Profitability in the hotel Industry is dependent on many factors; a few salient ones are listed below: 

• Tourism: This is the primary factor for the hotel industry. India has great potential of becoming a major stop for tourists. However, lack of infrastructure has kept the foreign tourist at bay. The government has been actively participating in propagating India as an oasis for global travellers. India has always conjured up a fascinating image in the mind of foreign tourists. India has an advantage of having diverse cultures, languages and religions, which makes it an exciting tourist destination for people all over the world.
  

• Business factor: Liberalisation has brought home a new class of MNCs, which has increased the number of corporate travellers visiting India. Other than metros, developing cities have also come into the limelight and hence there has been an increase in demand for hotels in various places. This trend has enthused many hoteliers to set up corporate hotels. This class of business travellers has reduced their dependence on seasonal tourism. The industry is again headed for a hit, with the attacks on the world's largest financial centre in the US.
  

• Room occupancy: The ARR and occupancy are the other critical factors that determine profitability. These, in turn, depend on the location, star rating, amenities and quality of service. The occupancy of Indian hotels and the ARR has been on the decline for the past three to four years due to the turbulent socio-political environment in the nation and also because of the East Asian economic crisis. However, the hotel industry reported impressive earnings and revenue growth for the year ended March 2001.
  

• Seasonality: India being a tropical nation witnesses an inflow of leisure tourists, mainly during the winter months of October to March. Hence the hotel industry has a better second half. In the first half of the year, local tourists prefer April to May and October in the second half due to summer and Diwali vacations respectively. Other months being off-season periods, many hotels offer heavy discounts on room tariff to ensure repeat customers such as corporates, airline crewmembers and tour groups.
  

• Political scenario: In the past few years, the hotel industry has been going through a lean phase. Room occupancy has been on a decline, mainly due to a steep fall in both business and tourist arrivals. Though the exorbitant rates of five-star hotels as compared to the quality of services provided is one of the factors for the decline, the fluid political environment has also had a negative impact and foiled the dreams of the Indian hotel industry.
  

• Tax structure: This industry is one of the heavily taxed sectors of India. State governments have levied various taxes like expenditure tax, luxury tax and sales tax. This is apart from the income tax levied by the central government. These taxes are as high as 30 per cent in cities like Chennai, while other Asian countries have a tax structure of 4 to 5 per cent. As a result, Indian hotels are more expensive than their Asian counterparts.
  

• Industry bottlenecks: Progress of the industry is held hostage to various bottlenecks existing within the industry like high variable costs. The hotel industry is reeling under high variable expenses. A high wage bill, maintenance costs and overhead expenses mark the industry. Domestic hotel chains have a high man-room ratio as compared to their overseas counterpart.
  

• Differential pricing: Hotels in India typically offer discounts on published room tariffs to many clients. As a result, though the occupancy rate of these hotels increases, the ARR does not increase proportionally. However, the magnitude of discounts varies depending on the nature of the client location and size of the hotel. Furthermore, in the dual tariff rate system, there is a domestic currency rate for local travellers and a dollar rate applying to foreign travellers. Hence there is need of a common yardstick for tariff rates.