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Published by Pradipta Paul

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Published by: Pradipta Paul on Jun 30, 2011
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Industry analysis
Current trends
The Indian Hospitality Industry is one of the fastest growing sectors of the Indian economy. Riding on the economic growth and rising incomelevels that India has witnessed in recent years, the sector has emerged asone of the key sectors driving the country¶s economy. The current marketsize is US$ 23 billion, accounting for 2.2% of India¶s GDP. Risingdisposable incomes and increase in double-income households have also played a part in this growth phenomenon.The size of the Indian hospitality industry is estimated as a sum of revenues of two segments; revenues generated from travel for purposessuch as business, leisure, visiting friends and relatives, religious,meetings and conferences, and revenue generated by consumers eatingout at any form of outlet ± restaurants, fine dining, Quick ServiceRestaurants (QSRs), takeaways, dhabas or any other form of unorganizedeateries.As per an analysis by the Economy Survey of India and Technopak (2008), the Indian hotel industry is estimated at US$ 17 billion; 70%(US$ 11.85 billion) contribution comes from the unorganized sector andthe remaining 30% (US$ 5.08 billion) comes from the organized sector.The foremost contribution of the organized hotel industry comes from 5-star hotels. Despite a dip in the year 2009, an upward trend in growth of the overall hotel sector is expected, whereby the industry is expected togrow to US$ 36 billion by 2018.There has been a consistent increase in the number of hotel rooms inrecent years; growth of 5% in the last 3 to 4 years. However, this rate of increase is still not enough to meet the rising demand; further investmentis required in this sector to meet this demand. The hotel sector is expectedto see an estimated investment of US$ 12.17 billion in the next 2 years,and an addition of over 20 new international hotel brands by 2011.
Rapidly Changing Operating Models
Unlike in the west, the franchise model has not been a success in India.What accounted for its success in the west is a consistency in the productoffering along with strict regulations by the Government on hygiene andhealth standards, which helped the franchise model to flourish. Recenttrends strongly suggest that the franchise model of business has taken a
 backseat and the focus is shifting to the management model. Factorsdriving this operating model are:‡Hotel operation is a critical area where efficiency has to be spot on andthis is where the management model stands out‡ There are a number of properties developing with a fewer number of operators
ergence of Mixed Land Usage
Mixed-use developments incorporating residential, retail, entertainment,hospitality and corporate offices are fast emerging in metros tier-II andtier-III cities. Some examples are as below:‡Kshitij introducing µMarket Cities¶, retail-led mixed-use development projects in Mumbai, Chennai and Bengaluru‡Brigade group is focusing on the µhotel-cum-mall¶ options with BrigadeMetropolis, a business hotel being developed at Chennai‡The Leela Kempinski, Gurgaon is located in a mixed-use complex of luxury residences, retail spaces, entertainment and wellness facilities
inishing Brand Loyalty
Guests today are becoming increasingly unpredictable and quickly switchtheir patronage for better deals across hotel segments, thereby reducingefficacy of many loyalty programs which hotels target towards their customers.
New Avenues of Growth
Service apartments, time sharing, fractional ownership, and companyhotels or guest houses, have immense potential to grow. Their growth islikely to be due to increased demand of the IT, ITES, BPO, KPO, biotechnology and medical tourism sectors.Heightened awareness of consumers towards their environment has brought into prominence the concept of µeco tourism¶ and µagri-tourism¶.There is an increased flow of people, especially those from the west, toIndia for medical services. This has also brought into limelight theconcept of µmedical tourism¶. The current market for µmedical tourism¶ inIndia is US$ 533 million, and is expected to grow to US$ 3.29 billion by2018.Diversification holds the key to survival in the long run. The hotelindustry isn¶t behind. Spas are appearing at hotel properties at aremarkable rate and are becoming independent profit centers. Cafes,lounges and bars which have high profit margins, are increasing their  presence in several hotels.
Growth of Budget Hotels
Leading groups present in this segment are Ginger Hotels, Lemon Tree,Sarovar Hotels, Fortune Hotels, Ibis and Choice Hotels. Currently, 3 & 4star category hotels together account for 22% of the total room supply inIndia, which clearly indicates a huge growth potential for budget hotels.Due to the vast demand- supply gap of mid-segment hotel rooms, aninvestment of US$ 835 million is proposed for this hotel category over the next three years. Furthermore, for the Commonwealth Games in 2010,the Government is expected to provide 10,000 budget rooms while therequirement would be for 40,000 to 50,000 rooms in this category.
Contribution of Technology
Hotel industry has been changed from a traditional hands-on, low- tech,locally based industry into a global industry that effectively utilizestechnology and implements information technology to combine high-touch and high-tech to the benefit of customers, employees and hotels.The ³development in IT is creating millions of electronic connectionsaround the globe, connecting and transforming information to people, the business community, industries, regional and international community¶s´.One way of using IT in tourism and hospitality industry is distribution.The impact of information technology since the advent of the WorldWide Web has significantly changed and even transformed the structureof tourism distribution. Traditionally, customers had two alternatives toreserve a hotel room ± directly approach the service provider (hotel) or touse services of a travel agent (intermediary). However, a surveyconducted in 2001 by Forrester Research (Harteveldt et al., 2001),indicated that the Global Distribution System (GDS) would continue toremain the most important channels of distribution for hotel industry andthe like.In addition, Internet will change the traditional travel and distributionscenario. Because of the Internet, several intermediaries can be by-passedto reach directly to new customers. According to research carried out byJupiter Research, the number of people who have bought travel productover the internet is likely to double from 18.6 million in 2001 to 38.6million by 2007. The key benefit of web distribution is its direct route tothe customers. Great cost saving can be achieved by encouragingcustomers to book electronically, which has made many tourism suppliersvery excited about this new distribution channel. This technology-

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