Rising Opportunities in India’s Hospitality Industry
The Indian hospitality industry has experienced prominent growth in recent years due to various factors, including the rising purchasing power of domestic travelers, an increase in commercial development and foreign tourist arrivals, a growing airline industry and government-led initiatives aiming to stimulate the sector.
"Ecole Hôtelière De Lausanne", a leading hospitality school in the world.
INDIA'S POPULATION of 1.3 billion presents a massive potential for the hospitality industry. In 2015, India was the fastest growing economy among the BRICS countries. That year, India’s travel and tourism sector contributed INR8,309.4 billion, amounting to 6.3% of the country’s GDP. This is forecast to rise to INR8,913.6 billion in 2016, and reach INR18,362.2 billion (7.2% of total GDP) in a decade’s time.
The Indian hospitality industry has experienced prominent growth in recent years due to various factors, including the rising purchasing power of domestic travelers, an increase in commercial development and foreign tourist arrivals, a growing airline industry and government-led initiatives aiming to stimulate the sector. There is a great deal of scope to expand tourism across India, and as the country improves air travel connections and relaxes visa restrictions, tourist arrivals should increase.
Consolidation of a highly fragmented sector
The Indian hotel industry is highly fragmented, with a large number of small and unorganised players dominating the market. In recent years, there has been a shift towards the mid-market and budget segments in the industry, and the development of hotel aggregators in the budget space, who have consolidated the massive and unorganised hotel market. Online platforms for budget accommodation such as Oravel Stays (OYO Rooms), WudStay, Zostel Hospitality (Zostel and Zo Rooms), Fab Hotels and Treebo have partnered with standalone hotels and guesthouses in order to provide them with marketing, distribution and quality assessments. These companies are raising venture funding and implementing ambitious plans for expansion. In just three years since its launch, OYO Rooms has nearly 70,000 rooms across 200 cities, making it one of India’s largest hotel chains.
Fragmentation and consolidation will be key drivers of change in the industry, creating both risks and opportunities. We detail the mechanisms around these dynamics in our soon to be published “Lausanne Report”, a comprehensive overview of the future of hospitality with an outlook through to 2030, which assesses trends and drivers of change in the hospitality industry. In Asia, the hospitality industry could continue to consolidate and create regional hotel chains with regional ownership. Elsewhere, Europe is likely to remain fragmented although a consolidation dynamic is gaining speed, whereas the hospitality market in the United States is already consolidated and durably so.
Talent management imperative
The hospitality sector is a significant source of employment in India. In 2015, the travel and tourism industry directly supported over 23 million jobs (5.5% of total employment), which is expected to rise by 3.2% in 2016. The international inbound leisure tourism sector in India is seasonal, and the majority of tourism activity in India is driven by the domestic market. Seasonality in India is region and city specific and can vary significantly. This brings its fair share of challenges in terms of human resource management, and also in terms of operational strains that need to be well prepared for. Average staff turnover in the industry remains high, at above 30%. The connection between staff retention and client satisfaction, combined with high staffing costs, highlights the ever present need for talent recruitment and retention.
I believe that adequate and adapted training can reduce turnover rates among Indian hoteliers. Hospitality management education can help cross-train staff and streamline the guest experience, reducing the cost of running a hotel and providing hotel staff with a higher amount of sought-after job skills. Staff who feel bored due to a limited role may be less tempted to leave for a new job if they are made to feel valued and useful. Furthermore, hoteliers should consider investing in education that will position them as strong niche players.
To accommodate this need and the growth in tourism, India has many hospitality schools, including the NIPS School of Hotel Management, several branches of the Indian Institute of Hotel Management, and Ecole Hoteliere at Lavasa, which is certified by Ecole hôtelière de Lausanne (EHL). Overall, India is powered by a thriving middleclass and resurgent economy and its hospitality industry is evolving in a promising direction.