How to start a Hotel Business in India? – A guide for future Entrepreneurs 

Step by Step guide on “How to start a Hotel Business in India?”


Starting and running a hotel business in India necessitates a number of licences and registrations. Many licences and registrations must be obtained prior to opening the hotel and renewed while it is open. Furthermore, most licences require the hotel to follow certain rules or criteria in order to remain valid. As a result, it is critical for hotel entrepreneurs to be aware of these licences and registrations in order to run a successful hotel business. Don’t worry if you are not aware of all this, because This article will cover information on the different licenses required to start a Hotel Business in India, and “How to Start a Hotel Business in India?”

Insights on Hotel Business in India

In India, a hotel is a business that provides lodging, meals, and other visitor services. To be known as a Hotel in India, a foundation must have at least six letting rooms, at least three of which are most likely joined (ensuite) private washroom offices. Despite the fact that lodgings are classified as ‘Star’ (1-Star to 5-Star), there is no standard method for assigning these ratings, and consistency with standard necessities is intended.

Permits required for starting a hotel business in India

  • Fire safety Permit: A fire safety certificate or permit required by the Fire Department is required for the operation of a hotel. A fire safety certificate is typically issued if the building has implemented proper fire prevention and fire safety measures as required by the applicable fire safety rules and regulations.

  • Building permit for opening a Hotel Business: The Bureau of Indian Standards created the National Building Code of India to standardise building regulations across the country. All government departments, municipal bodies, and other construction agencies follow the National Building Code. According to the National Building Code, no person shall carry out any development, erect, re-erect, alter, or demolish any building, or cause the same to be done, without first obtaining a separate permit from the Authority for each such development/building. As a result, all hotels must obtain a building permit in accordance with the relevant Town Planning Act, Development Act, Municipal Act, or any other applicable statutes for layout, building plans, water supply, sewerage, drainage, electrification, and so on.

  • Certificate of Environmental Clearance (CEC): This permit is required by the Ministry of Environment and Forests as part of the Environmental Management Act for a specific type of project. The CEC authority conducts an assessment to rule out any negative environmental impact after completing a questionnaire. The restaurant is responsible not only for its customers’ health but also for the environment. As a result, restaurants must still apply for an Environmental Clearance Certificate.

  • Police license for hotels: Hotels are public places that the Police Department closely monitors. As a result, all hotels must keep a proper log of all Guests who have stayed at the hotel, follow relevant regulations, and have a valid Police Department permit. The power to licence Places of Public Entertainment held by the Commissioner or Additional Commissioner of Police usually includes a police licence for hotels.

  • Lift Clearance Permit: If your hotel has multiple levels and you want to operate a lift, you must first obtain permission. The Electrical Inspector issues this licence from the Labour Commissioner’s office after verifying the installation of the lift, structure, safety gear, and other products. State-specific applications are available for receiving lift clearance.

Different types of licenses required to start a Hotel Business in India 

Listed are the different types of Licenses required to start a Hotel Business in India.

  • FSSAI License: FSSAI License is one of the main licenses required to start a Hotel Business in India, an FSSAI food business licence is required under the Food Safety and Standard Act. The FSSAI food business licence is usually issued for one year and must be renewed at the end of the year. The local FSSAI office manages the FSSAI licence for restaurants. The Central Government does not have jurisdiction over FSSAI licences for restaurants.

  • Business registration: It is recommended that a hotel be established under an artificial legal entity such as a corporation or LLP. By operating a company under an artificial legal entity, the promoters’ liability for the business is limited, and the business as a going concern is easily transferable to another person.

  • Provident Fund registration: In India, any establishment that employs more than 20 people must register with the Employee Provident Fund (PF). The PF Board manages a contributory provident fund, a pension scheme, and an insurance scheme for workers in India’s organised sector.

  • License for a Bar: If the hotel has a bar or serves alcohol in its restaurants, the relevant authorities will require a bar licence. Bar licences are typically issued by departments of the state government. As a result, the requirements for a bar licence differ from state to state.

  • Registration for GST: Prior to the implementation of GST, a restaurant bill included VAT, services tax, and a service charge. However, indirect taxes collected on the sale and purchase of goods and services in India have been absorbed by the GST Registration Limit regime of indirect taxation from 2019. Restaurants in starred hotels with daily room rates of Rs.7,500 or more will be charged 18% GST and will be eligible for ITC. Hotels with restaurants that charge less than Rs.7,500 per night will be charged 5% GST but will not be eligible for ITC (Input Tax Credit).

  • ESI (Employee State Insurance) Registration: ESI is an autonomous corporation of the Government of India’s Ministry of Labour and Employment. Employee’s State Insurance (ESI) registration is required in India for companies with ten or more employees. To remain in compliance with the ESI Regulations, the employer must contribute 4.75% of all employees’ wages earning Rs.15, 000 or less toward ESI employer dues. As ESI dues, the employee must contribute 1.75% of his or her wages.

How to start a Hotel Business in India?

  • Strategy formation: The first step in the process is to develop a business strategy that provides a snapshot of the hotel’s growth strategy for the next five years. This should include foreseeable goals, obstacles, an industry SWOT analysis, and detailed plans for meeting the set goals. In a nutshell, it should be a brief but concise summary that provides a clear outline of the entire business strategy. When you present your business plans to lenders in order to obtain a business loan, the investors and lenders usually go through the first page and decide if they want to read more, so it is also critical to lay out all the critical information up front, such as your market analysis proving the need for a new hotel and your unique skills and qualifications for meeting your objectives.

  • Marketing your business: Need to plan a marketing strategy that is you need to concentrate on the four P’s will be the product, price, place, and promotion. Product refers to your hotel and its services, price refers to the rates of your products and services, place refers to your hotel’s physical location as well as its website or other booking sites on which it is listed, and promotion refers to your method of attracting customers to not only stay with you once but also to return.

  • Business Operations: Your day-to-day operations will include booking reservations, checking in and out clients, luggage handling, housekeeping, accounting, and so on, whereas your long-term operations will include how you plan to meet your goals, such as achieving a certain rate of occupancy, adding more restaurants, and other such additional services to attract more visitors.

  • Management: A strong management team is the backbone of your hotel business because it will not only persuade financiers to invest money in your venture but will also ensure that operations run smoothly.

  • Financial Planning: Last but not least, consider how you will obtain financing for your hotel venture. Given the potential for growth in the Indian hotel sector, various lenders such as banks, NBFCs, and digital NBFCs are eager to invest in this expanding market.

  • Hire and Train Employees: Only if the employees play a role in the success of the hotel business in India can it be successful. You will be able to provide quality service to your guests and be an industry leader if you hire top employees at all levels. Many hotels choose to start with executive and departmental positions, which establishes the guidelines and tone. The leaders will then decide what goals they want to see in their teams and how many employees they will need. Every team must determine the roles and abilities they seek in an employee, as well as develop an action plan to find great new employees.

Bottom Line

You now understand how to open a hotel in India and the challenges that come with it. It’s a difficult process that requires a lot of dedication. If you are interested in providing hospitality and are confident in your resource availability, don’t be afraid to move forward.


Zarana Mehta: Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.
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