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ARTICLE
Hospitality Industry : An Insight
Overview
● The Indian hotel industry was estimated at USD
17 billion at the end of 2010. Of the total revenue,
nearly 70% is contributed by the unorganized sector
and the remaining 30% comes from the organized
sector. The hotel industry is estimated to grow at a
CAGR of around 15% over the next five years.
● The share of hotel and restaurant sector in the
overall economy is still below 2%. For the last five
years the total contribution of the hospitality sector
has remained stagnant. Although the overall share
increased from 1.46% in 2004-05 to 1.69% in 2007-08,
after the phase of economic meltdown in US the total
share again decreased to 1.45% in 2009-10.
● According to Economic Survey of 2010-11 the
average annual growth rate of hotel and restaurant
sector has been 8.8% for the period 2005-06 to 2009–
10. However, last two years have not been quite
pleasant for the sector as growth faltered badly.
● Till five years ago, the sector was registering a
growth of around 15% but slowdown in the economy
has affected the growth prospects of the sector badly
and the growth rate has dropped to single digit level.
● The sector registered negative growth (–3.41%)
in 2008–09 over the year 2007–08, which was due to
adverse global economic conditions in this year. But
the sector is back in the positive growth territory and
clocked a growth of 2.2% in 2009-10.
Annual growth rate (%)
Segment 2005-06 2006-07 2007-08 2008-09 2009-10
Hotels &
Restaurants 17.5 14.4 13.1 –3.4 2.2
Source : Economic Survey 2010-11
Sector Status
● Several studies have highlighted the demandsupply
gap in hotel rooms in India. Majority have
estimated a gap of 1,50,000 hotel rooms. A greater
need is being felt in the mid-market and budget hotels
segment in which a shortfall of around 1,00,000 rooms
Risk Management in Hospitality
Industry—Role of CMAs
P.K. Sinha*
Sanchari Sinha**
is estimated. Since the construction of hotels is capital
intensive with a long gestation period, the government
is making efforts to stimulate investments in this
sector and speed up the approval process to attract
private sector investments.
● It is estimated that the room demand in the
premium segment hotels in 10 major cities in India
increased by around 5% since the past year. The room
demand in India is expected to grow by approximately
10% over the next five years.
● According to the statistics by World Travel and
Tourism Council, India ranks 18th in business travel
and will be among the top 5 in this decade. With such
growth, sources estimate, demand is going to exceed
supply by at least 100% in coming years.
Number of Hotels — 2010
Hotel categories No. of Hotels No. of Rooms
5 star deluxe/5 star 165 43,965
4 Star 770 13,420
3 Star 505 30,100
2 Star 495 22,950
1 Star 260 10,900
Heritage 70 4,200
Uncategorized 7,078 —
Total
Source: FHRAI
8,707 1,32,885
● Although organized sector contributes only onethird
of revenue of the overall revenue of the industry,
several well known hotel chains have lined up
aggressive expansion plans for India.
● The foremost contribution of the organized hotel
industry comes from 5 star hotels. Despite a dip in
* M.Com, LLB, ACA, FICWA, ACIS (London), ACS, Post
Graduate in Management Accounting (ICA) and Ph.D.
in Management; Director, Zeal Institute of Management
& Computer Applications, Pune.
** MBA, Symbiosis (Pune), an M.Sc.(Econ) U.K.;
Research Associate in an International Consulting Firm
in Pune
The Management Accountant |September 2011 733