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In Focus: Room for Improvement

Strong economic growth, better connectivity are driving more tourists into India

The travel and tourism industry never had it so good. Though there is an increase in tourism and travel activity, both in bound and out bound, the fact remains that India's share in international tourist arrivals has stagnated at 0.5 per cent.

However, this is all changing due to government's increasing focus on the sector.

Strong economic growth and better connectivity is driving more tourists to India. The country reported around 15 per cent growth in foreign tourist arrivals and this year it is expected that the country will cross the 4 million mark.

The country is facing severe room shortages and the room rents have gone up by around 35-40 per cent during the past one year. Though room rents have been rising, premium hotels are running at full capacity. For example country's most expensive hotel, the Leela Palace Kempinski, Bangalore is booked till March. Its room rent: Rs 18,000. Following Leela Palace Kempinski is Oberoi Rajvilas in Jaipur. Though its average room rent is Rs 15,000, the hotel is expecting higher occupancy than last year. All the premium hotel chains are witnessing spiralling room rents. India currently has 1,00,000 hotel rooms across all categories and any significant fresh supply will only start coming in the latter half of 2008. India's largest hotel chain, the Indian Hotels, which own the famous Taj brand, East India Hotels and Hotel Leela Ventures are key players in the segment. For the next few years tourist arrivals will remain strong growing at a healthy 10 per cent and if room shortage continues then it will be difficult for the country to shed its “high-cost” destination tag. Tourism being the third largest foreign exchange earner for the country, more tourist activity will auger well for the country. The industry contributes 5.3 per cent to the country's GDP.

Though the country now figures among the top five tourists destinations in the world yet the arrivals remain among the lowest. For this sector to grow, the government is taking steps like easing visa formalities, rationalisation of tax structure in the sector, focus on aviation sector. India is now being considered by many as a MICE (meetings, incentives, conferences and exhibitions) destination. Additionally medical tourism is also gaining ground. People from developed countries are flocking to India for its low-priced and quality medical services. Another concept that is gaining ground is that of farm and rural tourism like the one developed in Anandpur Sahib in Punjab. Meanwhile the Railways is also developing its land to build budget hotels on a BOT (built-operate transfer) basis.

Tourism is such an industry where there are a large number of participants like tour operators, shipping players, airlines apart from hotels and guest house operators. According to some industry experts there is also a need to develop more night spots for tourists like night clubs, 24-hour shopping malls, casinos, game parlours etc.

Another noteworthy thing for the tourism sector would be to protect overseas tourists from touts which go after them the moment they land into the country.

If there is a rise in foreign earnings, it would help improve BoP position of the country.