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'I am optimistic about industry growth': Nakul Anand 18 Oct 2012

Business Standard

Q&A with Executive Director, ITC Hotels

So much is happening in the hotel industry. Supply of rooms, though not adequate yet, is increasing. Thanks to the global economic crisis the feeder markets almost dried up and the industry is looking to new markets.

For instance in Chennai, the hotel rooms supply is on the verge of increasing two fold in the next few months. The India's second largest hotel chain ITC recently launched its 600-room behemoth ITC Grand Chola in Chennai.

Business Standard caught up with the company's Executive Director Nakul Anand to speak about the industry more in his capacity as the President of Hotel Association of India. In the freewheeling interview on a coffee table with T E Narasimhan, Anand says though it may take some more time to be at the 2007-08 (pre-recession) levels, the industry is optimistic. Excerpts:

How do you see the travel and tourism industry shaping up? Do you see any emerging trend?

In the last two years occupancy was flat, the demand did not grow as the supply grew. Occupancy was in the 60% range. But in the last few quarters we have seen some positive sign. I am optimistic about the future.

India's share in the global tourism industry is around 0.55% and India must target atleast one% and 12 million tourists. If a country like Turkey can get around 15-16 million why can’t India?

The emerging trend I see is the blurring of borders between the leisure and business hotel. The people who are on business travel, also wants to relax at a SPA while people on leisure travel wants to remain connected with the work and world and enhance want to use the business centre.

As the major feeder markets – US and Europe – are yet to see recovery. Where do you see the travellers comes from?

True, these economies are yet to see recovery. But the good news the industry is tapping up new markets, especially in Asia, besides, the extent of economic activity in India has not decreased. There has been a growth in travel albeit with compromised on hotel spends.

What will be the driving forces of development in the sector?

Outlook for the economy is positive and there is a direct co-relation between GDP and tourism. The Government also realised and taking all its efforts to boost the tourism sector.

Rupee appreciation also made travelling to India cheaper to foreign tourist. The one segment of the business that however gets impacted when heading economies are experiencing recessionary trends is the drop in the long haul holiday travel. This will however get partially offset by the weakening of the Indian Rupee vis-a-vis other currencies.

How is the supply-demand situation?

Despite the supply is going up on the one hand and on the other the occupancy level is going down, thanks to the global economic crisis, at 60% occupancy the industry is doing reasonably good. But in the foreseeable future the demand will increase to match the supply.

What are the bottlenecks and challenges for the industry?

We need to start developing and marketing new tourism assets that will help us to market the country to a more diverse group of global tourists.

Better rail, air, road and hotel infrastructures is what will make traveller within in the country, not just possible but also pleasurable.

In India domestic market is very big, the high price levels of ATF resulting in higher airfare is also a set back for domestic tourism industry.

The other major hurdle is tax system, India’s cumulative taxes on the hotel industry varies from state to state and ranges from 20-30%. In contrast, tax rates in hotels in countries such as Malaysia, Japan or Hong Kong are far lower, ranging between 3-5%. So, there is a case to rationalise taxes.

Then availability of manpower. According to estimates the industry would require around three lakh people by 2020 in both skilled and unskilled category. There is lack of awareness about the career options available in the tourism industry.

© ITC Limited