Overview of the Hotel Industry in India

Today, hotels have become an integral part of the tourism industry, providing multidimensional services like food, lodging, mode of transport etc. Besides being used as temporary accommodation by tourists, the hospitality sector has become more than a means of providing accommodation. Today hotels are used for meetings, conferences, restaurants, destination weddings, and family entertainment.'Staycation', a peaceful getaway trend today, where people stay at luxurious hotels and not-so-luxurious hotels to relieve stress, is also on the rise. Therefore, the success of this industry relies on catering to their targeted clientele's specific needs, creating a desirable atmosphere, and offering a wide variety of services and amenities. The hotel industry in India has grown from providing lodging into a multi-faceted, diverse industry. Although the industry faced a great degree of slowdown during the pandemic, it is now reviving and creating fresh business avenues. Domestic and international tourism has started picking up pace. The business of hotels has even surpassed the pre-pandemic levels. The Central Government’s focus on one of its champion sectors, i.e. tourism and hospitality industry, has helped the hospital industry to recover from the covid-19 pandemic shock.

The construction of hotels is primarily a private sector activity which is capital-intensive and has a long gestation period. The list of Licences and documentation required for a hotel is vast and depends on the amenities provided by the hotel. In some cases, as many as 65 clearances and approvals are needed by hotel projects. In this write-up, we will learn about the advantages of entering the hotel industry and the legalities associated with starting one.

Advantages of Starting a Hotel Business in India

The following are the main advantages of being in the hotel industry.

Annual Cash Flow: Although the return on investment (ROI) in the hotel industry is lower than in other real estate projects, hotels provide a constant cash flow, unlike residential projects, where the cash flow stops when the property is sold.

Appreciating asset: Hotels appreciate in value over the years and astheir performance increases orstabilises at a point. The property appreciates in value, and if diversification is done in related products and services,the ROI can increase substantially.

India's Cultural Heritage:The growth of many heritage hotels can be attributed to India's culture, diversity and rich and exquisite history. The unique experiences provided by such hotelsdrivea huge volume of domestic and international tourism. Location, site seeing, amenities, and food experience,also lure tourists to a particular hotel.

Licences required for starting in the Hotel Industry

The hotel business needs several legal and regulatory approvals from a number of government bodies. The Hospitality Development and Promotion Board under the Ministry of Tourism monitors and facilitates the clearances and approvals of Hotel Projects in the country. Many central and state approvals are required at the pre-establishment and post-establishment stages. The followings are the registrations and permits you must have to start a hotel business in India.

Consent Certificate from SPCB/ PCC: The Pollution Board of the concerned state or union territory will provide a Pollution NOC to projects in the hotel industry in two stages, i.e. before the start of construction when a Consent to Establish (CTE) will be issued. The second one is before the hotel can start its operation, for which Consent to operate (CTO) will be given. This NOC is mandated under the Air and Water Act to ensure that the establishment does not violate pollution norms. Hotels with up to 20 rooms without boilers are categorised in the green category, while those with rooms between 20 to 100 with less than 3-star ratings are kept under the orange category. Hotels having wastewater generation of 100 KLD and more are considered the most polluting establishments in the hotel industry and are kept under the red category.

Environmental Clearance: This is a permit required as per the Environment Impact Assessment or EIA Notification, 2006, under the Environment (Protection) Act, 1986, for the construction, upgradation and expansion in the hotel industry. An EIA is required to rule out any negative impact of the project on the environment by the authorities.

Shop and Establishment Registration: The Shop and Establishment Act regulates aspects of the hotel industry, such as working hours for employees, rest intervals, opening and closing hours, holidays and leaves, overtime, provision for employment of children, etc. Shop & Establishment License can be obtained from the Labour Department of the state.

Trademark Registration: If you are planning for a chain of hotels or planning to invest a significant amount of time and money into the hotel's branding, obtaining a trademark registration is suggested.

Food Safety License: This licence is given by the Food Safety and Standards Association of India (FSSAI). This licence enforces and maintains hygiene standards at hotels and other food outlets. All food businesses (hotels, bars, cafes, offices, cafeterias, etc.)must acquire a food business operator license, comply with stringent guidelines, and maintain hygiene standards.

Health Trade License: This licence is issued by the municipal corporation of the concerned state. It is required to perform trade and business in items that directly affect public health. By issuing this license, the Municipal Corporation certifies that your establishment complies with the hygiene and security standards essential for public health.

Eating House License: Eating House license is a license for establishments such as a hotel where any food or drink is served for consumption on the premises. The state police of the particular state provide this.

Liquor or Bar License: If the hotel plans to serve liquor, it must apply for this license. This can be obtained from the Excise Commissioner of the city.

Lift Clearance: If your hotel is multi-storeyed and you will be operating a lift, you will have to get clearance to use the elevator. Sometimes the permission has to be from the electrical inspector or the office of the city's Labour Commissioner to ensure that the lift operations comply with the safety norms.

Music License: If the hotel plays recorded music or videos, one must obtain a license in compliance with the Copyright Act from the Indian Performing Right Societyor the  Phonographic Performance Limited. PPL and IPRS are separate organisations that license different sets of rights in the use of music. You may need a license from both organisations. PPL works for the recorded music industry on behalf of record companies and performers, whilst IPRS works towards musical composition and lyrics for authors, songwriters, composers, and publishers.

Scope of Setting up a Hotel Business in India

Hotspots for the hotel industry are popular tourist locations. Proprietors know thathotels in close proximity to a heavily visited city or areas within the city, monuments, theme parks etc., will automatically have demands around the year because of large influxes of travellers. To address the constraints the hotel industry faces in obtaining multiple clearances and to streamline the system for speedy approvals of hotel projects, the Government approved the formation of a 'Hospitality Development and Promotion Board (HDPB)' for hotel projects.

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