12
By DK AggarwalWith the steady increase in foreign tourist arrivals and a simultaneous increase in domestic airline passenger traffic, the hospitality sector has witnessed a healthy growth despite multiple challenges like curbs on liquor sale and the GST rollout.
Actually, the sector had been under pressure and into a near-debt trap after the global economic recession in FY09.
The tourism and hospitality sector in India accounts for 9.6 per cent of GDP.
The sector covers a wide variety of activities within the services sector and has generated tremendous employment opportunities, besides being third largest foreign exchange earner for the country.
Undoubtedly, the sector has achieved a significant level of maturity, and most of the major hotel chains have effectively established specific brands to target different segments of the market.
The sector has shown tremendous improvement on the occupancy front, and this has positive impact on Average Room Rates (ARR).
Such improvement reflects steady demand for rooms which, in turn, leads to higher room tariffs, the key to better profits.
The central government has contributed significantly to the development and growth of the sector by providing various tax incentives, policy measures and other various supports.
Some of the government steps include making medical visas available for tourists, allowing 100 per cent FDI through automatic route in the hotel and tourism sector, insuring tourist visas on arrival from select countries such as Finland, Japan and New Zealand and promoting rural tourism by the Ministry of Tourism.
With the new momentum in national highway infrastructure such as Bharatmala, the regional connectivity scheme to connect remote India by air under the Ude Desh ka Aam Nagrik (UDAN) scheme and initiatives to improve cruise tourism infrastructure, growth in the hotel sector is expected to take off in a big way.
Also, the tourism sector is looking forward to the expansion of e-visa scheme, which is expected to double the tourist footfall in India.
According to data, the Indian travel and tourism industry is worth USD 116 billion and is estimated to grow at 7.5 per cent annually to USD 250 billion by 2025.
Undoubtedly, the hospitality sector has the potential to be the main driving force behind the growth of the economy.
As the prospect of the hotel sector looks good, there is room for stocks of larger hotel chains to appreciate.
One may invest in the stocks such as Hotel Leela, Asian Hotels, Kamat hotel and Lemon Tree for the long term.
