HOSPITALITY INDUSTRY AN OVERVIEW

Hospitality is all about offering warmth to someone who looks for help at a strange
or unfriendly place. It refers to the process of receiving and entertaining a guest
with goodwill. Hospitality in the commercial context refers to the activity of hotels,
restaurants, catering, 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 years
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, Meridien, 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. The arrival of foreign
tourists has shown a compounded annual growth of 6 per cent over the past 10
years. Besides, travel and tourism is the second highest foreign exchange earner for
India. Moreover, it is also estimated that the tourism sector will account for nearly
5.3 per cent of GDP and 5.4 per cent of total employment.
GDP Employment Visitor Export Personal T&T Capital Investment Govt. Expenditure
Outlook for 2006 7.80% 1.40% 10.90% 6.90 % 8.30% 7.70%
Outlook for 2007-2016 6.60% 1.00% 7.80% 6.70% 7.80% 6.60%
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, which means friendliness to guests.
The hospitality industry covers a diverse range of establishments in the form of
accommodation, food and drinks. It includes hotels, motels, restaurants, bars, ships,
airlines and railways. The concept of hospitality business started when people
started traveling away on business and they 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 clientle 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). The major factors
contributing to this growth include stable economic and political conditions,
booming service industry, FDI inflow, infrastructure development, emphasis on
tourism by the central as well as state governments and tax rationalization
initiatives to bring down the tax rates in line with the international levels.

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 include 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, India's growth potential is boundless. "By 2020,
the hospitality and tourism sector would be a major contributor to the Indian
economy," says Sudeep Jain, executive director of JLLM.
South Asia is and will remain a must-visit destination and India is looking more and
more lucrative. 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. Jain 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. Nevertheless, this is

directly related to the travelers travel personal.
SWOT ANALYSIS OF HOSPITALITY INDUSTRY As A Whole
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 Aman 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

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 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.
TRENDS IN HOSPITALITY SECTOR
Trends that will shape the future of hospitality sector are:
1. Low Cost Carriers
2. 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 duration.
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.
Critical factor to drive future growth and performance

THE HOTEL INDUSTRY

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.
In recent years government has taken several steps to boost travel & tourism which
have benefited hotel industry in India. These include the abolishment of the inland
air travel tax of 15%; reduction in excise duty on aviation turbine fuel to 8%; and
removal of a number of restrictions on outbound chartered flights, including those
relating to frequency and size of aircraft. The government's recent decision to treat
convention centres as part of core infrastructure, allowing the government to
provide critical funding for the large capital investment that may be required has
also fuelled the demand for hotel rooms.
The opening up of the aviation industry in India has exciting opportunities for hotel
industry as it relies on airlines to transport 80% of international arrivals. The
government's decision to substantially upgrade 28 regional airports in smaller towns
and privatization & expansion of Delhi and Mumbai airport will improve the business
prospects of hotel industry in India. Substantial investments in tourism
infrastructure are essential for Indian hotel industry to achieve its potential. The
upgrading of national highways connecting various parts of India has opened new
avenues for the development of budget hotels in India. Taking advantage of this
opportunity Tata group and another hotel chain called 'Homotel' have entered this
business segment.
According to a report, Hotel Industry in India currently has supply of 110,000 rooms
and there is a shortage of 150,000 rooms fueling hotel room rates across India.
According to estimates 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 rates in India are likely to rise by
25% annually and occupancy by 80%, over the next two years. This will affect the
competitiveness of India as a cost- effective tourist destination.
To overcome, this shortage Indian hotel industry is adding about 60,000 quality
rooms, currently in different stages of planning and development, which should be
ready by 2012. Hotel Industry in India is also set to get a fillip with Delhi hosting
2010 Commonwealth Games. Government has approved 300 hotel projects, nearly

half of which are in the luxury range. 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
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 market in 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.

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

1. Star rated hotels:

2. Heritage hotels.

3. FACILITY HOTELS

4. Budget hotels:
Theyre usually preferred by domestic travelers seeking economical
accommodation. These are reasonably priced, offer limited luxury, seasonal
discounts and decent services.. Budget hotels are also 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.
5. Unclassified hotels: Theyre 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 Donalds, Ruby Tuesday, Bercos, etc.
C. Contract Costing
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.

Type of hotels, location and target customer

Various reputed Domestic and International hotels

Analysis on some Prominent and Prestigious Hotels

RADISSON HOTELS & RESORTS
Radisson is a division of Carlson Hospitality Worldwide, a global leader in
hospitality services encompassing more than 1,530 hotel, resort, restaurant and
cruise ship operations in 80 countries.
Upscale & Luxury Hotels
Radisson Hotels & Resorts, one of the world's leading, full-service global hotel
companies, operates, manages and franchises more than 400 hotels and resorts in
66 countries.
SWOT Analysis
Strengths
Customer satisfaction

strategies
Technological prowess
Well established brand
Global presence Weakness
Only serving the upscale market
Threats
Growing terrorism
Economic downturn
competitors Opportunities
Unexplored territories
Globalization
Porters Five Forces Model

Key Success Factors (KSFS)

Total customer satisfaction
Industry leading technology
Brand value
Global presence at convenient locations
Taj Groups Hotel
Taj Hotel established on December16, 1903
Taj Hotels resorts & places comprise 57 hotels in 40 locations across India.
18 International Hotels in the Malaysia,Australia.UK,USA,Sri lanka, Africa.
Taj is recognised as the premier Hospitality provider.
Innovator in dining:- Taj was the first to introduce thai,Italian ,Mexican into the
country.
Marketing strategy
A higher emphasis was placed on the business segment as the profits are higher
(this market being less price-sensitive) as compared to the luxury segment.
There was a proliferation of the Taj Presidency hotels not only in new cities, but
also smaller towns.
The action plan is more opportunities, adding to and complementing the brand.
Services

 Health & Fitness facility to its Guests.

Latest cardico vascular machines, strength-training equipment.
Spa also includes steam rooms &sauna,specialized treatment rooms.
Swimming pool, Gardens, Waterfall
The beauty saloon of the Taj hotel offer a wide range of beauty and hair treatment
for men &women.
SWOT Analysis
Strengths
Brand loyalty
Credibility
Huge Reputation
Patent protection Weakness
High cost service
Lack of safety measure
Not proper network in semi- urban
Threats
Fluctuations in international tourist arrivals
Increasing competition
Terrorism
Opportunities
Rising income
Globalization
New Geographical location
Porters Five Forces Analysis

KSFs
Technology related:Used of advance technology in hotel premises.
Manufacturing- related: High utilization of fixed assets.
Quality control know-how.
Serving customer according to their specification.
Distribution-related:Presence of hotel chain at various places.
A strong network.
Marketing related: Breadth of product line and product selection.
Personalized customer services.
A well-known and well-respected brand name.

Oberoi hotels
The Oberoi Group, founded in 1934, operates 27 hotels and three cruisers in five
countries under the luxury Oberoi and five-star Trident brands. The Group is also
engaged in flight catering, airport restaurants, travel and tour services, car rentals,
project management and corporate air charters.
Strengths
Cost advantage
Effective communication
Innovation
Loyal customers
Market share leadership
Strong management team
Weaknesses
Diseconomies to scale
Not diversified
Poor supply chain
Weak real estate
Opportunities
Acquisitions
Emerging markets and expansion abroad
Product and services expansion
Takeovers
Threats
Competition
Exchange rate fluctuations
Price wars

Recent figure on Indian hospitality industry

The current scenario
Existing hotel rooms in India: 202,963, source FHRAI
Revenue of the Indian hotel industry FY 2007-08: INR 38,558 crore
30% of this revenue i.e. INR 11,567.4 crore went back into the market in FY 200809 as operating expenses
Number of hotels and restaurants in India:
Hotel category No. of Hotels No. of Rooms
5 star deluxe/5 star 165 43, 965
4 Star 134 20, 770

3 Star 505 30,100

2 Star 495 22,950
1 Star 260 10,900
Heritage 70 4,200
Uncategorised 7,078 Total 8,707 1,32,885
Restaurants 12,750

Emerging trends in Indian hospitality industry

The Indian Hospitality sector is expected to show a healthy growth in the medium
term. Strong economic growth, increased FDI, greater emphasis on tourism
development, favorable Government policies, impending 2010 Commonwealth
games, 2011 Cricket World Cup and other international events, will be the major
drivers for the growth. There exists a lot of scope for growth in tourism sector.
According to the Ministry of Tourism, the contribution of tourism to Indias GDP is
only 5.9 per cent as compared to the worldwide average of 11 per cent.
By 2020, the Government of India expects travel and tourism to contribute Rs 8,500
billion to GDP, almost four times the value in 2005. With successive Governments
committed to reform, a strong manufacturing sector and a private sector that
already has a critical mass that is needed to drive growth, it is unlikely that the
strong growth in GDP is likely to be reversed. The rising middle class is also
becoming increasingly affluent, mobile, Internet savvy and more sophisticated in
terms of what is demanded in terms of tourism products and services, and more
importantly the price they are willing to pay for it.
Entry of international brands through joint ventures and tie-ups is likely to enhance
the service levels and will narrow demand-supply gap of rooms. But ICRA expects
the shortage in rooms to remain for next five years leading to higher occupancy
levels and increase in Average Room Rates (ARR). Currently, according to industry
estimates, there are only 1,05,000 hotel rooms in India while in China the figure is
much higher at 7,65,000 rooms. The annual growth rate of hotel rooms in India is
only 6 per cent, compared to 22 per cent in China, 18 per cent in Thailand and 15
per cent in Malaysia.
Economic growth in tier II and tier III cities have put these on the hospitality industry
map. ARR are likely to harden in these cities in next 2-3 years due to shortage of
room. Niche areas like health tourism and spiritual tourism are emerging as
lucrative business opportunity for the industry. The overall buoyancy in the market
is attracting increased interest from investors and higher inflow of capital in the
industry is expected. The growth for hotels is also likely to come from proliferation
of Special Economic Zones.
Major impediments to the growth are sensitivity to business cycles and adverse
political and social events (including terrorist attacks), high rate of tax, high land

price, bureaucracy, and poor infrastructure. For instance, the effective rate of
taxation on tourism in India is 21 per cent as compared to 7 per cent in Thailand, 4
per cent in Malaysia and 1 per cent in Hong Kong. Furthermore, owing to high land
prices, there are more five star hotels than budget hotels, making India a high cost
deluxe destination. Additionally, India still does not have facility of modernised evisa. The existing visa process is cumbersome and comparatively more expensive
than other destinations. Yields are expected to be low in coming years on account of
continuing price-cutting and discounts.
The Government is planning to grant infrastructure status to all budget hotels and
convention centres set up in Delhi and National Capital Region till 2010
Commonwealth Games. This will enable them to enjoy a 10 year tax holiday as in
case of other infrastructure projects such as roads, ports and power.
Emerging hotel concept in India

Projected investments years 2009-015

Rooms being built across hotel categories: 114,000, source HVS
Investment in rupees: INR 40,463.10
Conclusion and Recommendations
The outlook for the hospitality market in India is optimistic and will continue to
remain so, in our opinion. The economys buoyancy, initiatives to improve
infrastructure, growth in the aviation and real estate sectors and easing of
restrictions on foreign investment will fuel demand for hotels across star categories
in the majority of markets. Indias hotel industry is increasingly being viewed as
investment-worthy, both within the country and outside, and several international
chains are keen to establish or enhance their presence here. We anticipate that,
over the next three to five years, India will emerge as one of the worlds fastest
growing tourism markets and will be hard to ignore.
Recommendations
Tie ups with institutes: It is the duty of the Industry to make 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.