Wirtschaftswunder – that was the word used to describe the German economic miracle in the post war years. In the past year almost every western news organization has used similar terms to describe the economic renaissance happening in India. So too does today’s Wall Street Journal while reporting on the growth of India’s tourism industry – an estimated 30-35% per year. By any measure, that represents a staggering rate of growth. In the area of online bookings, Ram Badrinathan, Asian-Pacific analyst with PhoCusWright Inc., a travel-research firm based in the U.S., expects numbers to reach $2 billion by 2008, from a negligible amount now! While allowing for some hyperbole, the trend is towards exponential growth.
The implications for India’s hotel industry are enormous. As noted by Mr. Damera of online portal Travelguru notes “Online companies have an edge [over travel operators] as they can tie up with several hotels and airlines without incurring much cost and offer an expanded choice.” His company has deals with nearly 450 hotels across that country.
All of the above seems like heady stuff and point to an obvious need for hostelry. The country as a whole has fewer hotel rooms than New York City. But investing in real property India is not without its share of pitfalls. As this site has previously noted, no one has yet made the round-trip and opaque (even illegal) real-estate transactions make for a difficult entry. India has nothing that corresponds to title insurance and acquiring real estate involves lengthy searches of records to ensure mortgages have been satisfied and no claimants emerge from the wood work. Add to that an enduring belief in “cash” to dodge the taxman on the part of most sellers makes it virtually impossible fo American firms to invest. Nevertheless, no other country in the world today offers the (real) prospect of a CAGR of 8% and above in GDP. US companies have certainly led the way with most majors either already there or seeking a presence.