FDI IN HOSPITALTY INDUSTRY
(HOTEL CONSTRUCTION
-NEW DELHI,INDIA)
By: Sarthak Dangra,N0596992

REGION
THE
New Delhi is the capital city of India and is situated in the northern part of the country. It has a perfect blend of a rich past and vibrant present.
(Ministry of Tourism, India). Besides being one of the most developed cities in India, it has a yearly footfall of 25.01 million travelers especially post the recent foundation of the new Delhi IndraGandhi
International Airport.

ROLE OF INFORMAL
INSTITUTIONS
The Paharganj area in Delhi

• Informal institutions in the hotel industry includes motels, bed & breakfast dorms and apartments, which are not registered and rated with the Government of India. Places like Paharganj and Karol
Bagh in New Delhi are the hub of informal institutions for lodging. These informal institutions create competition for foreign direct investors in the same field but still there’s much larger scope due to constant increase in population and foreign tourist arrivals in India.
• Ministry of Tourism looks to double the tourist from 2012 to 2017, from 6 million to 12 million which in turn increases the scope of hotel industry.

Source: Incredible India, tourism survey in the state of Delhi; Ministry of Tourism, Government of India

POTENTIAL OF AN FDI
• The Department of Industrial Policy and Promotion states that Indian tourism comes under the top ten sectors that attract FDI in the country. •According to the World Tourism Organization, India will be the leader in the tourism industry in South Asia with 8.9 million arrivals by 2020. India is gradually emerging as the second most rapidly increasing (8.8 percent) tourism economy in the world over
2005-14 (Source: World Travel & Tourism).

•Almost 60% of the foreign tourists is leisure tourists in Delhi. (Source: Ministry of Tourism)

•In Delhi 90% of the foreign tourists stay at hotels . (Source: Ministry of Tourism)

• Also culture in Delhi plays an important part of continuing the trend of celebrating different occasions and Indian ceremonies commonly known as big fat Indian weddings in hotels, which gives a boost to the hotel industry especially for hotels with banquets, etc. Lavish weddings are recession-proof, say hoteliers. "The wedding segment in totality is not affected by external economic factors and is impervious to fluctuating trends in the tourism sector," says Vivek Sharma,
GM of a Hilton hotel.

INFLUENCE OF SOCIO
DEMOGRAPHIC DYNAMICS
• Being one of the most populous cities with a constant increase in population, Delhi's domestic hoteliers and tourism market has also been increasing.
• A shift in demographics with a rising young population is leading to greater expenditure on leisure services.(www.ibef.org)
• The literacy rate of 86% shows that large work force and labor is easily available. (Source:

TRADE DYNAMICS
Tourism is one of the third largest revenue generators of foreign exchange for India and also employs one of the highest numbers of manpower. In the period April 2000– August 2014, this sector attracted around US$ 7,441 million of FDI, according to the Department of
Industrial Policy and Promotion (DIPP). The roles of trade dynamics have been significant in growth of hospitality industry in terms of hotel construction. The following state the advantages and numerous opportunities present to the investors.
• Since 2005, 100% FDI is allowed in the hotels construction through the automatic route.
• Since 2014, minimum built-up area and capital requirement for an FDI has been decreased to 20,000 sq. m and $5 million from 50,000 sq. m and $10 million respectively.
• Now investors are also allowed to exit on completion or after three years from the date of final investment.

www.delhi.gov.in)

• Strong growth in per capita income in the country is driving the domestic tourism market. And
Delhi has the highest per-capita income in India .(www.delhi.gov.in)
•About 21.6 million domestic tourists and a total of 1.8