The Federation of Hotel & Restaurant Associations of India (FHRAI) said that the real growth drivers of industry are the small one star and two star budget hotels, which have a development cost starting from Rs 25 crore.
"Unless we have cheaper finances for the cost of land and infrastructure for these hotels, then they would not grow and if we do not help them out, these hotels would not qualify for at least the five per cent if the development taking place," said FHRAI President S M Shervani.
According to the report, Indian hotels have an average occupancy rate of 60.4 per cent during 2012-12, which is slightly lower than 2008-09, which was 63.1 per cent.
Moreover, share of revenue from room occupancy has gone down to 52.2 per cent in 2012-12, while it was 60.5 per cent in 2008-09.
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It also noted decline in the net income of the hotels due to rising costs.
"The year 2012-13 has been seen a decline of 4.7 per cent in net income as a percentage of revenue over the previous year. This phenomenon is mainly attributable to rising departmental costs, which are result of rising inflation coupled with an increase in energy cost," the report said.
USA and UK remained the largest international source market for the Indian hospitality sector with 23 per cent, however, it was on decline of 4.3 per cent.
"This may be attributed to the fact that Indian hotels gave seen a greater contribution from Middle East, Russia and SAARC nations," it said.