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India's Hotels Open Their Doors to U.S. Food Products
By Santosh Kumar Singh
Growing numbers of business travelers and tourists have led to unprecedented demand for hotel accommodations in India. To cater to travelers' diverse palates, Indian hotels and other enterprises are increasing their food and beverage imports.
India's hotel trade has emerged as an important niche market for high-value foods. Imports for this market are estimated at $10 million a year, and are expected to rise by 20-25 percent over the next 2 years.
Scaling the Import Barrier
Under India's trade rules, most foreign consumer food products are subject to a licensing requirement that effectively blocks imports. However, hotels and other tourist-related businesses can obtain licenses to import consumer foods. Hotels can import most food items; notable exceptions include beef products, mineral water, carbonated soft drinks, beer and gin.
Indian hotels may import food products based on their foreign exchange earnings: a hotel's consumer product imports can equal up to 10 percent of its earnings for the previous year. Other tourist enterprises can import goods valued at up to 2.5 percent of their prior year's earnings.
Making World Travelers Welcome
In the wake of economic reforms begun in 1991, India has experienced a boom in both business and tourist travel. Declines in the number of tourists that normally occur between April and September have been offset by an influx of business travelers. Foreign tourism has also risen dramatically: in 1995, the number of tourists visiting India surpassed 2 million for the first time.
These factors have boosted the foreign exchange earnings of the tourism and hotel industries: in 1995, they earned about $2.7 billion, allowing them to substantially expand their consumer imports.
Luxury hotels accounted for about 65 percent of these earnings. Five-star hotels in New Delhi, Bombay, Bangalore, Calcutta and Madras had occupancy rates of 90-95 percent in 1995, compared to 65-70 percent early in the decade. Luxury room prices have jumped nearly 30 percent in the past year; several hotel chains plan to expand to take advantage of the growth in international travel.
Business Class Bulging
With the expansion of the Indian economy, affordable, satisfactory office and housing space has become scarce. Representatives of many foreign companies have therefore established offices and residences in hotels.
The burgeoning hotel trade has spurred demand for foreign styles of cuisine. Business persons from the United States, Europe, Israel, Japan and South Korea account for a lot of foreign travel to India; because they often stay for long periods, they tend to prefer familiar Western or Asian foods. Although tourists often eat Indian dishes, they also contribute to higher food import demand.
To satisfy these customers, specialty restaurants featuring Chinese, Japanese, French or Italian cuisine have sprung up, and others have added non-Indian dishes to traditional menus. Although local supplies of ingredients commonly used in these dishes tend to be less expensive, they are often hard to obtain in sufficient quality and quantity. Hotels have found that their customers are usually willing to pay a premium for high-quality imported foods.
Lower Duties Mean Larger Imports
With the exception of some alcoholic beverages, India has sharply cut duties on food and beverage imports--from over 200 percent before 1991 to the current ceiling of 50 percent. The lower duties have further encouraged hotels to serve meals made with imported foods.
Hotel imports of consumer foods have grown about 30 percent a year in the past 2 years. Most hotels have increased the frequency of their import shipments from once a quarter to once a month.
One major hotel chain has started to import fresh fruits and vegetables every week. Another major group estimates that the share of imported food products in its total food basket climbed from 25-30 percent before 1993 to 55-60 percent in 1995.
Luxury hotels in New Delhi, Bombay, Calcutta, Madras and Bangalore, along with tourist hot spots like Goa and Jaipur, account for most Indian imports of consumer foods. Some state tourist departments also import food occasionally. The Indian Tourism Development Corporation (ITDC), a quasi-governmental organization, imports alcoholic beverages for ITDC-registered hotels and resorts and smaller hotels that find it cumbersome to import directly. Beer imports move solely through the ITDC.
Most hotel buyers purchase foods through export consolidators. This arrangement allows them to buy small quantities of assorted items and reduces storage and space requirements.
Hotel chains usually work with a few consolidators that have proved their ability to provide quality, quantity, affordability, selection and reliability in food imports. Most consolidators serving the Indian market operate from Singapore, the Netherlands, Germany, England, Dubai, Australia or New Zealand.
Market Ripe for Expansion
U.S. exports of restricted consumer foods to India (mostly for the hotel market) reached $1.2 million in 1994--primarily wines, meats and packaged foods. Although U.S. exports were up 20 percent from 1993, they captured only 6 percent of India's hotel food market.
Buyers for India's hotels cite several reasons for the limited U.S. presence:
Many Indian hotel groups have expressed willingness to import U.S. food products, particularly meats and wines, because of their high quality and competitive free-on-board prices. U.S. producers, exporters and consolidators could build on this interest and extend it to other products.
Continued economic growth and greater trade liberalization will likely swell India's market for consumer food imports.
If India perseveres with such economic reforms as reductions in duties, consumer food imports for the hotel and tourist industries could jump 20-25 percent annually in the next few years. In addition, India's new investment promotion policies may prompt domestic and foreign companies to enter its food processing sector.
India's Commerce Ministry has indicated that it may replace the country's nontariff barriers with a tariff system in the next few years. Such a change would constitute a major step forward in agricultural trade: it would open India's entire consumer foods market to international commerce.
If tariffs under the new import regime resemble current levels, U.S. consumer food exports to this market could rise sharply. And U.S. companies that cultivate India's hotel and tourist industries could put themselves a jump ahead of the competition.
How To Reach India's Hotel Buyers
U.S. exporters and consolidators interested in capitalizing on the niche markets offered by India's hotel and tourist trade may wish to participate in one of India's local food trade shows.
For exporters that wish to contact buyers directly, listed below are major hotel importers of consumer food products:
Indian Hotel Company Ltd. (Taj group)
Y.S. Guleria, Purchase Manager
Taj Palace Inter-Continental
Sardar Patel Marg, Diplomatic Enclave
New Delhi - 110 021
Phone: 011 91-11-3010404
Fax: 011 91-11-3011252
Or, Purchase Manager
Taj Mahal Inter-Continental
Appollo Bandar, Kolaba
Bombay - 400039
Phone: 011 91-11-2023366
Fax: 011 91-22-2872711
The East India Hotels Company Ltd. (Oberoi
Group)
Claudius E. Frey, Exec. Asst. Manager
The Oberoi, Dr. Zakir Hussain Marg
New Delhi - 110 003
Phone: 011 91-11-4363030
Fax: 011 91-11-4364251
Or, Nitin Tuli, Materials Manager
The Oberoi, Nariman Point
Bombay - 400021
Phone: 011 91-22-2025757
Fax: 011 91-22-204-3282/1505
Welcomgroup
Purchase Manager
Maurya Sheraton Hotel & Towers
Diplomatic Enclave
New Delhi - 110 021
Phone: 011 91-11-3010101
Fax: 011 91-11-3010908
Indian Tourism Development Corp.
General Manager
Jeevan Vihar Building, 4th Floor
3 Sansad Marg
New Delhi - 110001
Phone: 011 91-11-3732073/310923
Fax: 011 91-11-3734793
Ambassador Group
Purchase Manager
The Ambassador Hotel
S S Park, Cornwallis Road
New Delhi - 110003
Phone: 011 91-11-4632600
Fax: 011 91-11-4632252
Leela Group
Purchase Manager
Leela Kempinsky Hotel
Sahar, Bombay-400059
Phone: 011 91-22-8363636
Fax: 011 91-22-8360606
Bharat Hotels Ltd.
Purchase Manager
Delhi Hilton (Holiday Inn)
Barakhamba Ave., Connaught Place
New Delhi - 110 001
Phone: 011 91-11-3320101
Fax: 011 91-11-3325335
Asian Hotels Ltd.
K.P.S. Kohli, Liaison Officer
Hotel Hyatt Regency
Bhikaji Cama Place, Ring Rd.
New Delhi - 110 066
Phone : 011 91-11-609911
Fax: 011 91-11-6886833
Hotel Le Meridien
Amarjeet Singh Ahuja, Purchase Manager
Le Meridien, Windsor Place
New Delhi - 110 001
Phone : 011 91-11-3710101
Fax: 011 91-11-3714545
U.P. Hotels Ltd.
Purchase Manager
Hotel Clarke Avadh
8 Mahatma Gandhi Marg
Lucknow, U.P.
Phone: 011 91-522-236500-09
The author is an agricultural specialist with the U.S. Embassy, New Delhi, India. Phone: 011 91-11-611-3033; fax: 011 91-11-688-5608.
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