22581776 Hospitality Industry

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9/12/2009

Service Marketing Assignment

IBSINDUSTRY ANALYSIS OF INDIAN HOTEL &

HOSPITALITY INDUSTRY



Contents

HOSPITALITY INDUSTRY AN OVERVIEW ........................ ................................ ...................... ................... 3

Atithi Devo Bhavo (guest is God) ........................ ................................ ...................... ............................ 4

Accommodation .................................................................................................................................. 5

Bars & Clubs ........................................................................................................................................ 5

Travel and Tourism .............................................................................................................................. 5

Service and Support ............................................................................................................................. 5

CONTRIBUTION TO INDIAN ECONOMY..................................................................................................... 6

Future-wise.......................................................................................................................................... 6

The driving force .................................................................................................................................. 7

SWOT ANALYSIS....................................................................................................................................... 8

TRENDS IN HOSPITALITY SECTOR ............................................................................................................. 9

CHALLENGES FOR HOSPITALITY INDUSTRY ........................... ................................ ....................... ........... 10

RECOMMENDATIONS ............................................................................................................................ 11

Recommendations to the government ........................ ................................ ...................... ................. 11

Recommendations to the hospitality industry: ................................................. ...................... ............ 12

FUTURE OF HOSPITALITY SECTOR .......................................................................................................... 13

HOTEL INDUSTRY OVERVIEW ................................................................................................................. 13

LEADING COMPANIES IN HOTELS ........................... ................................ ...................... .......................... 17

ROAD AHEAD: ........................................................................................................................................ 21



HOSPITALITY INDUSTRY AN OVERVIEW

Hospitality is all about offering warmth to someone who looks for help at a strange or unfriendly

the commercial context refers to the activity of hotels, restaurants, catering, inn, resorts or clubs

who make a vocation of treating tourists. Helped With unique efforts by government and all

other stakeholders, including hotel owners, resort managers, tour and travel operators and

employees who work in the sector, Indian hospitality industry has gained a level of acceptance

world over. It has yet to go miles for recognition as a world leader of hospitality. Many take

Indian hospitality service not for its quality of service but India being a cheap destination for

leisure tourism with unlimited tourism and untapped business prospects, in the coming year¶s

Indian hospitality is seeing green pastures of growth. Availability of qualified human resources

and untapped geographical resources give great prospects to the hospitality industry. The number

of tourists coming to India is growing year after year. Likewise, internal tourism is another area

with great potentials.

The hospitality industry is a 3.5 trillion dollar service sector within the global economy. It is an

umbrella term for a broad variety of service industries including, but not limited to, hotels, food

service, casinos, and tourism. The hospitality industry is very diverse and global. The industry is

cyclical; dictated by the fluctuations that occur with an economy every year. Today hospitality

sector is one of the fastest growing sectors in India. It is expected to grow at the rate of 8%

between 2007 and 2016. Many international hotels including Sheraton, Hyatt, Radisson,

Meridian, Four Seasons Regent, and Marriott International are already established in the Indian

markets and are still expanding. Nowadays the travel and tourism industry is also included in

hospitality sector. The boom in travel and tourism has led to the further development of

hospitality industry. In 2003-04 the hospitality industry contributed only 2% of the GDP.

However, it is projected to grow at a rate of 8.8% between 2007-16, which would place India as

the second-fastest growing tourism market in the world. This year the number of tourists visiting

India is estimated to have touched the figure of 4.4 million. With this huge figure, India is

becoming the hottest tourist destination. The arrival of foreign tourists has shown a compounded

annual growth of 6 per cent over the past 10 years.



Atithi Devo Bhavo (guest is God)

We have all heard this phrase many times during our childhood from our parents and grand-

parents. We can also find its presence in the earliest Vedas and religious epics. Hospitality is

deep-rooted in our traditions and comes as an integral part of our heritage. In very simple terms,

hospitality is the art of being warm to strangers and has been

Derived from the Latin word hospitalitem, this means ³friendliness to guests´. The hospitality

industry covers a diverse range of establishments in the form of accommodation, food and

drinks. It includes:-

The concept of hospitality business started when people started traveling away on business andthey needed a place away from home which could cater to all their needs. Today hospitality has

evolved from the basic food and accommodation industry and taken a very important position in

almost all businesses. In fact, it has become a huge industry and drives economies across the

globe. The scope of hospitality/ service industry today is far more than one could have ever

imagined a few years back. Earlier people who graduated from a Hotel School could get



employed either in Hotels, Cruises or Airlines. But service is the BUZZ word for all businesses

today. Be it the Retail Sector, Banking Industry, BPO, Telecom world, Real Estate or any other

sector having direct customer contact, a person with hospitality background has an edge above

the rest, because of their sheer capability of understanding the needs of a customer better and

handling difficult customers/ situations efficiently. Hotel industry depends largely upon the

foreign tourist arrivals further classified into business travelers (around 65% of the total foreign

tourists) and leisure travelers. The following figures show that business as well as the leisure

travelers (both domestic and international) formed major clientele for hotels in 2004. Over the

last two years, the hotel industry has seen higher growth rates due to greater number of tourist

arrivals, higher occupancy rate (being around 75% in FY'06) and significant increase in average

room rate (ARR).

Accommodation

Hotels,

Residential

Public houses

Motels

Resorts

Sanatorium

Bars & Clubs

Nightclubs

Public houses

Restaurants

Travel and Tourism

Travel Agents

Airline Cabin Staff

Travel technology

Service and Support

Accountancy

Occupational Health and Spa



CONTRIBUTION TO INDIAN ECONOMY

The Indian hospitality industry is going great guns presently, with high operating margins and \

increase in the number of travelers visiting India - both inbound and outbound. Thus, the only

direction left for the sector points upwards. However, what needs to be focused on is the fact that

opportunities are not missed, which presently includes the large gaps in rooms supply as

compared to demand. India has approximately 100,000 rooms only in totality, which is lesser

than that in Las Vegas, besides contributing to an insignificant portion of the GDP - just 5.4 per

cent, In comparison to nations like China, Thailand and Malaysia where the hospitality share

ranges between 12 and 15 per cent. Within the nation, major contribution as destinations will be

from the growing tier I and II cities with a special emphasis on business hotels across categories

as well as the prime leisure destinations like Goa, Rajasthan, etc, which will remain on the

growth path, creating the aura for India as a leisure destination. Accordingly, the needs of the

traveler will be nothing less than perfection. With an increase in choices available, they will be

less forgiving of service deficiencies. Guests will require higher levels of service in the full-

service segments, which will warrant greater training requirements for hotel staff. The limited

service hotels will require a complete shift in the perception of customer service.

Future-wise

The driving force behind these will be global brand standards and therefore they will have

standard specifications creating a degree of uniformity and standardization in certain limited andmid-market hotel segments. Differentiations in product type will evolve more at the higher end

of the market with:-

boutique hotels

resorts

convention centers

The need to differentiate design will play an important role. Various brands and operators will

play a larger role in driving design standards, getting involved at early project planning stages.

As hotel segments cater to specific demand segments, design typologies will be more customized

to suit traveler¶s lifestyle. Equal importance will also be given to green-building concepts in

terms of development and operations, which will go beyond cost-saving, placating the demands

from both investors and customers... In addition, 'green-conscious' business and corporate groups

will patronize hotels and brands that support green concepts.



Besides all this, the reliance on technology will move beyond Wi-Fi and internet requirements to

tools to support sales and marketing as well as yield management. Even basic interiors will be

upgraded with the use of technology like self check-in and information kiosks. This will also

revamp sales and marketing as international brands will leverage their central reservation

systems and will initiate networks with third party reservation agencies. In addition, systems will

become more sophisticated and targeted, customizing sales and marketing efforts for each

targeted traveler. F&B, an area of immense importance within a hotel will also evolve, especially

for the select-service hotel categories. However when discussing service, which is the main play

of this industry, it has to be understood that the growth phase is still on and the market is

currently undersupplied in terms of trained hotel staff to cater to the large supply pipeline.

The driving force

If the country is able to sustain its economic growth especially in the service sector, it will have a

direct influence on the hotel industry. This is directly related to the incoming foreign

investments, not just in the hotels but the economy as a whole. Also equally important is the fact

that India has now discovered the power of marketing and with campaigns like Incredible India,

there are also the various large scales regional and global events like the upcoming

Commonwealth Games, Asian Games and the recent Indian Premiere League that builds interest

about the nation... Apart from these external factors there are other factors where the industry can

be given a great boost. For instance if land prices became more realistic, the process of getting

approvals and licenses to build and operate hotels are streamlined, together with strong

infrastructure development and investment and more tax/levy incentives being provided to build

hotels, it would prove very fruitful for the industry



SWOT ANALYSIS

STRENGTHS

1. Natural and cultural diversity: India has a rich cultural heritage. The "unity in diversity" tag

attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala, snow capped

Himalayas and the quiescent lakes are incredible.

2. Demand-supply gap: Indian hotel industry is facing a mismatch between the demand and

supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting

Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to

the rapid expansion of the sector

3. Government support: The government has realized the importance of tourism and has

proposed a budget of Rs. 540 crore for the development of the industry. The priority is being

given to the development of the infrastructure and of new tourist destinations and circuits. The

Department of Tourism (DOT) has already started the "Incredible India" campaign for the

promotion of tourism in India.

4. Increase in the market share: India's share in international tourism and hospitality market is

expected to increase over the long-term. New budget and star hotels are being established.

Moreover, foreign hospitality players are heading towards Indian markets.

WEAKNESSES

1. Poor support infrastructure: Though the government is taking necessary steps, many more

things need to be done to improve the infrastructure. In 2003, the total expenditure made in this

regard was US $150 billion in China compared to US$ 21 billion in India.

2. Slow implementation: The lack of adequate recognition for the tourism industry has been

hampering its growth prospects. Whatever steps are being taken by the government are

implemented at a slower pace.

3. Susceptible to political events: The internal security scenario and social unrest also hamper

the foreign tourist arrival rates.



OPPORTUNITIES

1. Rising income: Owing to the rise in income levels, Indians have more spare money to spend,

which is expected to enhance leisure tourism.

2. Open sky benefits: With the open sky policy, the travel and tourism industry has seen an

increase in business. Increased airline activity has stimulated demand and has helped improve the

infrastructure. It has benefited both international and domestic travels.

THREATS

1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists can

be risky, as there are wide fluctuations in international tourism. Domestic tourism needs to be

given equal importance and measures should be taken to promote it.

2. Increasing competition: Several international majors like the Four Seasons, Shangri-La and

Amman Resorts are entering the Indian markets. Two other groups - the Carlson Group and the

Marriott chain - are also looking forward to join this race. This will increase the competition for

the existing Indian hotel majors

TRENDS IN HOSPITALITY SECTOR

Trends that will shape the future of hospitality sector are:

1. Low Cost Carriers2. Budget Hotels

3. Service Apartments

4. Technology

5. Loyalty Travel

1. Low cost carriers: Travelers in general are more price sensitive to airfare than they are to

hotel room rates. Often a low airfare will stimulate demand for travel even if hotel prices are

increasing. LCCs are a good option for business travelers, as they have advantages like low

costs, more options and connectivity.

2. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from the

business travel segment. The average room rate (ARR) realized from business travelers is

normally higher than from leisure travelers.



Heightened demand and the healthy occupancy rates have resulted in an increase in the number

of budget hotels. Some of the new players entering into this category of hotels include Hometel,

Kamfotel, Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn.

3. Service apartments: The concept of service apartments, though a recent phenomenon in

India, is an established global concept. Villas in Spain, flats in the UK and apartment complexes

in the US have all created a viable market for those who want more than just a room in a hotel.

Service apartments are the latest trend in accommodation, offering the comfort and convenience

of a home without the hassles of having to maintain or look after it. Ideally suited for medium-to-

long staying guests, service apartments are a natural choice for corporate employees or

expatriates relocating to a particular city, non-resident Indians visiting the country for long spells

and foreigners visiting the city for long durations.

4. Technology: Travel and technology have become inseparable. Technology is making its own

advances with high-tech video conferencing facilities, web cameras and virtual reality mode of

conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity, easy access to

information, etc. are just a few areas where technology has completely changed the way we

travel.

5. Loyalty travel: Today, airline-credit card company tie-ups have brought a whole range of

benefits to the travelers. These include insurance cover, upgrades, free tickets, access to

executive lounges, and a host of other Goodies.

CHALLENGES FOR HOSPITALITY INDUSTRY

1. Shortage of skilled employees: One of the greatest challenges plaguing the hospitality

industry is the unavailability of quality workforce in different skill levels. The hospitality

industry has failed to retain good professionals.

2. Retaining quality workforce: Retention of the workforce through training and development

in the hotel industry is a problem and attrition levels are too high. One of the reasons for this is

unattractive wage packages. Though there is boom in the service sector, most of the hotel

management graduates are joining other sectors like retail and aviation.

3. Shortage of rooms: The hotel industry is facing heavy shortage of rooms. It is estimated that

the current requirement is of 1, 50,000 rooms. Though the new investment plan would add

53,000 rooms by 2011, the shortage will still persist.



4. Intense competition and image of India: The industry is witnessing heightened competition

with the arrival of new players, new products and new systems. The competition from

neighboring countries and negative perceptions about Indian tourism product constrains the

growth of tourism. The image of India as a country overrun by poverty, political instability,

safety concerns and diseases also harms the tourism industry.

5. Customer expectations: As India is emerging as a destination on the global travel map,

expectations of customers are rising. The companies have to focus on customer loyalty and

repeat purchases.

6. Manual back-end: Though most reputed chains have IT enabled systems for property

management, reservations, etc., almost all the data which actually make the company work are

filled in manual log books or are simply not tracked.

7. Human resource development: Some of the services required in the tourism and hotel

industries are highly personalized, and no amount of automation can substitute for personal

service providers. India is focusing more on white collar jobs than blue collar jobs. The shortage

of blue collar employees will pose various threats to the industry.

RECOMMENDATIONS

Recommendations to the government

The government could constitute a steering committee to review the demand and supply of the

human resources in the hospitality industry and prepare plans for developing qualitative human

resources which are required for the present day global industry. The committee should

constitute with the members from all concerned areas like:

State and central tourism development commissioners

Representatives from all areas of hospitality industry

Member¶s / president / secretary of the hotel management associations

Member¶s / president / secretary of the travel and tourism associations

Representative from hotel employees associations

One member representative from international hotel chain

The committee should review the present situation and suggest the steps to be taken to reduce the

gap between the demand and supply of human resources in the industry.

The committee should concentrate on the following issues mainly:



Create a policy on industry institute interaction

Establish an apex body t coordinate all the management institutes in the country

For conducting common entrance test for all Govt. university / AICTE / private

institutes in the country

Curriculum development from time to time as industry requirement

Fees structure for different courses in different institutes

Appoint a committee to identify the requirements of qualified manpower for

International Hotels and also identify the ways to develop.

Recommendations to the hospitality industry:

Tie ± ups with institutes: It is the duty of the Industry t makes necessary tie-up /

arrangement for their required human resources with one or two hospitality institutes in

the country.

Continuous training: There is a need of continuous training to all categories of

employees in the organization. when they have a tie ± up with the institutes , the institutes

will offer in ± house training to different category of employees from time to time to

update their skills

.

Sponsoring: It is the duty of the industry to sponsor some amount / equipment to the

institute for their betterment. If possible the sponsor a chair for continuous funding and

research for that institute.

Research: Every institute must spend some amount for the research which is essential

for further development and understand the present situation. The industry should

involve in the researchers by providing timely information and data which is ultimately

useful for them only.



FUTURE OF HOSPITALITY SECTOR

To boost up the growth of tourism in India, the government has proposed to invest Rs. 520 crore

in 2007-2008. Tourism in expected to grow further over the next few years due to the changes

taking place on the demand and supply sides. The factors that will account for the further growth

of tourism will include the following:

Change in standards of living

More disposable income

Better education

Long leisure time

Aging population

Owing to growth of tourism sector, infrastructure will improve, competition will increase, new

products will come into markets and better services will be provided. Due to the rapid growth in

tourism, the hotel industry is also booming. Many international players like Le Meridian and

Accor are heading towards Indian markets to expand their business. With government's full

support in developing infrastructure, increase in demand, open sky policies and increased

competition, the hospitality industry is getting consolidated and has many more opportunities to

grow further.

HOTEL INDUSTRY OVERVIEW A hotel is an establishment that provides paid lodging, usually on a short term basis. Hotels often

provide a number of additional guest services such as a restaurant, a swimming pool or childcare.

Some hotels have conference services and meeting rooms and encourage groups to hold

conventions and meetings at their location. Some of the main features of the Indian hotel

industry include the following:

The industry is more dependent on metropolitan cities as they account for 75% to 80% of

the revenues, with Delhi and Mumbai being on top.

The average room rate (ARR) and occupancy rate (OC) are the two most critical factors

that determine profitability.

ARR depends on location, brand image, star rating, quality of facilities and services

offered.

The occupancy rate depends on other seasonal factors.



India is an ideal destination for tourists.

Approximately 4.4 million tourists visit India every year. Thus the growth prospects are

very high.

In the hotel sector, a number of multinationals have strengthened their presence. Players like

Four Seasons are also likely to enter the Indian marketing the near future. Moreover, Indian hotel

chains are also expanding internationally. A combination of all these factors could result in a

strong emergence of budget hotels, which could potentially lower the cost of travel and related

costs.

The hotel industry can be further categorized into three segments:

Hotels

restaurants

Contract caterers.

HOTELS

The hotels in India can be broadly classified into the following segments:



Star rated hotels: They form 30% of the industry size. These are mainly situated in the business

districts of metro cities and cater to business travelers and foreign tourists. These are considered

to be very expensive. They are built over an area of up to 18000 sq. meters

The first 2 types are usually located in business areas of metro cities and cater to foreign tourists,

business travelers, top government officials and political brass, offering luxury at a high price.

You¶ll find the next 2 types in tier II cities and tourist destinations, preferred by mid-level

executives and leisure tourists.The last 2 types are found in smaller cities and around tourist

spots, preferred by domestic tourists. These are characterized by lesser capital expenditure and

affordability and include hotels running in palaces, castles, forts, hunting lodges etc.

The heritage hotels are further classified as:

Budget hotels: They¶re usually preferred by domestic travelers seeking economical

accommodation. These are reasonably priced, offer limited luxury, seasonal discounts and decent

services. Some new global entrants include UK¶s Dawnay Day and Whitbread Premier Travel

Inn, Shangri-la, Amman resorts, Golden Tulip budget hotels, Fairfield inn, Country inns and

suites, Courtyard by Marriott, Hometel, Ibis and Kamfotel among others. Budget hotels are

preferred by business travelers contributing to greater ARR (average room rate) than leisure

travelers. Increased demand and healthy occupancy has fueled the growth of budget hotels in a

short time.



Facility hotels:-

Unclassified hotels: They¶re motels spread across the country. They form 19% of the industry

size. Low price is their only USP.

B. RESTAURANTS

These typically include fast food chains, ethnic restaurants, fine dining and coffee bars. The

major players include Barista, Mc Donald¶s, Ruby Tuesday, Bercos, etc.

CONTRACT CATERING

This includes any catering business unit that is formally not a part of the hotel industry but is

closely allied to it. Some of the major players in this category include Sodexho, Compass Group,

etc.



LEADING COMPANIES IN HOTELS

1) EIH: - EIH, the flagship company of The Oberoi Group, provides hospitality and related

services. EIH is engaged in the ownership and operation of hotels and other related

services. The company primarily operates in India, where it is headquartered in Kolkata.

The company recorded revenues of INR11, 938 million (approximately $260.5 million)

in the fiscal year ended March 2009. Its net profit was INR1, 699.5 million

(approximately $37.1 million) in fiscal 2009.



2) ITC limited: - ITC-WELCOM GROUP has pioneered the concept of "BRANDED

ACCOMMODATION" in the hospitality industry. Branding led to the segmentation of

room which was termed as branded Executive club, The Towers and ITC One. In 2007,

ITC WELCOMGROUP tied up with STARWOOD with STARWOOD to launch its

premium brand, The µLUXURY COLLECTION¶. The company has more than 75 hotels

in India with about 5500 rooms and is developing 27 more properties that will add about

3000 rooms.

Indian Hotel Company limited: - The Indian Hotels Company (IHCL), a subsidiary of Tata

Group, is engaged in hoteliering and air catering business. IHCL and its subsidiaries are

collectively known as Taj Hotels Resorts and Palaces. Taj Hotels Resorts and Palaces comprises

of 59 hotels at 40 locations across India with an additional 17 international hotels in the

Maldives, Mauritius, Malaysia, UK, US, Bhutan, Sri Lanka, Africa, the Middle East and

Australia. The company primarily operates in India. It is headquartered in Mumbai, India.



Taj Hotels Resorts and Palaces is grouped into luxury, leisure and business categories. The Taj

luxury hotels offer suites and rooms, gourmet specialty restaurants and bars, business facilities,

fitness centers, spas, and banquet and meeting facilities. It has restaurants and bars that serve a

range of cuisines from across the globe.

The Taj leisure hotels include beach resorts, palaces, garden retreats, and historic and pilgrim

centers. It offers rooms by the sea, restaurants, water sports facilities, tennis courts, freshwater

swimming pools, spas, and travel assistance. The Taj business hotels are spread across India, Sri

Lanka, Africa, and the Middle East. It offers rooms, telecommunication facilities such as

wireless internet connectivity, specialty restaurants and bars, business centers, and conference

facilities and banquet areas. It also offers swimming pools, coffee shops, fitness centers, and

travel assistance.

IHCL also operates Taj Air, a luxury private jet operation with Falcon 2000 aircrafts designed by

Dassault Aviation, France; and Taj Yachts, two 3-bedroom luxury yachts. The company also

operates Taj Sats Air Catering, an airline catering service in South Asia, as a joint venture with \

Singapore Airport Terminal Services, a subsidiary of Singapore Airlines. IHCL also operates Taj

Wellington Mews Luxury Residences, which is a complex of 80 luxurious serviced apartments in

South Mumbai. Additionally, the company also operates the Institute of Hotel Management,

Aurangabad, which offers a three year diploma, designed with the help of international faculty

and has affiliations with several American and European programmers.



Market Value Forecast

In 2013, the Indian hotels and motels industry is forecast to have a value of $11.2billion, an

increase of 96.5% since 2008. The compound annual growth rate of the industry in the

period 2008-2013 is predicted to be 14.5%.



ROAD AHEAD:

A focus on quality, behavior-based evaluation, market choice and market response has

predominantly shaped the country's hotel & hospitality industry. Increased competition and

increase in demand has consolidated the hospitality segment, whilst opening up a plethora of

opportunities. Fierce competition has led to innovative ideas by hotel majors, thereby delivering

impressive hospitality products and services. This has, in turn, also prompted them to generate

new lines of revenue with creative approaches, be it by reducing transaction costs, increasing

productivity or promoting traditional Indian values. Combining unparalleled growth prospects

and unlimited business potential, this industry is certainly on the foyer towards being a key

player in the nation's changing face.

Documents

22581776 Hospitality Industry