preservation of monuments and heritage properties. This sector is also helping the traditional art forms, crafts, and culture.

Domestic tourism has increased over the years with well over 500 million trips taken in 2007 at a growth by 13% over the previous year. The Ministry of Tourism in India has a target of 760 million domestic trips by 2011. In order to achieve this, the Ministry has taken steps to promote key aspects of various regions such as cultural diversity, scenic beauty, heritage and religious sites. In addition, new tourism products such as adventure and rural tourism products are also being promoted. To tap into the growing mass of middle-income consumers in India and their increasing level of disposable income, the Ministry of Tourism has also launched its Incredible India! campaign within India in both electronic and print media.

Source: Euro monitor 2008 and GoI website

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