Marriott International launched its 100th hotel in India on April 3 - The Sheraton Grand Bengaluru Whitefield Hotel & Convention Centre. So what makes the group so confident about the Indian market? According to Arne Sorenson, President of Marriott International, the Indian economy is growing well and it has helped in driving demand.

“We are seeing growth in leisure travel as well. About 6 per cent of India’s GDP constitutes of travel, that compares to a global average of 10 per cent,” he said.

Contribution of hospitality business and tourism to gross domestic production (GDP) of India is one of the reasons why the Marriott group is betting big on India. The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in the country.

According to a FICCI-KPMG report, travel and hospitality is one of the key sectors of the Indian economy, growing at a steady growth with 15.6 per cent year-on-year (y-o-y) rise in foreign tourist arrivals (FTAs) and 20.8 per cent y-o-y growth in foreign exchange earnings (FEEs) during 2017.

“Demand for hotels and demand for travel is driven by couple of things—one is economic growth – a huge part of the reason people travel is to do business and as long as the economy is growing in India that boards well for the future. Second is leisure – where people want to take their vacations. We are very optimistic of the years ahead in India in both these measures,” Sorenson said.

Sorenson's bullishness about the Indian market can be gauged from the fact that Marriott is aiming to reach a target of 200 hotels in next five years in the country.

The hotel brand which operates at 70 percent occupancy across its portfolio has already signed 50 more properties apart from the 100 hotels it has in India. Neeraj Govil, area vice president, South Asia, Marriott International, said that the group is putting a lot of emphasis on tier II and III markets. “We are looking at getting hotels in Ahemdabad and have already signed seven deals there. We are also seeing lot of activities in Jaipur and Kerala.

Marriott expects to raise inventory to more than 30,000 rooms over the next few years looking at the increasing demand for mid-market hotels and is also expecting 3,000 more people to join the company in 2018.

But last year what came as a surprise to the hotel industry was the tax slab of 28 percent for room tariffs of Rs 7,500 and above and 18 percent for room rates between 2,500 and Rs 7,500 under the new tax regime, goods and tax services (GST).

Is GST impacting the hospitality business?

According to Govil, the impact of GST can be felt in the domestic MICE (Meetings, incentives, conferences exhibitions) business. “People are considering options outside of India. When they compare other options like what it costs to go to Thailand or Dubai and compare that with Indian rates with the 28 percent tax that becomes an issue.”

Govil pointed out one other area where high taxes are affecting the business—input credit which means that if a company is not registered in a certain state then it can’t get state portion of GST. “So, if I am a Bangalore based company and I want a conference in Goa unless I have registered operations in Goa I can’t claim GST.”

Lesisure segment is also getting affected because of the 28 per cent tax slab, Govil added.