India's hospitality industry is set for dramatic growth in the next couple of years. There is a serious shortage of hotel rooms, and demand far outstrips supply. Hotel room rates are going through the roof, especially in the cities. But with the industry showing very bright prospects, investment in the sector is witnessing a sudden spurt.

For decades, India was a paradise for backpackers on a shoestring budget or "nirvana seekers" eager to escape the rat race in Western societies. Much has changed since economic liberalization and the software boom. While curious backpackers keen to discover India continue to pour in, it is business travelers who constitute the bulk of visitors to the country in recent years. There are medical tourists, too - those who come to India for inexpensive but top-class medical treatment. A booming economy, growing affluence and cheap domestic flights have induced many Indians to travel as well.

But there aren't enough rooms in hotels to accommodate them all.
The scarcity of hotel accommodation is obvious from the fact that while all of India has about 110,000 hotel rooms (about the same as metropolitan New York), Shanghai alone has some 130,000 rooms. And only a quarter of India's 110,000 rooms are in the branded segment.

"India needs another 125,000 hotel rooms at least by 2010 to meet the surging demand, particularly in the upper and middle ranges," an official in the Ministry of Tourism told Asia Times Online.

"The demand for rooms has grown across the country. In towns like Agra, Goa and Khajuraho it is tourists - domestic and foreign - [who] are driving the demand. But it is business travelLers [who] are pushing up demand for hotel rooms in Delhi, Mumbai and Bangalore," said.

Bangalore accounts for the bulk of foreign business travelers visiting India annually - 51% compared with 35% who go to Mumbai and 26% to Delhi. Ninety percent of the hotel clientele in Bangalore consists of foreign business travelers. The city's booming information technology (IT) sector is fueling the soaring demand for hotel rooms here.

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