The hotel and restaurant (H&R) businesses contribute significantly to the Indian economy through employment, foreign exchange earnings (through tourism), and overall GDP growth. In order to assess its economic impact and growth potential, it is important to understand how this industry performs. Most of the studies in the H&R sector employ a conventional DEA approach to gauge the performance of the industry. These studies mainly focus on the production process only. In this paper, a relational two-stage DEA approach is applied by decomposing the complete process into two sub-processes. A total of 45 large-scale Indian H&Rs are considered, for which the data have been collected from the Centre for Monitoring Indian Economy Prowess database (CMIE). There is no H&R in the study that performs efficiently both at the stage of acquiring production and at the stage of earning profits. Furthermore, the low efficiency score of the whole production process is mainly caused by the low efficiency score of the profit-generating process, as the average efficiency score of the second stage is less than the efficiency score of the first stage. The H&R industry needs to consider product improvements and technological innovations to improve efficiency and profitability.