Recently HotelBenchmark with the assistance of Deloitte conducted a survey on the hospitality and tourism potential of India�s financial capital - Mumbai. The summary of the findings are as follows; Political stability and the expansion of the Indian economy have helped to drive tourism growth throughout the country. As India�s commercial and financial capital, it is therefore not surprising that Mumbai�s revenue per available room (revPAR) has increased 27 per cent year-to-June 2004 as compared to the same period in 2003.


Explosion Of India�s Tourism Market
Like many other countries, domestic travellers dominate India�s tourism markets. However, India�s situation is unique due to the sheer size of the domestic market. To put this into perspective, India had over 300 million domestic tourists in 2003, this equates to over one third of the international arrivals received by all global markets. Domestic tourism will continue to be an important driver of tourism, especially as improved economic performance fuels the growth of the middle-class market. As India�s second largest port of entry, Mumbai benefits from surging overseas arrivals.


According to the World Travel Organisation (WTO), international arrivals to India rose 24 per cent year-to-April 2004, following a 15 percent increase in annual performance during 2003. The recent �open skies� announcement has improved airline access to Mumbai, which along with added capacity has resulted in a positive response from overseas markets.


Government Sponsors New Image For India.
Over recent years, the Indian government has changed its attitude towards tourism. Recognising the economic importance of the industry, they have introduced a number of financial reforms, including a revised tax policy. The government has further supported the industry with a 44 per cent budget increase for tourism infrastructure projects. With highways and airports severely below international standards, this will be money well spent by a government focused on changing India�s image. To define India�s new image, the government has invested in rebranding the country with its �Incredible India� campaign. Their marketing efforts received a gold award from the Pacific Asia Travel Association (PATA) earlier this year. The brand promotes the unique experiences India has to offer as a country. In addition, individual states are busy extending the brand to develop their own niches. India�s emergence as a global information technology hub is one �image change� from which Mumbai has already benefited. Corporate demand in the city has risen as a result.


Occupancy Growth And Rate Stability
Given the current level of investment in India, it is understandable why international hotel companies want to have a presence in Mumbai. New hotels opening in recent years have increased the amount of world-class accommodation in Mumbai. Not only has this helped the image of the market but it has also kept existing hotels on their toes.


Mumbai�s revPAR performance follows occupancy performance. This allows revPAR to grow despite average room rates not yet recovering from increased supply. Many of the new hotels were established at the same time India received travel advisories, during the delicate political situation with Pakistan in 2002. But with a 13.5 per cent increase in average room rate year-to-June 2004, the future looks bright. Since the start of 2004, average room rates have started to follow demand patterns, indicating that rates may recover shortly.


Mumbai has experienced defined seasonal peaks at the beginning of each year. It is promising to see that the peak season has extended in length this year. Growth in corporate demand, which also supported Mumbai during SARS, has helped lengthen the peak season. The release of pent up demand following less stable conditions during 2002 and 2003 has also affected the peak season. To accommodate the needs of a giant domestic market, including the evolving middle-class, companies are busy developing mid-scale products. While many hotel companies are investing in this sector through strategic alliances (such as Hilton International and Trident), new mid-scale brands like Indian Hotels� IndiOne are also entering the marketplace.


Bold Opportunity Despite Limitations
While hotel performance in Mumbai continues to progress, we must not forget the current threats that exist in the marketplace. Despite the progress made by India with its �Incredible India� campaign and other government plans, infrastructure continues to sit well below global standards. Whilst a number of initiatives are in place, in order to sustain growth, the Mumbai hotel industry needs to continue addressing key areas such as developing support from both the airline and conference industries. The surge in travel demand shows no signs of abating. However, as basic economics dictates, both supply and demand determine performance. If the supply (i.e. industry infrastructure) is unable to support the demand, positive performance in Mumbai will suffer. In short, Mumbai does have the opportunity to make a lasting impression, however, only time will tell if this can be fully embraced.