Shortfall in rooms

According to estimates, India has just 130,000 hotel rooms, less than can be found in New York. The World Travel and Tourism Council estimate that additional 200,000 rooms are required to meet India's current shortfall and projected sector growth of 15% per year.

Hotel expansion plans

India Brand Equity Foundation expect the sector to be worth US$ 275 billion in the next 10 years, boosted by up to 40 international hotel brands entering the market. For context, Starwood Hotels & Resorts - one of the world's largest hotel and leisure companies - plans to open 14 new hotels across India by 2011, significantly boosting its current number of 21.

Sector recovery

Having experienced a 21% drop in net profit during 2008-09, East India Hotels (EIH), part of Oberoi Hotels plan a major expansion and renovation program. P.R.S Oberoi, chairman of EIH said, "We expect the first signs of recovery in our industry to take place during the winter season 2010.'

EIH plan to add 2,600 rooms to its current 4,022 room capacity, by end of 2012. A 440-room Trident is planned for Bandra Kurla and another for Gurgaon, in addition hotels are planned for Bangalore airport and Hyderabad.

Budget hotel growth

To date, high land prices meant new hotels were positioned at the mid to top-end of the market, as developers looked to achieve a quick financial return. Low occupancy numbers, slashed room rates and reduced margins and profits, have led operators to consider a new business model.

Tata's Indian Hotels Company plan to roll out the Ginger budget hotel brand. With 18 hotels already running, Tata hope to expand to 30 by end of 2010. The pared down "no frills", hotel requires a staff-to-room ratio of 0.5, compared to industry average 1.8 in the mid-market category. In addition, mid-range, Lemon Tree Hotels plan to expand and launch a budget chain called Red Fox, Sarovar Hotels are also developing the Hometel chain.

Foreign entrants

Given the maturity of the budget sector in Europe, it isn't surprising to find that Whitbread's, Premier Inn has entered the market, with plans for 80 hotels.

While competition is set to increase, there appears room for everyone. As India's economy recovers, road infrastructure improves and inbound and domestic tourism picks up the hospitality sector looks set to cater for travellers no matter what their budget.