Closely looking at rural tourism; focus is on MSMEs, says Hotel Association of India

8The growth in the number of unbranded hotels will also boost employment opportunities, the HAI Secretary General said.

The recovery in the number of domestic travellers as well as in foreign tourist arrivals (FTAs) in India to pre-Covid levels will put more focus on destinations beyond metros and Tier I markets, the Hotel Association of India (HAI), the apex organisation of Indian hospitality industry, said.

Domestic travellers are expected to increase in the coming years, which will put pressure on accommodation, said MP Bezbaruah, Secretary General of HAI. "We are trying to focus on India having a new approach to destination development. It is important to create more destinations otherwise the pressure on existing ones will be such that they will become unsustainable."

He further said that India had 2,200 million domestic tourists in 2019. The number dropped to 677 million in 2021. "We will go back to pre-Covid figures in 3-4 years time. By the end of 2030, we are projecting 1.5 billion domestic travellers. The impact of this will be felt in hotels and even transport. Hence, to make it sustainable tier II and III destinations will have to be developed. I have been closely looking at rural tourism. Also, foreigners are looking for new experiences so rural destinations have tremendous scope," he said.

FTAs in India are projected to increase from 1.5 million in 2021 to 15 million by 2024.

In March 2022, the J&K government launched Mission Youth and established the Jammu & Kashmir Tourist Village Network to boost rural tourism and transform 75 villages of known historical, picturesque, beauty and cultural significance into tourist villages, noted a report by HAI that outlines the potential of the Indian hotel industry in the next 25 years.

In August 2022, West Bengal set up six sectoral sub-committees for rural and tea tourism. The Ministry of Development of the Northeastern Region is also promoting research and development on Craft Tourism and allied activities such as nature tourism, rural and agrotourism, the report highlighted.

Bezbaruah pointed out that growth in the supply of rooms will mainly come from medium and small hotels, especially in the smaller markets. "Growth will have to be sustained by encouraging medium and small hotels in the interiors of the country. Branded hotels have been concentrating on metros and tier II markets. But for expansion beyond metros, medium and small hotels will have to be encouraged."

Medium and small or unbranded hotels constitute 70-80 percent of the hotel industry, he added. To encourage medium and small hotel growth, the hotel sector has been appealing to the centre to award infrastructure status to smaller projects worth Rs 10 crore or expand it to cities with a population of 5 million versus 1 million currently.

He also said that there will be a clear demand for hotels in tier II and III cities. Factors such as rising disposable income, the increasing number of events and the flourishing startup ecosystem will aid the room supply growth in these markets.

The growth in the number of unbranded hotels will also boost employment opportunities, the HAI Secretary General said.

The unbranded hotels and alternate accommodations employ 84 percent of the total employees in the hotel sector and the rest are employed by branded and new-age hotel chains, the report cited above said.

"Hotels are focusing on zeroing kilometres, which means hotels will focus on local resources, local talent hiring, and limit outside movement and this will be a game-changer for employment," Bezbaruah said.

The tourism and hospitality industry is expected to create 53 million jobs by 2029, the report said.

However, talent hiring will be a challenge for the hotel sector. According to a Ministry of Tourism study, the manpower shortage in 2018 was 2.6 million, and the hospitality industry is staring at a deficit of 1.1 million in 2025, posing a threat to the sector’s recovery following the Covid-19 pandemic.

On the other hand, occupancy has fully recovered and hotel room rates are better than ever before, said Bezbaruah. "We are back to normal and next year onwards will be growth from 2019 levels," he said.

He also said that the direct contribution of the hotel sector to the gross domestic product (GDP) will increase. "It was $40 billion in 2022 and is expected to reach $68 billion by 2027, and $1 trillion by 2047," Bezbaruah said citing the HAI report.