Cover Story

Celebrating Freedom

A post-Independence Day hospitality special is as much a misnomer as a revelation of its chequered journey of growth. Today, the industry is unshackling itself from regulatory red tape, to finally celebrate its freedom, albeit with restrictions, finds out Neeti Mehra

“The past is never dead; it is not even past,” Nobel Laureate William Faulkner once said. Resonating uncannily through the years since independence, the past left a lingering impact on the Indian hospitality industry's ebbing and waning fortunes, repeating itself in varying degrees. But memory is at best, unreliable, and the current benevolence of the goddess of fortunes on the industry's coffers with an addendum of high occupancies levels and impressive RevPars, the future seems bright; the past, hazy. The moot question being, were lessons from the past absorbed into the annals of memory of both policy makers and hoteliers? While pachyderms would own up to this anomaly, human beings, alas, are fallible.

India, since her independence, followed the socialist ideal set by the Nehruvian government. State control on resources - natural and man made - resulted in tourism policies grounded in socio-political leanings and macro economic connotations. The planned scheme of development, flogged by the licence-permit Raj, resulted in the industry's fortunes being governed by antiquated oddities. Adding to the ‘Circus Maximus’ was the changing map of India, with states acceding to the country at later stages, and some being carved out of existing states.

While the railways were always the lifeline of the masses and the classes also at that point of time, international travel was a sojourn by a steamer, till the birth of Indian aviation in 1933, when the aviation department of Tata Sons was set up. A vacation till then was confined to musty circuit houses in the halcyon days of hill stations and the verdant Kashmir Valley. As people set out to travel, both domestic and inbound, accommodation was as good as non-existent, and unavailable. But over half a century the landscape mirrored the change experienced by the world, and the reverberations altered the landscape to the next century.

The 1940's and before

Unraveling the industry's origin, in its rudimentary form, it was an insipid combination of boarding and lodging, and perhaps food. Flagging off primarily decades after independence, during the British rule, the only few properties dotting the landscape were accessible to only the colonialists. Today, the industry orbits familiar paths of colonialisation, visible with the surge of expats in the ranks.

Exceptions to the post-independence appearance of home-grown brands are two of hospitality's biggest institutions - Indian Hotels Company Limited owned-Taj Hotels, Resorts and Palaces and the East India Hotels owned-Oberoi Hotels. Ironically, the aforementioned discriminatory policy gave birth to the Taj Hotels, Resorts and Palaces set up by Jamsetji Tata, who was denied entry into one of the city's hotels because of his Hindustani antecedents. He built what would change the history of Indian hospitality at the Gateway in Mumbai, eponymous with luxury and style, and open to all his brethren.

About three decades later, in 1934, in the northern climes of India, Rai Bahadur Mohan Singh Oberoi, acquired his first property, The Clarkes Hotel, at the cost of his solvency. By 1943, he acquired controlling interest in Associated Hotels of India (AHI) that owned both Cecil and Corstophans in Shimla, Maidens and Imperial in Delhi, and a few more. The patriarch has oft voiced, "I have been able to accept the challenge and make good. There is comfort in knowing that whatever little I have achieved has also helped to raise the prestige of my country."

While India burned during her independence struggle, two independent nation states were carved out of British India in 1947 - India and Pakistan. Raja Hari Singh expressed accession of Kashmir to India, a bastion of tourism till the tumultuous times today. It was time to resurrect the ruins and build a new India, the seeds of hospitality being sowed in strife.

The 1950's and 60's

Impoverishment, destruction of the cottage industry, rampant famines, and illiteracy - the relics of partition and the curse of colonialisation loomed over the task of nation building, bringing in cohesion 560 semi-independent princely states, excluding territories under the occupation of the French and the Portuguese. Given this bleak scenario, the socialist state had more than tourism on its mind, and rightly so in hindsight, with the country's infrastructure vulnerabilities exposed in the wars. Tourism was considered an elitist activity, a folly admitted in the tenth year plan.

The initial five-year plans, formulated by the planning commission, concentrated on building India's industries and rebuilding rural India. But Nehru's vision of tourism was futuristic, taking the onus of development and setting up Vigyan Bhavan (infrastructure) for MICE tourism, concurrently with the Ashok Hotel (hotels) in Delhi. This led to a critical development with India Tourism Development Corporation (ITDC), primarily to augment tourism infrastructure, pioneering beach tourism in India with its Kovalam Resort in Kerala in 1972, which sadly has been divested of its glory today.

But the geopolitical situation in the 60's was terse, with two wars having a debilitating effect on the economy, and the problem of scarcity compounded by rising fuel prices. However, the latter part of the 60's saw the green revolution propelling the nation towards self-sufficiency. The silver lining on the somber cloud was Goa's inclusion in India after the war with the Portuguese, a state which would soon attract the ‘great unwashed’ during the decade of decadence.

The 70's and the 80's

This period saw a gentle push by the government, albeit one of not much consequence. The tenor of the macro economic policy was still on self-reliance. The fifth year plan (1974-1979) provided nearly 24 crore to the Department of Tourism, primarily for private sector loans and integrated development of varied accommodation, and nearly 34 crore for state tourism. Approximately 18 crore went to ITDC for hotel expansions and constructions, clearly pointing out its critical role for building necessary infrastructure, for much part of the history of independent India, until the foray of private players into the industry.

In 1975, ITC entered the fray with the Chola Sheraton in Chennai, and eventually entered into a marketing alliance with Starwood, a relationship that stood rock solid for its length, till some time back. It was only in the latter part of 1982 a national tourist policy was announced, albeit, formed within the framework of a closed economy, and after effects of an emergency. The progressive policy looked at private-public participation as a medium of growth, and pinpointing tourist resorts, the country's national heritage and mooted the development of circuit tourism.

Interestingly, while the planning commission recognised tourism as an industry, it took states another decade or so to implement this. Finally in the 90's, a few states accorded this status to hotels also. A slew of concessions were announced in 1987, including a tax exemption on forex earnings from tourism and a reduction on tariff on import of capital goods, and concessional finance, aiming to boost private participation in this sector. The end of the 80's, political instability coupled with a huge deficit and foreign debt led to the crisis in 1991, a turning point in the fortunes of this nation.

The 90's and the current decade

Clubbing two diametrically diverse decades does justice to neither, apart from highlighting the glaring contrast. While the beginning chapter saw India shaking off its isolationist stance, the turn of the millennium brought home the co-dependency that globalisation impelled, with 9/11, followed by the SARS crisis, though we were primary untouched, and then the Asian Tsunami. It was a sign of times that no nation was an island unto itself, and that tourism was at its fragile best. Economic devastation had a crippling impact on occupancies and consequently saw dipping RevPars. An element of fear loomed. No longer were people safe in airplanes or hotels, the hand of god had slipped into every facet, a slap on the face of tourism.

Coming back to the beginning, the balance of payment crisis compelled economic reform, and in 1992 the National Tourism Policy was formulated, targeting economic growth, while designating tourism finally as a national priority, with specific measures explicitly mentioning 100 railway budget hotels, an announcement which has materialised now, with a focus on hotels as an employment generator.

The changing hospitality landscape saw the eventuality that was to be with the government shouldering operational responsibilities in a highly competitive environment - the disinvestment of ITDC's thirty-three hotels through outright sale or lease. The government rightly identified its role as a facilitator, pointing out an impending role change for ITDC.

The private sector was seeing an influx of franchising; a phenomenon emerging as a viable option for standalone hotel chains and operators to leverage their partner's marketing database while enjoying the convenience of a well-accepted international brand name.

The 10th five-year plan (2002-2007) allocated 2900 crore as tourism outlay for the period, while the barriers to growth were the usual suspects of lack of consensus and priority, with little investment. But the private sector has been quick to uptake the growth potential, with hotels moving towards asset light policies and towards management contracts. A special breed of investors is emerging, focusing primarily on hotel development, hoping to make a killing given the high inflationary rates and escalating land and construction costs. With real estate IPO's poised to hit the market, Real Estate Investment Funds (REIT) stepping on the Indian shores, and realty majors setting up shop in the country, one wonders if the vaunted high ARR's will be a legend of mythical proportions when rates go crashing in the country with an increase in supply.

But if one were to go by the special report on Hotels in India by HVS International in 2004, ‘Assessing Trends and Opportunities’, there might still be hope. The report noted that the available rooms of all approved and unapproved hotels was estimated to be close to 90,000. And taking into account an estimated demand growth of approximately 18 per cent over the next few years, another 65,000-80,000 rooms will need to be added, across the country, in the next five years. It speaks of a great growth story, compared to Western markets where templates of growth are stale with disuse in oversaturated markets.

While positioned to attract a specific segment, hotels, realising the folly of exclusivity and to capture a slice of hospitality action, are resorting to differentiating without diluting their core brand. The best example being IHCL - with its Luxury Hotels and Resorts, Business & Leisure Hotels, Budget Hotels (with the Taj Gateway) and No-frills hotel (Ginger), and service apartments apart from foreign brands entering with their entire portfolio. But global interest isn't limited to the inanimate, and hotels nursing global ambitions are snapping up international cadre to take the brand forward, be it IHCL with Raymond Bickson or The Leela with Peter J Leitgeb at the helm.

Today the shrinking world decrees that the Indian traveller shall be no different from his global counterpart, demanding impeccable standards and at par facilities. The fragmented whole is just about falling into place, with infrastructure filling the gaps and the government weaving it together as a facilitator. While the turn of the century was reminiscent of the Malthusian catastrophes, the celebration in Indian hospitality has just begun.