Setup Biz in India: Hotels & Restaurants Industry

India is known as the land of snake charmers to some, as land of religious diversity to some others and as land of Bollywood to entertainment lovers. Whether it’s the food, the diversity in cultures, handicrafts or business opportunities, everybody seems to have some or the other reason to travel to India. And the fact that the World Travel and Tourism Council considers India to be one of the top most tourist spot with the highest ten year growth potential (2009-18) [ www.wttc.org ], we have a reason to believe that India is only going to see more visitors.

Mr. Manoj Kumar
Vice President
+919910688433
manoj@indiacp.com

It is said that the Indian tourism brings a substantial share to the country’s foreign exchange earnings and if you closely examine it, most of that comes from the hospitality business in India. The revenue from the hospitality sector in India broadly comes from two sources: 

1. Hotels: Which include lodging, attending business conferences and meetings 
2. Restaurants: Which includes all sort of eateries whether fine dining restaurants, quick service restaurants, takeaways or other forms of eating joints. 

Hotels and Restaurants after all are the prerequisites for any visitor, local or foreign. And focusing on the last bit, it’s hard to not miss out on the fact that not only the foreign visitors, but Indian visitors travelling across states and cities bring in a huge chunk of revenue for the country’s Hotel and Restaurant Industry. Therefore it can be said that the Tourism and the Hotel and Restaurant Sectors go hand in hand. Or rather, it can be said that the latter forms a prominent and an important part of the former. 

The market comprising of the foreign tourists is huge and is only growing year after year. The Foreign Tourist Arrivals standing at a figure of 4.15 Lakh in September 2012, registered a growth of a little over 3 percent compared to the corresponding month in the previous year. To prove the huge amount of foreign exchange that is added to the country’s reserves is the fact that the Foreign Exchange Earnings during September 2012 were almost Rs. 6,650 Crores! [ www.ibef.org ]. 

The rise in incomes coupled with fascination to travel to a new country is a considerable reason to believe the growth of foreign visitors to India. Similar reasons can be attributed to upsurge in the domestic visitors too. India is believed to be a country with the fastest growing middle class, and applying the general principles of economics with respect to availability of leisure time and disposable income, travelling is now a necessity for many. Visiting the dear ones, exploring your own country, taking a break from work, searching for business opportunities, there are reasons galore for Indian citizens to look to travelling. Thanks to this upsurge, the hotel rates in India increased by almost 12 percent in the first half year in 2012! [ www.ibef.org ] 

Hotels and Restaurants Industry: A source of bread for many 

It is clear that the Tourism and the hospitality industry are highly inter-related but not only that, the hospitality or the Hotels and Restaurants sector is substantially linked with other industries in the economy like agriculture, transportation and construction which can be easily reasoned. 

To add to that the sector creates the maximum number of jobs than any other industry in the economy. After all it has place for all kinds of people, no matter how unskilled or specialized, which can be easily sampled in any hotel or a restaurant. 

Typically a hospitality unit such as a Hotel or a Restaurant consists of various departments which work in close tandem to provide the combine service a customer enjoys. There is facility maintenance and direct operations which includes bartenders, kitchen workers, servers, housekeepers, porters, etc. Apart from that there is the obvious and more prominent Human Resources department, people taking care of the marketing and the management. 

Not only this, the employment generation potential has not gone unnoticed. The World Travel and Tourism Council says that India’s Travel and Tourism sector is soon going to be the second largest employer in the World. It will be employing more than 40 lakh persons by 2019. [www.invest-india.com] 

What’s enhancing the business lately? 

The tourism can be divided into various categories depending on the purpose of the visiting tourists. We have all known adventure tourism, heritage tourism, rural tourism and pilgrimage tourism; the heritage tourism being the most important driving factor in the Indian tourism sector because of the country’s rich heritage and ancient culture that is known Worldwide. 

But what is catching up more lately is the medical tourism. It is said that medical tourism is a sunrise sector in India because of a large number of foreign visitors coming to India for medical purposes. With good quality medical services at rates cheaper than those in other countries, India seems to have become one of the most preferred medical tourist destinations. Not only this, domestic tourists also avail these facilities especially if they can afford the super specialty hospitals which are known for guaranteed treatment in most cases. That’s the reason you see so many guest houses and B&B facilities (Bed & Breakfast) around hospitals these days. According to a RNCOS report titled ‘Booming Medical Tourism in India’, it is expected that the country will experience a Compound Annual Growth Rate of 27% during 2011-2015 in this sector. 

Another form is the wellness tourism which is more or less a subset of the medical tourism. Since India is known for Ayurveda, Yoga, Naturopathy and spiritual philosophy, our country is one of the most sought after wellness destinations which attracts tourists from world over and from around the country to various Ashrams and centers which have been established to promote the natural way of health and healing. 

Also, with the India Inc. brimming with opportunities, a trend which was well existing before has become stronger. It is the MICE tourism, which is basically an abbreviation for Meetings, Incentives, Conferences and Exhibitions, that is the fastest growing concept in the industry. 

Halls in hotels are almost perpetually booked by companies for such events and this brings in the business travelers. Some top hotels cater to these needs thus facilitating conduct of domestic as well as international business meets.

Approval of Hotels 

The nodal authority for regulation of Hotels is the Hotel & Restaurant Approval & Classification Committee which is a division of the Ministry of Tourism. It approves the projects on a 5 yearly basis. Once the hotel becomes operational, an application for classification has to be made whether or not all the rooms have been completed or not which again is valid for 5 years. 

Apart from the necessary prescribed documents, the following local approvals are required from: 

• Municipal Authorities 
• Concerned Police Authorities 
• Airport (for projects located near Airports) 
• Municipal Health Officer 
• Fire Service Department 
• Bar License 

The approvals shall depend on the classification of the Hotels in “Star Category” or “Heritage Category” 

Necessary Licenses for a Restaurant 

A restaurant apart from requiring a license under the respective state’s Shop and Establishment Act will require the following licenses among others: 

• Food Safety License from FSSAI (Food Safety & Standards Authority of India) 
• Health License from the Health Department of the Municipal Corporation 
• Eating House License from the Police Commissioner 
• Liquor License from the Excise Commissioner 
• License for playing music from the Phonographic Performance Limited 
• NOC from the Fire Department 

Some Important Associations you can be a part of if you operate in the Industry: 

• Federation of Hotels and Restaurants Associations of India: (www.fhrai.com) 

The 3rd largest Hotel & Restaurant Association in the world, FHRAI is the apex body of four regional associations representing the Indian hospitality industry. Aiming to promote and protect the interests of the Hospitality industry, FHRAI keeps its members well informed about latest trade information and trends, statistics and other studies. 

• Hotel Association of India: (www.hotelassociationofindia.com) 

The Association aims at projecting the industry’s role as a contributor to increasing employment opportunities and sustainable economic and social development. It’s objective is to raise the standards of hoteliering and build an image for the industry both outside and within the economy. 

• National Restaurant Association of India: (www.nrai.org )

The NRAI is the leading association for stand alone and chain restaurants and offers individual and corporate memberships to them. Having a pan India presence with over 1000 members, it aims at representing, educating and promoting the independent restaurant owners and operators. 

• International Hotel and Restaurant Association: (www.ih-ra.com) 

This International organization monitors issues that are raised by major international organizations involved in tourism and lobbies for better recognition of the hospitality members Worldwide. The membership is not only open to the National Associations for Hotels and Restaurants in various economies but individual restaurants and hotels as well.

Foreign Direct Investment: 

The Indian Government allows FDI up to 100% under the automatic approval route in the Hotels Industry. The investment is available for construction and development including that of hotels and resorts, recreational facilities and infrastructure. For this purpose the term hotels includes restaurants, beach resorts and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Not only this, a 5 year tax holiday is available for organizations which set up resorts, convention centres or hotels at specific destinations.

Major names in the industry: 

Several players, national and international have established a strong foothold on the Indian platform for Hotels and Restaurants. International names like Accor, Amanda, InterContinental, Hilton, Marriot, Starwood, Satinwoods and the similar continue to woo the customers whether Indian or visitors to India. But on the other hand, Indian Companies in the industry are equally well established and in many a case doing better than their international counterparts. The Indian Hotels Company, East India Hotels, ITC, Leela, Asian Hotels have all kept the visitors in awe. Where the restaurants are concerned, the Indian brands and stand alone restaurants co-exist in harmony with international food chains like Domino’s, McDonalds, Pizza Hut, KFC, Costa Coffee and now Starbucks also.

Important Developments that are hoped to boost the industry: 

• The Indian Company ITC launched its hotel “Great Chola” in Chennai with an investment of over Rs. 1,200 Crores which is touted to be the World’s largest LEED Platinum Green Hotel. 
• The KEF Company plans to set up a luxury hotel and a super specialty hospital in Kerala with an investment of Rs. 1,600 Crores approximately. 
• Bengaluru based Hyagreev Hotels have entered into a JV with the Japanese Toyota Enterprises. 
• FHRAI has signed four memorandums of understanding with its counterparts operating in USA, Europe, Middle East, United Kingdom and China to exchange expert solutions regarding the industry. 
• USA based Wyndham Hotels will increase its properties in India to 70 in number by 2016.

Government’s Initiatives which will have a direct impact on the Hotels and Restaurants Industry

• The Maharashtra Government will set up an international cruise terminal at the Mumbai port which is expected to bring the European and the American tourists to India. 
• The Gujarat State Government is whole heartedly trying to boost tourism in the State and has allocated Rs. 400 Crores for the purpose. The Planning Commission has also approved a grant of Rs. 1,200 Crores to promote coastal tourism in Gujarat. 
• The Incredible India Campaign started by The Ministry of Tourism which is already playing a huge role in development of the industry is hoped to continue bringing more tourists to India because of the way it promotes the Indian culture that leaves a lasting impression on the minds of people. Other campaigns started by the Government like the “Colours of India” and “Atithi Devo Bhava” are also doing well. 
• The Central Government allows the visa on arrival for tourists from Countries like Finland, Luxembourg, New Zealand, Japan and Singapore which removes unnecessary hassles for these tourists in terms of obtaining a visa. 
• The Government has introduced a new category of visa altogether, called the ‘Medical Visa’ or simply M-visa to promote medical tourism 

Given the enthusiasm of top players in the Industry, of the Government to promote the industry and of the tourists to visit India is proof enough of the bright future this Industry has. Setting up a new Hotel might be a herculean task requiring a lot of investment but starting a restaurant offers huge earning potential even for those who want to start small.