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

Hotel industry depends largely upon the foreign tourist arrivals further classified into business travelers (around 65% of the total foreign tourists) and leisure travelers. Cruises or airlines. It includes hotels. because of their sheer capability of understanding the needs of a customer better and handling difficult customers/ situations efficiently. a person with hospitality background has an edge above the rest. ships.strangers and has been derived from the Latin word hospitalitem. Real Estate or any other sector having direct customer contact. The major factors contributing to this growth include stable economic and political conditions. booming service industry. Earlier people who graduated from a Hotel School could get employed either in Hotels. food and drinks. restaurants. 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. 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. airlines and railways. . FDI inflow. Telecom world. bars. infrastructure development. The hospitality industry covers a diverse range of establishments in the form of accommodation. motels. In fact. Banking Industry. the hotel industry has seen higher growth rates due to greater number of tourist arrivals. But service is the BUZZ word for all businesses today. which means “friendliness to guests”. BPO. higher occupancy rate (being around 75% in FY'06) and significant increase in average room rate (ARR). Today hospitality has evolved from the basic food and accommodation industry and taken a very important position in almost all businesses. it has become a huge industry and drives economies across the globe. 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 scope of hospitality/ service industry today is far more than one could have ever imagined a few years back. Be it the Retail Sector.

4. Jain With an increase in choices available. The Department of Tourism (DOT) has already started the "Incredible India" campaign for the promotion of tourism in India. etc. Government support: The government has realized the importance of tourism and has proposed a budget of Rs. foreign hospitality players are heading towards Indian markets. India has approximately 100.just 5. 2. South Asia is and will remain a must-visit destination and India is looking more and more lucrative.4 per cent. Guests will require higher levels of service in the full-service segments. Nevertheless. 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. "By 2020. Rajasthan. the needs of the traveler will be nothing less than perfection. Thus. Increase in the market share: India's share in international tourism and hospitality market is expected to increase over the long-term. The priority is being given to the development of the infrastructure and of new tourist destinations and circuits. Moreover.CONTRIBUTION TO INDIAN ECONOMY The Indian hospitality industry is going great guns presently. SWOT ANALYSIS OF HOSPITALITY INDUSTRY 1. The coastlines.000 rooms only in totality. which is lesser than that in Las Vegas. creating the aura for India as a leisure destination. backwaters of Kerala. snow capped Himalayas and the quiescent lakes are incredible. This has led to the rapid expansion of the sector 3. which presently include the large gaps in rooms supply as compared to demand. which will warrant greater training requirements for hotel staff. the only direction left for the sector points upwards. In comparison to nations like China.both inbound and outbound. with high operating margins and increase in the number of travelers visiting India . With the privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five star hotels. Natural and cultural diversity: India has a rich cultural heritage. the hospitality and tourism sector would be a major contributor to the Indian economy. However. executive director of JLLM. besides contributing to an insignificant portion of the GDP ." says Sudeep Jain. Accordingly. The limited service hotels will require a complete shift in the perception of customer service. India's growth potential is boundless. 540 crore for the development of the industry. Within the nation. New budget and star hotels are being established. 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. this is directly related to the travelers’ travel personal. they will be less forgiving of service deficiencies. Thailand and Malaysia where the hospitality share ranges between 12 and 15 per cent. . which will remain on the growth path. The "unity in diversity" tag attracts most tourists. sunny beaches. what needs to be focused on is the fact that opportunities are not missed.

WEAKNESSES 1. The hospitality has failed to retain good professionals. Increasing competition: Several international majors like the Four Seasons. OPPORTUNITIES 1. the travel and tourism industry has seen an increase in business. Fluctuations in international tourist arrivals: The total dependency on foreign tourists can be risky. Two other groups . It has benefited both international and domestic travels. as there are wide fluctuations in international tourism.are also looking forward to join this race. One of the . Slow implementation: The lack of adequate recognition for the tourism industry has been hampering its growth prospects. Shortage of skilled employees: One of the greatest challenges plaguing the hospitality industry is the unavailability of quality workforce in different skill levels. Open sky benefits: With the open sky policy. Poor support infrastructure: Though the government is taking necessary steps. the total expenditure made in this regard was US $150 billion in China compared to US$ 21 billion in India. 3. which is expected to enhance leisure tourism. many more things need to be done to improve the infrastructure.the Carlson Group and the Marriott chain . THREATS 1. Retaining quality workforce: Retention of the workforce through training and development in the hotel industry is a problem and attrition levels are too high. Rising income: Owing to the rise in income levels. In 2003. 2. 2. Shangri-La and Aman Resorts are entering the Indian markets. 2. Susceptible to political events: The internal security scenario and social unrest also hamper the foreign tourist arrival rates. Increased airline activity has stimulated demand and has helped improve the infrastructure. Domestic tourism needs to be given equal importance and measures should be taken to promote it. 2. This will increase the competition for the existing Indian hotel majors CHALLENGES FOR HOSPITALITY INDUSTRY 1. Indians have more spare money to spend. Whatever steps are being taken by the government are implemented at a slower pace.

000 rooms. It is estimated that the current requirement is of 1. more options and connectivity. the shortage will still persist. Ibis and Fairfield Inn. Human resource development: Some of the services required in the tourism and hotel industries are highly personalized. The competition from neighboring countries and negative perceptions about Indian tourism product constrains the growth of tourism. Manual back-end: Though most reputed chains have IT enabled systems for property management. Low cost carriers: Travelers in general are more price sensitive to airfare than they are to hotel room rates. new products and new systems. 2. 7. expectations of customers are rising.50. etc. Though the new investment plan would add 53. The shortage of blue collar employees will pose various threats to the industry. 5. The companies have to focus on customer loyalty and repeat purchases.reasons for this is unattractive wage packages. The image of India as a country overrun by poverty. India is focusing more on white collar jobs than blue collar jobs. almost all the data which actually make the company work are filled in manual log books or are simply not tracked. Some of the new players entering into this category of hotels include Hometel.. Kamfotel. Intense competition and image of India: The industry is witnessing heightened competition with the arrival of new players. most of the hotel management graduates are joining other sectors like retail and aviation. safety concerns and diseases also harms the tourism industry. Courtyard by Marriott. 4. 2. as they have advantages like low costs. LCCs are a good option for business travelers. . that will IN shape Low the HOSPITALITY future of Cost hospitality SECTOR sector are: Carriers Hotels Apartments Travel Budget Service Technology Loyalty 1. Customer expectations: As India is emerging as a destination on the global travel map. 4. 3. Heightened demand and the healthy occupancy rates have resulted in an increase in the number of budget hotels. 6. 5. 3. Country Inns & Suites.000 rooms by 2011. TRENDS Trends 1. Though there is boom in the service sector. The average room rate (ARR) realized from business travelers is normally higher than from leisure travelers. Often a low airfare will stimulate demand for travel even if hotel prices are increasing. Shortage of rooms: The hotel industry is facing heavy shortage of rooms. political instability. and no amount of automation can substitute for personal service providers. reservations. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from the business travel segment.

The arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. service apartments are a natural choice for corporate employees or expatriates relocating to a particular city. Ideally suited for medium-to-long staying guests.3. including those relating to frequency and size . airline-credit card company tie-ups have brought a whole range of benefits to the travelers. These include the abolishment of the inland air travel tax of 15%. Critical factor to drive future growth and performance THE HOTEL INDUSTRY Hotel Industry in India has witnessed tremendous boom in recent years. Service apartments: The concept of service apartments. and removal of a number of restrictions on outbound chartered flights. and a host of other goodies. Technology: Travel and technology have become inseparable. etc. 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. reduction in excise duty on aviation turbine fuel to 8%. e-ticketing. offering the comfort and convenience of a home without the hassles of having to maintain or look after it. access to executive lounges. 4. Villas in Spain. Wi-Fi Internet connectivity. 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. web cameras and virtual reality mode of conferencing. are just a few areas where technology has completely changed the way we travel. 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. On-line bookings. free tickets. Loyalty travel: Today. 5. is an established global concept. These include insurance cover. upgrades. Service apartments are the latest trend in accommodation. easy access to information. In recent years government has taken several steps to boost travel & tourism which have benefited hotel industry in India. Technology is making its own advances with high-tech video conferencing facilities. non-resident Indians visiting the country for long spells and foreigners visiting the city for long duration. The thriving economy and increased business opportunities in India have acted as a boon for Indian hotel industry. though a recent phenomenon in India.

brand image. Some hotels have conference services and meeting rooms and encourage groups to hold conventions and meetings at their location. Fivestar hotels in metro cities allot same room. Hotel Industry in India currently has supply of 110. According to estimates demand is going to exceed supply by at least 100% over the next 2 years. This will affect the competitiveness of India as a costeffective tourist destination.4 million tourists visit India every year. The upgrading of national highways connecting various parts of India has opened new avenues for the development of budget hotels in India. The future scenario of Indian hotel industry looks extremely rosy. allowing the government to provide critical funding for the large capital investment that may be required has also fuelled the demand for hotel rooms. 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. hotel rates in India are likely to rise by 25% annually and occupancy by 80%. • In the hotel sector. receiving almost 24-hour rates from both guests against 6-8 hours usage. usually on a short-term basis. Players . Approximately 4. quality of facilities and services offered. more than once a day to different guests. • India is an ideal destination for tourists. 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. With demandsupply disparity. which should be ready by 2012. Thus the growth prospects are very high. The government's recent decision to treat convention centres as part of core infrastructure. a number of multinationals have strengthened their presence. 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. According to a report. Government has approved 300 hotel projects. over the next two years. with Delhi and Mumbai being on top.000 rooms fueling hotel room rates across India. ARR depends on location. nearly half of which are in the luxury range.000 quality rooms.000 rooms and there is a shortage of 150. • The average room rate (ARR) and occupancy rate (OC) are the two most critical factors that determine profitability. 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. To overcome. The occupancy rate depends on other seasonal factors. Hotels often provide a number of additional guest services such as a restaurant. this shortage Indian hotel industry is adding about 60.of aircraft. Hotel Industry in India is also set to get a fillip with Delhi hosting 2010 Commonwealth Games. a swimming pool or childcare. currently in different stages of planning and development. Taking advantage of this opportunity Tata group and another hotel chain called 'Homotel' have entered this business segment. Substantial investments in tourism infrastructure are essential for Indian hotel industry to achieve its potential. star rating.

Indian hotel chains are also expanding internationally. Moreover. A combination of all these factors could result in a strong emergence of budget hotels. The ϖ ϖ ϖ hotel industry can be further categorized into three segments: Hotels Restaurants Caterers. which could potentially lower the cost of travel and related Four Seasons are also likely to enter the Indian market in the near future. Contract A. HOTELS The hotels in India can be broadly classified into the following segments: .

seasonal discounts and decent services. offer limited luxury. Star Heritage rated hotels: hotels. These are reasonably priced. etc. . Budget hotels: They’re usually preferred by domestic travelers seeking economical accommodation. Budget hotels are also preferred by business travelers contributing to greater ARR (average room rate) than leisure travelers. C. Some of the major players in this category include Sodexho. FACILITY HOTELS 4. etc.1. The major players include Barista. 2. Unclassified hotels: They’re motels spread across the country. Contract Costing This includes any catering business unit that is formally not a part of the hotel industry but is closely allied to it. Compass Group. Increased demand and healthy occupancy has fueled the growth of budget hotels in a short time. They form 19% of the industry size. Bercos. RESTAURANTS These typically include fast food chains. Low price is their only USP. 5. Ruby Tuesday. ethnic restaurants. Mc Donalds.. B. 3. fine dining and coffee bars.

} Upscale & Luxury Hotels Radisson Hotels} & Resorts.530 hotel. operates. manages and franchises more than 400 hotels and resorts in 66 countries. a global} leader in hospitality services encompassing more than 1.Type of hotels. location and target customer Various reputed Domestic and International hotels Analysis RADISSON on some Prominent HOTELS and Prestigious & Hotels RESORTS Radisson is a division of Carlson Hospitality Worldwide. restaurant and cruise ship operations in 80 countries. resort. full-service global hotel companies. SWOT Strengths •Customer strategies •Technological •Well •Global Only serving the Analysis satisfaction established presence upscale market prowess brand Weakness . one of the world's leading.

Services • Health & • Latest cardico • Spa also includes Fitness facility to its Guests. adding to and complementing the brand. strength-training equipment.Threats •Growing •Economic •competitors •Unexplored •Globalization Porter’s Five Forces Model terrorism downturn Opportunities territories Key • • • • Success Total Industry Global Brand presence customer leading at Factors satisfaction technology value convenient locations (KSF’S) Taj Groups Hotel • Taj Hotel established on December16. steam rooms &sauna. ¬ The action plan is more opportunities.Mexican into the country.Sri lanka. vascular machines. Africa.specialized treatment rooms. . but also smaller towns.USA.Taj was the first to introduce thai. 1903 • Taj Hotels resorts & places comprise 57 hotels in 40 locations across India. ¬ There was a proliferation of the Taj Presidency hotels not only in new cities. 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. • Taj is recognised as the premier Hospitality provider.Italian . • Innovator in dining:.Australia. • 18 International Hotels in the Malaysia.UK.

Gardens. A strong network. SWOT Strengths ϖ Brand ϖ ϖ Huge ϖ Patent protection ϖ High cost ϖ Lack of safety ϖ Not proper network in semiThreats ϖ Fluctuations in international tourist ϖ Increasing ϖ Opportunities ϖ Rising ϖ ϖ New Geographical Porter’s Five Forces Analysis loyalty Credibility Reputation Weakness service measure urban arrivals competition Terrorism income Globalization location Analysis KSFs ϖ Technology related:Used of advance technology in hotel premises. Waterfall • The beauty saloon of the Taj hotel offer a wide range of beauty and hair treatment for men &women.• Swimming pool. ϖ Manufacturingrelated: High utilization of fixed assets. . Serving customer according to their specification. A well-known and well-respected brand name. ϖ Marketing related: Breadth of product line and product selection. ϖ Distribution-related:Presence of hotel chain at various places. Quality control know-how. Personalized customer services.

project management and corporate air charters. Strengths • • • • • • Weaknesses • • • • Opportunities • • Emerging • Product • Threats • • • Cost Effective Loyal Market Strong Diseconomies Not Poor Weak supply real share management to advantage communication Innovation customers leadership team scale diversified chain estate Acquisitions abroad expansion Takeovers Competition fluctuations wars markets and and expansion services Exchange Price rate Recent figure on Indian hospitality industry The current scenario • Existing hotel rooms in India: 202.Oberoi hotels The Oberoi Group. source FHRAI • Revenue of the Indian hotel industry FY 2007-08: INR 38. operates 27 hotels and three cruisers in five countries under the luxury ‘Oberoi’ and five-star ‘Trident’ brands.558 crore . car rentals. The Group is also engaged in flight catering. travel and tour services. founded in 1934.963. airport restaurants.

000 hotel rooms in India while in China the figure is much higher at 7. By 2020. will be the major drivers for the growth.500 billion to GDP. the Government of India expects travel and tourism to contribute Rs 8.e. almost four times the value in 2005. favorable Government policies.000 rooms. the contribution of tourism to India’s GDP is only 5.• 30% of this revenue i. according to industry estimates. Strong economic growth. With successive Governments committed to reform. There exists a lot of scope for growth in tourism sector. star 165 134 20.078 8.4 crore went back into the market in FY 2008-09 as operating expenses Number of Hotel category 5 star 4 Star 3 2 1 Heritage Uncategorised Total Restaurants hotels No.950 10. Internet savvy and more sophisticated in terms of what is demanded in terms of tourism products and services. 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). impending 2010 Commonwealth games.200 1. Currently.32. a strong manufacturing sector and a private sector that already has a critical mass that is needed to drive growth.885 Emerging trends in Indian hospitality industry The Indian Hospitality sector is expected to show a healthy growth in the medium term.567. 18 per cent in Thailand and 15 per cent in Malaysia.100 22. mobile. increased FDI.05. compared to 22 per cent in China.9 per cent as compared to the worldwide average of 11 per cent. greater emphasis on tourism development.900 4. 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. The annual growth rate of hotel rooms in India is only 6 per cent.65. According to the Ministry of Tourism.707 12. 2011 Cricket World Cup and other international events.750 and in of 43. The rising middle class is also becoming increasingly affluent. 505 495 260 70 7. India: Rooms 965 770 30. INR 11. it is unlikely that the strong growth in GDP is likely to be reversed. deluxe/5 Star Star Star restaurants of Hotels No. there are only 1. and more importantly the price they are willing to pay for it. .

4 per cent in Malaysia and 1 per cent in Hong Kong.463. Furthermore. India’s hotel industry is increasingly being viewed as investment-worthy. owing to high land prices. there are more five star hotels than budget hotels.000. The overall buoyancy in the market is attracting increased interest from investors and higher inflow of capital in the industry is expected. making India a high cost deluxe destination. India will emerge as one of the world’s fastest growing tourism markets and will be hard to ignore. Additionally. source HVS • Investment in rupees: INR 40. ARR are likely to harden in these cities in next 2-3 years due to shortage of room. Emerging hotel concept in India Projected investments years 2009-015 • Rooms being built across hotel categories: 114. in our opinion. This will enable them to enjoy a 10 year tax holiday as in case of other infrastructure projects such as roads. 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. both within the country and outside. Niche areas like health tourism and spiritual tourism are emerging as lucrative business opportunity for the industry. high rate of tax. 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. For instance. India still does not have facility of modernised e-visa. high land price. The economy’s buoyancy. Yields are expected to be low in coming years on account of continuing price-cutting and discounts. Major impediments to the growth are sensitivity to business cycles and adverse political and social events (including terrorist attacks). The growth for hotels is also likely to come from proliferation of Special Economic Zones. and poor infrastructure. The existing visa process is cumbersome and comparatively more expensive than other destinations. We anticipate that. over the next three to five years. Recommendations Tie – ups with institutes: It is the duty of the Industry to make♣ necessary tie-up / .Economic growth in tier II and tier III cities have put these on the hospitality industry map.10 Conclusion and Recommendations The outlook for the hospitality market in India is optimistic and will continue to remain so. and several international chains are keen to establish or enhance their presence here. bureaucracy. initiatives to improve infrastructure. the effective rate of taxation on tourism in India is 21 per cent as compared to 7 per cent in Thailand. ports and power.

arrangement for their required human resources with one or two hospitality institutes in the country. 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. . When they have a tie – up with the institutes. If possible the sponsor a chair for continuous funding and research for that institute. Continuous training: There is a need of continuous training to all♣ categories of employees in the organization. Sponsoring: It is the duty of the industry to sponsor some amount /♣ equipment to the institute for their betterment. the institutes will offer in – house training to different category of employees from time to time to update their skills.

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