Hospitality

Hotel & Tourism: FDI in Hotel & Tourism sector in India

100% FDI is permissible in the sector on the automatic route.

The term hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports, and health units for tourists and Convention/Seminar units and organizations.

For foreign technology agreements, automatic approval is granted if

• Up to 3% of the capital cost of the project is proposed to be paid for technical and consultancy services including fees for architects, design, supervision, etc.
• up to 3% of  net turnover is payable for franchising and marketing/publicity support fee, and up to 10% of gross operating profit is payable for management fee, including incentive fee.

Outlook

• Foreign tourist arrivals are targeted to grow to 10 million in 5 years
• Domestic tourism is expected to increase by 15% to 20% p.a. over the next 5 years
• Rapid growth in average room rates is expected to continue until sufficient new supply comes on stream
• Average room rates increased by over 15% in 2007; the fastest growth rate was in 4-star and 5-star segments

Potential

• Favourable demographics and rapid economic growth point to a long-term secular uptrend in the domestic demand for hotels – for business and leisure
• International inbound traffic is expected to grow rapidly with increasing investment and trade activity
• WTTC has identified India as one of the fastest growing countries in terms of tourism demand
• India has benefited from an aggressive promotion campaign and an out-performing economy
• The growth momentum in domestic and international travel is expected to receive a further boost with more budget airlines/lower air-fares, open sky policies and expected improvements in travel infrastructure (roads, airports, railways)
• There are opportunities in all price and value chain segments due to the shortage of hotel stock; plans are on to increase quality accommodation from the current 110,000 rooms to 200,000 rooms by 2011
• Hotel-asset construction and ownership
• Low penetration of brands (about 30%) provides opportunities for management contracts and franchising with local hotel owners/developers
• Serviced apartments in major cities – no chain operating in all cities, very little stock
• Need for world-class infrastructure in major Indian cities
• Significant requirement of hotel stock and tourist infrastructure for the Commonwealth Games in New Delhi in 2010

Major Projects Cleared by FIPB

• Dubai based Emaar group USD 500.0 million
• CESMA Intt Pvt Ltd with AP Govt - township project at Hyderabad and Vijaywada
• Jakarta based Salim group USD 100.0 million project at Kolkata
• Lee Kim Tah Holdings, Singapore USD 115.0 million project at Chennai.
• IJM's USD 350.0 Mn project at Mohali, Chandigarh
• Keppel Land, Singapore's USD 13.0 million land acquisition at Bangalore for condominium project in JV with Puravankara
• Morgan Stanley's USD 70 million in Mantri, Bangalore
• Capital Land's investment with Runwal Group, Mumbai