Travel accommodation in India accounts for only 12% of the travel and tourism industry in value terms. The skewed nature of hotel accommodation in India is evident from the fact that it constituted 5% of the accommodation market in terms of number of outlets, but accounted for 28% of sales value. The hotel subsector achieved growth of 18% in current value terms in 2005, which was driven by increasing demand, notably in business travel.
The huge gap between demand and supply of hotel rooms drove up occupancy levels and average room rates (ARRs) to new highs during the review period. Hotels generally cater to foreign visitors, corporate business clients and high-end Indian travellers, as hotel accommodation is out of the reach of the average Indian. Indians are increasingly seeking world-class facilities, such as clean and comfortable accommodation, Internet connection, and perhaps even fitness facilities, at local prices. In response to changing consumer needs, leading luxury and business hotels player Indian Hotels Company Ltd shifted its focus to budget hotels and rolled out the first indiOne hotel, its budget brand, in Bangalore in South India. Interglobe Enterprises signed a joint venture with Accor, in March 2005, to develop budget hotels in India under the brand name Ibis.
