SWOT ANALYSIS OF

HOTEL INDUSTRY

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INTRODUCTION TO HOTEL INDUSTRY

Hotel industry is about serving the guests to provide them with "feel-good-effect". "Athithi

devo bhavha" (Guest is God) has been one of central tenets of Indian culture since times
immemorial. In India, the guest is treated with utmost warmth and respect and is provided the
best services. 

Today hotel industry 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, Meridien, Four Seasons Regent, and Marriott International are already established
in the Indian markets and are still expanding.

Hotels in India' have supply of 110,000 rooms. According to the tourism ministry, 4.4
million tourists visited India last year and at current trend, demand will soar to 10 million in
2010 - to accommodate 350 million domestic travelers. 'Hotels in India' has a shortage of
150,000 rooms fueling hotel room rates across India. With tremendous pull of opportunity,
India is a destination for hotel chains looking for growth. The World Travel and Tourism
Council, India, data says, India ranks 18th in business travel and will be among the top 5 in
this decade. Sources estimate, demand is going to exceed supply by at least 100% over the
next 2 years. Five-star hotels in metro cities allot same room, more than once a day to
different guests, receiving almost 24-hour rates from both guests against 6-8 hours usage.
With demand-supply disparity, 'Hotel India' room rates are most likely to rise 25% annually
and occupancy to rise by 80%, over the next two years. 'Hotel Industry in India' is eroding its
competitiveness as a cost effective destination. However, the rating on the 'Indian Hotels' is
bullish. 'India Hotel Industry' is adding about 60,000 quality rooms, currently in different
stages of planning and development and should be ready by 2012. MNC Hotel Industry
giants are flocking India and forging Joint Ventures to earn their share of pie in the race.
Government has approved 300 hotel projects, nearly half of which are in the luxury range.
Sources said, the manpower requirements of the hotel industry will increase from 7 million in
2002 to 15 million by 2010.

With the USD 23 billion software services sector pushing the Indian economy skywards,
more and more IT professionals are flocking to Indian metro cities. 'Hotel Industry in India'
is set to grow at 15% a year. This figure will skyrocket in 2010, when Delhi hosts the
Commonwealth Games. Already, more than 50 international budget hotel chains are moving
into India to stake their turf. Therefore, with opportunities galore the future 'Scenario of
Indian Hotel Industry' looks rosy. 
CLASSIFICATION OF HOTELS

Classification is based on many criteria and classifying hotels into different types is not an
easy task. The hotel industry is so vast that many hotels do not fit into single well defined
category. Industry can be classified in various ways, based on location, size of property
etc. The main hotel chains of India are: The Taj Group of Hotels, the Oberoi
Group and ITC Welcome group.

Some of the international chains are Hyatt, Marriott, and Le Meridien etc.

these properties have also come up in India now.

Based on location

 City center: Generally located in the heart of city within a short distance from
business center, shopping arcade. Rates are normally high due to their location
advantages.They have high traffic on weekdays and the occupancy is generally
high.
Example: Taj Mahal, Mumbai
 Motels: They are located primarily on highways, they provide lodging to highway
travelers and also provide ample parking space. The length of stay is usually
overnight.
 Suburban hotels: They are located in suburban areas, it generally have high
traffic on weekend. It is ideal for budget travelers. In this type of hotel rates are
moderately low.
 Airport hotels: These hotels are set up near by the airport. They have transit guest
who stay over between flights
 Resort hotels: They are also termed as health resort or beach hill resort and so
depending on their position and location. They cater a person who wants to relax,
enjoy themselves at hill station. Most resort work to full capacity during peak
season. Sales and revenue fluctuate from season to season.
 Floating hotels: As name implies these hotels are established on luxury liners or
ship. It is located on river, sea or big lakes. In cruise ships, rooms are generally
small and all furniture is fixed down. It has long stay guest.
  Boatels: A house boat hotels is referred as boatels. The shikaras of Kashmir and
kettuvallam of kerala are houseboats in India which offers luxurious
accommodation to travellers.
 Rotels: These novel variants are hotel on wheel. Our very own "palace on wheels"
and "Deccan Odessey" are trains providing a luxurious hotel atmosphere. Their
interior is done like hotel room. They are normally used by small group of
travellers

 Based on Size of Property

The main yardstick for the categorization of hotel is by size the number of rooms 
available in the hotel.
 Small hotel: hotel with 100 rooms and less may be termed as small hotels.
 Medium sized hotel: hotel which has 100-300 rooms is known as medium sized
hotel.
 Large hotels: hotel which have more than 300 rooms are termed as large hotels.
 Mega hotels: are those hotels with more than 1000 rooms.
 Chain hotels: these are the group that have hotels in many number of location in
India and international venues

Based on the Level of Service

Hotels may be classified into economy, and luxury hotels on the basis of the level of
service they offer.

 Economy/ Budget hotels: These hotels meet the basic need of the guest by
providing comfortable and clean room for a comfortable stay.
 Mid market hotels: It is suite hotel that offers small living room with appropriate
furniture and small bed room with king sized bed.
 Luxury hotels: These offer world class service providing restaurant and lounges,
concierge service, meeting rooms, dinning facilities. Bath linen is provided to the
guest and is replaced accordingly. These guest rooms contains furnishing, artwork
 etc. prime market for these hotels are celebrities, business executives and high
ranking political figures. Example: Hyatt Regency, New Delhi

Based on the Length of Stay

Hotel can be classified into transient, residential and semi residential hotels depending
on the stay of a guest.

 Transient Hotel: These are the hotel where guest stays for a day or even less, they
are usually five star hotels. The occupancy rate is usually very high. These hotels
are situated near airport.
 Residential hotels: These are the hotel where guest can stay for a minimum period
of one month and up to a year. The rent can be paid on monthly or quarterly basis.
They provide sitting room, bed room and kitchenette.
 Semi residential hotels: These hotels incorporate features of both transient and
residential hotel.

Based on Theme

Depending on theme hotel may be classified into Heritage hotels, Ecotels, Boutique
hotels and Spas.

 Heritage hotel: In this hotel a guest is graciously welcomed, offered room that
have their own history, serve traditional cuisine and are entertained by folk artist.
These hotels put their best efforts to give the glimpse of their region. Example: Jai
Mahal palace in Jaipur.
 Ecotels : these are environment friendly hotels these hotel use eco friendly items in
the room. Example: Orchid Mumbai is Asia first and most popular five star ecotel.
 Boutique hotels: This hotel provides exceptional accommodation, furniture in a
themed and stylish manner and caters to corporate travelers. Example: In India the
park Bangalore is a boutique hotel.
  Spas: is a resort which provide therapeutic bath and massage along with other
features of luxury hotels in India Ananda spa in Himalaya are the most popular
Spa

Based on Target Market

 Commercial hotel: They are situated in the heart of the city in busy commercial
areas so as to get good and high business. They cater mostly businessmen
 Convention hotels: These hotels have large convention complex and cater to
people attending a convention, conference 
Example: Le meridien, Cochin, is a hotel with largest convention center in south
India.
 Resort hotels: These leisure hotels are mainly for vacationers who want to relax
and enjoy with their family. The occupancy varies as per season. The atmosphere
is more relaxed. These are spread out in vast areas so many resorts have solar
powered carts for the transport of guest.
 Suite hotels: These hotel offer rooms that may include compact kitchenette. They
cater to people who are relocating act as like lawyers, executives who are away
from home for a long business stay.
 Casino hotels: Hotel with predominantly gambling facilities comes under this
category, they have guest room and food and operation too. These hotels tend to
cater leisure and vacation travelers. Gambling activities at some casino hotels
operate 24 hours a day and 365 days a year
 THE TOP PLAYERS IN HOSPITALITY SECTOR

Public Sector Players:

 ITDC hotels
 Hotel Corporation of India

Private Sector Players:

 ITC Hotels
 Indian Hotels Company Ltd.(The Taj Hotels Resorts & Palaces)
 Oberoi Hotels(East India Hotels)
 Hotel Leela Venture
 Asian Hotels Ltd.
 Radisson hotels & Resorts
 SWOT ANALYSIS OF HOTEL INDUSTRY

Strengths

 India’s rich culture heritage: With a historical backdrop of 5,000 years, India is one
big package of culture and legend that never fails to captivate the imagination of the
visitor. Along with endless natural splendors like the mighty Himalayas, the vast Indo
Gangetic Plains, lush tropical jungles and a long coastline. A visit to the country is a
changing spectacle of religions, customs, festivals, sights and sounds.
 Demand–supply gap: Indian hotel industry is currently facing a mismatch between
the demand and supply of rooms leading to higher room rates and occupancy levels.
With 95,000 odd rooms in the country, the size of the hotel industry represents an
abysmal figure for India's size and growth prospects. Though new capacities are
expected to come in the next five years demand will outpace supply in the short to
medium term. The table below highlights that, over the last 24 months, major cities in
the country have witnessed impressive growth in average room rates, due to strong
demand and not much addition to supply.
 Government support: Till a few years ago, the Indian government had a total apathy
towards promotion of tourism. In fact, the industry did not find a place in the
government’s fund allocation. Things have, however, witnessed a change. The
government seems to have realized the importance of tourism and is willing to spend
towards the development of the industry. The ‘Incredible India’ campaign is a product
of this realization. The focus on infrastructure, modernisation of airports, open sky
policy, development of new tourist destinations and circuits, more fund allocation
towards tourism are some of the initiatives taken by the government to promote
tourism. The Indian hotel industry stands to gain from this proactiveness shown by the
government.

Weaknesses

 Poor support infrastructure: India is currently spending a miniscule amount

compared with its needs, on infrastructure. China is spending seven times as much as
India on infrastructure (excluding real estate) in absolute terms. In 2003, total capital
spending on electricity, roads, airports, seaports and telecom was US$150 bn in China
 (10.6% of GDP) compared with US$21 bn in India (3.5% of GDP). However, over
the past 2-3 years, the government has realized the importance of infrastructure and
has focused on improving it.

Opportunities

 Rising Income: While there has been much talk about record number of foreign
tourist arrivals, very little has actually been said or done about domestic tourism,
which, according to our estimates, has registered a 40% annual growth in the last
three years and is currently estimated at 300 m travelers. Per capita income grew by
an impressive 7.1% in 2005, while Gross Domestic Savings touched an all time high
of 28%. Significantly, the present-day consumption boom in India has been
influenced more by higher disposable income rather than lower savings. This is good
news, as income induced spending is likely to sustain itself for a longer period. Higher
disposable incomes are also expected to enhance the concept of traveling for leisure.

Also, there has been an overall transformation in consumption pattern in the last five years.
The increase in number of young people, their rising aspiration levels, and an increase in their
spending power has led to a change in the consumption pattern. There is a marked shift from
spending on traditional categories like food and grocery, clothing and jewelry, to lifestyle
categories such as leisure, and aspirational products and services.

 Open sky benefits: The opening up of the aviation industry in India brings exciting
opportunities for the hotel industry (airlines transport around 80% of international
tourists). Increased airline activity has stimulated demand and has helped to improve
India's troubled infrastructure. Increased competition among airline companies will
further lead to the development of new and improved services. Also the open skies
policy has benefited both international and domestic travel.
 New business opportunities: We believe that, over the next three to five years, the
biggest surge in accommodation demand is expected to come from commercial zones
that are being developed in metro suburbs and secondary markets. Mixed-use
development projects that include retail and commercial space have also gained
momentum in the last 24 months and will continue to be an attractive option. This
provides a unique opportunity for hospitality projects. Also the new concept, which is
going to gain importance is that of budget hotels (started by Indian Hotels – Ginger,
 the erstwhile Indione). Due to their inherent nature of operation, associated costs and
flexibility, budget hotels will be better suited to withstand the next economic
downturn as and when it takes place.

Threats

 Event risk: Dependency on foreign tourism can be a double-edged sword as travel

decisions are based on global patterns and events that happen elsewhere can have
serious impact the performance. Events like 9/11, SARS outbreak and Afghanistan
and Iraq wars have severely impacted the tourism industry in the past and the threat
remains.
 Increasing competition: Global hospitality majors like the Four Seasons,
Shangri-La and Aman Resorts are all making their entry into the Indian market.
They are not the only ones who are turning their attention to India. The Hilton
Group is deciding on a comeback and has tied up with the Oberoi Group. Two
other groups - the Carlson Group and the Marriott chain are furiously hunting for
new hotels in India's top cities. This will increase the competition for the existing
Indian hotel majors.