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A PROJECT REPORT ON Hotel Industries
IN PARTIAL FULFILLMENT OF THE REQUIREMENT IN SEMISTER IV IN THE SUBJECT OF SM MASTER OF BUSINESS ADMINISTRATION
SUBMITTED TO: Mrs. GAYATRI VYAS
SUBMITTED BY: CHAUDHARY SURESH (805) DAYMA HIRAL (806) DAVE RAVI (807)
S.P.B.PATEL ENGG. COLLEGE (MBA PROGRAM), MEHSANA Page 1
Service management report on hotel industries
1. 2. 3. 4. 5. 6.
EXECUTIVE SUMMERY BACK GROUND OF HOTEL INDUSTRIES STRUCTURE OF INDUSTRIES CURRENT SCENARIO OF HOTEL INDUSTRIES FEATURES OF HOTEL INDUSTRIES CLASSIFICATION OF HOTELS
a. BASED ON LOCATION b. BASED ON SIZE OF PROPERTIES c. BASED ON LEVEL OF SERVICE d. BASED ON THE LENGTH OF STAY e. BASED ON THEME f. BASED ON TARGET MARKET DEMAND DRIVERS KEY SUCCESS FACTOR ENVIRONMENTAL ISSUES DOMESTIC PLAYERS GOVERNMENT POLICIES FISCAL REGULATION INTERNATIONAL SCENARIO PORTER’S FIVE FORCE MODEL MARKET SHARES SWOT ANALYSIS CONCLUSION
7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.
S.P.B.PATEL ENGG. COLLEGE (MBA PROGRAM), MEHSANA
Service management report on hotel industries
Hotel operators and observers often employ industry-wide averages as key points of comparison and analysis for room rates, occupancy, and revenues. The use of simple averages, however, can be misleading if one does not take into account the possibility that a mean will be pulled in one direction or another by extreme values. This analysis of three industry averages shows that those averages are, indeed, subject to distortion, or skew. The analysis, which examines figures for virtually all brand-name hotels in the United States, determined that the means for average daily rate (ADR) and revenue per available room (RevPAR) are skewed in a positive direction by hotels with extremely high rates. On the other hand, occupancy is skewed in a negative direction by a group of hotels with inordinately low occupancy levels. Many of the extreme values are found in the top-25 markets, which have hotels with inordinately high ADRs. Analysis of those markets shows that, once again, the overall statistics are distorted by a relatively small set of hotels with exceptional ADRs and occupancies. However, each of the top markets shows a distinctive rate and occupancy pattern. The pattern of skewed operating statistics carries over into individual lodging segments. The greatest distortions arise in the luxury and upscale segments, while economy and budget hotels record more consistent (normally distributed) statistics. Finally, the analysis shows that although the events of created much turmoil for the industry, the hotel business had already cooled substantially from its record pace of a year earlier. In conclusion, managers must be careful in applying overall industry statistics to their own situation and should take into account the factors that distort operating statistics.
S.P.B.PATEL ENGG. COLLEGE (MBA PROGRAM), MEHSANA
Service management report on hotel industries
Scope of the report At the backdrop of such a conducive business atmosphere 'Pre-feasibility Report on Five-star Hotel Industry' attempts to examine such critical factors which will provide vital inputs in general to the potential investors and estimation of commercial viability of such an investment. - It presents the market analysis of Indian hotel industry in terms of structure& segmentation, market size, major hotels etc. - It analyses the steps involved in setting up a hotel describing the technical aspects in terms of locational details and land requirement. - It assess the manpower planning and financial estimate involved in setting up a hotel. - Brings an insight into the procedure for setting up a hotel, type of machinery & floors space required, requirement of regulatory permissions & clearances. -Analysis of porter’s five forces and SWOT of the industry.
Global travel increased by 6% in 2007 compared with 2006, crossing tourism forecasts for the fourth year in succession. Among the various regions, the Middle East registered the highest growth in arrival of international tourists with 46 million tourists compared with 41 million in 2006, a growth of 12.2%.The opening up of the aviation industry in India has resulted in exciting opportunities for the hotel industry. - The share of Travel & Tourism industry to the global GDP was 6.48% in the year 2007 with value of US$ 3,493.19 billion and industry demand contributed to 13.21% of global GDP in 2007. - Middle East was the fastest-growing region in terms of arrivals of international tourists during 2007. S.P.B.PATEL ENGG. COLLEGE (MBA PROGRAM), MEHSANA Page 4
Service management report on hotel industries
- According to the report by World Travel and Tourism Council, India currently ranks 18th in business travel and will be among the top 5 nations by the end of 2010. - ASSOCHAM has projected that Medical Tourism is likely to become the leading foreign exchange earner for India - India is now emerging as one of the hot destinations for medical - tourism after Singapore, Thailand, Hong Kong, Malaysia, Philippines, Columbia A touch of tenderness, a helping hand, a welcoming visage... the Indian hospitality sector is certainly the most apt replication of the belief ‘ATITHI DEVO BHAVA'. Good quality products and services at affordable prices should be the USP of any successful venture - and hotels in the country boast of exactly this! According to the world travel and tourism council, the growth in the hospitality industry is pegged at 15% every year, and with 2, 00,000 rooms (both luxury and budget) needed in the country, the segment is poised for a stupendous growth. Travel tales While the high influx of foreign tourists has ensured huge footfalls for the sector over the years, internal tourism too has, off late, begun offering great potential. With travelers taking new interests in the country, players in the hospitality sector have had to offer the best of services, at affordable prices. Also, with the USD 23 billion software services sector pushing the Indian economy skywards, more and more IT professionals are flocking to Indian metro cities, thus signaling a boom time for the hotel and hospitality segment. Several other factors such as Commonwealth Games in Delhi are fueling the need further. The best bet The Indian hospitality industry is projected to grow at a rate of 8.8% between 2007-16, placing India as the second-fastest growing tourism market in the world. Initiatives like massive investment in hotel infrastructure and open sky policies made by the government are all aimed at propelling growth in the hospitality sector.
S.P.B.PATEL ENGG. COLLEGE (MBA PROGRAM), MEHSANA
virtual golf.P. Also. CMD. Towards propelling its growth.the Group which boasts of providing state-of-the-art facilities and services at its hotels. Rajasthan . Couple this with the availability of qualified human resources and the hospitality sector has already got great growth prospects! S. Further permits and licenses required for the hotel operations need to be rationalised by offering a "single window" mechanism.PATEL ENGG.a proposed five star business hotel boasting of one of the largest conference and convention facilities.the elegant 3 star business hotel at Ahmedabad or The Cambay Grand . Some of the Group's forthcoming ventures include The Cambay Spa & Resort at Neemrana. the upgrading of national highways connecting various parts of India has opened new avenues for the development of budget hotels in India.the upcoming 5 star hotel in Ahmedabad that takes contemporary luxury to new heights with opulent rooms and suites. The government's decision to substantially upgrade 28 regional airports in smaller towns and privatization & expansion of Delhi and Mumbai airport has improved the business prospects of hotel industry in India. exotic spa. and multi cuisine fine dinning. MEHSANA Page 6 . another venture of Neesa Leisure Ltd in Dahej (SEZ) to have 100 rooms including apartment and conference facilities and Cambay Sapphire. Exclusive and innovative initiatives like the Cambay projects certainly focus on ensuring a bright future for the Indian hotel industry. Be it Cambay Sapphire . redefining luxury is the perennial mantra in each of Cambay's hospitality projects. while the government should confer infrastructure status to the hotel industries. COLLEGE (MBA PROGRAM).a business hotel.B.Service management report on hotel industries "Hotel and hospitality industries are among the biggest employment generators in the country. Neesa Leisure Ltd . several taxation issues also need to be rationalized." says Sanjay Gupta. Jodhpur .
Historically viewed as an industry providing a luxury service valuable to the economy only as a foreign exchange earner.24per cent in FY2000 to 1. and indirectly facilitates tourism and commerce. as per the recommendations of the International Monetary Fund (IMF). Growth in demand for hotels was particularly high during the early 1990s following the initiatives taken to liberalize the Indian economy in FY1991. 335. most of these efforts were directed towards the business travelers and foreign clientele.PATEL ENGG. As a result. the Indian hotel industry was a slow-growing industry. with significant benefits accruing to the hotel and tourism sector. the GDP from hotels and restaurants has increased from Rs. Prior to the 1980s. new entrants and international chains to chalk out ambitious capacity additions. in terms of improved demand patterns. However.65 billion in FY2000 to Rs. However. consisting Primarily of relatively static. COLLEGE (MBA PROGRAM).2per cent in FY2000 to 1. MEHSANA Page 7 . The euphoria of the early 1990s prompted major chains. the share of hotels and restaurants in total GDP at constant prices has increased from 1. As a result. the industry today contributes directly to employment (directly employing around 0. held in New Delhi in 1982.B. especially in the metropolitan cities. and the subsequent partial liberalization of the Indian economy generated tourism interest in India. 222.5per cent in FY2005.Service management report on hotel industries BACKGROUND OF THE HOTEL INDUSTRY The Hotel Industry comprises a major part of the Tourism industry. the share of hotels & restaurants in GDP at current prices has increased from 1. S.P. In constant (1999-2000) prices. In recent years.15 million people). single-hotel companies. the Asiad.40per cent in FY2005.49 billion in FY2005. the hotels sector has grown at a faster rate than GDP.
of Hotels 82 No.P. two star. 92 132 704 587 212 83 50 11332 9401 31039 19031 695 2216 5127 No. The segment accounted for 29per cent of the total hotel rooms in the country in December 2005.PATEL ENGG.of Rooms 18764 S. COLLEGE (MBA PROGRAM). Premium and Luxury Segment This segment comprises the high-end 5-star deluxe and 5-star hotels. 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.Service management report on hotel industries STRUCTURE OF THE INDUSTRY Hotels in India are broadly classified into 7 categories (five star deluxe.B. based on the general features and facilities offered. four star. The ratings are reviewed every five years. As of December 2005 (latest available figure) there are following number and category of hotels. which mainly cater to the business and up market foreign leisure travellers and offer a high quality and range of services. MEHSANA Page 8 . Star Category 5-Star Deluxe 5-Star 4-Star 3-Star 2-Star 1-Star Heritage To be classified Total 1934 103973 Source: Ministry of Tourism. and one-star and heritage hotels) by the Ministry of Tourism. five-star. Government of India. three star.
certain architecturally distinctive properties such as palaces and Forts. 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.B. The Ministry of Tourism has Classified these hotels as heritage hotels.PATEL ENGG. MEHSANA Page 9 . Budget Segment These comprise 1 and 2 star hotels referred to as ‘Budget Hotels’. Others At any point in time. have been converted into hotels.Service management report on hotel industries Mid-Market Segment This segment comprises 3 and 4 star hotels. COLLEGE (MBA PROGRAM). built prior to 1950. This segment also caters to the middle level business travellers 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. S. which cater to the average foreign and domestic leisure travellers. applications for classification are usually pending with the Ministry of Tourism because of which such properties remain unclassified. 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 travellers.P. Heritage Hotels In the past four decades.
PATEL ENGG. data says. Already. Government has approved 300 hotel projects. 'India Hotel Industry' is adding about 60. 'Hotels in India' have supply of 110. the rating on the 'Indian Hotels' is bullish.000 rooms fueling hotel room rates across India. According to the tourism ministry. Sources said. Sources estimate. This figure will skyrocket in 2010. However. 'Hotel Industry in India' is eroding its competitiveness as a cost effective destination. MNC Hotel Industry giants are flocking India and forging Joint Ventures to earn their share of pie in the race.P. With the USD 23 billion software services sector pushing the Indian economy skywards. Five-star hotels in metro cities allot same room. nearly half of which are in the luxury range. India is a destination for hotel chains looking for growth. currently in different stages of planning and development and should be ready by 2012. With demand-supply disparity.000 quality rooms.Service management report on hotel industries CURRENT SCENARIO OF HOTEL INDUSTRY Over the last decade and half the mad rush to India for business opportunities has intensified and elevated room rates and occupancy levels in India. more than once a day to different guests. more than 50 international budget hotel chains are moving into India to stake S.4 million tourists visited India last year and at current trend. 4. India ranks 18th in business travel and will be among the top 5 in this decade.000 rooms. Even budget hotels are charging USD 250 per day. the manpower requirements of the hotel industry will increase from 7 million in 2002 to 15 million by 2010. demand is going to exceed supply by at least 100% over the next 2 years. 'Hotels in India' has a shortage of 150. India. demand will soar to 10 million in 2010 – to accommodate 350 million domestic travelers. The World Travel and Tourism Council. COLLEGE (MBA PROGRAM). over the next two years. With tremendous pull of opportunity. MEHSANA Page 10 . 'Hotel Industry in India' is set to grow at 15% a year. receiving almost 24-hour rates from both guests against 6-8 hours usage.B. when Delhi hosts the Commonwealth Games. more and more IT professionals are flocking to Indian metro cities. The successful growth story of 'Hotel Industry in India' seconds only to China in Asia Pacific. 'Hotel India' room rates are most likely to rise 25% annually and occupancy to rise by 80%.
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. The Service sector is characterized by its diversity. S. The roles of the multinational companies are significant with their increasing contribution to the Economy. Typically. which is just 0. MEHSANA Page 11 . pricing of value added services.4% of the world tourist arrivals. Global opportunities are growing due to accelerated growth of the service economy. Average room rate (ARR) and occupancy are the two most critical factors that determine the profitability. At present India attracts approximately 2. Normally the Multinational hotels operated In India can be owned. Basically Services are intangible deeds. Hotel operators want the leverage on their management expertise and brand equity without making enormous capital investment. The hotels to manage and invest their fund in India adopt many business strategies to establish their place of business and create innovative service packages to their custom. This is because India is an ideal destination for tourists as it is the only country with the most diverse topography and relative political stability.P. star rating. processes and performances that cannot be touched.B. the management fee is to the tune of 3% of the total revenue and 7% of gross operating profits. COLLEGE (MBA PROGRAM). with opportunities galore the future 'Scenario of Indian Hotel Industry' looks rosy. Therefore. these measures bring significant financial returns.5 Million tourists every year. In the hospitality industry. since most of the marginal revenue gets added to the bottom-line. In a long-term perspective. In management contract agreements a fee calculated as a percentage of revenue and/or operating profit is charged. The hotel industry in India has a latent potential for growth.Service management report on hotel industries their turf. ARR in turn depends upon location.PATEL ENGG. quality of facilities. leased or acquired under management contract basis. brand image. complementary services offered and the seasonal factor. seen or felt but can be experienced.
5% of the total tourist arrivals whereas business travelers constitute 21% of the total arrivals. The luxury hotels earn about two-thirds of their revenue from foreign tourists. Hotels benefit from rupee depreciation as over 60% of revenues in the luxury hotel segment are in foreign currencies. Luxury hotels operate under single tariff structure whereby the foreign tourists are charged in dollar terms whereas the domestic guest is charged the equivalent amount in rupees.P. For the Indian hotel owners and the international hotel chains the benefit is mutual. While many countries are hampered by a still sluggish economy. For the international hotel chain they can ride on the boom of the industry without making enormous capital investments on infrastructure and facilities. COLLEGE (MBA PROGRAM). However the value of the international brand gets diluted if a foreign entity enters an agreement with several Indian companies. S. Associations with international brand also play a major role in image building and attracting foreign tourists.B. MEHSANA Page 12 . those with a low interest rate environment with relatively stable-banking conditions will provide opportunities for hotel investors to raise capital.PATEL ENGG. For hotel lenders. have entered into a marketing tie-up with major international hotel chains. Leela having tied up with Kempinski and ITCH having a franchisee agreement with ITT Sheraton to use the latter's brand name. Leisure travelers constitute approximately 76. there has never been a better time to provide new capital to this industry in India. tie-up with an international hotel chain puts the hotel on the global map with access to chain's reservation network worldwide. with the exemption of IHCL and EIH. as none of the costs are directly linked to the exchange rate. from a risk/return basis.Service management report on hotel industries Most players. The hotel debt environment is also improving. Thus we have Hyatt Regency a renowned international hotel chain having tied up with AHL. Thus any depreciation of the rupee goes directly to the bottom line (FOREX income is also fully tax exempt). The hotel industry is the second largest foreign exchange earner and between 1991 and 1998 there has been a 100% growth in foreign tourists. The remainder is accounted by students.
The authenticity. etc. and theme parks seek to maximize the number of customers they "process". housekeepers. Historically. and human resources. the supply of lodging facilities within the region has proved to be both inadequate in terms of product quality as well as insufficient in quantity for meeting the increasing levels of demand. or even an amusement park consists of multiple groups such as facility maintenance. MEHSANA Page 13 . Very important is also the characteristics of the personnel working in direct contact with the customers. recreation.PATEL ENGG. so do restaurants. direct operations (servers. S. bartenders. hotels. hotel. management. professionalism. accommodations.Service management report on hotel industries FEATURES OF HOTEL INDUSTRY The hospitality industry consists of companies within the food services. hospitality industry players find advantage in old classics (location). "barriers to entry" by newcomers and competitive advantages between current players are very important. Among other things. and particular themes adopted by the marketing arm of the organization in question (such as a restaurant called the 51st fighter group that has a WW2 theme in music and other environmental aspects).). A hospitality unit such as a restaurant. In viewing various industries.P. marketing. porters. COLLEGE (MBA PROGRAM). The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. initial and ongoing investment support (reflected in the material upkeep of facilities and the luxuries located therein). Usage rate is an important variable for the hospitality industry. and entertainment sectors. kitchen workers. and actual concern for the happiness and wellbeing of the customers that is communicated by successful organizations is a clear competitive advantage This significant growth of the tourism industry is the direct result of changes in international consumer behaviors as well as economic prosperity and political stability within the region.B. Just as a factory owner would wish to have his or her productive asset in use as much as possible (as opposed to having to pay fixed costs while the factory isn't producing).
The sustainability initiative goes beyond such wellknown ideas as reusing guest linens.B. recycling waste materials. even more vital is to use the hotel’s position as an industry leader in the nation’s capital to demonstrate to the hotel industry. While that goal is important. customers. The growth in residential real estate development has been primarily driven by foreign demand for vacation and retirement homes in both urban and resort destinations within the region.PATEL ENGG.” which embodies profitable operation combined with attention to the people who use and work in the hotel and a focus on careful stewardship of resources. resulting in a real estate boom in both tourism and residential development. Investment and development has been further supported by the variety of financial incentives for investment in tourism projects offered by national governments as well as the availability of local capital for the financing of large projects. MEHSANA Page 14 . and vendors that sustainable operation is the best strategy to ensure successful hotel operation. and changing to compact fluorescent lamps.P. COLLEGE (MBA PROGRAM). The first goal is to find ways to operate the hotel according to the idea of a “triple bottom line. S.Service management report on hotel industries These elements of supply and demand have created a favorable investment climate for development within the region.
Sales and revenue fluctuate from season to season. they provide lodging to highway travelers and also provide ample parking space. Resort hotels: They are also termed as health resort or beach hill resort and so depending on their position and location.Service management report on hotel industries CLASSIFICATION OF HOTELS: Classification is based on many criteria and classifying hotels into different types is not an easy task. It is ideal for budget travelers. Example: Taj Mahal. Airport hotels: These hotels are set up near by the airport. They have transit guest who stay over between flights. S. Suburban hotels: They are located in suburban areas. 1. MEHSANA Page 15 . Industry can be classified in various ways. Some of the international chains are Hyatt. it generally have high traffic on weekend. In this type of hotel rates are moderately low. They have high traffic on weekdays and the occupancy is generally high.PATEL ENGG. enjoy themselves at hill station. Mumbai Motels: They are located primarily on highways. based on location. size of property etc.P. The hotel industry is so vast that many hotels do not fit into single well defined category. Based on location City center: Generally located in the heart of city within a short distance from business center. Marriott. Most resort work to full capacity during peak season.B. the Oberoi Group and ITC Welcome group. and Le Meridian etc. Rates are normally high due to their location advantages. these properties have also come up in India now. COLLEGE (MBA PROGRAM). The main hotel chains of India are: The Taj Group of Hotels. The length of stay is usually overnight. shopping arcade. They cater a person who wants to relax.
B. Our very own "palace on wheels" and "Deccan Odessey" are trains providing a luxurious hotel atmosphere. Their interior is done like hotel room. It has long stay guest. S. Large hotels: hotel which have more than 300 rooms are termed as large hotels.PATEL ENGG. Mega hotels: are those hotels with more than 1000 rooms. MEHSANA Page 16 . It is located on river. COLLEGE (MBA PROGRAM). Based on Size of Property The main yardstick for the categorization of hotel is by size the number of rooms available in the hotel. Boatels: A house boat hotels is referred as boatels. Chain hotels: these are the groups that have hotels in much number of locations in India and international venues. They are normally used by small group of travelers. The shikaras of Kashmir and kettuvallam of kerala are houseboats in India which offers luxurious accommodation to travelers. In cruise ships.Service management report on hotel industries Floating hotels: As name implies these hotels are established on luxury liners or ship.P. rooms are generally small and all furniture is fixed down. Medium sized hotel: hotel which has 100-300 rooms is known as medium sized hotel. Small hotel: hotel with 100 rooms and less may be termed as small hotels. 2. sea or big lakes. Rotels: These novel variants are hotel on wheel.
Semi residential hotels: These hotels incorporate features of both transient and residential hotel. Mid market hotels: It is suite hotel that offers small living room with appropriate furniture and small bed room with king sized bed. Economy/ Budget hotels: These hotels meet the basic need of the guest by providing comfortable and clean room for a comfortable stay. New Delhi. 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.PATEL ENGG. business executives and high ranking political figures. prime market for these hotels are celebrities. MEHSANA Page 17 . 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 occupancy rate is usually very high. concierge service. Example: Hyatt Regency. dinning facilities. They provide sitting room. 4. These guest rooms contains furnishing. S.B. COLLEGE (MBA PROGRAM).P. bed room and kitchenette. Bath linen is provided to the guest and is replaced accordingly. and luxury hotels on the basis of the level of service they offer. artwork etc. Based on the Level of Service Hotels may be classified into economy.Service management report on hotel industries 3. meeting rooms. residential and semi residential hotels depending on the stay of a guest. they are usually five star hotels. Luxury hotels: These offer world class service providing restaurant and lounges. Based on the Length of Stay Hotel can be classified into transient.
These hotels put their best efforts to give the glimpse of their region. offered room that have their own history. Boutique hotels and Spas. in Resort hotels: These leisure hotels are mainly for vacationers who want to relax and enjoy with their family. Convention hotels: These hotels have large convention complex and cater to people attending a convention.PATEL ENGG. Example: In India the park Bangalore is a boutique hotel. furniture in a themed and stylish manner and caters to corporate travelers.Service management report on hotel industries 5. Cochin. COLLEGE (MBA PROGRAM). They cater mostly businessmen. serve traditional cuisine and are entertained by folk artist. The atmosphere is more relaxed.P. Ecotels: these are environment friendly hotels these hotel use eco friendly items in the room. Ecotels. conference Example: Le meridien. Example: Jai Mahal palace in Jaipur. Based on Theme Depending on theme hotel may be classified into Heritage hotels. Heritage hotel: In this hotel a guest is graciously welcomed. 6. S.B. Boutique hotels: This hotel provides exceptional accommodation. 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. MEHSANA Page 18 . The occupancy varies as per season. 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. is a hotel with largest convention center south India. These are spread out in vast areas so many resorts have solar powered carts for the transport of guest. Example: Orchid Mumbai is Asia first and most popular five star Ecotels.
There are 1.Service management report on hotel industries Suite hotels: These hotel offer rooms that may include compact kitchenette. Indian hotel industry is currently adding about 60.327 hotel rooms as on December 31. International Tourist Traffic The foreign tourist arrivals in India increased at CAGR of 5.57 million compared with 461.73 billion in 2007. The number of foreign tourists arriving to India reached 5. they have guest room and food and operation too. which are expected to be ready by 2012. COLLEGE (MBA PROGRAM).000 quality rooms. These hotels tend to cater leisure and vacation travelers.56% in 2007. showing growth of 14.5per cent from 2.B. Gambling activities at some casino hotels operate 24 hours a day and 365 days DEMAND DRIVERS The hotel and restaurant industry of India was Rs.56% to India’s GDP.29 million in 1996 to 3.437 hotels approved and classified by the Ministry of Tourism. with a total capacity of 84. 2007. contributing 3.49% in 2005 and further to 0.P. executives who are away from home for a long business stay. Significantly.08 million compared with 4. showing growth of 14. They cater to people who are relocating act as like lawyers. S. Travel & Tourism Industry of India was valued at US$35. the bulk of international arrivals into India.76 million in 2006.92 million in 2005.52% in 2006 and 0. The number of domestic tourists in India was 526.45 million in the year 2006.PATEL ENGG. Government of India.46% in 2004 to 0. have been business travelers.03%. MEHSANA Page 19 . Main reason for this increase has been following fundamental factors: •India’s strong GDP growth. both in 2004 and 2005. India’s share in international tourist arrivals at global level gradually improved from 0. Casino hotels: Hotel with predominantly gambling facilities comes under this category.89 billion during 2007-08. 658.16%.
COLLEGE (MBA PROGRAM).) Months 2005 2006* 2007* January 385977 444260 February 369844 407198 March April May Total 352094 390824 248416 225394 309775 258527 514453 462578 443976 Percentage Change 2006/05 15. Also. Middle East).1 11.7 14. by way of providing additional seats to Key destinations. conducted by Condé Nast Travellers has recently placed India at number four among the world’s must-see countries.5 2007/06 15.6 13. •Success of “Incredible India” campaign and other tourism promotion measures. up from number nine in 2003) has helped boost its image as a leisure destination. Foreign Tourist Arrivals Foreign Tourist Arrival (Nos.B. MEHSANA Page 20 . USA.0 334558 271454 1581725 1810584 2027019 S. seat capacity and frequency into the country and the decision to allow private airlines like Jet Airways and Air Sahara to fly overseas has had a positive impact on tourist and business arrivals into India. •Reforms in aviation sector which led to better connectivity with many countries (such as ASEAN) and created additional capacity on existing routes (for e.g.P. •Development of infrastructure by the Government •India’s emergence as an outsourcing hub.7 14.0 12.8 13.0 24. •Strengthening of ties with the developed world. The increase in international flights.1 10. introduction of low cost airlines also contributed to the demand.Service management report on hotel industries •Opening of sectors of the economy to private sector/ foreign investment.0 5.6 8. •India’s growing recognition as an exciting place to visit (‘The Readers Travel Awards 2006’.PATEL ENGG.
50 14.43 16.7 22.03 2006/05 17.94 33.34 S.2 16.P.5 10.53 99.Service management report on hotel industries Foreign Exchange Earnings Foreign Exchange Earnings (in Rs.04 27.PATEL ENGG.26 23.83 27.99 23.1 2007/06 21.41 18.22 26.2 14. billion) Percentage Change MONTHS 2005 2006* 2007* January February March April May Total 23.1 28.0 15.B.59 133.74 15.00 30.27 16.0 11.0 10.0 14. MEHSANA Page 21 .11 24.0 12.9 15. COLLEGE (MBA PROGRAM).36 21.
Also. While the senior executives usually stay in 5 star hotels. who are much larger in number. 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. use more of facilities such as PCs. tourist attractions like beaches. The business offered by this segment is highly seasonal and tends to peak in the September to March period.P. MEHSANA Page 22 . leisure travelers are part of a package run by a tour operator. both domestic and foreign.B.PATEL ENGG. they seek higher discounts and also provide less F&B revenues as they usually eat out. COLLEGE (MBA PROGRAM). corporate executives who make extended stay either for long duration projects or while waiting for permanent accommodation (primarily expatriates) and convention arrivals.Service management report on hotel industries KEY SUCCESS FACTORS 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 travelling for business purposes. Among non-business foreign tourists the primary motivation for visiting India is largely cultural attraction followed by conferences and conventions. This segment includes corporates. The margins offered by leisure travelers tend to be lower because of two reasons. as they demand relatively smaller discounts on room rents (about 10per cent-15per cent). Usually. the Food & Beverage (F&B) revenues are better as they usually eat in the hotel itself due to their busy schedules. Firstly. fax multi-media. conference halls. hill resorts etc. the middle level executives. who open offices in the hotel premises during start-ups. wild life. This segment offers better realizations. S. stay in the budget hotels.
which mainly cater to the business and up market foreign leisure travelers and offer a high quality and range of services. COLLEGE (MBA PROGRAM).Service management report on hotel industries Airline Cabin Crew Airline Cabin Crew forms another important segment because of the repetitive and guaranteed nature of the business that they provide.B. this represents a low-yield segment for hotels in general Premium and Luxury Segment This segment comprises the high-end 5-star deluxe and 5-star hotels. these are a part of an annual contract whereby. a certain number of rooms are provided on demand for cabin crews. The segment accounted for 29per cent of the total hotel rooms in the country in December 2005. S.PATEL ENGG. Usually. in return for a fixed rate. With discount rates in the range of 40per cent and 50per cent. MEHSANA Page 23 .P.
P. What chains will be next? Increasingly. voters and travelers are clamoring for clean air. here is my own list for the New Year: The Environmental Issues Facing the Hospitality Industry in 2009.Service management report on hotel industries ENVIRONMENTAL ISSUES International Society of Hospitality Consultants (ISHC) represents a significant part of the lodging industry's brain power. Who will step forward? Meeting planners increasingly will require green practices as they select their meeting destinations. MEHSANA Page 24 . and that there are a lot of industry leaders who do recognize the importance of environmental protection. What hotel companies and cities will be best positioned to take advantage of this trend? S. As evidence continues to mount regarding the reality of global warming. Last year saw Marriott. Staying ahead of rising energy costs. At the association level.B. Is it any wonder that the lodging industry has such a long way to go to become sustainable? Keeping in mind that there are a lot of positive things happening in the industry. Yes. the industry did get a breather from skyrocketing energy costs in the second half of 2008. Climate change. Westin and others transition to 100 percent nonsmoking environments. the lodging industry is hungry for leadership: individuals to take the lead in pushing the industry toward sustainability. COLLEGE (MBA PROGRAM).PATEL ENGG. how will the lodging industry react? What companies will demonstrate the greatest leadership? Indoor air quality. it was disheartening that rising energy costs and other environment-related issues. but prices were still higher than the previous year for the fifth straight year.
As you meet with your management teams this month. Will 2009 be the year when stakeholders in these programs start to talk to one another with the goal of establishing one green hotel rating system? Greenhouse gas/carbon offsetting programs are becoming more common. Green lodging certification programs are popping up at the state level around the country. These are just some of the environment-related issues the lodging industry will face in the New Year. show in Mumbai will feature a Green Restaurant Products Pavilion for the second year. If you do so.should consider similar setups. MEHSANA Page 25 .the International Hotel/Motel & Restaurant Show and the many large hotel chain conferences -. In 2008. National level programs also continue to grow in India. you can be sure that 2009 will be a much more profitable year for everyone S.P. Other major industry shows -.PATEL ENGG.Service management report on hotel industries There is a need for a greater environmental presence at the lodging industry's largest trade shows.000 megawatt-hours of wind energy. COLLEGE (MBA PROGRAM).B. Vail Resorts announced it will offset 100 percent of its energy use by purchasing nearly 152. Will that happen in 2009? The National Restaurant Assn. be sure to set measurable. What other companies will join Vail Resorts and others in doing this in 2009. It will be 40 percent larger than last year. green goals and make the environment a priority.
these players have preferred to opt for operating/management arrangements with international players of repute. EIH Limited (the Oberoi Group). Some of the players who have already entered or plan to enter the Indian market include Marriott. As late entrants.PATEL ENGG. However most of these players have initiated expansion plans during the late 1990s. S. Some of the companies in this category are Hotel Leela Venture (with Kempinski). Asian Hotels (Hyatt International Corporation). Public Sector Chains ITDC and HCI boast of some of the best locations in major cities but are relative underperformers. Subsequent to the tourism boom. Small Chains They are companies that have come up after the tourism boom of the 1980s and 1990s. Bharat Hotels (formerly with Holiday Inn and Hilton and now with Intercontinental). Indian Tourism Development Corporation (ITDC) and Hotel Corporation of India (HCI) (the latter two being under the Public Sector). COLLEGE (MBA PROGRAM).P. compared with the big chains. Star wood. Due to lack of prior experience in the hotel industry. The private players among the hotel chains are industry leaders and have well-established brand identities across the different industry segments. Berggren Hotels. MEHSANA Page 26 . ITC Hotels Limited (the ITC Welcome Group).B. Emaar MGF. Most of these chains have ambitious expansion plans especially with a strong focus on the budget segment and tier II cities. These chains are establishing themselves in the Indian market by entering into joint ventures with Indian partners or by entering into management contracts or franchisee arrangements. these chains aggressively expanded their presence in other locations. as compared with their private sector counterparts International Hotel Chains They are also looking at India as a major growth destination. Most of these chains had an established presence in one or more metro cities prior to the tourism boom of the 1980s. most of these hotel companies have fewer properties.Service management report on hotel industries DOMESTIC PLAYERS Major players in the Indian Hotel Industry: Hotel Chains They comprise major players including Indian Hotels Company Limited (the Taj Group) and associate companies.
PATEL ENGG. COLLEGE (MBA PROGRAM). From the 1970s through the 1990s. The Taj. PROFILES OF SOME OF THE MAJOR PLAYERS IN THE HOTEL INDUSTRY The Indian Hotels Company The Indian Hotels Company and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces.P. United Kingdom. S. The Taj Mahal Palace Hotel. Mauritius. Taj Hotels Resorts and Palaces comprises 59 hotels at 40 locations across India with an additional 17 international hotels in the Maldives. Working in tandem with the Indian government. Africa. the Taj developed resorts and retreats while the government developed roads and railways to India's hidden treasures. Sri Lanka. Jamsetji N Tata. recognized as one of Asia's largest and finest hotel company. the Taj played an important role in launching several of India's key tourist destinations. The company has had a long-standing commitment to the continued development of the Indian tourism and hospitality industry.B. Malaysia. MEHSANA Page 27 . Bhutan. United States of America. completed its centenary year in 2003.Service management report on hotel industries Localized Hotel Companies They are mainly comprise early entrants who have an established localized presence and who preferred not to expand during the tourism boom but focus on building and catering to a loyal customer base. Bombay. Incorporated by the founder of the Tata Group. a symbol of Indian hospitality. in 1903. the Middle East and Australia. the company opened its first property.
With more and more hotels being added at strategic destinations.P. S. Recently in 2001 Capt. built on a rock face cradled between two wide sweeping Beaches with a stunning view of the famous Kovalam coastline. Palaces and Resorts. Krishnan Nair. Nair fulfilled his longstanding dream of constructing a palace hotel in the garden city of Bangalore. is today one of India's finest hotel chains. ITC – Welcome group Hotels. For this to have been achieved in 12 short years is Nothing short of remarkable. with its distinctive logo of hands folded in the traditional Namaste is widely recognized as the ultimate in Indian hospitality. It is set amidst 8 acres of landscaped garden and waterfalls. which ruled India from time to time. Each of the chain's hotels pays architectural tribute to ancient dynasties.P. there are currently 10 ITC – Welcome group Sheraton hotels. with the opening of its first hotel -Chola Sheraton in Chennai. The design concept and themes of these dynasties play an important part in their respective style and decor. A successful marketing franchise for almost 25 years now. the Rs. and more in the pipeline The Leela Group Founded in 1957 by Capt.5 billion Leela Group is engaged in the business of ready-made garments and luxury hotels and resorts. The Leela Kempinski.PATEL ENGG.Service management report on hotel industries ITC/ Sheraton Corporation ITC's Hotel division was launched on October 18. Goa are two of the best hotels in India. MEHSANA Page 28 . It is a palace with the heart of a modern hotel. the group has joined hands with the Sheraton Corporation to strengthen its international marketing base. Its 254Kovalam is Kerala’s largest resort. Mumbai and The Leela. COLLEGE (MBA PROGRAM).4.B. Bangalore is built in art deco style recreating the grandeur of The Mysore Maharajas Palace. and have also won Considerable international acclaim. The Leela Palace Kempinski. C. 1975.
India. Jaypee Hotels Limited primarily engages in the ownership and operation of hotels in India. if you ask EIH (better known as The Oberoi Group). Goa & Srinagar and The Grand Ashok Bangalore. Amritsar and other key locations. The company in 2004 joined forces with Hilton International to rebrand most of its midrange hotels as Trident Hiltons (the former Oberoi Towers is now known as the Hilton Towers Mumbai). The company owns and operates about 20 luxury hotels. The Grand Jaipur. The company owns three Five Star Deluxe Hotels. In addition. These include Intercontinental ‘The Grand’ hotels in New Delhi. Jaypee Hotels involves in construction operations. The Grand Ahmedabad. The company is headquartered in New Delhi. the company plans to open hotels in Hyderabad. but also in Australia. It also manages the operation of the hotels Jaypee Residency Manor at Mussoorie and Jaypee Green Resorts.P. S.B. The EIH Ltd (The Oberoi Group) Asian elegance is the key to running hotels. Indonesia. and Saudi Arabia. Jaypee Hotels Limited is a subsidiary of Jaiprakash Associates Limited. and Jaypee Vasant Continental and Jaypee Siddhartha Hotel at New Delhi. COLLEGE (MBA PROGRAM). The Oberoi Group also operates luxury cruises of the Nile River and India's Kerala region. Mumbai. The Oberoi Group operates primarily in India. namely Jaypee Palace Hotel at Agra. Jaypee Hotels Ltd. and two inland cruises. The Grand Chandigarh. about 10 mid-range hotels. Most of the company's luxury properties bear the Oberoi banner.PATEL ENGG.Service management report on hotel industries The Bharat Hotels Group The Bharat Hotels group is a major player in India’s tourism and hotel sector. Egypt. The Grand Laxmi Vilas Palace Udaipur and The Grand Temple View Khajuraho. The Grand Resort Bekal. soon to open hotels in 2008-09 are – The Grand Great Eastern Kolkata. Additionally. Mauritius. It operates its hotels under ‘THE GRAND’ banner and its present portfolio of hotels incorporates 14 luxury hotels in the five-star deluxe segment. The Grand Noida and The Grand Fort Dubai. By 2009. MEHSANA Page 29 .
Service management report on hotel industries India Tourism Development Corporation (ITDC) / The Ashok Group: India Tourism Development Corporation (ITDC) was established in 1966 as an autonomous public sector corporation. both at the International Airports and at other places of tourist interest. comfort hotels and classic hotels. the Agra Ashok in Agra. 1971 under the Companies Act. MEHSANA Page 30 .B.PATEL ENGG. Kerala. The Hotel Corporation of India (HCI) The Hotel Corporation of India Limited (HCI) is a public limited company wholly owned by Air India Limited and was incorporated on July 8. Most of the hotels managed by the ITDC Ashok Group have had the privilege of playing host to several international and national dignitaries. The hotels that are a part of the elite and classic category of the ITDC Ashok Group are the Ashok Hotel in New Delhi. The management of Ashoka Group believes in offering the best in the hospitality industry and the staff at each of the hotels run by the group is especially trained to be courteous and efficient. the Kovalam Ashok Beach Resort in Kovalam. The ITDC Ashok Group of hotel chains manages 33 hotels in 26 different tourist destinations all over India. The hotels run by the ITDC Ashok Group of hotel chains may be divided into different categories. thereby also increasing tourism of India. 1956 when Air India decided to enter the Hotel Industry in keeping with the then prevalent trend among world airlines. Hotel Jaipur Ashok in New Delhi and the Qutab Hotel in New Delhi.P. these are elite hotels. COLLEGE (MBA PROGRAM). S. The Ashok Group of hotel chains boasts of running some of the best hotels in the Indian hotel industry. The objective was to offer to the passengers a better product. The ITDC Ashok Group of hotel chains manages some of the best five star and luxury tour hotels in the Indian hospitality industry. entrusted with the task of helping develop tourism infrastructure and promoting India as a tourist destination.
PATEL ENGG. the National Tourism Policy was formulated in the year 2002.P. private sector and other agencies • Ensure that the tourist to India gets physically invigorated. license from police (issued by local police) and a bar license (issued by excise department). economic S. Broadly. and culture in partnership with States. Tourism Policy In order to develop tourism in India in a systematic manner. MEHSANA Page 31 . mentally rejuvenated. This includes license to operate a restaurant. the “Policy” attempts to: • Position tourism as a major engine of economic growth • Harness the direct and multiplier effects of tourism for employment generation. The regulations include statutory and regulatory sanctions (or approvals and licenses) from the Central and State departments or agencies.Service management report on hotel industries GOVERNMENT POLICIES Tourism being a concurrent subject under the Indian constitution. development and providing impetus to rural tourism • Focus on domestic tourism as a major driver of tourism growth • Position India as a global brand to take advantage of the burgeoning global travel trade And the vast untapped potential of India as a destination • Acknowledges the critical role of private sector with government working as a pro-active facilitator and catalyst • Create and develop integrated tourism circuits based on India’s unique civilization. spiritually elevated and “feel India from within”.B. a hotel license (issued by municipal authorities). position it as a major engine of economic growth and to harness its direct and multiplier effects for employment and poverty eradication in an environmentally sustainable manner. heritage. both the central and state governments regulates the hotel industry. culturally enriched. COLLEGE (MBA PROGRAM).
Bihar. • International passenger traffic observed a growth of 16. S. Karnataka.Service management report on hotel industries The Government’s major policy initiatives include: • Liberalization in aviation sector • Pricing policy for aviation turbine fuel which influences internal air fares • Rationalization in tax rates in the hospitality sector • Tourist friendly visa regime • Immigration services • Procedural changes in making available land for construction of hotels • Allowing setting up of Guest Houses The Indian Ministry of Tourism has identified 31 villages across the country to be developed as tourism hubs. • Private airlines accounted for 77. The booming aviation business is bringing an ever-increasing number of passengers to India. Maharashtra. • Domestic air passenger traffic grew by 16. The numbers. Rajasthan and West Bengal. Sikkim.0 per cent of the total domestic traffic. and pulling Indians out of their homes and into hotels.B. start-up of various low-cost carriers. Andhra Pradesh.9 per cent in the same period. Assam. MEHSANA Page 32 . Kerala. permission for domestic airlines to commence International flights.34 million in 2005/06 since 1970. according to the Ministry of Tourism. speak for themselves: • The number of domestic and international passengers has increased fifteen-fold to 73.8 per cent in 2005/06 compared to 2004/05. Gujarat. The states in which these villages have been identified include Himachal Pradesh. COLLEGE (MBA PROGRAM).PATEL ENGG. Government’s Open Skies Policy The Government’s Open Skies policy. Tamil Nadu.P. and fleet expansion by domestic players have created a huge incentive for domestic travelers to explore far-off destinations within and outside India. Madhya Pradesh. Orissa.
against their foreign exchange earnings under the Served from India Scheme. this entitlement is 5per cent of previous year’s foreign exchange earnings for hotels of one-star and above (including managed hotels and heritage hotels) approved by the Department of Tourism and other service providers in the tourism sector registered with it. foreign exchange earned through International Credit Cards and other instruments as permitted by RBI for rendering of service by the service providers shall be considered for the purposes of computation of entitlement under the Scheme. The measure aims at supporting the Group service companies not earning foreign exchange in getting access to the international quality products at competitive price and providing services of international standards. This new initiative allows transfer of both the script and the imported input to the Group Service Company. Also.B. 2006. offered following incentives to the hospitality industry: Hotels and Restaurants are allowed to import duty free equipment and other items including liquor. Benefits of the Scheme earned by one service provider of a Group company can now be utilized by other service providers of the same Group Company including managed hotels. will now qualify for benefits under the Served from India Scheme. The stand-alone restaurants will be entitled to duty credit equivalent to 10per cent of the foreign exchange earned by them in the preceding financial year (instead of the earlier 20per cent). As in previous years. Service exports in Indian Rupees. MEHSANA Page 33 . S. The earlier provision allowed transfer of imported material only.P.PATEL ENGG. COLLEGE (MBA PROGRAM).Service management report on hotel industries Foreign Trade Policy The Foreign Trade Policy announced in April. which are otherwise considered as having been paid for in free foreign exchange by RBI.
Sagarmala project which intends to create a network of seaports. S. adventure and wild life experience to tourists. The term hotels Include restaurants.PATEL ENGG. including incentive fee.846 km Golden Quadrilateral and the 7. • up to 3 per cent of net turnover is payable for franchising and marketing/publicity Support fee. surface. and up to 10 per cent of gross operating profit is payable for management fee. 5.Service management report on hotel industries FDI in Hotel and Tourism Sector 100 per cent FDI is permissible in the sector on the automatic route. tour operating agencies and tourist transport operating agencies. which will change the way people discover and experience real India.P. Other Government Initiatives Government has undertaken following initiatives to attract both inbound and outbound Tourists: • Incredible India . • Other projects are the Rs. entertainment.Under this program the Government promotes India through various integrated marketing programs. • Atethie devo bhava (guests are equal to god) . Tourism related industry include travel agencies. MEHSANA Page 34 .300 km north-south and east-west corridors. For foreign technology agreements. COLLEGE (MBA PROGRAM).B. beach resorts. amusement. • Various Infrastructure building initiatives • Encourage religious tourism for instance promotes various places in India as Buddhist abodes. leisure. and health units for tourists and Convention/Seminar units and organizations. automatic approval is granted if: • Up to 3 per cent of the capital cost of the project is proposed to be paid for technical and Consultancy services including fees for architects. sports. design. units providing facilities for cultural. etc.Under this program the Government create awareness among Indian people who come in contact with the tourist. the 5. air and water transport facilities to tourists. supervision.400 million National Highways Development Project. and other tourist complexes providing accommodation and/or catering and food facilities to tourists.
India is already facing acute shortage of quality accommodation for both international as well as domestic tourists. S. promoters will be able to seek capital loans from banks and ease out the liquidity issues particularly to the new hotel projects. The ministry has been canvassing that the hotel segment of the tourism industry is highly capital-intensive and has a long gestation period.PATEL ENGG. animal husbandry and fisheries. The processed food industry food industry ranks fifth in size in the country.3 per cent of GDP. Meanwhile. While India has an abundant supply of food. and 15 per cent of milk produced being processed. the sources added. the food processing industry is still nascent with only two per cent of fruit and vegetables. Sources said yet another proposal of the ministry pending with RBI is to provide fiscal amenities for creation of additional hotel room capacity to meet the surge in demand in the tourism sector.B. the Union tourism ministry has permitted the hotel industry to go in for external commercial borrowings up to $100 million during the current financial year.Service management report on hotel industries FISCAL REGULATION India's credit-starved hotel industry can now afford to heave a sigh of relief.P. This two-pronged push will make larger credit available to the capital-intensive and credit starved hospitality industry at lower rates of interest. It accounts for 13 per cent of the country's exports and 6 per cent of total industrial investment. thus bringing down the high cost of the hotel projects. With the delinking of hotels from commercial real estates. Food processing in India covers a spectrum of products from agriculture. horticulture. This will help the interest rate to go down further to single-digit levels for hotels. MEHSANA Page 35 . plantation. In a move that promises to make credit easily available to the sector. the Reserve Bank of India too has removed hotels from the 'commercial real estate' classification. representing 6. COLLEGE (MBA PROGRAM). Tourism ministry sources have that said that efforts are on to obtain infrastructure status for hotel projects and the RBI's approval is being sought for this.
20. up to 51 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment. is allowed for most of the food processing sector. Carrefour and Woolworth taking interest in the Indian market.B. laundry and food service equipment. This sector is emerging as one of the fastest growing sectors with international retailers like Wal-Mart.Service management report on hotel industries The industry size is estimated at US$ 70 billion. offers a platform for the manufacturers and suppliers to display the latest state of the art equipment manufactured by them. MEHSANA Page 36 . FDI in the Food Processing Sector has witnessed over two and a half times increase from Rs 174 crore in 2005 to Rs 441 crore in 2007.PATEL ENGG. Hospitality industry in India The hospitality Industry in India is poised for major growth. including US$22 billion of value added products.P.000 more hotel rooms are required for the Commonwealth Games. Areas which have seen remarkable change in these years are bakery. Many processed food items are totally exempted from excise duty. Automatic investment approval (including foreign technology agreements within specified norms). Hospitality India which encases various categories of equipment being used. COLLEGE (MBA PROGRAM). It is expected that FDI inflow into the processed food sector would be in the region of Rs 1.300 crore in 2009. For achieving international standards. Excise and Import duty rates have been reduced substantially. Policy initiatives The Indian government has abolished licensing for almost all food and agro-processing industries. To cater to the demand for rooms five-year tax holiday for two. in quality machinery and tools and latest technology. convention centers. Wide-ranging fiscal policy changes have been introduced progressively. investment is being made by manufacturers on improving skills of manpower. S. three and four-star hotels. as well as.
B. irradiates and modernized abattoir. air and water pollution control equipment and accessories. hotel and kitchen equipment and tableware. health and fitness equipment.Service management report on hotel industries AAHAR 2009 AAHAR 2009 will offer a segmentised platform for showcasing the developments and progress achieved in the processed food and hospitality sectors. food processing. AAHAR also brings together potential business partners from India and abroad and provides a platform for implementing in government schemes for infrastructural development like establishing food parks. consultancy services and hospitality supplies. packaging and value-added centres. COLLEGE (MBA PROGRAM). and the scope embodied by them for investment and tech up gradation.PATEL ENGG. technologies and services. poultry and farm equipment and supplies. interior and house keeping. through a wide ambit of display covering products. with 20 per cent rise in participation. This exposition helps the visitors from the hospitality sector to find a one window solution to their need to provide hygienic environment at back of the house (kitchen). laundry. Significantly. It also offers a reliable and time tested forum for B2B transactions. packaging. `FOOD INDIA' covering food and food processing sector and `HOSPITALITY INDIA' representing hotel and restaurant equipment and supplies. dairy and confectionery equipment.P. mill machinery and equipment. integrated coldchain facility. air-conditioning. good quality food and higher level of productivity. refrigeration and cold storage systems. alcoholic (subject to obtaining prior permit from the office of Excise Commissioner of NCT of Delhi) and other beverages. MEHSANA Page 37 . exploration of joint venture and technological up-gradation and sourcing opportunities. the forthcoming edition of the fair will be divided into two independent shows viz. S. processed food. On display will be all kind of foods.
The industry is adding about 60. India ranks 18th in business travel and will be among the top 5 in this decade.4 million tourists visited the country. This figure will skyrocket in 2010. there has been a mad rush to India for business opportunities. Therefore. the future scenario of the Indian hotel industry looks rosy. During 2007.000 quality rooms. With a shortage of 150. S. Already. Government has approved 300 hotel projects. currently in different stages of planning and development and should be ready by 2012. According to the World Travel and Tourism Council.P.PATEL ENGG. more than 50 international budget hotel chains are moving into India to stake their turf. With this robust trend in tourism. The manpower requirements will increase from 7 million in 2002 to 15 million by 2010. Hotels in India have a supply of 110.000 rooms.000 rooms.B. elevating room rates and occupancy. registering a growth of 14 per cent. when Delhi hosts the Commonwealth Games. COLLEGE (MBA PROGRAM). The industry seems to be fast getting rid of competition when it comes to being a cost-effective destination. an estimated 4. nearly half of which are in the luxury range. the hotel industry has also witnessed a rise in the growth and over the last decade and half. India is a destination for hotel chains looking for growth. likely to result in demand-supply disparity. The Hotel Industry in India is second only to China in Asia Pacific. At the current trend. MEHSANA Page 38 . room rates will see a rise to 25 per cent annually and occupancy would rise by 80 per cent over the next two years.The hotel industry is set to grow at 15 per cent a year.Service management report on hotel industries INTERNATIONAL SCENARIO Tourism has suddenly become a booming sector. demand will soar to 10 million in 2010.
ports and telecommunications and be granted full tax benefits. it should be made available only on demand.4 million tourists visited India last year and at current trend. both in use and source of origin. and laundry and dry-cleaning should be given priority because these areas have huge wastages which can be curbed. Paper and stationery can be recycled.000 rooms. and fostering the education of environmental awareness. demand will soar to 10 million in 2010 . The hotel should be constructed and start functioning during the period April 1. MEHSANA Page 39 . Hence. With tremendous pull of opportunity.PATEL ENGG. cost cutting measures have led to lower business tourist arrivals in recent times. minimizing waste production. 2008 to March 31. pursuing action programs that benefit the environment in the local community. Income tax exemption for 5 years is granted to two. The industry wants it to be treated at par with other infrastructure sectors such as roads. The government should increase its budget towards the hotel industry as it is observing high rates of growth and can lead to India’s development as well. Plus. water use. 'Hotel Industry in India' have supply of 110.Service management report on hotel industries The government of India has taken a number of steps to promote tourism. There is an urgent need for the hotels to adopt cost cutting devices. S. 'Hotels in India' has a shortage of 150.P. 4. rising crude prices and higher airfares has affected the hotel sector to a certain extent. Due to rising costs. These can include using resources more efficiently. The slowdown in the global economy.000 rooms fueling hotel room rates across India. COLLEGE (MBA PROGRAM). 2013. Some hotels also offer free wine and hence it should be available in only those rooms where it is demanded. both internally and externally. air conditioners and other electrical appliances should be switched off when not in use.6 bn is to be allocated for the Commonwealth Games. companies are facing pressure on their earnings. using products and materials that have the least negative impact on the environment. According to the tourism ministry. People generally tend to misuse the free stuff that is available in the hotels. Waste management.to accommodate 350 million domestic travelers. three or four star hotels established in specified districts having UNESCOdeclared World Heritage Sites. energy conservation.B. India is a destination for hotel chains looking for growth. An amount of Rs 0.
Five-star hotels in metro cities allot same room. Travelers are taking new interests in the country which leads to the upgrading of the hospitality sector.P. Therefore. Hospitality Industry is closely linked with travel and tourism industries. when Delhi hosts the Commonwealth Games. Sources estimate. This figure will skyrocket in 2010. With the USD 23 billion software services sector pushing the Indian economy skywards. India. demand is going to exceed supply by at least 100% over the next 2 years. MEHSANA Page 40 . 'Hotel Industry in India' is eroding its competitiveness as a cost effective destination.PATEL ENGG. 'Hotel India' room rates are most likely to rise 25% annually and occupancy to rise by 80%. with opportunities galore the future 'Scenario of Indian Hotel Industry' looks rosy. receiving almost 24-hour rates from both guests against 6-8 hours usage.92 million and consequently International tourism receipts have also reached a height of US$ 5. more than 50 international budget hotel chains are moving into India to stake their turf. the manpower requirements of the hotel industry will increase from 7 million in 2002 to 15 million by 2010. However. 'Hotel Industry in India' is set to grow at 15% a year. Indian tourism and hospitality sector has reached new heights today. 'India Hotel Industry' is adding about 60. Already.B. the rating on the 'Indian Hotels' is bullish. MNC Hotel Industry giants are flocking India and forging Joint Ventures to earn their share of pie in the race. Sources said. India is experiencing huge footfalls as a favorite vacation destination of foreigners and natives and the hospitality industry is going into a tizzy working towards improving itself. With demand-supply disparity. S. currently in different stages of planning and development and should be ready by 2012. India ranks 18th in business travel and will be among the top 5 in this decade.000 quality rooms. COLLEGE (MBA PROGRAM). Visiting foreigners has reached a record 3.7 billion. over the next two years. Government has approved 300 hotel projects. nearly half of which are in the luxury range. Even an increase in business travel has driven the hospitality sector to serve their guests better.Service management report on hotel industries The World Travel and Tourism Council. more and more IT professionals are flocking to Indian metro cities. data says. more than once a day to different guests.
P.Service management report on hotel industries PORTER’S FIVE FORCES MODEL INTRODUCTION Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially. competitive strategy should base on and understanding of industry structures and the way they change.B. MEHSANA Page 41 . S.PATEL ENGG. COLLEGE (MBA PROGRAM).
Boatels. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry.P. The hotels customers are fragmented. There are no substitutes for spas and five star hotels.Service management report on hotel industries Porter has identified five competitive forces that shape every industry and every market. so they have to reduce their bargaining power to attract the customers. Porter’s model supports analysis of the driving forces in an industry.EIH. Because they are having their own brand image. The hotel chains are operating different services like Spas. ITC& Oberoi are having various rates and tariffs. The high class hotels are operating by few hotel chains like-TAJ.PATEL ENGG. The Taj. 1.BARGAINING POWER OF SUPPLIERS The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. Resorts.B. management can decide how to influence or to exploit particular characteristics of their industry. Based on the information derived from the Five Forces Analysis.ITC&THE LEELA PALACE so they have a control over the industry. S. etc. MEHSANA Page 42 . COLLEGE (MBA PROGRAM). City Centers. Heritage HOTELS. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization.
and LEELA PALACE. luxury tax and sales tax inflate the hotel bill by over 30%.B. MEHSANA Page 43 . This acts as a major deterrent to the Indian hotel industry. market shares. 3. the easier it is for other companies to enter this industry. new entrants could change major determinants of the market environment (e. The suppliers are providing better information about them to attract the customers’ .P. COLLEGE (MBA PROGRAM). Some unseasoned timings the hotels are offering discounts and incentives to reduce the bargaining power of buyers. prices. the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Access to raw materials and Distribution channels are controlled by Existing players like TAJ.g. the Customers have low margins and are pricesensitive. customer loyalty) at any time.Service management report on hotel industries 2 . ITC.THREAT OF NEW ENTRANTS The competition in an industry will be the higher. Effective tax in the South East Asian countries works out to only 4-5%. The hotel industry is one of the most invested in its fixed assets.PATEL ENGG. BARGAINING POWER OF CUSTOMERS Similarly. The foreign hotel chains are tied up with Indian hotels to reduce the initial cost and using the latter’s brand name. ITC. If the hotel price changes are moderate. So they are trying to recover their amount quickly. There is always a latent pressure for reaction and adjustment for existing players in this industry. In such a situation. In India the expenditure tax.Here the buyers are highly informed. Brand loyalty of customers like TAJ. and LEELA PALACE affects the new entrants. The cost of land in India is high at 50% of total project cost as against 15% abroad. S.
5. The top competitors in hotel industry are having the same services like five star. and hence. The healthy competition among the all players is helping to increase the industry growth. The price variation of same class hotel services from various brands is one of the reasons to choose a substitute. LEELA PALACE.PATEL ENGG. spas.B. High competitive pressure results in pressure on prices. heritage hotels and palaces. THREAT OF SUBSTITUTES A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. This category also relates to complementary products.) is dominating the substitutes. slowly picking up in secondary cities. boatels and motels. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players.P. COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS This force describes the intensity of competition between existing players (companies) in an industry. Brand loyalty of customers (TAJ. ITC. The hotel relationship with customer and costs also the reasons to switching to substitutes. margins. More fixed cost and switching costs affects the business. Intense in metro cities. S. The present demand and supply of hotel rooms is one of the reasons to choose a substitute. COLLEGE (MBA PROGRAM). MEHSANA Page 44 . on profitability for every single company in the industry. etc.Service management report on hotel industries 4.
Service management report on hotel industries MARKET SHARES The tourism in India has seen a steep decline over last 12 months and the effects of that have seen Hospitality Industry in India cut to half.PATEL ENGG.493. in Q4 FY ’09. India currently ranks 18th in business travel and will be among the top 5 nations by the end of 2010. have severely impacted the bottom line to the extent of 64 per cent of the Indian hospitality sector. COLLEGE (MBA PROGRAM).65 per cent in the fourth quarter of FY ’09.B. The total expenditure in fourth quarter of FY ’09 rose by 7. • The share of Travel & Tourism industry to the global GDP was 6. ASSOCHAM recently released the report on the performance of Hospitality Industry. Here are some of the key findings of the report: The average net profit of 10 hotels has declined by 65 per cent in Q4 FY ’09 as compared to the Q3 FY ’09.21% of global GDP in 2007. The interest cost of 10 hotels went up by 51.47 as compared to the third quarter of FY ’09. Mumbai terrorist attack combined with the global slowdown. • ASSOCHAM has projected that Medical Tourism is likely to become the leading foreign exchange earner for India S. • Middle East was the fastest-growing region in terms of arrivals of international tourists during 2007. 8 hotels have registered decline in net profit on sequential basis. as per the analysis carried out by the Associated Chamber of Commerce and Industry of India (ASSOCHAM). The fall in total income was about 4. MEHSANA Page 45 . • According to the report by World Travel and Tourism Council. Out of these 10 hotels.47 per cent as compared to the third quarter of FY ’09.19 billion and industry demand contributed to 13.P.48% in the year 2007 with value of US$ 3.
47 11.28 per cent). Hotel companies such as TAJGVK Hotels & Resorts Limited has registered decline in net profit by 41.28 19. which included income from operation and other income also.86 per cent during the same period. MEHSANA Page 46 . COLLEGE (MBA PROGRAM). Thailand. registered average decline by 4.80 Corporate Announcements for the year ending 2008-09.Service management report on hotel industries • India is now emerging as one of the hot destinations for medicaland tourism after Singapore. Malaysia.65 -64. there has been a rise in expenses as based on profitability and cost parameters of the hotels on the quarterly results posted by hotel companies listed on the Bombay Stock Exchange (BSE) from 1st April-25th.47 7. Philippines. The other hotels which registered major decline in net profit were Oriental Hotels Limited (28.47 per cent in Q4 FY ’09 as compared to the Q3 FY ‘09.63 -4.63 per cent during Q4 FY ’09. S.12 per cent) and Howard Hotels Limited (57. The income from operation also showed the average decline by 4. Power and Light Total Expenditure Interest Net Profit Source: Per cent Change -4. Hong Kong. The total income of such hotels. Performance Analysis of Hotel Industry Parameters Income from Operation Total Income Employee Cost Fuel.May 2009.49 per cent in Q4 FY ’09 as compared to the Q3 FY ’09 followed the Jaypee Hotels Limited which registered decline in net profit by 44. Jindal Hotel Limited (58.B. Columbia While the inflow of foreign tourist came down sharply and the rates shrieked.P.84 51.34 per cent).PATEL ENGG.
Ishwar Bhuvan Hotels Limited (15. while the total income decreased by 4.47 per cent during the period.10 per cent) among others. The maximum rise was incurred by Asian Hotels Limited (11. COLLEGE (MBA PROGRAM). the maximum increase was incurred by TAJGVK Hotels & Resorts Limited (193.34 per cent).85 per cent) and TAJGVK Hotels & Resorts Limited (8. fuel & light by 147. Among the hotels. The rapid pace of expansion in hospitality sector of India raised the interest cost borne by the Indian hotel industry. S.51 per cent) followed by Howard Hotels Limited (164.65 per cent). The borrowing cost of the hotels went up by 51. MEHSANA Page 47 .94 per cent) and Oriental Hotels Limited (89.PATEL ENGG. The employee cost of hotels rose by average 7.28 per cent in Q4 FY’09 as compared to the Q3 FY ‘09. The hotels that witness maximum rise in employee cost include Asian Hotels Limited (24. Jindal Hotels Limited incurred maximum expenditure on the cost of power.81 per cent.91 per cent). Howard Hotels Limited (21. along with TAJGVK Hotels & Resorts Limited (20.30 per cent).45 per cent) and Oriental Hotels Limited (13. fuel & light increased by 11. The ten hotels analyzed by the AFP registered rise in interest cost.65 per cent in fourth quarter of FY ’09. the cost of hotel industry went up by 20 per cent during Q4 FY ’09 as compared to the Q3 FY ’09.47 per cent in Q4 FY ’09 as compared to the Q3 FY ’09.27 per cent) among others in Q4 FY ’09 as against Q3 FY ’09.P. The employee cost of hotels also registered a rise in the total expenditure during the period. Asian Hotels Limited (17.79 per cent) and Despite the decline in income top line and bottom line. TAJGVK Hotels & Resorts Limited (24 per cent).57 per cent) followed by Jaypee Hotels Limited (10.Service management report on hotel industries The cost of power.B.
S.B. 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.Service management report on hotel industries SWOT ANALYSIS STRENGTHS A very wide variety of hotels is present in the country. COLLEGE (MBA PROGRAM).P. The hotel industry in India is heavily staffed.000 hotel rooms are available in India today. Only 97. MEHSANA Page 48 .PATEL ENGG. High tax structure in the industry makes the industry worse off than its international. Only limited value added services Poor support infrastructure Slow implementation Susceptible to political events. India offers a readymade tourist destination with the resources Natural and cultural diversity Demand-supply gap Government support Increase in the market share WEAKNESSES The cost of land in India is high at 50% of total project cost as against 15% abroad.
PATEL ENGG.Service management report on hotel industries OPPORTUNITIES Demand between the national and the inbound tourists can be easily managed due to difference in the period of holidays. Fluctuations in international tourist arrivals. Lack of training man power in the hotel industry. In the long-term the hotel industry in India has latent potential for growth. Open sky benefits.B.P. 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. COLLEGE (MBA PROGRAM). THREATS Guest houses replace the hotels. Increasing competition S. MEHSANA Page 49 . Unique experience in heritage hotels.
MEHSANA Page 50 . The government support towards the hotel industry and its development is appreciable.P.PATEL ENGG.B. The report shows that the present and future skyrocket scenario of the industry. The hotel industry comprises a major part of the tourism industry. It creates interest of the competitors to grow drastically. The hotel industry contributes employment and economical growth of the country.Service management report on hotel industries CONCLUSION This hotel industry analysis report helps to know the full information of Indian hotel industry. COLLEGE (MBA PROGRAM). The market share and expansion of industry in Indian economy is rosy day by day. Various classes and categories of hotels and their services of the industry are very effective. S. At present the government is very liberal in regulating and licensing to the hotels because to increase foreign tourist average daily rate.
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