CHAPTER - 1 INTRODUCTION

1.1

History & Evolution

The hotel industry that exists today can be traced back to 3000 B.C. where the earliest inns were homes with rooms provided for travelers. Conditions improved in 1700s England when the renaissance sparked the desire to travel. The United States saw its hotel industry created a century later. By this time they had revolutionized many firsts in the industry including private rooms with locks and doors, free soap, a trained staff, and a pitcher of water in each room. Indoor plumbing and the creation of the lobby followed shortly thereafter. The business of providing strangers with hospitable means has come along way. What once was a service to fellow man is now the foundation numerous economies throughout the world. The modern era of the hotel industry saw its beginnings in 1794 New York where the first ever hotel was built. Profit potential was recognized with the inception of the industrial revolution. Stock companies invested in hotels seeking profit from property value appreciation and room occupancy revenue. Surrounding communities were promised increase in sales by means of higher volume of people passing through., the industry creates a multitude of opportunities that now saturate the industry in the form of spin-offs of these top four hotel companies creating the most common chains we know of today. History has proven that the success of this industry has largely to do with two factors, location and innovative integration, the combination of these two has created a margin between the larger chains and those who operate on a smaller scale. Soap and locks on doors were the innovation for their day. Strategic placement and product differentiation once again guide the success of this industry. The word hotel is derived from the French hôtel (coming from

hôte meaning host), which referred to a French version of a townhouse or any other building seeing frequent visitors, rather than a place offering accommodation. A hotel is an establishment that provides paid lodging on a short-term basis. The provision of basic accommodation, in times past, consisting only of a room with a bed, a cupboard, a small table and a washstand has largely been replaced by rooms with modern facilities, including en-suite bathrooms and air conditioning or climate control. Additional common features found in hotel rooms are a telephone, an alarm clock, a television, and Internet connectivity; snack foods and drinks may be supplied in a mini-bar, and facilities for making hot drinks. Larger hotels may provide a number of additional guest facilities such as a restaurant, a swimming pool or childcare, and have conference and social function services. Some hotels offer meals as part of a room and board arrangement. Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry is inextricably linked to the tourism industry and the Growth in the Indian tourism industry has fuelled the growth of Indian Hotel industry. The thriving economy and increased business Opportunities in India have acted as a boon for Indian hotel industry. The Arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. The 'Incredible India' destination campaign and the recently launched 'Atithi Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and international tourism and consequently the hotel industry. According to a report, Hotel Industry in India currently has supply of 110,000 rooms and there is a shortage of 150,000 rooms fuelling hotel room rates across India. According to estimates demand is going to exceed supply by at least 100% over the next 2 years. The future scenario of Indian hotel industry looks extremely rosy. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years.

1.2 List of players in the industry • Taj Group • Inter Continental • Le Meridien Group of Hotels • Oberoi Group of Hotels • The Park Group of Hotels • Welcome Heritage Group of Hotels • ITC Welcome group of Hotels 1.3 Categorization of players in the industry

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. 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

They cater a person who wants to relax. Mid market hotels: It is suite hotel that offers small living room with appropriate furniture and small bed room with king sized bed. In this type of hotel rates are moderately low. Sales and revenue fluctuate from season to season. Based on the Level of Service Hotels may be classified into economy. Their interior is done like hotel room.on weekend. Floating hotels: As name implies these hotels are established on luxury liners or ship. Economy/ Budget hotels: These hotels meet the basic need of the guest by providing comfortable and clean room for a comfortable stay. and luxury hotels on the basis of the level of service they offer. Chain hotels: these are the groups that have hotels in much number of locations in India and international venues. Large hotels: hotel which have more than 300 rooms are termed as large hotels. They have transit guest who stay over between flights. enjoy themselves at hill station. Mega hotels: are those hotels with more than 1000 rooms. sea or big lakes. Medium sized hotel: hotel which has 100-300 rooms is known as medium sized hotel. Boatels: A house boat hotels is referred as boatels. Based on Size of Property The main yardstick for the categorization of hotel is by size the number of rooms available in the hotel. The shikaras of Kashmir and kettuvallam of kerala are houseboats in India which offers luxurious accommodation to travelers. Resort hotels: They are also termed as health resort or beach hill resort and so depending on their position and location. Our very own "palace on wheels" and "Deccan Odessey" are trains providing a luxurious hotel atmosphere. . Rotels : These novel variants are hotel on wheel. Most resort work to full capacity during peak season. Small hotel: hotel with 100 rooms and less may be termed as small hotels. It has long stay guest. In cruise ships. It is ideal for budget travelers. They are normally used by small group of travelers. rooms are generally small and all furniture is fixed down. Airport hotels: These hotels are set up near by the airport. It is located on river.

bed room and kitchenette. These hotels are situated near airport. Example: Orchid Mumbai is Asia first and most popular five star Ecotels. They cater mostly businessmen. Example: Hyatt Regency. These hotels put their best efforts to give the glimpse of their region. prime market for these hotels are celebrities. offered room that have their own history. Ecotels. Residential hotels: These are the hotel where guest can stay for a minimum period of one month and up to a year. 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. They provide sitting room. concierge service. Example: In India the park Bangalore is a boutique hotel. 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. New Delhi Based on the Length of Stay Hotel can be classified into transient. Semi residential hotels: These hotels incorporate features of both transient and residential hotel. Heritage hotel: In this hotel a guest is graciously welcomed. Transient Hotel: These are the hotel where guest stays for a day or even less. The rent can be paid on monthly or quarterly basis. meeting rooms. they are usually five star hotels. These guest rooms contains furnishing. business executives and high ranking political figures. Boutique hotels and Spas. Bath linen is provided to the guest and is replaced accordingly. artwork etc.Luxury hotels: These offer world class service providing restaurant and lounges. Based on Theme Depending on theme hotel may be classified into Heritage hotels. residential and semi residential hotels depending on the stay of a guest. Example: Jai Mahal palace in Jaipur. dinning facilities. Boutique hotels: This hotel provides exceptional accommodation. Ecotels: these are environment friendly hotels these hotel use eco friendly items in the room. furniture in a themed and stylish manner and caters to corporate travelers. The occupancy rate is usually very high. serve traditional cuisine and are entertained by folk artist. .

It is a luxury brand of great fame and reflects the inherent Le Meridien touch of elegance and class through all its properties in India. Best Western Group: A world famous name when it comes to hospitality and service. Le Meridien Group of Hotels: The Le Meridien Group of Hotels has played an instrumental role in playing the perfect host to the millions of tourists and guests coming here. The Oberoi Group of Hotels in India: One of the most prominent names among the hotel chains of India is the Oberoi Group. 1. Gambling activities at some casino hotels operate 24 hours a day and 365 days. the Best Western Group owns several properties across India. executives who are away from home for a long business stay. It also owns several properties in exotic places like Australia and Mauritius. With its world class facilities and efficient staff to manage and play the perfect Indian hosts. The atmosphere is more relaxed. the Oberoi hotels is no doubt a great feather on the grand cap of tourism in India.4 Brief profile of players in the Industry Best Hotel Chains Of India Mentioned below are the significant hotel chains of India. Taj Group of hotels in India: The most popular name that is almost synonymous to hospitality in India is that of the Taj Group. They cater to people who are relocating act as like lawyers.Convention hotels: These hotels have large convention complex and cater to people attending a convention. These hotels tend to cater leisure and vacation travelers. luxury hotels and even sea resorts. Offering the best hotels across various genres like business hotels. Each of the hotels has been equipped with numerous features to enable a cozy comfortable stay to the guest. conference Resort hotels: These leisure hotels are mainly for vacationers who want to relax and enjoy with their family. they have guest room and food and operation too. It is no wonder one of the exclusive hotel chains of India. heritage resorts. Casino hotels: Hotel with predominantly gambling facilities comes under this category. Suite hotels: These hotel offer rooms that may include compact kitchenette. . These are spread out in vast areas so many resorts have solar powered carts for the transport of guest. the Taj Group is definitely the best in the field. The occupancy varies as per season.

but still not deluxe. This adds revenue as well as a facility for the customers who are staying in hotels.2 PRODUCT LINES AND CONSUMER BEHAVIOUR 2. Recreation facility 2. These halls provide extra revenue for the hotels. The facilities in the rooms are based on the type of hotel and price of the rooms are based on the type and facilities provided in the room.CHAPTER .1 Products Rooms : The rooms in hotels are based on the Category of the hotel. The price depends on the facilities. Few types of rooms are explained below STANDARD: This category usually means the most basic room type offered by the hotel. standard amenities and furnishings.2 Product Description There are several types of rooms provided by the hotels based on their category. MODERATE: Usually a slight bit better than standard. Standard rooms in hotels with higher categories often have no view or have a poor view over the dumpster or parking lot. Restaurants & Bar : Along with the rooms hotels provide restaurants and bars which are charged separately. Banquets & Halls: Banquet halls are provided by hotels for parties and functions. It has basic. space and time utilized. It may . Conference Rooms: The conference rooms are provided by hotels for the meetings and other requirements as per the request by the customers.

Free Local Calls • Superstar Hot Continental Breakfast. Fitness Centre • Meeting Rooms. manicure. Many hotels use the word "suite" to define any room with a sofa in it so be sure to check thoroughly if what you really want are the two or more separate rooms. location. regeneration cure. but it often refers to just the view.refer to the room view as well as the size and type of furnishings offered. Microwave • Complimentary Valet Parking • Wake Up Service • Bike rental at the reception desk • Fitness centre • Tenis court • Beauty parlour Lucie: lifting cure. but has the added advantage of a "kitchenette. SUITE: A Suite is usually two or more rooms clearly defined. SUPERIOR: This category is always subject to interpretation. Business Centre • Complimentary High Speed Internet. but it is not two separate rooms. Mini fridge. the categories then are defined by the view and location of the room.4 • • • • Substitutes Friends or relative houses. a bedroom and a living or sitting room. Paying guests Dormitories . pedicure • Hairdresser • Private car park on the hotel premises • Travel agent • Air port pick up and drop • Guide facilities • Banquit halls • Meeting rooms • Swimming pools 2. STUDIO : This is usually configured like a Junior Suite. DELUXE: These rooms are supposed to be Deluxe in every way: View. JUNIOR SUITE: A "junior" suite is typically a larger room with a separate seating area. Some hotels have only Superior rooms. furnishings and size." or cooking facilities 2.3 Complimentary Products • Swimming pool. Dry Cleaning • Coffee/tea Maker. Youth hostels. . Sometimes it's got a small divider between the part of the room that the bed is in and the seating area. with a door that closes between them. Complimentary morning newspaper • Guest Laundry. It's supposed to mean superior to a standard room in both size and furnishings.

One of the major reasons for the increase in demand for hotel rooms in the country is the boom in the overall economy and high growth in sectors like information technology. receiving almost 24-hour rates from both guests against 6-8 hours usage. bus shelters. which should be ready by 2012.3 GROWTH OF THE INDUSTRY 3. more than once a day to different guests. To overcome. With demand-supply disparity. hotel rates in India are likely to rise by 25% annually and occupancy by 80%.000 rooms and there is a shortage of 150. The hotel industry in India is going through an interesting phase.000 rooms fuelling hotel room rates across India.000 quality rooms. telecom. The future scenario of Indian hotel industry looks extremely rosy. over the next two years. retail and real estate. Private guest houses and R&B guest houses CHAPTER . Rising stock market and new business opportunities are also . Five-star hotels in metro cities allot same room. Hotel Industry in India currently has supply of 10. railway stations. currently in different stages of planning and development. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years. This will affect the competitiveness of India as a cost-effective tourist destination. this shortage Indian hotel industry is adding about 60. According to estimates demand is going to exceed supply by at least 100% over the next 2 years.1 Rate of Growth According to a report. Hotel Industry in India is also set to get a fillip with Delhi hosting 2010 Commonwealth Games.• • • • Resorts Motels Lounges in airports.

The upgrading of national highway connecting various parts of India has opened new avenues for the development of budget hotels here. hotels and motels benefit from high visibility and proximity to generators of room night demand. Tirupathi. 3. Resort Locations . the Federation of Hotel and Restaurant Associations of India suggested to the government that the floor area ration of the existing hotels should be increased. The proposal is yet to be implemented. noise. convenient and attractive to market.2 Pattern of Growth (Seasonal & cyclic) Pattern of growth in hotel industry is both seasonal and cyclical as hotel industry is inter related and based on the tourism industry. safety and other factors should be considered. Hyderabad. hospitals. Seasonal demand is depend on the climate and location (ex: beaches in India are mostly visited in summer because of climate and vacations) 3. attractions. This was a couple of years before and will help create additional rooms in the existing properties and ease the burden of shortage of hotel rooms in the country. The Government of India’s Incredible India destination campaign and the Atithi Devo Bhavah campaign have also helped the growth of domestic and international tourism and consequently the hotel industry.3 Growth Determinants Location Location is a critical consideration because if affects hotels ability to draw customers.attracting hordes of foreign investors and international corporate travelers to look for business opportunities in the country. Commercial Locations By location along major highways or in business or industrial districts. The opening up of the aviation industry in India has led the way for exciting opportunities for the hotel industry as it relies on airlines to transport 80% of international arrivals. Surrounding land uses are important for all types of lodging operations. Local colleges. accessible. Substantial investment in tourism infrastructure is essential for Indian hotel industry to achieve its potential. As the industry is related and run on the demand based on the location in some regions like historical places and business centers (ex: Delhi. Moreover. services and entertainment are examples of “room night” demand generators. The arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. the government’s decision to substantially upgrade 28 regional airports in smaller towns and privatization and expansion of Delhi and Mumbai airport will improve the business prospects of hotel industry in India. In order to increase the stock of hotel rooms. It is important that hotel location be visible. Aesthetics of the area. etc) the demand for the hotels are cyclical and for few places the demand is seasonal.

Other Travelers: Various lodging customers cannot be classified under the categories of business. services. In larger. more urban market areas. or small groups. Attractions can include both natural and manmade places of interest. summer months and holiday periods. Leisure travelers may be individuals. couples. They include people traveling on business representing commercial. leisure. leisure room demand may be limited to weekends. Leisure room demand is often seasonal. are secondary to the quality of the facility. to attend sporting or social events. utility crews and others. while important. These travelers may include construction workers. Business Travelers: Business travelers represent a large portion of lodging demand in many market areas. They might be staying over simply because they are traveling to other destinations. amenities. Tourism Activity Hotels and motels in resort areas typically rely on local attractions to bring in customers. Business Climate Hotels and motels that primarily serve business travelers usually rely on the strength of the local business community. families. Leisure Travelers: Leisure travelers may visit an area for a vacation. to shop. truckers. or group. Local Market Area A lodging facility must be located in a market area that attracts overnight visitors. and nearby attractions. CHAPTER .4 . industrial and governmental organizations. Peak business demand is usually experienced Monday through Thursday nights.Hotels and motels in resort areas generate most of their business form leisure travelers who see the lodging facility and surrounds area as their “destination. or to visit friends and relatives. Travelers visiting hospitals and universities are typically included in this market segment.” Access and visibility.

Share capital 2. water treatment plant. Cost of civil works 3. IPO FUND ALLOCATION FOR THE PROJECT Hotel industries displays an investment characteristic with Distinguishes it for other industries. land development. water pump. filtration plant. A study of the balance sheet of the leading hotel companies shows that bulk capital is 90%. Borrowed capital 5. furniture furnishing and Equipment. Preference share capital 3. 8. . land scaping.TECHNOLOGY OF PRODUCTION AND DISTRIBUTION 4. The industry can be classified as one among those which are highly capital intensive. Cost of electrics installation and fixtures 4. Cost of furniture fixture and fitting 6. Cost of sanitary work and fixtures 5. Cost of providing swimming pool. Cost of land and building 2. drainage system. The following are usual method of rising finance for the hotel Industries:1. Loan from commercial bank 8. Cost of providing facilities like air-conditioning. Inter company loans 11. Provision for taxation 12.1 Cost structure SOURCE OF FINANCE The source of finance available to a hotel development is similar to those available to real estate developers of others kind of project. Equity share capital 4. Loan from financial institution 9.credit guaranteed by supplier 10. Cost of carpet 7. Public fixed deposit 13. Mortgage 7. Most of the Hotel represented by land. boilers. building. Debenture 6. Trade debt. A hotel project requires money under the following heads: 1.

while having seen highest improvement. Agra. are Pune. are likely to experience rapid growth in demand in the next year or two. with an average rate of Rs 2. which will continue to put pressure on the city’s performance. Hotels in metro cities. in the next year or two. The luxury segment is set to perform extremely well over the next few years until the supply. There also some unfinished hotel projects in Agra. with an average rate of Rs 1. if the occupancy is high the expenses are distributed occupied rooms resulting in the increase of revenue.3 Economies of Scope Opportunities for the Indian hotel sector continue to be in the budget and mid-market segment. is for 8 to 10 hours) thus enjoying the chance to rent same room to other customers for 24 hours. Anticipation for huge growth and expansion.000. Shopping arcade. When the occupancy rate is high the hotels enjoy the economies of labor and fixed cost is distributed over large number of rooms effecting in the increase of the revenue and the various other costs like maintenance will remain same what ever the occupancy. Even hotels having Coffee Shop provides 24 .600-3. the recent announcement by a major IT company to set up a base outside Jaipur. which many potential developers are currently shying away from. and hotels in non-metro cities. means that Jaipur can look forward to some additional room night demand from the business segment. 11.400. as well as the state government’s initiative to promote IT-related activity in the city. Other than the savings in cost many hotels charge 24hours rent on rooms used for night halts (i. Cost of kitchen ware.e. 4.800-2. has still a long way to go (citywide occupancy 47%). Cost of manpower Misllinious cost The hotel industry enjoys the economies of scale based on the occupancy rate. and certain pockets in major cities like Delhi (west) and Mumbai (mill lands). These developments in the leisure segment including the strong performance in Goa leads to believe that the leisure segment is clearly benefiting from the increase in foreign tourist arrivals and growth in domestic travel. 4. Goa.demand gap is bridged.9.2 Economies of Scale 4. New opportunities lie in the extended stay segment. Cities to watch out for. in terms of development opportunity. 10. .4 Labour Department of Hotels that are available for guest 24 X 7:Hotel Industry Kitchen/ Food Production: Kitchen & food production is a department of hotel that responsible for food . As regards Jaipur. 12.

Internet Access. so that they can get the things in hotel itself. providing safety lockers to the guest. A/C not working . or in Conference rooms. Hotel Industry Travel Desk:. Saloon. Swimming Pool. Hotel Industry Housekeeping:.They include providing guest the services whether in rooms. Restaurants or Banquets. etc. games like Billiards. bulb fuse. Beauty Parlor. Health Club.Few Star hotels providing big parking space. making their bedroom. . Also providing guest Money Exchange Services. if guest like this section then only he will go for other option like restaurant. etc facilities to their guests. then need to contact Hotel Engineers. E-Mails. and also provides the information for sightseeing to the guests. Front desk consists of young and energetic staff who is always (24 x 7) be there to help guest. shops in the restaurant itself for the guest conveyance.Medium and large hotels are providing Gyms. Most of the Hotels are providing these facilities complimentary with the rooms. Taking Reservation by Telephone. Parking/ Shops:. and Fax from the guest. Hotel Industry Engineering:. bathroom. they are also responsible for Business Centre. Gym/ Health Club/ Sports:. Hotel Industry Front desk:.hour services to the guest.Front desk is 1st impression on guest. Providing guest Laundry services also do day to day room cleaning for guests.Housekeeping are available 24 X 7 for guest. etc. laundry. Pool. They also do the ticket confirmation work. they are also available 24 hours. Hotel Industry Food & Beverage Service:.They are responsible for arranging day to day travels for the guest.If any problems come in room. Front office desk responsible for making C-Form for Foreigner Clients.

Star Category No. five-star. The segment accounted for 29per cent of the total hotel rooms in the country in December 2005. Premium and Luxury Segment this segment comprises the high-end 5-star deluxe and 5-star hotels. four star. Government of India. of Hotels No. and one-star and heritage hotels) by the Ministry of Tourism.CHAPTER . The ratings are reviewed every five years. which mainly cater to the business and up market foreign leisure travelers and offer a high quality and range of services.5 MARKETING 5. Government of India The table excludes hotels in the unorganized sector that have a significant presence across the country and cater primarily to economy tourists. two star. based on the general features and facilities offered. of Rooms 5-star Deluxe 82 18764 5-star 92 11332 4-star 132 9401 3-star 704 31039 2-star 587 19031 1-star 212 695 Heritage 83 2216 To be 50 5127 Total 1934 103973 Source: Ministry of Tourism. Market Sgmentation . As of December 2005 (latest available figure) there are following number and category of hotels. three star.1 Hotels in India are broadly classified into 7 categories (five star deluxe.

however. Budget Segment These comprise 1 and 2 star hotels referred to as ‘Budget Hotels’. Others At any point in time. some hotel chains that started out in a mid-market segment have tried to move up-market by creating new brand concepts to do so. while having had a significant impact on brand marketing. built prior to 1950. These categories do not offer as many facilities as the other segments but provide inexpensive accommodation to the highly price-conscious segment of the domestic and foreign leisure travelers. The number of hotel rooms pending classification has declined from historical 15-20per cent to 5per cent of the total rooms available in the recent past. As hotel companies fine-tune their identities. The increasing role played by the . The Ministry of Tourism has classified these hotels as heritage hotels. as in all arenas of commerce. reposition their products and promote growth through aggressive franchising programs. . Technology In the hospitality industry. Heritage Hotels In the past four decades. Hotel reservation systems have been shifting from voice to electronic Global Distribution Systems and are now on the verge of consumer access via the Internet. have been converted into hotels. applications for classification are usually pending with the Ministry of Tourism because of which such properties remain unclassified. 5. certain architecturally distinctive properties such as palaces and Forts. the hotel industry saw an explosion of new brands. This segment also caters to the middle level business travelers since it offers most of the essential services of luxury hotels without the high costs since the tax component of this segment is lower compared with the premium segment. technology represents one of the strongest forces for change.Mid-Market Segment This segment comprises 3 and 4 star hotels. With the benefit of hindsight. Large hotel chains assumed that they could create new markets by establishing niche products in a variety of segments. Seen as a vehicle for growth by a number of hotel companies that tapped a virtually limitless supply of capital in those years. Market segmentation has served as one of the most powerful drivers in the creation of more and more branded products a trend that became a popular marketing concept in the 198Os and remains so today. which cater to the average foreign and domestic leisure travelers.2 Market Strategies Branding During the 1980s.

3 Market practices PRICING STRATEGIES One of the single greatest challenges facing independent hotels today is pricing. pricing the inventory ineffectively can lead to disaster. • Promotional rates: These rates were originally used sparingly and used as a means to stimulate business by using discounted rates to anyone. businesses were guaranteed discounted rates. which was the highest rate. • Group Rates: With a block of rooms. • Rack Rates: Without any affiliations to warrant discounts. Capitalizing on this situation. rates varied based on time of year and the nature of the group.. • Consortia Rates: This was the same customer who booked through a travel agent using the GDS and received a 5%-10% discount off Rack Rates.Internet should slowly affect booking patterns in the future as inexpensive consumer access to hotel product becomes available. 5. such as volume. and customers were eager to use them as confidence and security in buying goods and services on-line increased. Hotels were eager to work with them.6 INNOVATION . has potential implications for the benefits associated with the branding of hospitality products. During the last decade. • Weekend Rates: Individual leisure travelers. Pricing the inventory effectively can lead to profitability and helps lay the foundation for long term success. • Corporate Rates: Having met the hotel’s qualifying criteria. usually within a drive distance to the hotel. regardless of affiliation. But. third party Internet companies seized the opportunity to grow their businesses. This. the Rack Rated customer paid the published rate. two simultaneous factors impacted the market place and customer buying practices: (1) the dramatic drop in demand (2) and the widespread use of the Internet for booking rooms. of course. CHAPTER .

The color of the sheets. Most if not all of the hotel chains offer some sort of online reservation enabling the hotel management and staff to focus their efforts in a variety of different places. Electronic advertisement accompanied with the ability to make reservations online has made the Internet tremendously valuable. Understanding and acting on the needs of clientele will lure travelers away from competitors. targeting the very core needs of clientele means they will return to what they are comfortable with. Though the hotel industry is a service industry it is continuously innovating the way the services are provided. In addition to room booking. Offering special services respecting the customer’s traditions and customs and providing the service in their way is new innovation to attract the customers. most importantly the ability to book clients. most hotel chains today utilize the Internet by offering online deals and major advertising campaigns. Few hotels are providing an services in their unique way to get into moonlight. Again. the softness of toilet paper. CHAPTER .Service Innovation Hotel industry is continuously using the concept of technology to develop its image and occupancy ratio. A higher understanding of market needs will ensure a larger portion of it.7 STRATEGIES AND COMPETITION IN THE INDUSTRY . Adapting to ecommerce transitions such as the implementation multi-purpose computer software are necessary to cater to the clientele of the next generation. most if not all hotel chains today are utilizing some sort of customer pattern tracking. the position of an ice machine. Complete client pleasure is dependent upon what you can offer differently from the other guy. Technological Innovation The advent of the Internet has opened up many avenues for the hotel industry. Many hotels have a category of rooms which are different in the space and facilities each one having their own specialties and range of price. Hoteliers are now running their business according to the taste and preferences of the customers continuous feed back from the customers are helping the management to innovate in the services provided by the. It is reported that 25 percent of all reservations are made online making it a key tool in room occupancy fulfillment. Information processing management is another key element that has contributed to hotel industry success.

Each company finds their strengths and does everything in their power to be acknowledged by the customer.1 Internal Rivalry The degrees of internal rivalry consist of competitors in the hotel industry that differentiates their strengths. • The hotel industry in India is heavily staffed. THREATS • Guest houses replace the hotels. cost. product offering. and positioning within the industry. • India offers a readymade tourist destination with the resources • Natural and cultural diversity • Demand-supply gap • Government support WEAKNESSES • The cost of land in India is high at 50% of total project cost as against 15% abroad. • High tax structure in the industry makes the industry worse off than it’s international. • Only 97. • There are international players in the market such as Taj and Oberoi & International Chains • A manpower cost in the Indian hotel industry is one of the lowest in the world.2 SWOT Analysis STRENGTHS • A very wide variety of hotels is present in the country. • Rising income. • Political turbulence in the area reduces tourist traffic and thus the business of the hotels • Changing trends in the west demand similar changes in India • The economic conditions of a country have a direct impact on the earnings in hotel industry. Once they uncover how they can serve their consumers better than leading competitors they position themselves in the industry that better serves the consumers. • Unique experience in heritage hotels. .000 hotel rooms are available in India today. • Fluctuations in international tourist arrivals. • Lack of training man power in the hotel industry.7. 7. In the hotel industry there is a lot of competition that takes place between different providers. • In the long-term the hotel industry in India has latent potential for growth. • Only limited value added services • Slow implementation OPPORTUNITIES • Demand between the national and the inbound tourists can be easily managed due to difference in the period of holidays.

Heritage HOTELS.EIH. • If the hotel price changes are moderate. THREAT OF NEW ENTRANTS The competition in an industry will be the higher. market shares. prices. So they are trying to recover their amount quickly. • The cost of land in India is high at 50% of total project cost as against 15% abroad. • The Taj. There is always a latent pressure for reaction and adjustment for existing players in this industry. • Access to raw materials and Distribution channels are controlled by Existing players like TAJ. Because they are having their own brand image. City Centers.Here the buyers are highly informed. • The hotels customers are fragmented.ITC&THE LEELA PALACE so they have a control over the industry.3 Porters Five Forces Model BARGAINING POWER Of SUPPLIERS The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. Resorts. • The suppliers are providing better information about them to attract the customers’ . • There are no substitutes for spas and five star hotels. Boatels. • The foreign hotel chains are tied up with Indian hotels to reduce the initial cost and using the latter’s brand name. luxury tax and sales tax inflate the hotel bill by over 30%. new entrants could change major determinants of the market environment (e. the easier it is for other companies to enter this industry. • The hotel industry is one of the most invested in its fixed assets. ITC. • In India the expenditure tax. and LEELA PALACE affects the new entrants. etc. ITC& Oberoi are having various rates and tariffs. • Brand loyalty of customers like TAJ. ITC. so they have to reduce their bargaining power to attract the customers. and LEELA PALACE. • The high class hotels are operating by few hotel chains like-TAJ. This acts as a major deterrent to the Indian hotel industry. In such a situation.g.• Increasing competition 7. Effective tax in the South East Asian countries works out to . the bargaining power of customers determines how much customers can impose pressure on margins and volumes. the Customers have low margins and are price-sensitive. • Some unseasoned timings the hotels are offering discounts and incentives to reduce the bargaining power of buyers. customer loyalty) at any time. • The hotel chains are operating different services like Spas. BARGAINING POWER OF CUSTOMERS Similarly.

slowly picking up in secondary cities CHAPTER . • Brand loyalty of customers (TAJ. etc.only 4-5%. on profitability for every single company in the industry. heritage hotels and palaces. margins. LEELA PALACE. boatels and motels. • The present demand and supply of hotel rooms is one of the reasons to choose a substitute. spas. COMPETATIVE POWER OF RIVALRY PLAYERS This force describes the intensity of competition between existing players (companies) in an industry. • More fixed cost and switching costs affects the business. This category also relates to complementary products.8 BUSINESS ENVIRONMENT . High competitive pressure results in pressure on prices. • The hotel relationship with customer and costs also the reasons to switching to substitutes. THREAT OF SUBSTITUTES A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. and hence. • Intense in metro cities. ITC. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. • The price variation of same class hotel services from various brands is one of the reasons to choose a substitute. • The healthy competition among the all players is helping to increase the industry growth.) is dominating the substitutes. • The top competitors in hotel industry are having the same services like five star.

which must be looked at before entering into the industry. Australia and New Zealand. it would only make sense to believe that all regulations are negative for corporations because it takes away from the bottom line. hotel industry can have chance to expand more. We have to abide by certain rules and regulations in order to remain in society. Although each corporation has to face rules and regulations. jail sentences Another political factor that can impose a concern for a member in the hotel industry is the laws regarding labor. labor. Hotels are could be liable for clean up of contamination and other corrective action under various laws. ethnic. Consumers are shopping on the Internet. such prosecutions can now result in heavy financial penalties. it is evident. and sexual harassment. This goes for corporations as well. and they will introduce laws that will protect the environment. In Europe. the Internet is increasingly being used. By satisfying each consumers or generalizing the way to hospitalize. The labor laws are pretty strait forward. it can lead to severe lawsuits. For instance. Such laws referring to keeping the environment in good shape can be quite costly to hotels in the industry. For example. the barriers of entry will become easy leaving opportunity for other companies to increase their bottom line. there are laws that govern minimum wage. that there is a strong focus on technology. but anytime you are forced to pay a wage not in plans. Today. As it moves through the twenty-first century. All corporations have to face some sort of rules and regulations. Technological factors In order for a hotel to prevent obsolescence and remain technologically advanced. from music to travel and anything one can think of. each industry faces different rules and regulations. but must be obeyed in order to keep on going profits. For example. they will possibly loose potential consumers. the hotel must be up to date with all the latest technological changes that are taking place that might have an impact on the industry. Discussing in further . they also need to advertise aggressively on the Internet. The reason is that if hotels don’t have a well developed website. a ruling in favor of anti-trust laws will take away from the monopolistic company. Such laws will need to be looked at as a player in the hotel industry. there can be positive affects of the regulations. which are taking away bottom line. Social Cultural Factors Social cultural factors are a big issue to look into for hotel industry because it deals with a lot of consumers who have different demographic. Another law that can be quite costly is treatment of employees. Although this might not seem to be a concern. they need to take this into consideration. but at the same time. and at the same time the hotel will be slicing their revenues. If a hotel company violates these laws. Not only do they need to alternate their distribution channels of information. considerable clean-up costs or in worst instances. cultural backgrounds. ordinances and regulations relating to environmental matters. there are laws that prevent discrimination. Of course. For the hotel industry. and food & safety regulations as well as regulations for merging. However. An analysis of the hotel industry has revealed that there are environmental. North America. Environment is one aspect the government will always have their eye on.PESTAL Model Political factors Rules and laws are apart of citizens everyday life.

with high-energy costs some businesses are thinking innovation. So. For example. While the computer is changing the way hotels in the industry can offer information to their potential consumers and the way a hotel organizes their operations. DVDs. Such image would come from being ecoefficient by improving resources to prevent pollution. you will still find stereos. a hotel must also look at the alternatives of energy that are coming into the world. Solar Cities will be the successes of the 21st century. and digital HDTV for room use.9 CRITICAL SUCCESS FACTORS . it should be a concern for long term planning the time frame for such effects is more likely to happen in the future. even though this is a definite concern. The uncertain climate can have a direct impact on hotels that are in areas of ski resorts. A way that could allow this not to be an impact for other hotels is to build a strong image in the consumers mind. movies. VCRs. things have changed in the way people access music. So. it would only make sense as a member of an industry that is looking to increase the demand of consumers to fully understand what environmental factors for their industry might impose an impact on the customer’s decision. However. Ecological factors Environment is something we as human beings come in contact with everyday. and of course T. Global warming is another ecological factor calls for concern. However. materials supplied to the hotel are starting to become obsolete. in order for a hotel to have a competitive advantage. For example. For instance. in most hotels. VCRs.detail of what the computer has brought is using it for organizing the hotel operation. and regular televisions. the customer decision to stay in a hotel on the east coast is not as likely as it was before these natural disasters. if it is really smoggy outside. The day of having everything on paper is obsolete. The ozone is slowly being exhausted by human actions while leaving the earth degrees warmer. A strategy of how to manage it would be one thing. thus the revenues will increase. however. Today’s society. CHAPTER . The final technological factor that needs to be looked at is the rising costs of energy. for a hotel to prevent obsolescence the must change from the suppliers that are supplying them with stereos. thus the only thing that can be done to limit the impact of these increasing costs is for hotels to manage the use of energy efficiently. Moving in this direction will make the hotel much more attractive. individuals have moved away from those big boxes and adopted the use of digital technology. during hurricane season. For example. and regular TVs and look for suppliers that will offer them ipods. So.V. they need to have a very high tech information system. These are uncontrollable costs. The condition of the environment will often guide decisions. the chances of going for a hike or to an amusement park are very small.

International Tourist Traffic The foreign tourist arrivals in India increased at CAGR of 5.56% in 2007.03%.29 Million in 1996 to 3. Government of India. Significantly. The number of foreign tourists arriving to India reached 5.327 hotel rooms as on December 31. the bulk of international arrivals into India. The increase in international flights. have been business travelers.57 million compared with 461.46% in 2004 to 0. •Strengthening of ties with the developed world.49% in 2005 and further to 0. Also. There are 1. contributing 3.92 million in 2005.08 million compared with 4. seat capacity and frequency into the country and the decision to allow private airlines like Jet . which are expected to be ready by 2012. showing growth of 14.000 quality rooms. Indian hotel industry is currently adding about 60.45 million in the year 2006. with a total capacity of 84.89 billion during 2007-08.52% in 2006 and 0. 658. showing growth of 14. The number of domestic tourists in India was 526.16%.9.56% to India’s GDP. Travel & Tourism Industry of India was valued at US$35. 2007. both in 2004 and 2005.5per cent from 2.76 million in 2006.73 billion in 2007. Main reason for this increase has been following fundamental factors: •India’s strong GDP growth. The hotel and restaurant industry of India was Rs.437 hotels approved and classified by the Ministry of Tourism.1 Factors influencing Success in the Industry Demand Drivers. introduction of low cost airlines also contributed to the demand. India’s share in international tourist arrivals at global level gradually improved from 0. •Opening of sectors of the economy to private sector/ foreign investment.

this represents a lowyield segment for hotels in general. corporate executives who make extended stay either for long duration projects or while waiting for permanent accommodation (primarily expatriates) and convention arrivals. these are a part of an annual contract whereby. The margins offered by leisure travelers tend to be lower because of two reasons. conference halls. fax multi-media. •Development of infrastructure by the Government •India’s emergence as an outsourcing hub. they seek higher discounts and also provide less F&B revenues as they usually eat out. use more of facilities such as PCs. up from number nine in 2003) has helped boost its image as a leisure destination. Usually. leisure travelers are part of a package run by a tour operator. •India’s growing recognition as an exciting place to visit (‘The Readers Travel Awards 2006’. The Leisure Traveler The Leisure Traveler could either be a foreigner or a domestic traveler whose Primary purpose of visit is holiday or site seeing. Usually. Premium and Luxury Segment This segment comprises the high-end 5-star deluxe and 5-star hotels. conducted by Condé Nast Travelers has recently placed India at number four among the world’s must-see countries.2 Identifying Critical Success Factors (CSF) For the Industry The market for the hotel industry can be divided into the following key consumer segments based on purpose of visit: The Business Traveler The Business Traveler is a businessman or a corporate executive traveling for business purposes. as they demand relatively smaller discounts on room rents (about 10per cent-15per cent). •Success of “Incredible India” campaign and other tourism promotion measures. Also. tourist attractions like beaches. . in return for a fixed rate. both domestic and foreign. This segment includes corporate. Airline Cabin Crew Airline Cabin Crew forms another important segment because of the repetitive and guaranteed nature of the business that they provide. With discount rates in the range of 40per cent and 50per cent. The business offered by this segment is highly seasonal and tends to peak in the September to March period. who open offices in the hotel premises during start-ups. Firstly. wild life. which mainly cater to the business and up market foreign leisure travelers and offer a high quality and range of services. a certain number of rooms are provided on demand for cabin crews. Among non-business foreign tourists the primary motivation for visiting India is largely cultural attraction followed by conferences and conventions.Airways and Air Sahara to fly overseas has had a positive impact on tourist and business arrivals into India. who are much larger in number. the middle level executives. The segment accounted for 29per cent of the total hotel rooms in the country in December 2005. While the senior executives usually stay in 5 star hotels. This segment offers better realizations. by way of providing additional seats to: Key destinations. 9. hill resorts etc. stay in the budget hotels. the Food & Beverage (F&B) revenues are better as they usually eat in the hotel itself due to their busy schedules.

Industry is opening gates for the foreign investment which is a good sign for the industry and industry is working toward the fulfillment of the demand and supply gap.CONCLUSION: The hotel industry in India having a tremendous opportunity in the future because of increasing trends in the tourism industry and government promoting the “Incredible India” campaign and other tourism promotion measures. Though the industry is having opportunities in future it is suffering with the cost of land which is costing 50% of the total cost and the taxes are main drawbacks for the industry. The hotel industry in India is mix of many brand internationally established hotels having the scope to attract shares in the brand hotels which will help to expand the industry and the innovations in the industry is helping the hotels to retain the customers with them. .

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