The hotel industry in India is expected to see about Rs260bn ($4.6bn) being invested by 2017, according to the Federation of Hotel and Restaurant Association of India (FHRAI), an apex body in the hospitality industry.
The industry, which employs 24 million people at present, is expected to add another 44 million employees by 2017 and is likely to double its number of rooms by 2017 to 5.2 million from the existing 2.6 million rooms.
FHRAI said if the infrastructure status demand made by the body in its post-budget memorandum is extended to below three star hotel categories and the threshold of location outside cities with population of more than one million is removed in the near future, hotel tariffs are expected to decline by 2% to 3%.
FHRAI president Kamlesh Barot said by the end of the Twelfth Five Year Plan Period in 2017, it is estimated that the industry would require an additional 188,000 rooms.
"Infrastructure status to hospitality industry under the RBI’s Infrastructure lending list would mean bank loan repayment periods will be extended to 10-15 years and the interest rate would settle around 3%-4% compared to 12%-13% now," Barot said.
Though the hospitality industry was given infrastructure status, the majority of hotels in India are not included. "It covers only 5% of hotels. The remaining 95% will not enjoy infrastructure status," Barot added.
FHRAI has reportedly requested the government to provide this status to the entire segment to be able to compete with the rates at which foreign hoteliers operate.
The industry was also adversely affected by the hike in service tax from 10% to 12% during the last budget, according to the body.