Good days again ; India's travel and tourism industry was one of the first and worst affected by the global recession. It's finally bouncing back.

Even in their heydays, aviation and hospitality performed waybelow their potential in India. Then a complex combination of pricewars, short-term overcapacity and global economic meltdown pushedthese industries into a sea of red with mounting losses, widespreadlayoffs and stalled investments. Therefore, when the first signs ofrecovery appeared around January 2010, caution preceded celebration.But as the first quarter of the year ends, there are definitivesigns of an upswing.

Foreign tourist arrivals in January-February 2010 were higherthan during the same months of 2009. A study by the World Travel &Tourism Council (WTTC) forecasts that, between 2008 and 2018, Indiawill report the highest annualised real growth of travel and tourismdemand worldwide, at 9.4 per cent. Travel and tourism accounted for5.92 per cent of GDP in 2007-08, the latest year for which figuresare available. By 2020, tourism-related activities will contributeabout Rs 8,500 billion to the GDP.

But, despite the sector's high contribution to the economy, thegovernment has proposed an outlay of just Rs 1,050 crore for tourisminfrastructure in the 2010-11 Budget. This is about 0.1 per cent oftotal government spending. Meanwhile, the industry is gaining frombetter occupancy rates, increased FTAs, a growing airline seatcapacity and reach. The hotel industry, so far focussed on the bigcities and the luxury category, is now offering greater depth andwidth (read: midmarket and budget category) and nonconventionaldestinations.

-- Hotel occupancy rates have gone up to 65per cent overall from60per cent in 2008-09

-- Foreign tourist arrivals are up 13per cent to 10.9 lakh in thefirst two months of 2010

-- India's airlines carried 8.05 million passengers in the firsttwo months of 2010, 1.29 million more than they did during the sameperiod last yearOn the flip side, India is widely believed to be amuch more expensive destination than its Asia-Pacific counterpartslike Thailand, Malaysia and Singapore. To illustrate, a standardqueen-bed three-star Ibis Hotel room in Gurgaon will cost you $95.43(Rs 4,485). A similar three-star Ibis Hotel room with one double-bed in Bangkok would cost Rs $39.32 (Rs 1,848). A key reason forthis anomaly is the huge deficit of budget hotels. Branded budgethotels offering clean and safe rooms across the country couldtrigger exponential growth in domestic tourism. But can they bridgethe gap? Domestic and foreign brands are trying their best-in theface of archaic policies.

A hotel's promoter has to approach up to 40 different agencies toobtain 70-110 licences and clearances. Nothing is spared: thefountain, neon sign, letterbox, dustbin, the bathroom fittings- allneed approval of some kind. In Singapore, a promoter needs sixlicences from six agencies. As far as physical infrastructure isconcerned, the new airports at Hyderabad and Bangalore, along withthose being redeveloped at Delhi and Mumbai, promise better airtravel. Then, the government can encourage more low-cost airlinesand speeding up highway projects.

This BT special on Travel & Hospitality dissects the problems(shortage of hotels, sagging infrastructure), prospects (the rise ofbudget hotels) and takes a look at the years ahead.