ECONOMIC ENVIRONMENT AND INDUSTRY INSIGHT Global Economy: The Year in Review
The global economy witnessed a recovery in 2022 following two years of a
pandemic-inflicted environment. The International Monetary Fund (IMF) in their report of
April 2023 estimates growth in global Real Gross Domestic Product (GDP) for 2022 to
increase by 3.4% on the back of a 6.3% increase in 2021. A higher-than-usual growth in
2021 was due to a low-base effect of 2020 as a result of the global pandemic during which
GDP contracted by 2.8%. The year 2022 saw inflationary trends across the globe,
particularly in developed economies of United States of America (US), United Kingdom (UK)
and Europe, which resulted in tighter monetary interventions by central banks which in
turn stifled growth. Continuing invasion of Ukraine by the Russian Federation disrupted
supply chains causing an increase in food, commodity and energy prices. Finally, a
resurgence of COVID-19 in China weighed on the global economy in 2022. IMF forecasts
global growth for 2023 to decelerate to 2.8% from 3.4% in 2022 before rising to 3.0% in
2024. This forecast is lower than expected growth rates a year ago. The economic slowdown
in 2023 is concentrated in advanced economies especially the Euro Area and UK where growth
is expected to fall to 0.8% and -0.3% in 2023. A lower growth in 2023 is attributable to
prevailing tight monetary and financial conditions, recent signs of stress in the banking
system, rising debt levels in certain countries including lower and middle-income
countries, rising geo-economic fragmentation, stickier than expected inflation and no
signs of truce in the Russia-Ukraine war. In contrast, emerging and developing economies
are showing stronger economic prospects than advanced economies. In the medium-term, the
IMF forecasts global inflation to fall to 7.0% in 2023 and to 4.9% in 2024 on the back of
gradual softening of interest rates, unwinding supply chain disruptions and a fully
reopened Chinese economy putting the global economy back on the growth track. (Source: IMF
- World Economic Outlook Update, April 2023). The World Banks Global Economic Prospects
report of January 2023 was more conservative in its estimates by forecasting global
economic output to decelerate sharply to 1.7% in 2023 and thereafter grow by 2.7% in 2024.
Indian Economy: The Year in Review
India is now the fastest growing, major economy in the world. The First Advance
Estimates of National Income released by the National Statistical Office (NSO) of the
Government of India in January 2023 estimates Indias GDP to have grown by 7.0% in FY
2022-23 following a growth of 8.7% in FY 2021-22. Total Consumption grew by 7.0% in FY
2022-23 mainly due to private consumption. Growth in exports for FY 2022-23 seems to have
plateaued at 12.5% while Imports grew by 20.9% in FY 2022-23. By sectors, agriculture grew
by 3.5% during FY 2022-23 after a growth of 3.0% in FY 2021-22. Mining grew by 2.4%,
manufacturing by 1.6% and construction by 9.1% while electricity, gas water supply and
other utilities services grew by 9.0% in FY 2022-23. Services sector exhibited the
strongest growth in FY 2022-23 at 9.1%. Within services, trade, hotels, transport,
communication and broadcasting related services constituting about a third of overall
services, grew by 13.7%. Indias service exports have nearly doubled in a decade to US$
322.72 billion for FY2022-23 according to provisional data of the Ministry of Commerce.
Indias foreign currency reserves stood at US$ 578.45 billion as of March 31, 2023
covering approximately 9 months of imports due to timely interventions of the Reserve Bank
of India (RBI). The consensus of GDP growth for FY 2022-23 was in the range of 6.5% to
7.0%. (Source: India Economic Survey 2022-23 – January 2023 and National Statistical
Office estimates) Indias economic recovery from the pandemic exhibited a K-Shaped
recovery where certain sectors like information technology, e-Commerce and financial
services registered healthy recoveries while other sectors such as retail trade and
consumer discretionary were highly impacted. Travel and hospitality remained beneficiaries
of such recovery. Indias service exports have risen at a staggering pace since the
pre-pandemic period. Service exports have increased by more than US$60 billion per year as
India gains global market share. Exports are not only of Information Technology services
but also professional management and consultancy, research and development and expanding
Global Capability Centers. This growth is expected to bring in higher employment, higher
disposable income and thus a higher propensity to spend by ‘white-collar people
working in such sectors. This is an important factor in making economic growth broad based
and inclusive.
The outlook for FY 2023-24 is optimistic. Retail inflation ebbed out to 5.6% in March
2023 from a peak of 7.79% in April 2022 and is expected to moderate to 5.2%. Core
inflation which remained above 6% for the year eased to 5.8% in March 2023. Among the high
frequency indicators, direct and indirect tax collection has shown strong momentum, bank
balance sheets are strong, adequately capitalized and credit offtake during the year was
highest since FY 2011-12. RBI paused increase in interest rates in April, 2023 after a 250
basis points increase during FY 2022- 23 citing reasons of resilient economic activity and
expected moderation in inflation. The Indian Rupee is stable, the Current Account Deficit
is expected to remain moderate and consumer sentiment is high. (Source: RBI Monetary
Policy, April 2023, Revised Estimates – Ministry of Finance, April 2023).
After factoring the downside risks of domestic inflation, slowing global growth and
geopolitical situation, India is expected to grow at the fastest pace among large
economies at a rate ranging between 6.0% to 6.5% in FY 2023-24.
Global Economy and Hospitality Scenario
The global hospitality market grew from $4,390.59 billion in 2022 to $4,699.57 billion
in 2023 at a compound annual growth rate (CAGR) of 7.0%. The Russia-Ukraine war disrupted
the chances of global economic recovery from the COVID-19 pandemic, at least in the short
term. The war between these two countries has led to economic sanctions on multiple
countries, a surge in commodity prices, and supply chain disruptions, causing inflation
across goods and services and affecting many markets across the globe. The hospitality
market is expected to grow to $5,816.66 billion in 2027 at a CAGR of 5.5%.
Global Hospitality and Tourism Industry
Global tourism is steadily improving towards pre-pandemic levels consequent to the
relaxation of travel restrictions across countries and increase in demand for travel.
Tourist arrivals internationally for 2022 were 917 million, double that of 2021 but
recovering to 63% of pre-pandemic levels of 2019, according to data from the United
Nations World Tourism Organization (UNWTO). Europe with the largest share of global
inbound tourism registered a 92% increase over 2021 to reach nearly 80% of pre-pandemic
levels. Even with a 241% increase in tourist arrivals in 2022 over 2021, Asia and the
Pacific remained the weakest in terms reaching pre-pandemic levels. However, within the
region, international tourist arrivals in South Asia at 25.5 million, were higher by 158%
over 2021 and achieved 76% of pre-pandemic levels (Source: UNWTO, Barometer January 2023).
According to the S&P Global Sector Purchasing Managers Index, the Tourism and
Recreation sector led a pick-up in global business activity amongst all sectors recording
its sharpest pace since May, 2022. Transportation recorded the third fastest growth behind
software services (Source: S&P Global Sector PMI April 2023).
Outlook
The UNWTO expects international tourism to consolidate its recovery in 2023 more
specifically in Asia and the Pacific region. It attributes this growth to the recent
opening of several source markets and destinations including China, which was the worlds
largest outbound market in 2019. In December, 2022, 116 destinations had no COVID-19
related restrictions. In addition, improved performance of air traffic and robust travel
demand from US markets for European holidays backed by a strong US Dollar are expected to
be the other contributors to global growth. Domestic tourism will continue to be a key
driver of recovery of the tourism sector through 2023. Major risks threatening the ongoing
recovery of tourism in 2023 remain economic, health and geopolitical risks. UNWTOs
scenarios expect international tourist arrivals to reach 80% to 95% of pre-pandemic levels
in 2023 (Source: UNWTO, Barometer January 2023).
Indian Hospitality and Tourism Industry
FY 2022-23 continued to be a year of strong recovery in the Indian travel and tourism
industry. Restrictions on flights were relaxed in most countries into and from India.
Travel restrictions, documentation and certifications were also progressively relaxed for
travel within India. Consequently, demand for accommodation grew significantly, mainly
arising from domestic leisure travel, weddings, social events, conferences and resumption
of business travel within the country. Foreign tourist arrivals were 6.19 million for the
calendar year 2022 in comparison with 1.52 million in 2021. This constituted 57% of 2019
foreign tourist arrivals at 10.93 million (Government of India, Ministry of Tourism Annual
Report – 2022-23). Domestic air traffic passengers for 2022 were at 123 million,
growing by 47% over 2021 to 85% of pre-pandemic levels. As per Horwath HTLs India Hotel
Market Review 2022, calendar year occupancy for 2022 was 59.8% in comparison with 43.5% in
2021. The average daily rate (ADR) for 2022 was "6,103 and revenue per available room
(RevPAR) was "3,648 as against "4,429 and "1,924 respectively for 2021.
Like-for-like hotels reported an occupancy of 67.8% and an ADR of "6,498 during 2022.
During FY 2022-23 RevPAR of all destinations surpassed pre-pandemic levels of FY 2019-20
with growth ranging from 15% to 54%. Similarly, occupancies of all destinations except
Gurugram exceeded that of FY 2019-20. Mumbai registered the highest RevPAR and occupancy
at "7,532 and 78%. Goa registered the highest growth in RevPAR of 54% to "7,049,
also the second highest RevPAR among all destinations.
Outlook
The outlook for the Indian hospitality industry during 2023 remains positive. The
upsides working in favour of the hospitality industry in India are good macroeconomic
environment evidenced by 6%+ GDP growth, superior performance by the services sector of
the Indian economy, abating COVID-19 fears, continuing infrastructure development projects
within the country, growth in air and railway passenger traffic and growth in demand for
branded rooms outpacing a tepid growth in supply of those rooms to provide long-term
sustainable demand. Moreover, the industry has learnt to work with volatility and adopt
leaner cost structures thus contributing to higher profitability. Balance Sheets of large
corporates have also strengthened over the past few years. Growth in the industry is
largely expected from domestic demand which is expected to remain strong through FY
2023-24 even as international travel has shown green shoots of recovery and provides scope
for further growth in demand. Additionally, the Indias G20 Presidency and an opportunity
to host international events, including the ICC Mens World Cup, is expected to increase
demand for hotels in the cities hosting the events.
Review of the Business
During the current year, the Company saw strong rebound in the business aided by
leisure travel and gradual pick up in business travel and witnessed robust revenue growth
and profitability. The Company reported highest ever revenue and profitability in the
current year.
In line with the consistent increase in demand and high occupancies, the company will
add a 100-room tower with larger rooms and take the total inventory to 230 rooms at Taj
Ganges, Varanasi.
Effective from April 1, 2023, The Gateway Hotel, Gondia has been rebranded as Ginger
Hotel, Gondia. This transition is expected to benefit the hotel in terms of market
positioning and profitability.
Financial Performance
The Total Income for the year ended 31st March, 2023 stood at Rs. 9,483 lakhs as
compared to Rs. 4,994 Lakhs in previous year and the Gross Operating Profit (EBIDTA) stood
at Rs. 3,766 Lakhs as compared to Rs. 1,472 Lakhs in previous year.
The profit before Tax for the year was at Rs. 3,128 Lakhs as compared to profit before
tax of Rs. 771 lakhs for the previous year. The profit after Tax for the year was at Rs.
2,338 lakhs as compared to profit after Tax of Rs. 565 lakhs for the previous year.
Internal control systems and their adequacy
Your Company has in place an adequate system of internal controls, with documented
procedures covering all functions in the hotel operating units. Systems of internal
controls are designed to provide reasonable assurance regarding the effectiveness and
efficiency of operations, the adequacy of safeguards for assets, the reliability of
financial controls, and compliance with applicable laws and regulations.
Adequate internal control measures are in the form of various policies & procedures
issued by the Management covering all critical and important activities viz. Revenue
Management, Hotel Operations, Purchase, Finance, Human Resources, Safety, etc. These
policies & procedures are updated from time to time and compliance is monitored
continuously. The Company continues its efforts to align all its processes and controls
with global best practices.
The internal audit process through the Taj group unique Taj Positive Assurance Model
is an objective methodology of providing a positive assurance based on the audits of
operating units. It is a convergence of Process Framework, Risk & Control Matrix and a
Scoring Matrix. A framework developed for each functional area is identified on the basis
of an assessment of risk and control as also providing a score, allowing the unit to
identify and mitigate high- risk areas.
The Audit committee of the Board oversees the adequacy of the internal control
environment through regular reviews of the audit findings and monitoring implementations
of internal audit recommendations through the compliance reports submitted to them.
The Statutory Auditors of your Company report that your company has adequate internal
controls over financial reporting.
Certifications and Awards
Your Company has been participating in the globally recognized EarthCheck
benchmarking and certification system. Earth Check certifications are a result of
extensive assessments and audits by Independent Environmental Assessors - mapping
indicators ranging from energy & water consumption, waste management to sensitivity
exhibited vis-? -vis social and cultural dimensions in all areas of hotel
operations. Taj Ganges, Varanasi has been certified Earth Check ‘Platinum for last
two years after successfully retaining the gold category for consecutive five years.
Workforce
Total manpower employed by the company was 279 as on March 31st 2023 as compared to 199
as on March 31st 2022.
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