HOTEL INDUSTRY

1

August 2018

© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

Disclaimer

Due care has been taken to avoid errors or omissions in this publication. In spite of this, er ors may

still persist. Any mistake, er or or discrepancy if noted, may be brought to the notice of the Institute,

which shal be taken care of in next edition.

The Institute shall not be responsible for any loss or damage resulting from any action taken on the

basis of the contents of this publication. To avoid any doubt, it is suggested that the reader should

cross-check the contents of this publication with original Government notifications.

This industry specific research report is for wide circulation among experts to receive valuable

suggestions and necessary supports for further improving the manuscript. Experts are encouraged to

email their suggestions and contribute any material which they think could value add the manuscript

to research@icsi.edu.

The Section 3, “Legal Framework” is indicative only.

Published by :

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Printed at: Indian Offset Press/August 2018

ii

PREFACE

In the liberalized economic policy regime, the corporate sector has been assigned a

major role as the driver of growth and development of the Indian economy. This has

resulted in a number of changes, especial y in the regulatory framework applicable to

specific industry sectors. As an economy is consist of different industries like agriculture,

service, engineering, manufacturing etc., it provides impetus to the economy i.e.

employment generation, production of goods and services, income distribution in the

whole economy.

With the intent to further enhance the competitiveness of India’s services sector and

to boost productivity with the creation of new employment opportunities, the Central

Government has focused attention on 12 sectors in the economy as ‘Champion Sectors’

i.e., IT & ITeS, Tourism and Hospitality, Financial, Accounting and Finance, Transport and

Logistics, Construction and Related Engineering, Communication, Education, Medical

Value Travel, Audio Visual, Legal and Environmental.

As part of its support to government’s policy initiatives, the Institute has started an

initiative by projecting Company Secretary as ‘Corporate Saviour’- a person who can

be relied upon by stakeholders i.e., Corporates, Promoters, Shareholders, Government

and Regulators.

With this basic objective, the institute has initiated the process of developing industry

specific knowledge through research, creating awareness among the members about

the contribution the Company Secretary can make in specific industry, capacity building

of members in the specific industry, securing recognitions for members in specific industry

sector, and sensitisation of regulatory authorities about the contribution the Company

Secretaries can make in specific industry.

For conducting the detailed analysis in a structured manner, a format is designed with

four sections, Section-I covering the industry profile, Section-II Business Scenario, Section-III

legal framework and Section-IV Contribution of Company Secretary in employment and

in practice. The research publications in all the industry sector are based on exploratory

research.

I wish to express my sincere thanks and gratitude to CS Ahalada Rao V, Vice-President, the

ICSI for his efforts in guiding and finalizing industry specific publications.

iii

I also appreciate Dr. Prasant Sarangi, Director (Research), the ICSI-Research Cell for doing

in-depth study of Hotel Industry and bringing out this research publication, under the

guidance of CS Sonia Baijal, Director, Professional Development, Prospective Planning

and Studies and Dr. S.K. Dixit, Mentor, Research Cel .

I am sure this research publication will prove to be of immense value to professionals,

corporates and researchers. The research is an ongoing process, and I welcome the

readers to give suggestions to make this research publication more comprehensive.

I wish all the readers a happy reading

New Delhi

CS Makarand Lele

Date : August 23, 2018

President

The Institute of Company Secretaries of India

iv

TABLE OF CONTENTS

Section Title of the Section / Sub Topics

Page Number

No.

1

Introduction

1

1.1 Introduction

1

1.2 The Hospitality Industry

2

2

Business Scenario

6

2.1 History

6

2.2 Business Scenario

7

2.3 Nature

19

2.4 Types of Hotel Industry

20

3

Legal Framework

29

3.1 Industry type

29

3.2 Applicable Laws

29

3.3 State Acts

34

4

Contribution of Company Secretary

36

4.1 Introduction

36

4.2 Role of Company Secretary in Employment

39

4.3 Role of Company Secretary in Practice

39

4.4 Suggestions to Ministry of Tourism (MOT) to boost

39

Indian Hotel Industry:

4.5 Conclusion

42

Bibliography

43

Revised Guidelines for Marketing Development

44

Assistance (MDA) Scheme

Served From Indian Scheme

53

v

vi

1

SECTION 1

INTRODUCTION

1.1 INTRODUCTION

With opening up of the Indian economy after 1991 and the adoption of globalization,

there has been a steep rise in the operational activities of various sectors that were

earlier dormant. One of the best examples of this is the hospitality industry. The sectors

in hospitality services include travel and tourism, and hotel industry. The other industries

included in this sector are food and service management, leisure, bars, night clubs,

amusement parks, motels, hostels, restaurants, self-catering accommodation, holiday

centers and travel agents. It has rapidly grown in training people for hospitality industry

the last 26 years and despite the recession in economy is determined to grow further.

The sector at present employs about 2.5 million people and provides support to other

industries, like hotels and restaurants, and educational establishments. One of the

major part of this sector is the hotel industry. The economy has grown and with it has

grown the personal wealth of people. This domestic success has created greater

need for more hotels, attract tourism.

India is a country with a long history, and many people visit the country for spiritual reasons,

bringing in visitors from all over the world. Additionally, the country has 32 national heritage

sites bringing in history buffs, and a wide variety of nature reserves and parks for those

looking for adventure. The variety of available sites have made India a popular choice for

many foreigners.

Other areas in the hospitality industry come from businesses that have been outsourced

here to India, because the wages are much cheaper over the last decade and a half

the mad rush to India for business opportunities has intensified and elevated room rates

and occupancy levels in hotel’s. Even budget hotels are charging USD 250 per day. This

successful growth story of ‘Hotel Industry in India’ is second only to that of China in the Asia

Pacific. This brings in business people who are meeting and working with the international

companies, thus strengthening the hotel industry.

The expanding activities of the hotel industry have turned it into a multimillion-dol ar

industry. Hotel industry consists of restaurants, lodging places, theme parks, event planning,

1

2

HOTEL INDUSTRY

etc. and includes activities such as facility maintenance and direct operations including

servers, porters, housekeepers, bartenders, kitchen keepers, etc. Such services that are

provided by the hotels constitute to be the subject matter of laws that regulate the hotel

industry. This study is specific to hotel industry only.

1.2 THE HOSPITALITY INDUSTRY

The hospitality industry is a large umbrel a industry that contains several different divisions

of businesses:

• Food and beverage Industry

• Air and land travel Industry

• Entertainment such as movies/theatre/sports Industry, and

• Tourism Industry and medical tourism

• Hotel Industry

The hospitality industry is usually one of the largest revenue producers for countries since it

deals with a variety of businesses. Hospitality usually focuses on extra money that people

have to spend on pleasurable things and leisure, though not always. Business conventions,

trainings, and meetings in different countries also affect the hospitality industry greatly.

Besides this domestic and international travellers also contribute to it.

The present analytical research broadly discusses the Indian Hotel Industry. The paragraphs

below shortly introduce the nature of other related industries as wel . However, a detailed

study of each of these industries is the subject matter of our extensive research, which are

is discussed below in a logical sequence.

• Food and Beverage Industry

India is among the largest producers of food grains globally. Fol owing figure-1 shows the

production of food grains (in million tonnes) in India by 2014. It can be seen from the

figure that the total increase is 34 MT with a CAGR of 2%.

It is increasingly becoming evident that only a vibrant food processing sector can lead

to increasing farm-gate prices and thus enhance income levels, reduce wastages and

increase employment opportunities. An average Indian spends about 50% of household

expenditure on food items, and the demand for processed/convenience food is also

constantly on the rise. As India has liberalized its overall policy regime with specific

incentives for a high priority food processing sector, a very conducive environment for

investments and exports in the sector has attracted lot of capital.

SECTION 1 – INTRODUCTION

3

The Indian food processing industry accounts for 32 per cent of the country’s total food

market. It is one of the largest industries in India, and is ranked fifth in terms of production,

consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent

of Gross Value Added (GVA) in Manufacturing and Agriculture respectively. The Indian

gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound

Annual Growth Rate (CAGR) of 20 per cent. India’s organic food market is expected to

increase by three times by 2020.

The online food-ordering business in India is in its nascent stage, yet it is witnessing

exponential growth. With online food delivery players like FoodPanda, Zomato, TinyOwl

and Swiggy are building scale through partnerships, the organised food business has a

huge potential and a promising future. The online food delivery industry grew at 150 per

cent year-on-year with an estimated Gross Merchandise Value (GMV) of US$ 300 million

in 2016.

Indian is also a leading market for food related raw materials in the world. The following

table shows various items related to raw materials in food production with their global

ranking.

According to the data provided by the Department of Industrial Policies and Promotion

(DIPP), the food processing sector in India has received around US$ 7.54 billion worth

of Foreign Direct Investment (FDI) during the period April 2000 to March 2017. The

Confederation of Indian Industry (CI ) estimates that the food processing sectors have the

potential to attract as much as US$ 33 billion of investment over the next 10 years and also

to generate employment of nine million person-days.

• Air and Land Travel Industry

In 2018, airlines have the opportunity to take progressive steps towards defining the next

generation of air travel. Airlines are leaving behind a decade where losses surpassed

many-fold. Now, bolstered by low fuel prices, tighter capacity, new merchandizing

strategies, and industry consolidation, the sector is expected to post a consecutive run

of annual profits. Indian carriers should seize the opportunity of the upswing – and that

begins with investment in critical infrastructure and technology that has been lacking

behind because of recent industry pressures.

Many airlines are taking steps in the right direction. On the infrastructure side, large

Indian carriers are announcing significant airport investments and fleet expansions that

are critical to capitalize on rising travel demand. Carriers are also upgrading fleets with

sorely needed amenities to meet rising flyer expectations, including new seats, satellite

Wi-Fi service, larger overhead bins, and power for devices. A competitive aircraft leasing

market will likely continue to grant carriers easier access to attractive aircraft-financing,

enabling fleet growth and expansion in 2018.

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HOTEL INDUSTRY

Air traffic reform will likely continue to be a key infrastructure debate throughout the year,

with enormous implications for the industry. A confluence of emerging technologies can

unlock incredible solutions for airlines, specifically around main points, such as security

checkpoints, baggage systems, route optimization, helping consumers navigate busy

airports, and mitigating the impact of weather delays and equipment failure. Consider

the following scenario that showcases the potential impact technologies like the Internet

of Things (IoT), robotics, 3D printing, asset tracking, and smart workforces can have to

relieve pain points around aircraft malfunctions:

• In-air detection and notification: Mid-flight, an IoT connected aircraft part

recognizes it is not functioning properly. The aircraft sends a message to the

ground about the malfunctioning part for repair upon arrival.

• The on-demand supply chain: The part used in the repair will need to be replaced

upon landing, so before arrival, a 3D printer at the arrival airport receives a signal

to print the part.

• The connected, autonomous tarmac: The printed part must be delivered to the

arrival gate. An autonomous vehicle picks it up and makes a delivery.

• The connected employee: The mechanic uses heads-up display eyeglasses

to reference documents from the cloud. Using a bore scope connected to a

wireless tablet, the mechanic streams live video to a remote engineer allowing

the repair and inspection to benefit from the engineer’s authority.

Instead of this aircraft being taken out of service, frustrating travelers with delays, the aircraft

leaves on time for its next segment. This example not only demonstrates the synergistic

power of different technology platforms, it highlights the inextricable link between airline

operations and customer experience.

• Entertainment Industry

The Indian media industry has tremendous scope for growth in all the segments due to rising

income and evolving lifestyles. Media is consumed by audience across demographics

and various avenues, such as television, films, out of home (OOH), radio, animation and

visual effect (VFX), music, gaming, digital advertising, and print.

The Media & Entertainment industry is anticipated to grow at a Compound Annual Growth

Rate (CAGR) of 13.9 per cent during 2016-21 to reach US$ 37.55 billion. The industry

has provided employment to 3.5-4 million people, including both direct and indirect

employment as of 2017.

Advertising expenditure in India is expected to grow 13 per cent year-on-year to Rs 69,346

crore (US$ 10.71 billion) in 2018 and Rs 1.07 trillion (US$ 16.70 billion) by 2020. The Indian

SECTION 1 – INTRODUCTION

5

digital advertising industry is expected to grow at a CAGR of 32 per cent to reach Rs

18,986 crore (US$ 2.93 billion) by 2020. India’s digital revenues are expected to reach

US$394.22 million by 2021. India is the second largest television market in the world with

US$ 10.14 billion in revenue in 2017. The Indian film industry is expected to grow at a rate

of 11.9 per cent by 2020. India digital advertising market has reached Rs 8,202 crore

(US$ 1.27 billion) in 2017 and is forecasted to grow at a CAGR of 32 per cent to reach

Rs 18,986 crore (US$ 2.95 billion) by 2020. The Government of India has supported this

sector’s growth by taking various initiatives such as digitizing the cable distribution sector

to attract greater institutional funding, increasing Foreign Direct Investment (FDI) limit from

74 per cent to 100 per cent in cable and Direct-to-home (DTH) satellite platforms, and

granting industry status to the film industry for easy access to institutional finance.

• Tourism Industry

Tourism is a major engine of economic growth and an important source of employment

& foreign exchange earnings in many countries including India. It has great capacity

to create large-scale employment of diverse variety – from the most specialized to the

unskilled, and hence can play a major role in the creation of additional employment

opportunities. It can also play an important role in achieving growth with equity and

sustainability.

Tourism Industry in India is growing and it has vast potential for generating employment and

earning large amount of foreign exchange besides giving a fillip to the country’s overall

economic and social development. By 2030 it will be nearly two billion people, spending

just over $2 trillion, in all corners of the world. As per the report of UNWTO around two billion

people, experiencing new cultures are sharing new friends, creating new businesses. Two

billion people providing jobs and an income 400 million people globally. By 2030, travel

& tourism will be 11% of the world’s economy. Each and every person who travels will play

a part in this story of growth, adventure and experience.

SECTION-2

BUSINESS SCENARIO

2.1 HISTORY

A hotel is an establishment that provides lodging paid on a short-term basis. Facilities

provided may range from a basic bed and storage for clothing, to luxury features like en-

suite bathrooms. Larger hotels may provide additional guest facilities, such as a swimming

pool, business centre, childcare, conference facilities and social function services. The

Indian Hotel Industry Survey 2013-2014 reflects a positive change indicated by the key

operating statistics, which may be an early indicator towards the end of a downturn for

the Indian hotel industry. There are over 600 hotels and resorts in India that constitute the

“organized” or modern sector. Most of these hotels are in the larger cities and major tourist

or business destinations. India has several world class domestic hotel chains. Besides

several international chains have also established their presence through franchising

or entering into partnerships with Indian firms. These branded hotels are mostly in the

premium segment (5 star/5 star deluxe/heritage) and mid-range segments (4 star), which

cater to businessmen and leisure travelers. With the rise in tourism and business travel,

several international brands are exploring the possibility of entering or expanding even

further in India.

Hotel Industry as we know started in the 19th century with the development of major

cities, easier sea travel and coming up of railways. During Mogul rule, the forts and their

surroundings would cater to the needs of the travelers often in exchange for no more than

the story of their adventures during their travel or any news from other towns and villages

they passed by. In India, resting houses called dharamshallas were established on high

ways by kings and emperors of during the ancient and medieval periods. Movement of

people both political and pilgrimage stressed the need for better and improved facilities

to cater to the varied needs of the people coming from various classes of the society.

Most of modern hotels that sprouted were managed by European families. The Bombay

hotel was opened in 1799. The British brought modern hotels to Kolkata. The Oldest was

John Spence’s Hotel. Spence’s, the first ever hotel in Asia was opened up to the public in

1830. The credit for opening the first western style hotel under the name of British Hotel in

Bombay in 1840 goes to Pallonjee Pestonjee. Then came the ‘Auckland’ hotel by David

6

SECTION 2 – BUSINESS SCENARIO

7

Wilson in Calcutta in the year 1840-41 (‘The Great Eastern Hotel’ now officially called Lalit

Great ‘Eastern Hotel’) is a colonial era hotel in the Indian city of Kolkata (formerly Calcutta)

and Connemara Hotel in Madras (now Chennai) in the year 1870 by E. A. Oakshroff.

In 1971-72, a beautiful palace of Rajasthan was linked up to the Taj, the Lake Palace

in Udaipur, a marble dream, afloat lake pichola and the Rambagh palace, original y

created at the height of Rajput splendour in Jaipur. In 1903 the group, hired the best

architects and craftsmen and build the exquisitely beautiful Taj Mahal hotel in Bombay

(now Mumbai) with 220 rooms. Mohan Singh Oberoi took Carlton Hotel in Shimla on Lease

in 1927, renamed as Clarks hotel. He took a building in 1933 and built Grand Hotel in

Calcutta it.

The India Tourism Development Corporation (ITDC) was set up in 1966 as a corporation

under the Indian Companies Act of 1956, with the merger of Janpath Hotel India Ltd.

Three Welcome Group Hotels were commissioned between 1975 and 1977; these were

non-franchised hotels, inspired by the slogan “Be Indian, Buy Indian” and using Indian

expertise. Ultimately, however, these hotels adopted the Sheraton system in 1978 and

used the services of expatriates for the purposes of upgrading staff training and installing

Sheraton operating systems-all without a management contract. This gave the Welcome

Group a good start.

When India agreed to host the 1982 Asian Games, the Government of India granted

licenses for building hotels to the Taj Palace, Asian Hotels Hyatt Regency, India Tourism

Development Corporation – Lodhi Hotel, Samrat Hotel, Kanishka, Le Meridien, and Surya

Sofitel, with the stipulation that their new hotels had to be completed in time for the

games. India hosted the Commonwealth Games in 2010, at Delhi. It was India’s most

successful Commonwealth Games to date with Indian athletes winning 38 gold, 27 silver

and 36 bronze medals. This also added to the growth of hotel industry in India.

2.2 BUSINESS SCENARIO:

After registering GDP growth of over 7 per cent for the third year in succession in 2016-

17, the Indian economy is headed for somewhat slower growth, estimated to be 6.5

per cent in 201718, as per first Advance Estimates released by CSO. This is slightly

lower than the range of 6.5 per cent to 6.75 per cent being currently projected based

on recent developments. Even with this lower growth during 2017-18, GDP growth has

averaged 7.3 per cent for the period from 2014-15 to 2017-18, which is the highest

among the major economies of the world. That this growth has been achieved in

a milieu of lower inflation with improved current account balance and a notable

reduction in the fiscal deficit to GDP ratio makes it all the more creditable. In addition

to the introduction of GST, the year also witnessed significant steps being undertaken

8

HOTEL INDUSTRY

towards resolution of problems associated with non-performing assets of the banks,

further liberalization of FDI, etc., thereby strengthening the momentum of reforms.

After remaining in negative territory for a couple of years, growth of exports rebounded

into positive one during 2016-17 and strengthened further in 2017-18. There was an

augmentation in the spot levels of foreign exchange reserves close to US$ 414 billion,

as on 12th January 2018.

Table-1: Indian Economy Outlook

Years

2014-15

2015-16

2016-17

2017-18

GDP at Constant

10536984

11381002

12189854

12985363

Market price

(7.4)

(8.0)

(7.1)

(6.5)

(Growth %)

Gross saving (% of

33.1

32.3

NA

NA

GDP)

Gross Capital

34.4

33.3

NA

NA

Formation (%)

Per capita

86454

94130

103219

111783

National Income

WPI Inflation (%)

1.2

-3.7

1.7

2.9

CPI Combined

5.9

4.9

4.5

3.3

Inflation (%)

Foreign Exchange

341.6

360.2

370.0

409.4

Reserve (US $

billion)

Gross Fiscal Deficit

4.1

3.9

3.5

3.2

(% to GDP)

Revenue Deficit

2.9

2.5

2.1

1.9

Source: Compiled from Economic Survey, 2017-18

The derived graph-1 given below shows the overall economic indicator by considering

three variables like GDP, CPI combined inflation and Fiscal deficit. The CPI and fiscal

deficit are observed to be decreasing continuously which is a positive sign for the

country.

SECTION 2 – BUSINESS SCENARIO

9

Graph-1: GDP, CPI and Fiscal Deficit (in %)

Source: Economic Survey, 2017-18

Inflation in the country continued to moderate during 2017-18. Headline inflation as per

Consumer Price Index – Combined (CPI-C) declined to 3.3 per cent in 2017-18 (Apr-Dec)

from 4.8 per cent in the corresponding period of 2016-17. CPI inflation, which was below

3.0 per cent in the first quarter of 2017-18 mainly due to lower food inflation, especial y

pulses and vegetables, rose marginal y and stood at 3.0 per cent in the Q2 of 2017-

18. Food inflation in terms of the Consumer Food Price Index (CFPI) declined to 1.2 per

cent during 2017-18 (Apr-Dec) from 5.1 per cent in 2016-17 (Apr-Dec). CPI-based core

(non-food, non-fuel) inflation also declined to 4.5 per cent in 2017-18 (Apr-Dec) from

4.8 per cent in 2016-17 (Apr-Dec). Inflation for all the major subgroups of CPI-C, except

housing and fuel & light groups, declined in 2017-18 (Apr-Dec) over 2016-17 (Apr-Dec).

The decline was sharpest for food & beverages. Average inflation based on the Wholesale

Price Index (WPI) stood at 2.9 per cent in 2017-18 (Apr-Dec) as compared to 0.7 per

cent in 2016-17 (Apr-Dec). WPI inflation which remained subdued for several months

surged during February and March, 2017 due to sudden spurt in global crude oils prices.

Thereafter, with the moderation in the global crude prices, inflation also moderated in

the next four months till July, reaching a low of 0.9 per cent in June 2017. As oil prices

bounced back and moved upwards in the successive months, coupled with rising food

prices, inflation too rose and reached the level of 3.6 per cent in December 2017. WPI

based food inflation declined to 2.3 per cent in 2017-18 (Apr-Dec) from 6.3 per cent

in the corresponding period of 2016-17. WPI fuel & power inflation increased to 9.7 per

cent 2017-18 (Apr-Dec) from (-) 6.5 per cent in the corresponding period of the previous

year. WPI based core (non-food manufactured products) inflation stood at 2.6 per cent

in 2017-18 (Apr-Dec) as compared to -0.8 per cent in 2016-17 (Apr-Dec). The inflation

10

HOTEL INDUSTRY

of manufactured group, which has the weight of 64.2 per cent in the WPI basket, has

however, remained range-bound hovering around 2.6 per cent.

India’s foreign exchange reserves reached US$ 409.4 billion on December 29, 2017, with

a growth of 14.1 per cent on a YoY basis from end of December, 2016 and growth of 10.7

per cent from end-March 2017. The foreign exchange reserves were US$ 413.8 billion

on 12th January 2018. The foreign exchange reserves in nominal terms (including the

valuation effects) increased by US$ 30.3 billion during 2017 as compared to an increase

of US$ 11.8 billion during the same period of preceding year. The import cover of India’s

foreign exchange reserves increased to 11.1 months at end-September 2017. Exchange

Rate is 1.46 during 2017-18 (up to December 2017), the rupee generally traded with an

appreciating bias against the US dollar, barring intermittent depreciation in September

and October 2017. The rupee strengthened by 2.5 per cent to a level of Rs. 64.24 per US

dollar during December, 2017 from the level of Rs. 65.88 per US dollar during March 2017

on the back of significant capital flows. The appreciating trend vis-à-vis US$ has continued

in January so far. During 2017-18 (April-December), on an average, the rupee has also

appreciated against other major currencies but for the US dollar. The appreciation of the

rupee (in real effective exchange rate) indicates that India’s exports may have become

slightly less competitive. In the last few years, the value of Rupee has been relatively stable

vis-à-vis US$. The rupee depreciated by much higher levels between 2011-12 and 2013-

14 than between 2014-15 and 2016-17. Not only this, within the year fluctuations have

been much less.

(a) GDP:

With Gross Domestic Product (GDP) growth averaging 7.5 per cent in 2014-15 and 7.1

in 2016-17, India can be rated as among the best performing economies in the world

on this parameter. Although growth is expected to decline to 6.5 per cent in 2017-18,

bringing the 4-year average to 7.3 per cent, the broad story of India’s GDP growth to

be significantly higher than most economies of the world does not alter. The growth

is around 4 percentage points higher than global growth average of last 3 years and

nearly 3 percentage points more than the average growth achieved by emerging

market and developing economies (EMDE). Table-2 derived below highlights Gross

Value Added and GDP growth trends from 2014 to 2017-18.

Table-2: Annual Real GVA and GDP Growth (%)

GVA at Basic prices from

2014-15

2015-16

2016-17

2017-18

Agricultural, forestry and

-0.2

0.7

4.9

2.1

Fishing

Industry

7.5

8.8

5.6

4.4

SECTION 2 – BUSINESS SCENARIO

11

(a) Mining & quarrying

11.7

10.5

1.8

2.9

(b) Manufacturing

8.3

10.8

7.9

4.6

(c) Electricity, gas, water

7.1

5.0

7.2

7.5

supply & Other utility

services

(c) Construction

4.7

5.0

1.7

3.6

Services

9.7

9.7

7.7

8.3

(a) Hotel,

Trade,

9.0

10.5

7.8

8.7

Transport, Storage,

Communication &

services related to

broadcasting

(b) Financial, Real Estate

11.1

10.8

5.7

7.3

and

professional

services

(c) Public

8.1

6.9

11.3

9.4

administration,

defense and other

services

GVA at basic Prices

7.2

7.9

6.6

6.1

GDP at Market Prices

7.5

8.0

7.1

6.5

Source: Compiled from Economic Survey, 2017-18

The estimated growth in GVA for this sector during 2017-18 is placed at 7.3 percent as

compared to growth of 5.7 percent in 2016-17. The key indicators of this sector are the

growth of corporate sector, real estate sector and computer related activities which

are estimated using latest available information on listed companies for the first half of

financial year 2017-18. The combined growth in aggregate bank deposits and credits

as on 10 November 2017 was 8.4 per cent. The tables 3 and 4 derived below show the

contribution of financial, real estate and professional services estimated by first advance

estimates of gross value added by economic activities at basic price at 2011-12 and

current price, respectively.

12

HOTEL INDUSTRY

Table-3: First Advance Estimates of GVA at Basic Price by Economic Activities

(At 2011-12 prices) (Rs. crore)

Industry

2015-16

2016-17

2017-18

Percentage

(PE)

(Ist AE)

change over

previous year

2016- 2017-

17

18

1. Agriculture,

1,617,208

1,696,175

1,732,371

4.9

2.1

forestry & fishing

2. Mining &

324,740

330,485

339,972

1.8

2.9

quarrying

3. Manufacturing

1,872,115

2,019,227

2,112,345

7.9

4.6

4. Electricity, gas,

224,447

240,590

258,672

7.2

7.5

water supply

& other utility

services

5. Construction

879,782

894,668

927,085

1.7

3.6

6. Trade, hotels,

1,989,161

2,143,956

2,329,801

7.8

8.7

transport,

communication

and services

related to

broadcasting

7. Financial,

2,298,798

2,429,638

2,606,602

5.7

7.3

real estate &

professional

services

8. Public

1,284,263

1,430,002

1,564,473

11.3

9.4

administration,

defence and

Other Services

GVA at Basic Price 10,490,514 11,185,440 11,871,320

6.6

6.1

Source: Compiled from Economic Survey, 2017-18

All these demographic and economic indicators and more are enough to convenience

that the real estate sector is having an ample scope growth in the coming years.

SECTION 2 – BUSINESS SCENARIO

13

Table-4: First Advance Estimates of GVA at Basic Price by Economic Activities

(At current prices)

Industry

2015-16

2016-17

2017-18

Percentage

change over

previous year

2016- 2017-

17

18

1. Agriculture,

2,175,547

2,372,085

2,438,546

9.0

2.8

forestry & fishing

2. Mining &

296,253

301,921

341,843

1.9

13.2

quarrying

3. Manufacturing

2,064,820

2,257,413

2,422,101

9.3

7.3

4. Electricity, gas,

321,651

342,422

368,269

6.5

7.5

water supply

& other utility

services

5. Construction

1,006,403

1,041,343

1,109,608

3.5

6.6

6. Trade, hotels,

2,294,364

2,519,999

2,825,708

9.8

12.1

transport,

communication

and services

related to

broadcasting

7. Financial,

2,631,120

2,889,048

3,186,115

9.8

10.3

real estate &

professional

services

8. Public

1,668,486

1,945,683

2,205,463

16.6

13.4

administration,

defence and

Other Services

GVA at Basic Price 12,458,642 13,669,914 14,897,653

9.7

9.0

Source: Compiled from Economic Survey, 2017-18

Real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year 2017-

18 is likely to attain a level of Rs.129.85 lakh crore, as against the Provisional Estimate of

GDP for the year 2016-17 of Rs. 121.90 lakh crore, released on 31st May 2017. The growth

14

HOTEL INDUSTRY

in GDP during 2017-18 is estimated at 6.5 per cent. With GDP at current prices in the year

2017-18 is likely to attain a level of Rs. 166.28 lakh crore, as against Rs. 151.84 lakh crore

in 2016-17 showing a growth rate of 9.5 per cent.

The table-5 derived below shows some important countries gross domestic product

calculated at purchasing power parity per capita calculated by the International

Monetary Fund and the World Bank. The purchasing power parity value of al final goods

and services produced within a country in a given year is calculated by dividing the

average (or mid-year population). It can be seen from the figures that, even though

India ranks at a higher side in the world, still its ranking is improving contentiously. This

could be considered as a positive sign due to backward linkages for the real estate

industry.

Table-5: List of Countries by GDP (PPP) Per Capita

Country

International

World Bank

Monetary fund

Singapore

87,855

87,856

Switzerland

59,561

62,882

United states

57,436

57,467

Australia

48,899

46,790

Germany

48,111

48,730

Canada

46,437

44,025

United Kingdom

42,481

42,609

France

42,314

41,466

Japan

41,275

41,470

South Korea

37,740

35,751

United Kingdom

42,609

New Zealand

37,294

39,059

Italy

38,161

36,833

India

6,616

6,572

Source-Compiled Data from IMF and World Bank, 2017

(b) GDP Nominal:

The nominal GDP are calculated at market or government exchange rates. The ranks of

some of the major countries of the world calculated by the International Monetary Fund

and the World Bank are figured in the table derived below. From the table, it can be

SECTION 2 – BUSINESS SCENARIO

15

seen that as per the ranking given both the organizations, India stands among the top 10

countries in the world.

Table-6: List of Countries by GDP (Nominal)

Country

International

World Bank

Monetary fund

Singapore

305,757

296,966

Switzerland

680,645

659,827

United states

19,362,129

18,569,100

Australia

1,390,150

1,204,616

Germany

3,651,871

3,466,757

Canada

1,640,385

1,529,760

United Kingdom

2,565,051

2,618,886

France

2,574,807

2,465,454

Japan

4,884,489

4,939,384

South Korea

1,529,743

1,411,246

United Kingdom

2,565,051

2,618,886

New Zealand

200,837

185,017

Italy

1,921,139

1,849,970

India

2,439,008

2,263,522

Source-Compiled Data from IMF and World Bank, 2017

(c) GDP Growth rate:

Some important countries are listed in the following table ranked by their real gross

domestic product growth rate. The real growth rate is calculated by considering the

values of all final goods and services produced within a country in a given year. From the

ranks of International Monetary Fund, it can be seen that India’s position is among top five

countries of the world.

Table-7: List of Countries by GDP Growth Rate (Nominal)

Country

International

Monetary fund

Singapore

2.00

Switzerland

1.30

United states

1.60

Australia

2.50

16

HOTEL INDUSTRY

Germany

2.05

Canada

1.40

United Kingdom

1.80

France

1.20

Japan

6.83

South Korea

2.80

United Kingdom

1.65

New Zealand

4.00

Italy

0.90

India

8.50

Source-Compiled Data from IMF and World Bank, 2017

(d) Per Capita Income

The real per capita income (measured in terms of per capita net national income

at constant (2011-12) prices shown in table-1 derived above is one of the important

indicators representing the welfare of the people of a country. It is expected to increase

from Rs. 77,803 in 2015-16 to Rs. 86,660 in 2017-18, growing at an annual average rate

of 5.5 per cent. In nominal terms it increased by an average of 9.0 per cent per annum

from Rs. 94,130 in 2015-16 to Rs. 111,782 in 2017-18.

The per capita net national income during 2017-18 is estimated to be Rs 111,782 showing

a rise of 8.3 per cent as compared to Rs. 103,219 during 2016-17 with a growth rate of

9.7 percent.

The per capita income in real terms (at 2011-12 prices) during 2017-18 is likely to attain a

level of Rs. 86660/- as compared to Rs. 82269/- for the year 2016-17. The growth rate in

per capita income is estimated at 5.3 per cent during 2017-18, as against 5.7 per cent

in the previous year.

(e) FDI Inflow:

Table-8 derived below shows FDI share of the top 10 service sectors, such as financial

and non-financial services falling under the Department of Industrial Policy & Promotion

(DIPP) services sector definition; as wel as telecommunications; trading; computer

hardware & software; construction; hotels & tourism; hospital & diagnostic centres;

consultancy services; sea transport; and information & broadcasting that can be

taken as the best estimate of services FDI. However, these could include some non-

service elements too. The share of these services is 56.6 per cent of the cumulative

FDI equity inflows during the period April 2000-October 2017 and 65.8 per cent of

SECTION 2 – BUSINESS SCENARIO

17

FDI equity inflows during 2017-18 (April-October). If the shares of another 5 services

or service-related sectors like retail trading, agriculture services, education, book-

printing and air transport are included, then the total share of FDI equity inflows to the

services sector would increase to 58.5 per cent and 69.6 per cent respectively for the

above two periods. In 2016-17, FDI equity inflows to the services sector (top 10 sectors

including construction) declined by 0.9 per cent to US$ 26.4 billion, though the overall

FDI equity inflows grew by 8.7 per cent. However, during 2017-18 (April-October), the

FDI equity inflows to these services sector grew by 15.0 per cent, as compared to 0.8

per cent growth in total FDI equity inflows, mainly due to higher FDI in two sectors, i.e.,

Telecommunications and Computer Software and Hardware.

Table-8: FDI Equity Inflow to the Service Sector

Sector

Value (in US$

Share

Growth Rate

Billion

in Total

(%)

%

2016-

2017-

Apr

2016- 2017-

17

18 (Apr

2000

17

18

– Oct)

to Oct

(Apr-

2017

Oct.)

1. Services Sector

8.7

3.4

17.6

26.0

-45.8

2. Construction

2.0

1.4

9.9

-57.5

22.0

3. Telecommunication

5.6

6.1

8.4

320.1

115.9

4. Computer Software and

3.7

3.3

7.8

-38.2

116.0

Hardware

5. Trading

2.3

1.6

4.4

-39.2

-1.2

6. Hotel and Tourism

0.9

0.6

3.0

-31.3

-4.1

7.

Information

and

1.5

0.5

2.0

-50.3

-48.9

broadcasting

8. Hospital and Diagnostic

0.7

0.6

1.4

0.7

6.9

centre

9. Consultancy Services

0.3

0.4

1.1

-49.5

137.6

10. See Transport

0.7

0.6

0.9

71.2

71.1

Top 10 Services (1 to 10)

26.4

18.4

56.6

-0.9

15.0

Top 15 services

27.2

19.5

58.5

-1.7

17.5

Total FDI

43.5

28.0

100.0

8.7

0.8

Source: Compiled from Economic Survey, 2017-18

18

HOTEL INDUSTRY

(f) Services Sector:

With a share of 55.2 per cent in India’s GVA, the services sector continued to be the key driver

of India’s economic growth, and is expected to contribute almost 72.5 per cent of GVA

growth in 2017-18. While the growth of this sector in 2017-18 is expected to be at 8.3 per

cent, the growth in services exports and net services were robust at 16.2 per cent and 14.6

per cent respectively in 2017-18. Out of the 32 States and Union Territories (UTs) for which data

are released for new base (2011-12 series) by CSO, the services sector is the dominant sector

contributing to more than half of the gross state value added (GSVA) in 15 states and UTs.

Among these 32 states and UTs, Delhi and Chandigarh are at the top with over 80 per cent

and Sikkim is at the bottom with 31.7 per cent in terms of services sector GVA share. In 2016-

17, FDI equity inflows to the services sector (top 10 sectors including construction) declined by

0.9 per cent to US$ 26.4 bil ion, though overall FDI equity inflows grew by 8.7 per cent. However,

during 2017-18 (April to October), the FDI equity inflows to these sectors grew by 15.0 per cent,

as compared to 0.8 per cent growth in total FDI equity inflows, mainly due to higher FDI in two

sectors, i.e., telecommunications, and computer software and hardware. India remained the

eighth largest exporter of commercial services in the world in 2016 (WTO, 2017) with a share

of 3.4 per cent, which is double the share of India’s merchandise exports in the world. India’s

services export growth returned to positive ter itory with 5.7 per cent growth in 2016-17 from

growth of (-) 2.4 per cent in 2015-16. Services exports recorded a robust growth of 16.2 per

cent during April-September 2017, with turnaround observed in some major sectors like travel

and software services. India’s service sector imports also exhibited a much higher growth of

17.4 per cent in April-September 2017. Net services receipts rose by 14.6 per cent during April-

September of 2017-18 as compared with 2016-17. Net surplus in services financed about 49

per cent of India’s merchandise trade deficit in 2017-18 and cushioned the current account

deficit.

In India, the tourism sector has been performing robustly with Foreign Tourist Arrivals

(FTAs) growing to 8.8 million in 2016. Foreign Exchange Earnings (FEEs) from tourism

grew at 8.8 per cent to US$ 22.9 billion in 2016. As per the provisional data of Ministry

of Tourism, FTAs during 2017 were 10.2 million with a growth of 15.6 per cent, while

the FEEs from tourism were US$ 27.7 billion with a growth of 20.8 per cent over 2016.

Outbound tourism has also picked up in recent years, with the number of departures

of Indian nationals from India growing by 7.3 per cent to 21.9 million during 2016 from

20.4 million in 2015. This is more than double of the foreign tourists’ arrivals in India.

Domestic tourist visits grew by 12.7 per cent to 1,614 million in 2016 from 1,432 million

in 2015. The detailed contribution of Indian hospitality Industry to the services sector is

derived in the table-9 given below.

SECTION 2 – BUSINESS SCENARIO

19

Table-9: Share and Growth of India’s Hospitality Industry in Services Sector

(GVA at basic prices)

Sector

Share

Growth (%)

(%)

2015-

2015-

2016-

2017-

16

16

17

18

Total Services

52.9

9.7

7.7

8.3

Trade, repair, hotels and restaurants

11.4

11.2

7.7

8.7

(a) Trade and repair services

10.4

10.9

--

--

(b) Hotels and restaurants

10.0

14.4

--

--

Transport, storage, communication

7.0

9.3

--

--

& services related to broadcasting

(a) Railways

0.8

7.0

--

--

(b) Road transport

3.2

6.7

--

--

(c) Air transport

0.2

16.8

--

--

Financial Services

5.8

6.8

5.7

7.3

Real Estate, ownership of dwelling & 15.3

12.5

--

--

professional services

Public administration and defence 13.4

6.9

11.3

9.4

and others

Construction

8.1

5.0

1.7

3.6

Total Services

71.0

9.1

6.9

7.7

Source: Compiled from Various studies.

2.3 NATURE:

There has been a continued change in the revenue composition over the past few years.

Although ARRs saw a marginal increase, the trend of declining revenues from the Rooms

division continued in 2013-14, falling from 52.2% in 2012-13 to 51.3% in 2013-14. The

contribution of Food and Beverage (F&B) revenue, on the other hand, has increased

marginally from 41.2% in 2012-13 to 41.9% in 2013-14 with rising contribution from

Banquets and Conferences. Additional y, Other revenue that includes laundry, gift shop,

business centre, health club and rentals also saw a slight growth from 6.6% in 2012-13 to

6.9% in 2013-14. The survey reveals that energy expenses on an All-India PAR basis have

increased by 13.2% in 2013-14 as compared to that in the previous year. Over the past

20

HOTEL INDUSTRY

five years, the energy cost on a PAR basis has grown at a CAGR of 10.5%. High energy

costs are a major concern especial y in cities such as Chennai and Pune where they are

a major factor in declining profitability of hotels. This year’s survey reveals that amongst

the use of various technological applications, the use of Energy Management Systems

(EMS) has witnessed the highest increase on an Al -India level, both in sourcing the energy

(renewable sources like solar) and water (tapping rainwater and using treated grey water).

The average number of employees per hotel has increased marginally from 95.1 in 2012-

13 to 95.8 in 2013-14. However, it is interesting to note that the increase has been at the

managerial and supervisory level. In fact, according to the survey results, the increase in

the number of employees at the supervisory and managerial levels has been growing at

a CAGR of 4.7% over the past five years, whereas the number of staff level employees

per hotel has increased at only 1.7%. The use of technology and increasing dependence

on online reservation systems is a fast emerging trend amongst hotels across the country.

Hotels are focusing more on online travel agents and third-party websites for advance

reservations due to the scale and reach of these channels. The use of property level

technology such as Intranet and Local Area Network (LAN), Yield Management Systems,

Property Management Systems, and Electronic Keycards is also increasing across hotel

segments. The use of cash as a payment method has been on a declining the past few

years. In 2013-14, the percentage of guests using cash as a payment method was 36.1%

as compared to 43.2% in 2009-10. This trend is in line with the countrywide trend of cash-

free transactions and increased usage of credit cards and electronic fund transfer, which

have become a norm across industries such as retail.

2.4 TYPES OF HOTEL INDUSTRY

The hotel industry is a mature industry marked by intense competition. Market share

increases typically come at the competitor‘s expense. Industry wide, most growth occurs

in the international, rather than in the domestic, arena.

Commonly, hotel industries are classified as:

Ø

Commercial Hotels – These cater mainly to business clients and usually offer room

service, coffee-shop, dining room, cocktail lounge, laundry and valet service as

wel as access to computers and fax services.

Ø

Airport Hotels – There are conveniently located near airports to provide any level

of service from just a clean room to room service; sometimes provide bus or

limousine service to the air lines as wel .

Ø

Conference Centers – There are designed to specifically provide meeting space

for groups; they provide all services and necessary equipments required to handle

conventions.

SECTION 2 – BUSINESS SCENARIO

21

Ø Economy Hotels- These hotels provide a limited service and are known for clean

rooms at low prices meeting just the basic needs of travelers.

Ø

Suite or Al -Suite Hotels- These are hotels which offer spacious layout and design.

Business people like the setting which provides space to work and entertain

people separate from the bedroom.

Ø

Residential Hotels- They are very popular. The typical residential hotel offers long-

term accommodations.

Ø Casino Hotels- There are often quite luxurious. Their main purpose is to support

the gambling operations. Casino hotels often offer top name entertainment and

excellent restaurants.

Ø Resort Hotels – These are the planned destination of guests, usually vacationers.

These beaches resorts are located at the or in the mountains away from main

cities. Resort hotels may offer any form of entertainment to keep their guests

happy and busy.

Few popular categories of Indian hotels are:

Ø Restaurants- A restaurant is a business which prepares and serves food and drinks to

customers in exchange for money, either paid before the meal, after the meal, or

with an open account. Traditional y, Indians tended to eat at home and eat Indian

cuisine. Those who ate outside the home often ate street foods from the enormous

number of street stal s and informal eateries that are a common sight across the

streets. Eating in a restaurant was reserved for special occasions. However, India

appears to be in the early stages of a significant transformation in the restaurant

sector. Indian consumers are eating out more frequently and younger generation

has shed the bias of their elders against international franchises and foreign foods.

With only an estimated 100,000 modern organized restaurants (20 or more seats,

waiting staff, menus) in India, there is plenty of room for growth in the industry. It is

estimated that Indians spend 8 to 10 percent of their food expenditure outside the

home in restaurants, cafeterias and other food establishments As per the 2013 India

Food Service report published by the National Restaurant Association of India, the

restaurant sector is valued at $48 bil ion and is expected to grow to $78 bil ion in

the next five years. In terms of market segments, Quick Service Restaurants (QSR)

and Casual Dine in formats account for 74 percent of the total market, while Cafés

make up 12 percent, and Fine Dining Pub Bars Clubs& Lounges (PBCL) comprise

the rest After struggling with supply chain issues for many years, major franchises

have developed a handful of suppliers in India who can meet quality requirements,

placing existing restaurants in a better position to expand and ease the way for new

22

HOTEL INDUSTRY

restaurants seeking to enter the market. While the number of casual dining, fast food

restaurants and coffee shops is growing, high tariffs and other trade restrictions tend

to limit the use of imported food products on restaurant menus. Imports are typical y

limited to specialty ingredients that are not available in India.

The level of competition within the restaurant industry is unprecedented. Success

in this environment requires brands to focus on a number of strategic imperatives

that will define the industry in 2018 and beyond:

ü Embrace the experience: In today’s competitive restaurant marketplace,

successful brands need to do much more than offer good food at a

reasonable price. They need to deliver a differentiated customer experience

along with their meals. But differentiation is not so simple. It requires restaurants

to execute on all dimensions of the customer experience: value, menu,

quality, and the right managers and employees to tie it all together.

ü Drive employee engagement: Many winning brands are discovering that

strategic employee engagement programmes are the foundation for

redefining and transforming the customer experience, driving brand loyalty,

and growing their market share. Engaged and motivated employees are

at the heart of positive restaurant experiences – from how customers are

greeted when they walk through the door, pick up a take-out order, or get

home delivery, to how quickly and well their food is prepared and served.

According to our recent customer experience survey, a staff of friendly,

hospitable employees was cited as the most important element needed

for a positive experience at a restaurant.

ü Dominate delivery: A swell of food delivery apps have permanently changed

consumers’ expectations of when and how they get their food. For some

brands, the shift to third-party digital distribution can translate to massive

exposure and order volume. For others, it represents a missed opportunity

to engage directly with their customers, understand their preferences, and

build better relationships not to mention lost revenue.

ü Compete with non-traditional players: The days of high volume foot traffic

at overcrowded mall food courts are mostly over. A rising penchant for

unique food experiences, authentic local menus, and convenience are

drawing customers away from traditional brick-and-mortar locations as they

explore alternatives such as pop-up food kitchens, food trucks, restaurants

in premium grocery stores, subscription-based meal kits, and even privately

hosted meals enabled by the sharing economy. Traditional players should

consider the risks of sticking with traditional strategies.

SECTION 2 – BUSINESS SCENARIO

23

ü Operational excellence and compliance: Many restaurants are realizing

the pressing need to augment store operations through better technology

enablement, which reinforces operational excellence and enhances

team member capabilities. Benefits include increased store performance,

enhanced “on-brand” guest experience, and stricter adherence to

regulatory requirements.

Ø The restaurant industry should anticipate the level of competition and innovation

to rise throughout 2018 as Wall Street continues to get more aggressive in the

sector. Private equity players and the broader investment community are no

longer keeping it safe with larger restaurant brands with proven track records.

They are increasingly paying attention to smaller restaurant players with bold,

innovative ideas around menu, technology, and supply chain. Deep pockets are

hunting for innovation and opportunity. This collision of capital investment and

new ideas will continue to drive unprecedented disruption throughout the industry.

Ø

Café/Bars- Cafés/bars in India are driven by many factors, such as favourable

demographics, rising income levels, the development of mid-sized cities and

the advent of international chains. A growing willingness, especial y among the

youth, to consume food and drink outside the home and increasing disposable

incomes are helping to fuel further growth. Cafés/bars are considered as perfect

places to socialize and hangout; hence, sales in this category are mainly driven

by the younger generation. The population segment aged 15 to 34 is the target

demographic that visits cafés/bars frequently. Young people also prefer to drink

on-site rather than take products away. Chained cafe culture is also growing in

India. They are likely to expand their numbers of outlets and also extend their

reach to medium- and small-sized cities. These expansion plans would al ow

café chains to leverage on the growing influence of the coffee culture in India.

Chained cafés, especially those in cities, are expected to provide value for money

food items on their menus to induce new consumers into trying their products.

Premium outlets are expected to spring up in major cities to tap into consumers

who are wishing to upgrade. Rising disposable incomes, a greater population of

younger people, growth of consumers in smaller towns and widening exposure

to a drinking and pub culture has propelled the growth of bars and pubs, as wel .

This growth was driven by an increasing number of Indian consumers partaking

in alcoholic drinks. Bars and pubs make a major proportion of from money from

drinks. Brew pubs featuring craft products are a new concept that is appearing in

different parts of the country and slowly gaining popularity among beer drinkers.

Table-10 derived below shows the figures of foreign tourist arrivals to India 2004 to 2016

from top 15 sources. Whereas table-11 highlights foreign exchange earned by India over

the last few years due to tourism activities.

24

HOTEL INDUSTRY

425

2016

1296939

941883

1380409

297418

317239

238707

265928

251313

293625

301961

163688

251313

227749

95417

111076

119663

161097

6715

189

2015

1213624

867601

1133879

299513

284306

230854

24314

207413

263101

272941

152238

206322

172419

88091

102993

115860

154720

5790

ia.

099

2014

Ind

1118983

942562

838860

301601

268485

246101

262026

239106

219516

239762

150731

181020

269832

91589

106870

121362

126416

7679

ntries

nt of

601

e

ou

2013

C

1085309

809444

524923

262345

255222

248379

252003

220283

218967

242649

143025

174712

259120

93951

112619

117136

113790

6967

rnm

e

ve

rc

o

745

G

2012

1039947

788170

487397

296983

256021

240674

254783

220015

202105

195853

131452

168952

177526

98743

109469

105141

125375

6577

15 Soup

urism,

222

To

2011

To

92404

m

980688

798249

463543

305853

259017

231423

240235

193525

192592

208196

119022

142218

144312

100889

108680

119131

6309

fro

692

ia

2010

nistry of

931292

759494

431962

266515

242372

225232

227720

168019

169647

179077

107487

119530

122048

94100

95587

76617

104374

5775

f Mi

s in Ind

699

2009

rts o

827140

769251

468899

239995

224069

196462

191616

124756

149074

135343

95328

100209

94945

77873

70485

67309

88785

5167

op

rrival

(1)

603

us Re

urist A

2008

804933

776530

541884

218805

222364

207802

204344

145352

146209

115794

97851

98093

91095

85766

82335

58065

78133

5282

rio

To

va

ign

504

m

re

2007

799062

796191

480240

204084

208214

204827

184195

145538

135925

112741

92908

88103

75543

93540

84583

50037

83037

5081

fro

167

iled

-10: Fo

p

2006

82574

62330

62203

79978

70407

46623

91552

le

696739

734240

484401

154813

176567

175345

156808

119292

109867

107286

4447

mo

Tab

: C

610

e

2005

611165

651803

456371

136400

157643

152258

120243

103082

96258

96276

68666

44897

56446

67642

49895

41978

77024

3918

urcSo

698

2004

526120

555907

477446

128711

135884

131824

116679

96851

81608

84390

60710

34100

47077

65561

47835

33442

53207

3456

f

s

n)

o

sh

ai

uth)

e

rie

ed

a

ny

reo

m

la

e

a

lia

ysia

p

(M

(So

nd

a

unto

nka

an

a

a

a

a

ila

N

C

ng

nad

nc

rm

a

e

pal

ustra

al

hin

ly

re

e

tal

USA

UK

Ba

Srila

C

Fra

G

Jap

A

M

Sing

C

Russia

Ita

Ko

Tha

N

To

SECTION 2 – BUSINESS SCENARIO

25

Table-11: Foreign Exchange Earnings from Tourism

Month

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Jan

1229

1505

2055

3272

3970

4698

4599

4530

5593

5777

8623

10785

11664

Feb

1294

1442

2050

3136

3793

4401

5496

4610

6646

7653

8502

10255

11510

March 1177

1199

1812

2985

3378

4144

4312

4160

5507

5522

7843

9545

10479

April

1102

1153

1368

2156

2850

3218

3740

3873

4518

5724

6745

7226

9179

May

947

1014

1134

1957

2350

2543

3153

3410

4358

5047

5562

6627

7936

June

906

1263

1364

2144

2566

2849

3538

3926

4751

5440

6485

7149

8366

July

1254

1489

1779

2556

2990

3436

4553

5042

5444

7116

8389

8620

10284

Aug

1127

1354

1552

2273

2698

3080

4041

4306

4620

5734

7260

8351

10385

Sept

1108

1264

1476

2135

2640

2594

3602

3852

4678

5748

6652

7811

9057

Oct

1111

1421

1906

2921

3355

3785

4234

4543

5219

7019

8154

8645

10041

Nov

1351

1585

2389

3560

3793

4533

5003

5361

6516

7941

9723

10663

11431

Dec

1588

1741

2589

4028

4642

5079

5023

6096

7039

8870 10549 11994

12988

TOTAL 14195 16429 21472 33123 39025 44360 51294 53700 64889 77591 94487 107671 123320

Source: Compiled from various Reports of Ministry of Tourism, Government of India.

Figure-2 derived below shows the pictorial representation of the foreign exchange earnings

earned by India from Tourism.

Figure-2: Foreign Exchange Earnings from Tourism

As per the latest World Tourism Barometer of the United Nation’s World Tourism

Organization (December, 2017 edition) international tourist arrivals reached a total

26

HOTEL INDUSTRY

of 1.2 billion in 2016, 46 million more than in the previous year, though the growth

rate of 3.9 per cent was lower than in 2015 (4.6 per cent). In India, the Tourism sector

has been performing wel with Foreign Tourist Arrivals (FTAs) growing at 9.7 per cent to

8.8 million and Foreign Exchange Earnings (FEEs) at 8.8 per cent to US$ 22.9 billion

in 2016. As per the provisional data of Ministry of Tourism, FTAs during 2017 were 10.2

million, with a growth of 15.6 per cent, while, the FEEs from tourism were US$ 27.7

billion, with a growth of 20.8 per cent over 2016.

Outbound tourism has also picked up in recent years, with the number of departures of

Indian nationals from India growing at 7.3 per cent during 2016 to 21.9 million from 20.4

million, in 2015. This is more than double the foreign tourist arrivals in India. Domestic tourist

visits grew by 12.7 per cent to 1,614 million in 2016 from 1,432 million in 2015. In terms

of number of domestic tourist visits, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Madhya

Pradesh, and Karnataka were the top 5 destination States, accounting for 61.3 per cent

of total number of tourist visits in 2016. Amongst centrally protected ticketed monuments,

for domestic visitors, Taj Mahal was the most visited monument in 2016 followed by Qutub

Minar and Red Fort, while for foreign visitors Taj Mahal was the most visited monument,

fol owed by Agra Fort and Qutub Minar.

Table-12: Growth in Net Sales of selected Services: Company-Based

Services

Net Sales

2015-16

2016-17

2017-18*

Transport Logistics

1.0

7.3

5.8

Shipping

-1.6

-18.7

4.75

Aviation

6.7

9.1

15.65

Retail Trading

23.0

19.5

17.0

Health services

15.4

12.8

10.65

Hotel and Restaurant

8.1

2.7

1.1

ITES

17.8

9.5

2.95

Software

11.2

7.2

3.85

Construction & Real Estate

7.6

-1.9

1.9

Source- Compiled from Economic Survey, 2017-18, * Average of Q1+Q2

SECTION 2 – BUSINESS SCENARIO

27

Graph-2 derived below shows figures of room availability in major Indian cities and

estimated rooms availability by the year 2021-22 as predicted by HVS research.

Source: HVS Research.

Business Transactions

A robust business management strategy is of the utmost importance for helping one to

optimize business results. Following are a few business strategies which are commonly

needed while involving oneself in this sector.

• Market Knowledge

In order to implement a successful revenue management strategy, one must clearly

understand his/her market which includes analysis on where demand comes from and

various different local factors that might affect seasonal demands, nature of customers

visiting to that place, competition that exists within the market, marketing strategies that

the competitors are implementing and so on.

For instance, many business customers enjoy a hotel that has close proximity to the

airport. Some may prefer viewing natural sights, etc.

• Segmentation and Price Optimization

Selling the right room to the right person at the right price is most important. This requires

adequate analysis on consumer segments. This, in turn, may help to generate customer

loyalty from those who appreciate the price consistency.

For example, some guests may prefer a ground floor room, later breakfast, or 24-hour

gym access. Providing these choices will make the guest feel like they’ve had a more

personalized stay.

28

HOTEL INDUSTRY

• Proper Coordination between the Departments

It is important to maintain close coordination between the various departments of the

hotel in order to ensure direction proper.

• Forecasting Strategies

Forecasting helps to anticipate future demand and revenue by enabling necessary

adjustments to be made whenever required. Within the hospitality industry, high-quality

forecasting relies on upkeep of accurate records, including occupancy, room rates

and revenue.

• Proper Branding of the USP

One of the most important requirements is to brand the USP in a fruitful way. The

branding strategy mostly depends on the nature of customers.

Corporate Actions

One of the recent mergers in the industry is the Louvre Hotels Group, the second largest

in the hospitality industry in Europe, bought a majority stake in Sarovar Hotels in India this

January, beating Wyndham Hotel Group in the race. The deal, estimated at $50 million

(Rs. 336 crore), makes the combined entity one of the biggest hotel chains in India in

terms of number of properties.

The basic activities involved in the corporate actions are:

§ Corporate and entity level transactions

§ Buy and sell side M&A advisory

§ Cross-border expansion including portfolios

§ Capital sourcing

§ Joint ventures

§ Company valuations

§ Business restructuring

SECTION-3

LEGAL FRAMEWORK

3.1 INDUSTRY TYPE

Hotel Industry is an integral part of services Industry. This industry goes hand in hand with a

few other important related industries, like tourism industry, food processing, aviation and

road transportation, entertainment industry.

3.2 APPLICABLE LAWS

General Laws

The majority of the legislations governing the hospitality and hotels industry can be divided

into three main sectors.

• The first head is the legislation for the construction and commissioning of hotels,

restaurants, guest houses and other establishments, and it includes the Foreign

Exchange Management Act, the industrial licensing policies, land laws and

various development control orders issued by the Central and state governments.

• The second head has legislation for the operation, maintenance and management

of establishments, food and hygiene standards. It also includes insurance laws,

fire safety, and weights and measures regulation. Further, various licenses, such as

liquor license, dance license, lodging-house license, eating-house license, police

permissions, a license under the Shops and Establishment Act, or a license under the

Food and Drug Administration Act granted on an annual basis.

• The third head has rules regarding taxation, employment and other contractual

relationships. This includes laws on income tax, service tax, expenditure tax, excise

duty, luxury tax, entertainment tax, as well as laws on employment matters like

Apprentice Act, ESI Act, etc.

Licenses Required

Following are a few important licenses required for the hotel industry as specified under

various acts.

29

30

HOTEL INDUSTRY

• Police License / Registration.

• License under Shops & Establishments Act.

• License under Prevention of Food Adulteration Act.

• Registration under the Luxury Tax Act.

• Registration under the Sales Tax Act.

• Registration under the Contract Labour Act.

• Registration under the Pollution Control Act.

• Registration under the Apprentices Act.

• Registration under the Provident Fund Act.

• Registration under the ESI Act.

• Entertainment License on Festival Occasions

• License for Chimney under the Smoke Nuisance Act.

• Registration under the Weights & Measures Act.

• Factory License for Laundry.

• Central Excise License for Bakery Products.

• Registration & Permits under the Motor Vehicle Act for Tourist Coaches / Taxies.

• Eating House License.

• Municipal Beer Bar License.

• License for storage of Diesel Oil.

• License for storage of Kerosene & Compressed Gas (LPG).

• Sign Board Directions, Neon Signs.

• License to deal in Foreign Exchange under FEMA.

• Cold Storage License, (if over 25 cubic ft.).

• License for Boiler & Generators and Mixers and Grinders.

• Bar License (Foreign Liquor).

• Mild Liquor License.

• Temporary License for Awnings & covering of Terrace during monsoon.

• Building Completion Certificate.

SECTION 3 – LEGAL FRAMEWORK

31

• Copy Right License for Playing of Music.

• Lodging House License

• Approval from the Department of Tourism, Government of India.

• Registration from GTDC for new projects under the Package Scheme of Incentives.

Specific Acts Applicable

Prevention of Food Adulteration Act

It is a Central Government Act and its main purposes are to:

• protect the public from poisonous and harmful foods;

• prevent the sale of substandard foods;

• protect the interests of the consumers by eliminating fraudulent practices.

Food Safety and Standards Act, 2006

The Act deals with the fol owing:

• Establishment of the Food Safety and Standards Authority of India, which lays

down scientific standards relating to articles of food;

• Regulates the manufacture, storage, distribution, sale and import of food articles;

and

• Ensures the availability of safe and wholesome food for human consumption and

for matters connected therewith or incidental thereto.

The Legal Metrology Act

This Act is a Central Government Act enacted to establish and enforce standards of

weights and measures, regulate trade and commerce in weights, measures and other

goods which are sold or distributed according to weight, measure or number.

The Apprentices Act

This Act has been enacted to provide to regulate and control of training of the apprentices

and for matters connected therewith. It is a Central Government Legislation

The Air (Prevention and Control of Pollution) Act, 1981

This Act as a Central Government Legislation has been enacted to provide for the

prevention, control and abatement of air pollution, for the establishment, with a view to

carrying out the aforesaid purposes of Boards, for conferring on and assigning to such

32

HOTEL INDUSTRY

Boards, the powers and functions relating thereto and for matters connected therewith.

The Water (Prevention and Control of Pol ution) Act, 1974

As a Central Government Legislation, this Act has been enacted to provide for the prevention

and control of water pol ution and for maintaining or restoring of wholesomeness of water

for the establishment, with a view to carrying out the purposes aforesaid of Boards for the

prevention and control of water pollution, for conferring on and assigning to such Boards,

the powers and functions relating thereto and for matters connected therewith.

Hotel Insurance Policies

Hotel insurance is specifically designed to meet the growing requirements of the hotel

industry. Some purposes of the act includes

• Customized hotel insurance can be arranged to cover all types of establishments.

Be it spas, ranches, guest houses, bed and breakfasts (B and Bs) or apartments,

hotel insurance caters to every kind of establishment.

• A standard hotel insurance policy includes protection against perils, such as

builder’s risk, fire and accidental damage, and natural calamities. Other types of

coverage, such as liquor liability are also a part of the policy’s casualty portion.

Goods and Services Tax

The GST slab on hotel room tariffs that widens the slab of 18 per cent to tariffs ranging

between Rs 2,500 and Rs 7,500. With the revision, the highest tax rate of 28 per cent is

assigned to tariffs of Rs 7,500 and above. The slabs for room tariffs, the tax rate for air-

conditioned restaurants, including restaurants in five-star hotels will have GST at 18 per

cent, effective from July 1, 2017. Hotels and lodges with a tariff below Rs 1,000 a day are

exempted from GST, while those with a room rate of Rs 1,000-2,500 are taxed at 12%,

those with a tariff of Rs 2,500-7,500 will attract 18% tax and those above Rs 7,500 will be

taxed at 28%. Earlier, threshold for the 28% slab was at room tariffs of Rs 5,000, but later it

was revised to Rs 7,500 by the GST Council.

Income Tax Act, 1961

It is tax on income imposed by Central Government. Residents in India are taxed on their

worldwide income. Non- residents are taxed on their Indian sources of income.

Value Added Tax (VAT)

Before GST, Sales tax / VAT is levied by states on the sale of goods within its territory. VAT is

levied on value added at each stage in the production and distribution process of goods

SECTION 3 – LEGAL FRAMEWORK

33

and services. All hotels that exceed the annual registration threshold have to be registered

for VAT. VAT is levied on hotel bills pertaining to lodging, food, telephone, tours, etc. After

the implementation of VAT, hotel tax was abolished and therefore hotels do not have to

be registered for hotel tax anymore. The rates of VAT differ from state to state. The general

rate of VAT applicable on food and beverages in a restaurant is 14.5 %.

CENVAT

Before GST, Duty imposed by Central Government on manufacture of goods, CENVAT is

imposed at 12 % with lower rates applicable in certain cases. Food preparations containing

fruits and vegetables falling under Chapter 20, which are prepared and served in a hotel,

restaurant or retail outlet, whether or not such food is consumed in such hotel, restaurant

or retail outlet is being fully exempted from basic excise duty with exception of the Bakery

and Confectionery items.

Service Tax

Before GST, under the recent service tax regime, al services are taxable unless exempt.

General rate of service tax is 12.36 % (Including EC and SHEC). Service tax on hotel

accommodation is payable at 7.42 %. Service tax on food and beverages is chargeable

at 4.94 % in restaurants with air-conditioning. Food served in hotel rooms from their air-

conditioned restaurants with liquor license will not attract service tax.

Luxury Tax

Under the current tax regime, every state has their individual Luxury Tax Acts. Though

previously it covered more categories of assessees, at present it covers only the hotels

as a taxable assessee. The tax is levied on luxuries provided in hotels, lodging houses,

clubs and inns, etc., including residential accommodation but it does not include the

supply of food, drinks or other services which are separately charged for under Service

Tax or other taxes.

Expenditure Tax

Expenditure tax, a tax col ected by Central Government in India is regulated by the

Expenditure Tax Act, 1987. This Act shal apply in relation to any chargeable expenditure

incurred in a hotel wherein the room charges for any unit of residential accommodation

at the time of incurring of such expenditure or incurred in a restaurant are one thousand

two hundred rupees or more per day per individual and where (a) a composite charge

is payable in respect of such unit and food, the room charges included therein shal be

determined in the prescribed manner; (b) (i) a composite charge is payable in respect of

such unit, food, drinks and other services, or any of them, and the case is not covered by

the provisions of sub-clause (a), or (ii) it appears to the Assessing Officer that the charges

34

HOTEL INDUSTRY

for such unit, food, drinks or other services are so arranged that the room charges are

understated and the other charges are overstated; and (2) incurred in a restaurant.

3.3 STATE ACTS

The State specific Shops and Establishments statutes

These legislations have been enacted to provide statutory obligation and rights to

employees and employers in the unorganized sector of employment, i.e., shops and

establishments.

• It is applicable to all persons employed in an establishment with or without wages,

except the members of the employer’s family.

• It is a state legislation and each state has framed its own rules for the Act. The

State Government can exempt, either permanently or for a specified period, any

establishments from all or any provisions of this Act.

• The Act provides for compulsory registration of shop/ establishment within 30

days of commencement of work and al communications of closure of an

establishment within 15 days from its closing.

• It also lays down the hours of work per day and week as wel as the guidelines for

spread-over, rest interval, opening and closing hours, closed days, national and

religious holidays, overtime work, etc.

Entertainment/Amusement Tax

In India, entertainment tax is levied on every financial transaction that is related to

entertainment such as movie tickets, major commercial shows and big private festivals.

Entertainment means any exhibition, performance, amusement, game, sport or race,

(including horse race) and cinematographic exhibitions. As per the Indian Constitution,

entertainment is included in List 2. This revenue is reserved primarily for the state

governments.

Following are some other forms of entertainment that are included in the purview of

entertainment taxes: amusement parks, video games, arcades, exhibitions, celebrity

stage shows, sports activities, bowling alleys and billiards/pool joints.

In India, state governments are primarily responsible for collecting the entertainment

taxes. However, the union government can also col ect these taxes on the basis of the

type of transaction.

The basic financial principle, which separates the entertainment taxes to be collected

SECTION 3 – LEGAL FRAMEWORK

35

by the union government and ones under the jurisdiction of the State Government is

mentioned in the Article 246 of the Indian Constitution.

Regulatory Agencies

The hotel industry is governed by few regulatory agencies. The brief functions of the

agencies are:

The Hotel and Restaurant Approval and Classification Committee (HRACC)

It inspects and assesses establishments based on the facilities and services offered. The

Department of Tourism grants star status based on how wel the establishment scores in

the HRACC report: 90 % = five-star deluxe; 80 % = five star; 75 % = four star; 65 % = three

star; 55 % = two star; and 50 % = one star.

The Department of Tourism

The department of tourism acts as a nodal agency in the operations of the hotel industry.

Some important functions are:

• Approval of Hotels at Project Stage and Classification & Reclassification of Hotels.

• Guidelines for Classification of Heritage Hotels.

• Time Share Resorts (TSR).

• Stand Alone Restaurants.

• Guidelines for apartment hotels.

• Guidelines for approval of Guest Houses.

• Hospitality Development and Promotion Board.

• Implementing a transparent system for the effective monitoring of hotel projects.

• Ensuring timely accrual of approvals / clearances / NOCs by the multiple agencies

and facilitate the implementation of hotel projects.

• Expeditious clearances wil enable completion of hotel projects in time leading to

enhancement of room availability for the tourists.

SECTION-4

CONTRIBUTION OF COMPANY SECRETARY

4.1 INTRODUCTION

In the light of economic developments in recent years stakeholders of companies,

particularly in the services sector, are increasingly concerned with the conduct of

the affairs of the company and therefore it is essential that best practice is adhered

to at all times and evidence is available to demonstrate the same. The requirement

for higher standards in Tourism Industry can be further evidenced by the introduction

of the Ministry of Tourism and other Global regulatory bodies a series of corporate

governance codes including fitness and probity standards for certain pre-approval

control ed functions or persons who perform controlled functions. Controlled functions

include “ensuring, controlling or monitoring compliance by a regulated service provider

with its relevant obligations”. Therefore the Company Secretaries in employment role

may be presented as per the following diagram:

Fig-3: Role of a Company Secretary

While the monitoring of compliance in the services sector has traditionally been outsourced

with the introduction of these new standards there is more caution in the provision of such

36

SECTION 4 – CONTRIBUTION OF COMPANY SECRETARY

37

services which are more likely in the future to be laid at the feet of the company secretary.

It is true to say that the role of the company secretary also includes keeping the Board

informed of new legislation and how it applies to them. With this increased focus on

corporate governance, the role of the company secretary has been extended such that

the secretary is now seen as the guardian of the company’s compliance with legislative

requirements and best practices.

As far as hospitality industry and particularly hotel Industry is concerned a Company

Secretary primarily has to perform the following role:

Governance and Regulatory Compliance:

• Review al corporate governance arrangements or developments which might

impact the Board.

• Ensure that the Board is fully briefed on all governance matters.

• Provide advice and guidance to the Board on al matters of governance, statutory

requirements, laws, regulations risk, compliance, duties and responsibilities.

• Monitor changes in relevant legislation and advise the Board

• Ensure that board and management remains compliant with applicable

standards of corporate governance and has the necessary infrastructure to

support the governance rationale and governance framework.

• Develop and oversee the systems that ensure, the company complies with all

applicable codes, in addition to its legal and statutory requirements.

• Manage and compile content of the governance report of the Annual Report

• Ensure implementation of board deliverables as agreed with the shareholders.

Board and Committee Administrative Support:

• Convene meetings in compliance with regulatory requirements, including notice

of meetings, agendas preparing meeting packs, dissemination of information,

coordinating attendance at meetings and minutes taking, etc.

• Ensure company policies are kept current and approved, and that company

members are aware of their implications.

• Deal with correspondence, collating information and writing reports, ensure

decisions made and actions from meetings are communicated to the relevant

company stakeholders.

38

HOTEL INDUSTRY

• Positively support the implementation of all decisions of the Board, Committee

Members, and the CEO.

Hotel Records and Policy Maintenance:

• Oversee the storage, maintenance, and retrieval of corporate documents to

ensure secure access and safe-keeping.

• Review meeting materials prior to presentation, and ensure compliance with the

company’s document retention policy.

• Establish and maintain relationships with key stakeholders, Board, Committee

Members, external regulators and advisors.

• Communicate and engage relevant stakeholders on directions and decisions

taken by the business.

• Policy and charter maintenance, compilation and implementation.

In the hotel Industry, Management of Human Resources is very important. A Company

Secretary may become the guiding force in Human Resources Management like

advising on Industrial and Labour Laws; manpower planning and development;

performance appraisal; Remuneration Strategies following the applicable laws of

land; Audit of the HR function; Office Management, Work Studies and Performance

standards; Maintaining Industrial relations; Preparation of Project Reports and Attaining

Cultural Integration.

In exercise of the powers conferred by section 410 of the Companies Act, 2013, the

Central Government hereby constitutes the National Company Law Appel ate Tribunal

for hearing appeals against the orders of the National Company Law Tribunal with effect

from the 1st day of June, 2016. Establishment of NCLT/NCLAT shal offer various following

opportunities to Practicing Company Secretaries as they have been authorized to appear

before the Tribunal/ Appellate tribunal:

• Compromise and arrangement,

• Sick companies,

• Winding up, (only notified sections)

• Reduction of capital, etc.

• Act as company representative in all other related matters.

Likewise now-a-days the Practicing Company Secretaries are taking a lead role as

Counsel of various Corporates to appear before the other Quasi-judicial Bodies such

SECTION 4 – CONTRIBUTION OF COMPANY SECRETARY

39

as Competition Commission of India, Securities Appel ate Tribunal, Registrar of

Companies, Consumer Forums, Telecom Disputes Settlement and Appellate Tribunal

Tax Tribunals, etc.

4.2 ROLE OF COMPANY SECRETARY IN EMPLOYMENT

Advisory Service

Performs independent reviews across various verticals of compliance viz. statutory,

regulatory, product, legal, HR, administration etc., and submits a quarterly/periodic report

to the management for review.

Compliance

Develop, maintain and refresh the company’s compliance programme/ framework to

ensure all key risks are objectively assessed & dealt with.

Procedural

Identify risks for the company and prepare of mitigation plan for risks pertaining to non-

compliance of Indian regulations, licensing requirements and Code of Ethics violations.

Representation

Take on legal department projects related to contracts, contract management &

commercial transactions.

4.3 ROLE OF COMPANY SECRETARY IN PRACTICE

• Preparing case for Arbitration and representation before arbitrators

• Consultation on behalf of companies at NCLT

• Consultation as an expert in providing training to employees

• Consultation in market development assistance scheme (Annexure-I: Guidelines

for the scheme of market development assistance for promotion of domestic

tourism

• Consultation in certification of the industry (Format attached in Annexure-II)

• Any other such consultancies that are required from time to time

4.4 SUGGESTIONS TO MINISTRY OF TOURISM (MOT) TO BOOST INDIAN HOTEL

INDUSTRY:

1. To Take Support and expertise from the Professionals like Company Secretaries to

design Ling Term Planning and Legal Compliances.

40

HOTEL INDUSTRY

2. To provide for effective marketing and advertisement of India as a global tourist

destination through promotional campaigns that project India as a whole and

not merely a combination of states.

3. Proper transportation facilities: Families in different strata need facilities like

bus, cars, and trains to approach their favorite destinations. Major distances

are covered by trains or planes. Sufficient transport facilities exist and additional

facilities can be made for the same based on requirements. India’s transportation

system is also in need of a serious overhaul. Although cars and trucks traverse

India’s roads, laws for operating vehicles are widely ignored. Often the result is pure

chaos, as cars, trucks, bicycles and rickshaws drive into opposing traffic rules and

ignore traffic lights to get where they need to go. Fatal car and truck accidents

are not uncommon. For a tourist visiting India, the experience of traveling along

India’s lawless roadways can induce cardiac arrest. While India also has an

extensive railway system, due to overcrowding and poor maintenance, this

mode of transportation is not in any way better. Trains are frequently so crowded

that people sit on the roofs of moving trains or hang out the windows. While a

rare breed of adventurous tourist may find traveling on India’s trains exciting, the

majority of tourists find using India’s railways highly inconvenient. India needs to

enforce its traffic laws and reduce railway overcrowding so that visiting tourists will

have an easier time traveling from place to place.

4. Proper accommodation facility: While an international tourist is in India he/she

needs to be provided with good quality accommodation at reasonable prices in

nearby localities of tourist spots.

5. The educational nature of heritage sites should not be forgotten. Theatres showing

educational videos about the heritage site and its history should be available and

cost should be included in tour costs.

6. Food and restaurants: Food and restaurants are required at tourist sites. The

restaurants should be able to serve a variety of global cuisines to suit all tastes

and also have stress for local food. Restaurants should be able to supply mineral

water to the health conscious tourists of the day.

7. Adequate and hygienic toilet, bathroom and urinal facilities are required at

heritage sites. These facilities also need maintenance and cleanliness.

8. Primary Health Care: Every tourist spot should be equipped with a primary

healthcare centre to provide first aid and amenities to minimize stress and fatigue

relief.

9. Handicraft and local crafts sales facilities: A tour is probably a time when the

tourist is brought close to local handicrafts and local craftsmen. Adequate space

SECTION 4 – CONTRIBUTION OF COMPANY SECRETARY

41

for having shops to sell Indian handicrafts, garments and traditional items must be

provided.

10. Amusement Parks and secondary entertainment facilities: Now-a-days the tourists

want to enjoy more and that too by spending least of their time. This opportunity

can be availed by the ministry of tourism by building good amusement parks and

shopping complexes near the famous tourist spots. It will not only promote tourism

but also lead to employment generation for a large number of people.

11. Bank and ATM facilities: Most tourist locations require Bank and ATM facilities.

Nationalized banks can be directed to provide ATM facilities nearby heritage/

tourist sites.

12. Persons performing unclean acts can be fined for such purposes. Indian tourism

department should frame surveillance and penal code that should authorize

the specific persons at respective tourist spots to impose and collect penalties

and fines from those who are damaging the tourist spots or creating an unclean

environment.

13. Incentive to explore the heritage: The government of India is recommended to

design such tourism packages which cover a large number of tourist spots at

discounted prices .It will provide an incentive to the tourists to visit more tourist

places in a single visit to India. It will help in flourishing the tourism industry.

14. Another issue with an adverse effect on India’s tourism is its widespread

environmental pollution. Air quality throughout India is notoriously bad, since there

are no curbs on emissions and law enforcement to prevent gross polluters. Most

days, the air in big cities such as Mumbai has a red tinge to it, causing watery

eyes and cough. Respiratory infections are common, especially among sensitive

individuals or those with allergies. Additionally, air pollution is beginning to show its

effects on prominent tourist landmarks, such as Agra’s Taj Mahal. In recent years,

toxic air has damaged the ancient marble of the monument, jeopardizing its

beauty and requiring significant repair. Measures should therefore be initiated

for strict enforcement of provisions of Environmental Protection Act and the latest

amendments made therein.

15. As India’s population is growing, forests are being cleared to make room for more

housing and development. The destruction of these forests leads to a loss of

habitat for many of India’s famed fauna, such as Bengal tigers, Asian elephants

and Indian ring neck parrots. If India does not make greater efforts to reduce

this loss of habitat, tourists searching for safari like encounters with the animals

made famous in Rudyard Kipling’s “Jungle Book” will be out of luck. India needs to

preserve ecotourism by protecting its forests and the animals that inhabit them.

16. India’s government should be cognizant of the different types of tourists that

may want to visit the country ecotourists, history buffs or those seeking meditative

retreats. India should take advantage of the West’s intrigue with Indian culture,

42

HOTEL INDUSTRY

including yoga, ayurvedic medicine, Hinduism and meditation, and market itself

accordingly.

17. Coastal development: Development of coastlines and management of

water resources will give a new impetus to tourism, tremendous boost to the

development of flora and fauna and multiply our domestic and export income

through sea food, fisheries and a variety of flora .This can be done with the expert

guidance of consultants, hoteliers, industrialists and businessman.

18. Single window facility should be provided for booking rooms in city hotels and other

tourism related services the government should improve & change the image of

Kashmir val ey: Germany was the first country to change the caution notice to its

citizens against travelling to Kashmir. They also went on to state that “foreigners were

not a target for militants in Indian-held Kashmir”. The government should urge other

countries to change their travel advisories and market Kashmir as an adventure

tourism destination.

19. More efforts have to be laid in by the Government of India to provide adequate

safety of foreign tourists, especially for the female visitors.

20. Similar entry fees at tourist spots: It is a common practice in India to charge

much higher entry fees at major tourist spots from foreign tourists in comparison

to Indians. Although it is major revenue generating source for the government of

India still the price discrimination if not abolished should be minimized.

21. Development of North-east states: Efforts should be made for promotion of

heritage of north-eastern states of India which have a great potential to attract

foreign tourists because of the rich natural beauty.

22. VoA scheme: In an attempt to push inbound arrivals in India the government should

extend VoA (Visa on Arrival) scheme to more and more nations. India currently

issues VoA to 14 countries viz: Japan, Indonesia, The Philippines, Cambodia, Laos,

Vietnam., Singapore, Myanmar, Finland, New Zealand, Luxembourg, France,

Germany and Russia.

4.5 CONCLUSION

The hotel industry has made a special place in the world of hospitality. India is the most

diverse place in world as it has different kaleidoscope of landscapes, spectacular hilly

sites, varied cultures and festivals. Hotels in India are an old tradition, and the demand for

travel and tourism in India is expected to increase annually by 8.5%. It also accounts for

about 11% of total population. The government of India has taken and is taking various

initiatives to strengthen the industry. Indian hotel industry is one of the fastest growing

and important sector revenue wise as well as employment-wise. Company Secretary

Profession is having a wide role to perform in the sector. However, the need of the hour is

to implement industry-specific act and regulators to monitor and boost the industry on an

international scale.

BIBLIOGRAPHY

43

BIBLIOGRAPHY

• Government of India, Economic Survey 2017-18, Ministry of Finance.

• Sharma, Sonal, (2016), “Impact of Growth of Hospitality Industry on Indian

Economy”, International Journal of Commerce and Management Research,

Vol.2, No-3, pp. 148-151.

• Federation of Hotels and Restaurant Associations of India, Indian Hotel Industry

Survey 2011-12, RH&RA India, New Delhi.

• Federation of Hotels and Restaurant Associations of India, Indian Hotel Industry

Survey 2015-16, RH&RA India, New Delhi.

• Horwath HTL, Hotel Review Report-2017, India, www.horwathhtl.com

• Bagri, S.C. (2015), “Marketing Environment of Indian Hotel Industry”, Researchgate,.

• Government of India, Annual Report 2017-18, Incredible India, Ministry of Tourism.

• Government of India, Annual Report 2015-16, Ministry of Tourism.

• Government of India, Annual Report 2016-17, Ministry of Tourism.

• Kumar, Kuldip, (2015), “Growth Drivers and Challenges in Indian Hotel Industry”,

World Wide journal of Multidisciplinary Research and development, Vol-1, No-6.

• Confederation of Indian Industry, Hospitality Insight: From the Indian CEO’s Desk,

2012.

• HVS Research, Hotels in India: Trends and Opportunities, 2017, www.HVS.com

• Government of India, India Tourism Statistics, 2017, Research Division, Ministry of

Tourism.

• Sufi, Tahir, (2015), “Indian Hotel Industry: Past, Present and Future”, Journal of Hotel

management, Researchgate.

• Deloitte, 2018 Travel and Hospitality Industry Outlook.

44

HOTEL INDUSTRY

F.No. 5 (30)/2006-MDA

Revised w.e.f. 01.04.2017 Government of India Ministry of Tourism

(OM Division)

REVISED GUIDELINES FOR MARKETING DEVELOPMENT ASSISTANCE

(MDA) SCHEME

1. Objective:

The Marketing Development Assistance Scheme (MDA), administered by the Ministry of

Tourism, Government of India, provides financial support to tourism service providers,

i.e. hoteliers, travel agents, tour operators, tourist transport operators for undertaking the

fol owing tourism promotional activities abroad:

These activities may include sales tours, participation in travel fairs/exhibitions and

road shows.

Tourism Departments of all States and Union Territories (UTs) are also eligible for benefits

under Scheme for participation in travel fairs / exhibitions and road shows held overseas.

The main objective of the MDA scheme is to promote marketing of brand “Incredible

India” – in the established markets as wel as in the emerging markets.

2. Eligibility Criteria:

(i) The Tourism Service Providers must be approved by the Ministry of Tourism, Govt. of

India. In the case of the state of Jammu & Kashmir and states in the North Eastern

Region (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,

Sikkim and Tripura) the Tourism Service Providers must be approved by the State

Tourism Department.

(ii) Financial support under the Scheme would be available to companies with

foreign exchange earnings up to a maximum of Rs. 15.00 crore (Rupees Fifteen

Crore only) during the preceding financial year. In respect of tourism service

providers from the state of Jammu & Kashmir and States in the North Eastern

Region, the service providers not having any foreign exchange earnings but with

a total turnover of up to Rs. 20 crore (Rupees Twenty Crore) would also be eligible.

(iii) Tourism Service Providers must show a cumulative increase of 5% in Foreign

Exchange Earnings (FEE) during a three year period, to be eligible for financial

support under the MDA scheme i.e. at the end of year 3, there must be a

cumulative increase of 5% in FEE over the base year. For this purpose, the base

year will be taken as the financial year preceding the year when the promotional

ANNEXURE

45

activity is undertaken. The clause wil be made effective from the financial year

2015-16 and tourism service providers will need to show a cumulative increase

of 5% in FEE at the end of year 3 over the base year 2014-15 (actual financial

year 2017-18) and so forth. In the case of Tourism Service Providers in Jammu

& Kashmir and the North Eastern Region, there must be a cumulative increase of

5% in foreign exchange earnings or total turnover of the agency during the three

year period.

(iv) Financial support under the MDA Scheme will be provided to tourism service

providers including States/UT Administrations for participation in a total of 02

(two) events (covering sales tours, travel fairs/exhibitions and road shows) in one

financial year.

(v) The tour to single country or a group of countries should be for a minimum of two-

night stay abroad excluding journey period.

(vi) Assistance is permissible to one regular employee/Director/ partner/ proprietor of

the company.

(vii) In order to avail the benefit of reimbursement of air fare under the MDA Scheme,

al tourism service providers / officials of Tourism Departments of States / UTs may

travel only by Air India, to stations directly connected by Air India.

For travel to stations not directly connected by Air India, but which are directly

connected by other airlines, travel by other airlines would be permissible on the

lowest available fare. The claimant agency would have to provide certificate

with regard to lowest available fare issued by the concerned airlines or the

ticket issuing agencies.

For travel to stations not directly connected by any air services with stations in India,

if travel on the shortest route available is undertaken through a station connected

by Air India, reimbursement of air fare would only be made for travel by Air India

on that sector.

(viii) In order to take benefit of reimbursement it is mandatory to take prior approval

from Ministry of tourism as detailed at clause 3(ii) of these guidelines.

(ix) The agency should not have got any assistance from any Government agency

for the promotional activity abroad.

(x) Details of financial assistance availed during the last three years from any

Government agency & the Ministry of Tourism.

(xi) The claim must be submitted within 30 days of return to India.

46

HOTEL INDUSTRY

(xii) Claim form received after 30 days of return to India or wherein the deficiencies

in the claim as intimated are not fully completed within 30 days of the date of

information/documents sought, would not be entertained and would be rejected.

However, in the cases of prior approval, the concerned agency would have

to ascertain that the prior approval of the Ministry has been received by them

before pursuing on the promotional activity abroad.

3. Pattern of Funding

(i) The Ministry of Tourism, Government of India gives maximum grant of Rs.2.50

lakh to the Tourism Service Providers for promotional activities abroad by way of

reimbursement towards air fare, participation fee, hotel accommodation as well

as to the State Governments/UT Administrations.

(ii) To avail the reimbursement from the Ministry of Tourism, the Tourism Service

Providers would have to request to the Ministry of Tourism for prior approval

at least 21 days in advance before going abroad for promotional activity

through the email mda-tourism@nic.in Ministry of Tourism would respond

within the 07 working days. The Tourism Service Providers wil have to provide

the following details along with the documents given at Clause 4 (a) of the

guidelines for obtaining the prior approval:-

(a) Name and contact details of the applicant company.

(b) Name of person undertaking the promotional tour.

(c) Category under which the promotional activity is proposed to be undertaken.

(d) Name of event proposed to be participated in.

(e) Dates / Country(ies) of visit of the proposed tour.

(iii) Financial support for undertaking sales tours, participation in travel fairs/exhibitions

and Road Shows organized overseas is provided as fol ows:-

(a) 90% of economy class air fare from India to any other country and/or by air/

euro rail from one country to another country abroad.

(b) 90% of cost of built up/ furnished stal , electricity, water charges and

participation fee, etc. at travel fairs/exhibitions.

(c) Hotel Room expenses for a maximum of 5 nights, with an upper limit of

Rs.8000/- per night.

Subject to an overall upper ceiling of Rs.2.50 lakh per case.

ANNEXURE

47

4. Documents:

(a) Documents required for obtaining prior approval:

(i) Self-certified copy of proof of approval of the company by Ministry of Tourism

or by the State Government i n the case of Jammu & Kashmir and the North

Eastern States (copy of approval letter needs to be attached).

(ii) Declaration with official seal, date and on letter head of the company to

the effect that the claimant is not under any investigation and/or has not

been charged/prosecuted/debarred/ blacklisted by the Ministry of Tourism,

Govt. of India or any other Government agency.

(iii) Certificate of foreign exchange earnings during the preceding financial

year, clearly indicating the percentage increase in foreign exchange

earnings in the preceding year as compared to the earlier financial year,

duly certified by Chartered Accountant. In the case of service providers

from Jammu & Kashmir and the North Eastern States, certificate as above

or of total turnover and % increase in total turnover, duly certified by the

Chartered Accountant.

(b) Documents required while claims are forwarded to the Ministry:

(i) Declaration with official seal, date and on letter head of the company

stating that no financial assistance has been claimed/received for the said

promotional activity from any Government Department/agency including

the Ministry of Tourism.

(ii) Air ticket(s) for journeys performed along with Boarding Pass(es) for each

sector along with the copy of passport showing exit/entry dates.

(iii) Bank advices/statement of accounts/receipts, etc., in evidence of payments

made for air tickets / booth / hotel accommodation, as the case may be,

for which reimbursement is being claimed.

(iv) A comprehensive Tour Report and achievements during the tour undertaken.

5. Formats:

(i) Application Form for obtaining Prior Approval under MDA Scheme for Sales Tours/

Participation in Travel Fairs & exhibitions/Road Shows is at Annexure-I.

(ii) Format for claim form for MDA for Sales Tours/Participation in Travel Fairs &

exhibitions/Road Shows is at Annexure-II.

48

HOTEL INDUSTRY

(iii) Format for declaration from the Agency that the Company is not under

investigation/ charged/ prosecuted/ debarred/blacklisted by the Ministry of

Tourism, Government of India or any other Government Agency is at Annexure-

I I.

(iv) Format for declaration from the agency that they have not claimed/received any

financial assistance for this sales tour / participation in this travel fair/exhibition / this

road show (as applicable) from any Government Department/agency including

the Ministry of Tourism is at Annexure-IV.

Annexure-I

Application Form for Obtaining Prior Approval for Marketing Development Assistance

for Sales Tours/Participation in Travel Fairs & Exhibitions / Road Shows

1

Name of the firm with full address

2

Name and designation of the person going abroad

3

Certificate regarding approval of the Agency/Firm by No. & Date:

Ministry of Tourism OR State Tourism Dept. in the case of

Jammu & Kashmir and North Eastern States (Attach a

copy of approval letter) (not applicable in the case of Valid up to :

Tourism Departments of States/UTs).

4

Certificate of Foreign Exchange Earnings during the

preceding financial year, duly certified by Chartered

Accountant. In the case of service providers from Jammu

& Kashmir and the North Eastern States, certificate as

above or of total turnover, duly certified by the Chartered

Accountant. (not applicable in the case of Tourism

Departments of States/UTs). (Membership Number to be

indicated in the CA Certificate)

5

Name of the travel fair/exhibition/road show and the

countries along with the dates/duration of visit abroad

6

Date of departure from India

7

Date of arrival in India

8

Details of the financial assistance availed earlier under

the MDA Scheme:

ANNEXURE

49

a) Name of countries visited and exhibitions/ road

shows participated

b) Name of the Persons

c) Dates

d) MDA amount received

Signature

& Designation with stamp

Place:

Date:

Annexure II

Declaration

( To be furnished on official letterhead of the company)

1. I solemnly declare that the particulars given in my application are correct. I

bound myself and the company accountable and responsible for any incorrect

information given in the above statement and shall immediately refund amount

received on the basis of wrong information provided in the above statement.

2. I hereby declare that the company / agency M/s …………………………….

(name and city to be given) is not under investigation/ charged/ prosecuted/

Debarred/ blacklisted by the Ministry of Tourism, Government of India or any other

Government Agency.

Signature ___________________

Name ___________________

Designation _________________

Place:

Date:

Office Seal of Company

50

HOTEL INDUSTRY

Annexure III

Declaration

( To be furnished on official letterhead of the company)

1. I solemnly declare that the particulars given in my application are correct. I

bound myself and the company accountable and responsible for any

incorrect information given in the above statement and shall immediately

refund amount received on the basis of wrong information provided in the

above statement.

2. I hereby declare that I have not claimed/received any financial assistance for

this Sales Tour / Participation in this Travel Fair/Exhibition / this Road Show (as

applicable) from any Government Department/agency including the Ministry

of Tourism.

Signature ___________________

Name ___________________

Designation _________________

Place:

Date:

Office Seal of Company

Annexure-IV

Claim Form for Marketing Development Assistance for Sales Tours / Participation in Travel

Fairs & exhibitions / Road Shows

1

Name of the firm with full address

2

Name and designation of the Person who travel ed

abroad

3

Category under which claim is submitted (i.e. Sales

Tour or Travel Fair/Exhibition or Road Shows

4

Whether prior approval regarding the tour was

conveyed by the Ministry of Tourism (Copy of the

same to be enclosed.)

5

Details of Number of proposal(s) already submitted

in the same financial year

ANNEXURE

51

6

Details of the financial assistance availed earlier

under the MDA Scheme separately for:

a) Sales Tour &

b) Participation in fair/exhibition/road show

(Please furnish details of the sales tours/fairs and

exhibitions/ road shows, countries visited, name of

the person who went abroad and the amount of

financial assistance received in each case)

7

Name of the Country(ies) / Sectors visited for the Sales

Tour.

8

Name of the Travel Fair/ Exhibition/Road Show

participated in and the countries along with the dates/

duration of stay abroad

9

Date of departure from India

10

Date of return to India

11

Sector-wise details of journeys undertaken:

(i) Airline on which travelled

(ii) Flight Number

(iii) Class in which travelled

(iv) Ticket Number

(Air ticket with boarding pass for each sector travel ed

to be submitted)

12 Actual expenditure incurred on return airfare by

economy excursion class

(a)

(Please attach receipt/document in evidence of

payment made for the air ticket)

If travel was undertaken by any other class

(Business/First, etc.), economy excursion class fare for

sectors/countries visited to be indicated.

52

HOTEL INDUSTRY

(b)

Actual expenditure incurred on stal , decoration,

water, electricity and participation fee (in case of

participation in travel fair/ exhibition/road show)

(Please attach original voucher/ bank advice/receipt,

etc. evidencing payment made).

(c)

Actual expenditure on hotel accommodation

(Please attach original voucher/ bank advice/receipt,

etc. evidencing payment made.)

14

Total expenditure incurred i.e. 13 (a) + (b) + (c)

15

Amount being claimed

Signature ___________________

Name ___________________

Designation _________________

Date _________________

ANNEXURE

53

Served From Indian Scheme

CERTIFICATE OF CHARTERED ACCOUNTANT (CA) COST AND WORKS ACCOUNTANT

(ICWA)/COMPANY SECRETARY (CS)

I hereby confirm that I have examined prescribed registers and also relevant records

of M/s ............................................ ..................... having IEC number..........................

for period ..................... of the current financial year 2008-09 (as per the frequency of

application, please specify the month/quarter/half year/annum) and hereby certify that:

(i) Following documents/records have been furnished by applicant individual/firm/

company and have been examined and verified by me/us namely:-

Bil s, Invoices, Forward Inward Remittance Certificates (FIRCs), Bank Realization

Certificates, Certificate from international credit card companies, and evidences

of foreign exchange earnings as well as the connected books of accounts.

(ii) Relevant accounting and financial register(s) as prescribed under different Acts

and Rules made there under have been maintained and authenticated under

my/our seal and signature.

(iii) Information given by applicant in ANF 3H including details on Services rendered

From India as per Appendix 10 of HBP v1 (with relevant Sr. No. and description) is

true and correct.

(iv) Services for which benefits is claimed does not include ineligible services and

remittances as listed under Para 3.18.1 of HBP v1.

(v) It has been ensured that information furnished is true and correct in all respects; no

part of it is false or misleading and no relevant information has been concealed

or withheld;

(vi) Neither I, nor any of my/our partners is a partner, director, or an employee of

above-named entity, its Group companies or its associated concerns;

Place:

Signature of CA/ICWA/CS:

Date:

Name of the Signatory:

Address:

Membership No.

Email Address:

54

HOTEL INDUSTRY

(vii) Certificate of Foreign Exchange Earned by Supply of Service from India to (outside

India or In India) is as under :

Certificate of Foreign Exchange Earned by Supply of Service from India to

(outside India or In India)

For the period ................ (as per the frequency of application, please specify

the month/quarter/half year/annum of the current financial year 2008-09)

Sl.

Category of Service Provider

Sl. No. of

Foreign

No.

Appendix 10

Exchange

(within each

Earned (Rs)

category)

1

Para 9.53 (i)

i)

…

2

Para 9.53 (ii)

i)

ii)

…

3

Para 9.53 (iii)

i)

…

4

Para 9.53 (iv) for Category 4(i ) of Sr. No i)

5 of ANF 3B

ii)

…

5

Para 9.53 (iv) for Category 4(i), 4(i i), i)

4(iv) of Sr. No. 5 of ANF 3B

ii)

…

6*

Para 9.53 (iv)* for Category 4(ii) of Sr. i)

No. 5 of ANF 3B

ii)

…

7*

Para 9.53 (iv) for Category 4(i), 4(i i), i)

4(iv) of Sr. No. 5 of ANF 3B

ii)

…

Total Foreign Exchange Earned by Supply of Service from

India to (outside India or In India) (Rs)

*Earnings in Indian Rupees that are otherwise treated as deemed to be

realized in free foreign exchange by RBI - See Para 9.53(iv) of FTP.

ANNEXURE

55

(vii) I fully understand that any statement made in this certificate, if proved incorrect

or false, will render me liable to face any penal action or other consequences as

may be prescribed in law or otherwise warranted.

Place:

Signature of CA/ICWA/CS:

Date:

Name of the Signatory:

Address:

Membership No.

Email Address:

56

HOTEL INDUSTRY

Document Outline

Contents

Hotel Industry