Economic Analysis of Hotel Industry:
The economic liberalization of the early 90s led to a boom in the hotel industry, especially in 1994:
When the economic conditions are favorable, hotels enjoy high occupancy rates. This gives them the flexibility of increasing their room rates. During the boom phase most hotel companies operated at very high occupancy rates, which gave them the leeway of increasing their room rates.
Foreign Direct Investment (FDI) is entering Indian shores and foreign institutional investors (FIIs) are increasing their exposure to India. All these positive signals spell more business travelers and better times for the hotel industry.
The hotel industry is heavily taxed. Expenditure tax, luxury tax and sales tax inflate the hotel bill by over 30%. Effective tax in the South East Asian countries works out to only 4-5%. As these taxes are the domain of the state government, the rates vary accordingly.
These units will be allowed to import capital goods under the EPCG scheme at zero duty, the minimum amount of imports being capped at Rs10mn.
v The infrastructure facilities like the Airports, Communication facilities & commuting facilities not being at par with oriental countries affects the attractions of the tourists.
v Generally 50% of the hotel’s revenue is dependant on the tourism industry. The Average Room Revenue (ARR) has increased from 3.47 USD in 1947 to 347 USD in 2002 (AH&LA report).
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