Innovations in the Indian Hospitality Industry - 1

Innovations in the Indian Hospitality Industry

by Daniel Ratheiser, Managing Director Knowledge Must

Table of Contents
1. INTRODUCTION ....................................................................................................................................................... 2
1.1 Hospitality in the Indian Economy ................................................................................................................................... 3 1.2 Historical Overview........................................................................................................................................................ 4 1.3 Innovation..................................................................................................................................................................... 6

2. INNOVATIONS ACCORDING TO PARTICULAR HOSPITALITY CATEGORIES ......................................................... 8

2.1 Based on Ownership ..................................................................................................................................................... 8 2.1.1 International Brands............................................................................................................................................... 9 2.1.2 Rapidly Emerging Local Brands ............................................................................................................................ 11 2.1.3 New Entrants from Outside of the Industry ............................................................................................................ 12 2.2 Based on Location ...................................................................................................................................................... 12 2.2.1 Rural Settings ..................................................................................................................................................... 12 2.2.2 Special Locations ................................................................................................................................................ 13 2.3 Based on Service Levels.............................................................................................................................................. 13 2.3.1 Bed and Breakfast .............................................................................................................................................. 14 2.3.2 Quality Budget Hotels.......................................................................................................................................... 14 2.3.3 Super Luxury Establishments ............................................................................................................................... 15 2.3.4 Heritage ............................................................................................................................................................. 16 2.4 Based on Theme ........................................................................................................................................................ 17 2.4.1 Ethical Tourism ................................................................................................................................................... 18 2.4.2 Authenticity......................................................................................................................................................... 18 2.4.3 Eco-Tourism ....................................................................................................................................................... 19 2.4.4 Agricultural Tourism ............................................................................................................................................. 21 2.4.5 Unconventional Accommodations.......................................................................................................................... 21 2.4.6 Medical Tourism .................................................................................................................................................. 22

3. INNOVATIONS ACCORDING TO FUNCTIONAL CATEGORIES .............................................................................. 22

3.1 Organisational Level .................................................................................................................................................... 22 3.2 Hotel Construction ...................................................................................................................................................... 23 3.3 Mixed Usage .............................................................................................................................................................. 23 3.4 Technology................................................................................................................................................................. 23 3.5 Unique Sales Points .................................................................................................................................................... 24 3.6 Human Resources ...................................................................................................................................................... 25 3.7 Corporate Social Responsibility ..................................................................................................................................... 26 3.8 Diversification ............................................................................................................................................................. 26 3.9 Food and Beverages ................................................................................................................................................... 27 3.10 Foreign versus Domestic Tourists ............................................................................................................................... 28 3.11 Innovation Diffusion ................................................................................................................................................... 29

4. READING THE TEA LEAVES ................................................................................................................................... 30 5. BIBLIOGRAPHY ...................................................................................................................................................... 31 This research was conducted for publication in a forthcoming book on the Indian tourism industry to be published by Oldenbourg Wissenschaftsverlag in Germany. Please get in touch with our Travel Must Team if you want to benefit from our unique expertise in the Indian travel industry and beyond.

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1. Introduction
Innovations in the Indian hospitality sector can be analysed on many different levels. This analysis makes the attempt to give a broad overview on innovations taking place in the industry according to various categories of hotels as well as relevant functions, concluding with a brief outlook on future directions these innovations might take. India holds a special place in the international world of hospitality. Culturally the country might very well be the most diverse place in the world. It is a vivid kaleidoscope of landscapes, magnificent historical sites and royal cities, misty mountain retreats, colourful people, rich cultures, and festivities. Luxurious and destitute, hot and cold, chaotic and tranquil, ancient and modern - India's extremes rarely fail to leave a lasting impression. The hospitality industry is defined as "hosts offering services to guests", which includes reception, entertainment, and other services for travellers and tourists. Hospitality is a long running tradition in India. From the majestic Himalayas and the stark deserts of Rajasthan, over beautiful beaches and lush tropical forests, to idyllic villages and bustling cities, India offers unique opportunities for every individual preference. However, until fairly recently this was hardly evident when looking at India's hospitality industry. By now, accommodation options throughout India have become extremely diverse, from cosy homestays and tribal huts to stunning heritage mansions and maharaja palaces. From Kashmir to Kanyakumari, from Gujarat to Assam, there are different cultures, languages, life styles, and cuisines. This variety is increasingly reflected by the many forms of accommodation available in India, ranging from the simplicity of local guest houses and government bungalows to the opulent luxury of royal palaces and five star deluxe hotel suites.

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Kashmir Houseboats by trisb (http://www.flickr.com/photos/trisb/2282110094/) From beach shags along Goa's soothing beaches to British colonial mansions in the many scenic hill stations, the hospitality industry in India sells "great experiences". As the experiences sought by travellers around the world diversify, the global hospitality industry is adjusting accordingly in order to satisfy these complex demands. India is no exception here - quite the contrary. Coming from a rather old-fashioned understanding of hospitality services, India is rapidly catching up and turning into an innovation leader on several key fronts.

1.1 Hospitality in the Indian Economy

The contribution of the entire travel and tourism sector in India to Gross Domestic Product is estimated to rise from 8.6% (USD 117.9 billion) in 2010 to 9.0% (USD 330.1 billion) by 2020. Between 2010 and 2019 the demand for travel and tourism in India is expected to grow annually by 8.2%, which will place India at the third position in the world. Travel and tourism in India also accounts for 49,086,000 jobs in

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2010 (about 10% of total employment) and is expected to rise to 58,141,000 jobs (10.4% of total employment) by 2020 (World Travel and Tourism Council, 2009). Within the travel and tourism sector, the Indian hospitality industry is one of the fastest growing and most important segments, revenue-wise as well as employment-wise. According to an estimate of the Economic Survey of India and Technopak (2008), the Indian hotel industry accounts for USD 17 billion, 70% (USD 11.85 billion) of which take their origin from the unorganised sector and the remaining 30% (USD 5.08 billion) from the organised sector. In 2000, India hosted only 2.6 million international visitors. By 2009, the figure had already increased to 5.13 million arrivals. Compared to other tourism markets in nearby Asian countries, this is still a limited success, but one with the potential to develop into a tremendous success story.

1.2 Historical Overview

India has a great tradition of accommodating people of other origins and tolerating their different culture, lifestyle, habits, and religion. In Indian culture stories abound of hosts who lovingly cook up the best foods available to them for their guests beyond what they can afford, rather going themselves hungry than not being able to satisfy their guests. This element of Indian culture is based on the philosophy of "Atithi Devo Bhava", meaning "the guest is God" in Sanskrit language. From this stems the Indian generosity towards guests whether at home or elsewhere.

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Welcome Puja by mckaysavage (http://www.flickr.com/photos/mckaysavage/2458852328/) The growth story of the Indian hospitality industry started in the 1980s, when several prestigious hotels were developed to cater to the Asiad Games in New Delhi. Until about ten years ago, however, the hospitality industry in India continued to be characterised by its extremely limited choice of options. There was a very limited availability and lesser quality of hotels in cities beyond the usual suspects: Delhi, Mumbai, Kolkata, Chennai, and Bangalore. Other aspiring hospitality markets have been gradually catching up, such as Ahmedabad, Jaipur, Goa, Hyderabad, and Pune. Even during the 1990s India was characterised by a dichotomy of luxury hotels on one end and nondescript unclassified hotels on the other. The massive unclassified market was mainly composed of no-frills guest houses and lodges in the budget segment, many catering especially to backpackers, such as in Delhi's Paharganj; nondescript privately-owned standard hotels; and government-owned accommodation such as by the Power Department or the Wildlife Department as well as the various hotels run by the Tourism Departments.

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Only during the last decade did the mid-segment gradually develop beyond non-chain properties, with entrants into the field such as Hilton Garden Inns and Taj Group's Ginger Hotels. Other prospective entrants consider the mid-market segment most promising, too. Since 2000, India has also experienced the rapid emergence of unconventional and innovative hospitality service providers, be it far-off ecolodges in the jungles or NGOs offering accommodation in tribal villages. After many years of obscurity, the Indian hospitality industry is suddenly now in the limelight of the global hospitality industry. The trade press is full of features on the potential of the Indian hospitality sector and presents ever new stories of successful innovations in the industry.

1.3 Innovation
Innovation is a change in the thought process for doing something, whether it is a revolutionary change or only an incremental one. By definition, innovation implies positive change, something becoming better. Innovation is a key driver in economic growth via increased productivity as well as new products and services (McKeown, 2008). Whether innovation is mainly supply-pushed (such as based on new technological possibilities) or demand-led (such as based on social needs and market requirements) has been a hotly debated topic. A technology push implies that an innovation becomes technologically feasible and is then pushed onto the market. A market pull describes a demand in the market that inspires innovation. Push Factors Pull Factors

Revolutions in communication and transportation More foreign guests visiting Technological progress More Indians travelling abroad

Foreign investment in the Indian hospitality Increased client demands industry Trends spreading from abroad Reverse brain drain Increased expectations Mass media impact on demands and expectation

Figure 1: Push and Pull Factors for Innovation in the Indian Hospitality Industry This highly simplistic dualistic model does barely do justice to the complex factors that underlie innovation processes. Rather than showing innovation as the result of industrial supply-side innovations coupled with the articulation of user demands, innovation has to been seen in the context of intricate networks of actors (including consultants, standards and regulatory bodies, media, etc.) and circumstances. Often, challenging environments are most conducive to spur innovation. The manifold challenges faced by the Indian hospitality sector, such as the pressing shortage of skilled employees, the difficulty of

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retaining best staff, and the shortage of quality rooms, stimulate the Indian hospitality industry to come up with innovative answers to these pressing questions. Cultural boundaries used to render the adoption of innovations in the Indian marketplace rather difficult in the past. With an increased enmeshment of India in global networks and currents of exchange, innovations flow freer across India's borders. Once innovations reach India, the Indian "bazaar" (market) is known to rapidly diffuse innovations. Much hope for the Indian economy lies in harnessing innovations in the hospitality industry. Not only has the Indian hospitality industry an enormous growth potential, the industry itself reinforces the diffusion of innovations by attracting foreigners, facilitating the movement of people, and so on. Innovators tend to be risk takers, younger in age, of a higher social class, have great financial lucidity, are very social, and have closest contact to scientific sources and interaction with other innovators. Early adopters follow their risk-taking behaviour and play a central role in diffusing innovations. People choose to interact with others who are similar to them. Hence, diffusion is facilitated among people sharing the same culture. The hospitality business requires entrepreneurs to continuously come up with new services, new ways to present existing services, new ways of enhancing the experiences of their increasingly demanding clientele, and new processes to economise operations. Without innovation, hospitality service providers face the threat of becoming obsolete- ultimately driving them out of business or forcing them to hand the business over to more efficient and innovative entrepreneurs (Gopal and Shetty, 2008). Innovations in the Indian hospitality industry can be analysed on various levels. One level of analysis is based on the category of the hospitality service providers. Another level is based on functions in the hospitality industry, such as management, human resources, technology, and so on. Each of the levels throws light on particular aspects of innovation. When combined, analysing the various levels of the hospitality industry creates a broad overview of innovations taking place in the sector as a whole, which lays an excellent foundation for looking into the future of hospitality in India.

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2. Innovations According to Particular Hospitality Categories

Ownership Leading domestic chains International brands Rapidly emerging local brands New entrants from outside of the industry Remainder of nondescript, largely standalone properties Location Urban Rural Special locations Service Level No frills Bed and Breakfast Quality Budget hotels Luxury segment Ethical Agricultural tourism Authenticity Eco-Tourism Theme

Super Luxury segment Unconventional accommodations Heritage Medical tourism

Figure 2: Categorisation of Indian Hotels Hotel classifications are based on many criteria and classifying hotels into different types is not an easy task. Many hotels do not fit into a single well defined category. Moreover, classifications can be based on many distinctive characteristics, such as ownership, location, service level, theme, and so on. In the following, innovations across these levels of analysis and in the relevant categories are presented.

2.1 Based on Ownership

Major players in the hospitality industry can be categorised into leading domestic hotel chains, international brands, emerging Indian brands, market entrants from outside of the industry, and the remainder of nondescript, largely standalone properties.

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The Taj Mahal Palace & Tower, Mumbai by Knowledge Must The leading Indian hotel chains, such as The Taj Group of Hotels, Oberoi Hotels & Resorts, and ITC Welcomgroup, and the government-run ITDC dominated the Indian hotel market for decades, when only a handful of international brands had a token presence in India.

2.1.1 International Brands

Of the major international hotel chains Sheraton, Hilton, Hyatt, Radisson, Marriott, and Le Meridien are already firmly established in the Indian markets and steadily expanding. With China and India as leading engines of growth in the global hospitality industry, few of the globally operating companies want to be left out. Considering the immense scope of opportunity in India, more and more international brands follow their footsteps. By now, about 50 international hotel chains have entered the Indian marketplace.

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International hotel chains are now in India trying to leverage their market share in about 15 main hotel markets in the country, all of which offer a variety of branded hospitality services across different market positionings. The development of independent micro-markets in the large metropolises such as Delhi and Mumbai allows major brands to maintain multiple hotels with the same brand affiliation, without fears of threatening their own market. Foreign Direct Investment (FDI) in the Indian hospitality industry has a huge potential to generate employment, enhance the competitiveness of the domestic economy through skills and technology transfer, strengthening infrastructure, and contributing to the long-term economic development of the country. The Indian government permits 100% FDI in the hospitality industry. Leading global hotel chains are continuously making large-scale investments in the hotel industry in India, while laggards are currently weighing their options on how to best leverage the Indian market. With more international players and their sophisticated services, competition in the market is growing increasingly fierce thus leading to a higher degree of professionalism in the industry, and with the spread of established hospitality brands, guests are increasing their demands and expectations on the whole industry, thus creating an environment conducive to innovation. At the same time, FDI is leading to the transfer of new technologies, innovative management techniques, and industry expertise.

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2.1.2 Rapidly Emerging Local Brands

Neemrana Fort-Palace by dixie law (http://www.flickr.com/photos/dixielaw/3352310731/) In recent years also local hospitality brands have been mushrooming in India. Starting with a single lounge or hotel, some ventures expand to become India-wide or even international hospitality brands. Examples are the Neemrana group of hotels and Delhi-based Shalom. The latter is a Mediterranean inspired hospitality provider that started out as a standalone lounge in Delhi and quickly developed into a professionally managed company that offers lounges, restaurants, bars, annually released music CDs, music concerts, and a chic hotel in Goa called Soul Vacation. Shalom has become a famous success story in the Indian hospitality industry, not least due to its innovative ways in which it is positioning and expanding its brand.

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2.1.3 New Entrants from Outside of the Industry

New entrants to the Indian hospitality industry also come from other segments of the economy. While real estate companies invest in the sector to leverage their properties, financial service providers such as ICICI Bank and CitiBank team up with major Indian tourism players like Thomas Cook and Cox & Kings to offer personal travel loans and "holiday now, pay later" schemes. Strong companies from other industrial backgrounds also diversify into the hospitality business in order to take advantage of their brand equity. For example, Reliance Industries and the Mahindra Group successfully entered the hospitality industry. Others yet engage the hospitality industry to increase their bargaining power, such as eminent IT companies, who count among the biggest clients of hospitality services in India. This heavy dependence coupled with the substantial increase in hotel room rates prompts them to buy stakes in hospitality ventures and even maintain their own accommodation facilities.

2.2 Based on Location

Locations of hospitality service providers can be divided into three main categories: urban settings, rural settings, and special locations. Among these three categories, metropolitan cities dominate the industry, accounting for 75% to 80% of total revenues, with Delhi and Mumbai leading the field.

2.2.1 Rural Settings

Increasingly, hospitality services are offered in India's rural areas. Private persons convert their country homes, villagers offer home stays, and agriculturalists as well as pastoralists open their farms to visitors. Notably, it is not only foreign tourists who demand these services. More and more Indian families as well as corporate clients are tempted to the countryside with the advent of quality amenities and improved facilities. Many new and innovative leisure destinations are developed in the remote corners of India. Beaches, mountains, agricultural estates, wildlife sanctuaries, religious pilgrimage places, among others, have played a key role in putting rural India on the hospitality map. This trend has the potential to change the face of rural India enduringly.

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2.2.2 Special Locations

Other accommodation options emerge in special locations. One popular trend is the houseboat hotel, which is also referred to as a boatel. The houseboats of Kashmir and Kerala offer luxurious accommodation to travellers for affordable prices. Their unique location in nature combined with the rustic architecture of the boats is especially appealing to tourists from abroad as well as within. Rotels, such as the famous Indian luxury trains "Palace on Wheels" and "Deccan Odyssey", are continuously expanding the hotels on wheels concept. A growing number of other trains in India provide a luxurious hotel atmosphere to discerning tourists.

2.3 Based on Service Levels

Due to the lack of a standardised international hotel rating system, ratings of hotels in different countries typically come from local government sources, independent ratings agencies, and sometimes the hotels themselves. Therefore, variations between Indian and international standards naturally exist. In India, the classification of hotels and its various categories are done by the FHRAI (Federation of Hotel and Restaurant Association of India). This association also is responsible for categorising hotels into star ratings. Hotels in India are classified into seven categories: five star deluxe, five star, four star, three star, two star, one star, and heritage hotels, and every five years these ratings are reviewed. Star rated hotels, mainly situated in the business districts of metro cities in India, form about one third of the total industry size. The entry of major international players in the Indian hospitality industry such as Radisson and Hyatt has pushed the benchmarks of the industry in India. Existing luxury hotels are improving their service offering and renovating and refurbishing their properties in order to stay competitive (Corporate Catalyst India, 2008).

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Excluding the massive unorganised sector of the Indian hospitality industry (that mainly caters to economy travellers), as of December 2005 there were the following number of hotels and rooms across the standard categories of hotels. Category 5-Star Deluxe 5-Star 4-Star 3-Star 2-Star 1-Star Heritage To Be Classified Total 82 92 132 704 587 212 83 50 1934 Number of Hotels Number of Rooms 18764 11332 9401 31039 19031 695 2216 5127 103973

Figure 3: Number of Hotels and Rooms across Standard Categories of Hotels Source: Government of India - Ministry of Tourism, 2006. Strikingly, the foremost contribution of the organised sector of the hotel industry comes from five star hotels, which alone account for 58% of the total organised market.

2.3.1 Bed and Breakfast

The Bed and Breakfast concept has arrived in India. The government is now classifying home owners providing hospitality facilities as "Incredible India Bed and Breakfast Establishments". Remarkably, also big hospitality service providers are attracted to this nascent market. Mahindra Group's Mahindra Homestays already have hundreds of rooms on a Bed and Breakfast basis in Indian homes countrywide that can be booked online. Average room rates hover around INR 2,500 for facilities at par with three star category hotels.

2.3.2 Quality Budget Hotels

Leading hotel groups offering quality accommodation for economical prices are Ginger Hotels, Lemon Tree, Sarovar Hotels, Fortune Hotels, Ibis, and Choice Hotels. High demand but a still rather limited supply in this mid-market segment proves attractive to potential investors and many of the upcoming

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hotel development projects currently taking place, position themselves in this segment (Kumar, Singh, Saigal, and Cebula, 2009). The Indian Hotels Company Limited (IHCL), a unit of Tata Group known mainly for its Taj luxury hotels, such as the famed Taj Mahal Hotel in Mumbai's Colaba district, is Indias largest hotel chain with more than 70 hotels in India and abroad as well as more than 100 years of presence in Indias hospitality sector. One innovative experiment by IHCL is Ginger Hotels, a revolutionary concept in hospitality for the value segment focusing on key facilities that meet the key needs of the economically-minded traveller. Ginger outsources a wide range of services from cleaning and laundry to computer support and cafeteria service. To free up space in the very compact rooms, TVs are mounted on the wall. To save on cleaning staff, the furniture, flooring, and bathroom fixtures are made of easy-to-clean materials. To cut the need for security, guests stash valuables in lockers. To deal with the increasingly expensive real estate rates in India, the company has come up with an innovative strategy of offering landowners a share of the hotels' profits. With their concept they are able to offer rooms between INR 1,000 and 1,500, while making handsome profits selling highly sought after quality rooms at reasonable rates. Most bookings are made online and the brand spreads mostly through media reports and word of mouth due to the very reasonable rates, which allows the Taj Group to save on advertising expenses as well. The concept proves so successful that the company is planning to open hundreds of Ginger Hotels in India and around the world. Taj's brand sharpening exercise is bearing fruits. Credit Suisse recognised IHCL as one of the 27 Great Brands of Tomorrow' (Tandon, 2010).

2.3.3 Super Luxury Establishments

India also has entered the field of Super Luxury Hotels; some are located in the big cities, while others are located close to nature. Mumbai's Sahara Star hotel, for instance, is one of famous the Super Luxury city hotels in India. It features the 3-floor Sahara Suite, which might well be India's most expensive suite at INR 400,000 per night (about USD 8,600). The price is justified by a private elevator, a personalised spa station with floatation tank, a glass-roofed lounged with artificial rainfall, etc. In the same line, Super Luxury resorts such as the Aman Bagh in Alwar have entered they fray, where the cheapest rooms are priced at about USD 600 per night.

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2.3.4 Heritage

Udaipur City Palace by tvangoethem (http://www.flickr.com/photos/tvangoethem/418737260/) Often by necessity as much as opportunity in a time of declining importance Indian royalty open their family palaces to guests. Authenticity, a concept that already is in danger of becoming a clich in the hospitality world, is quite an understatement for what is on offer. Guests in India easily know the difference between brand-new hotels built to look like 200-year-old palaces and authentic 200-year-old palaces turned into hotels with modern amenities and history that speaks to guests from every corner. Often the royal family will be present at dinner and be accessible to explain their heritage to hotel guests. More and more rustic colonial properties, beautiful havelis (stately mansions), and imposing palaces are renovated to become heritage hotels. Properties that are also converted are ruined castles, planters' clubs, and hunting lodges, among others. All, however, have one feature in common: a minimum of 50% of the floor area was built before 1950 and no substantial changes to the faade have been made.

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2.4 Based on Theme

Beach resorts, diving resorts, river resorts, mountain resorts, ski resorts, family resorts, golf resorts, and so on, the list of hotel themes in the hospitality industry in India is ever more diversifying. Themes such as cultural tourism, religious tourism, eco-tourism, medical tourism, adventure tourism, beach holidays, and wellness vacations offer prospective customers much more focused value propositions. Whether guests visit diving resorts from Goa in the west to the Andaman Islands in the far east, riverside camps catering especially to canoeing and kayaking, mountain and jungle lodges focusing on trekking enthusiasts, ski resorts in the Himalayas for fans of snow sports, or royal tents during camel, horse, and elephant safaris, all these options tremendously widen the experiences the Indian hospitality industry is able to offer.

Chrome Hotel, Kolkata by ArijeetB@sscindia (http://www.flickr.com/photos/85296574@N00/3615852488/) Other emerging forms of accommodation in India take a rather untypical theme. For example, recently the first futuristic-themed hotels emerged in India. A prominent example here is the brand new Chrome Hotel in Kolkata, with its experimental architecture and high-tech facilities.

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2.4.1 Ethical Tourism

Travel ethics are increasingly in focus of travellers worldwide. Countries like India with its diversity and immense contrast between rich and poor are in the limelight. A growing number of travellers would like to actively contribute to the well-being of the communities that they are visiting. By fostering local community pride in, and protection of, the cultural and natural heritage of their hosts, tourism can indeed make a difference. The hospitality industry is utilising this demand and advertise that they are aware of these issues and aim to sustain the character and integrity of their locale. Others even go a step further and commit themselves to provide financial benefits to local communities. In their choice of services they try to ensure that mainly the local economy is supported, for example, by using only local products, materials, and labour.

2.4.2 Authenticity
Based on the believe that it depends heavily on the type of accommodation how guests will experience local culture, a rising amount of hospitality service providers focus on cultural content, for example, accommodations that mirror the authentic architecture, flair, and lifestyle of the respective destinations. New hospitality ventures such as New Delhi-based Travel Must go a step further and take tourists to fascinating places that are not always easy to navigate on their own, trying to strike a balance between cultural immersion, vivid history, sheer natural beauty, and enjoyment. They offer exposure to local culture by giving deep insights into the local culture such as local trades, customs, art, architecture, religion, food, and music. These kind of authentic cultural experiences are tailored according to the demands and needs of the clients, and can be as diverse as a tribal village stay in the jungle-clad mountains of Alwar or an urban homestay run by a university professor and her scientist husband.

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Welcome Rangoli by mckaysavage (http://www.flickr.com/photos/mckaysavage/2225262197/) Travel Must as trusted intermediary between local communities and the interested public ensures that a meaningful exchange results between guests and hosts. Guests are welcomed into private homes, attend fascinating ceremonies, and gain invaluable insights into ancient, complex cultures often unknown and inaccessible to outsiders. Intricate local networks coupled with deep cultural expertise guarantee that guests learn about and participate in the rich traditions that make India such a vibrant destination.

2.4.3 Eco-Tourism
Eco-Tourism can be defined as responsible travel to natural areas that conserves the environment and improves the well-being of native cultures, thereby contributing to the preservation of the diversity of our world's natural and cultural environments. According to the World Tourism Organization, Eco-Tourism is the fastest growing market in the entire tourism industry. From the 1990s, the global Eco-Tourism sector has experienced an annual growth rate of between 20% and 34%, thereby growing three times as fast as the tourism industry as a whole. Until 2014, the Eco-Tourism industry is expected to grow up to a quarter of the world's total travel market (Pandey, 2009). India had initially been a laggard regarding ecological hospitality models rather following the old trodden path of mass tourism. However, the ugly face of mass tourism in India was soon visible and ecology emerged as a popular concept in the hospitality industry, striking a balance between business interests and sustainability. Given the massive potential Indian hoteliers have jumped on the bandwagon and are gradually harnessing the potential of some of the most outstanding ecosystems in the world, such as in the Himalayas and the Western Ghats.

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Kerala Houseboat by Christian Haugen (http://www.flickr.com/photos/christianhaugen/3286687515/) An excellent example here is Kerala, a state on the tropical Malabar Coast of south-western India that is nicknamed as "God's own country". It is famous especially for its houseboats travelling the extensive backwaters, Ayurveda retreats, jungle lodges in the Western Ghats, pristine beach resorts, eco-lodges, and other Eco-Tourism initiatives. Its unique culture and traditions, coupled with its varied geography, has made it one of the success stories in India. An increasing number of tour operators in India make it a point to minimise the negative environmental impacts caused by their customers and make positive contributions to the conservation of biodiversity. So when their customers chance upon a Red Panda in the Himalayas or witness the hatching of sea turtles on the Bay of Bengal, they have improved the chances of preserving their habitat by providing a realistic economic alternative to exploiting local natural resources. The environment is becoming more and more of a priority in the Indian hospitality industry. Statutory compliances are already in place regarding sewage, energy, products, and water. Upcoming properties often have programmes to save water and energy and reduce solid waste in place. Besides the obvious cost advantages of energy conservation and product recycling, the potential to market Ecotels is massive.

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To be certified as an Ecotel, a hotel must adhere to at least two of the following five factors: Energy efficiency Water conservation Employee education and community involvement Solid waste management Environmental commitment Rainwater harvesting, tree plantation drives, and converting wet waste to energy through biogas plants are some of the many strategies Indian hoteliers go nowadays. Ecologically-sensitive hotels can also be found in the high-end luxury market, such as the five star rated Orchid Hotel in Mumbai, which is Asia's first certified eco-friendly five star hotel and the world's only Ecotel to be certified as ISO 14001 (Environmental Management Standard).

2.4.4 Agricultural Tourism

Agricultural tourism is widely acknowledged as an instrument for economic development and employment generation particularly in the remote and backward areas. It creates opportunities to generate additional revenue, makes for economic diversity, and improves the understanding of farmers in society. The Indian government collaborates with the United Nations Development Program (UNDP) to promote rural tourism and also sanctioned more than 100 rural tourism infrastructure projects to spread tourism and socio economic benefits to identified rural sites. Guests in India can stay on farms ranging from stud farms over dairy farms up to full-fledged agricultural farms. They are perfect for urbanites looking to unwind and get back to nature, but with a bit of comfort and the chance to freely choose the activities in what the guests want to engage in, whether they want to milk the cows, wash the buffalos, learn to grind wheat, pick vegetables, or go fishing. Besides, guests experience the natural, cultural, and heritage aspects of the region, such as the local geography, cuisine, and handicrafts.

2.4.5 Unconventional Accommodations

Today's travellers are enthusiastic about travelling in different ways to widen their experiences. This is also reflected in their choice of unconventional accommodation options. In India religious centres, ashrams, and monasteries are among the popular alternatives to classic choices of accommodation. Given the cleanliness and hygiene of these accommodations, besides their unique cultural content, this segment offers huge potential. Organisations such as the Krishnamurti Foundation, Bharat Sevashram Sangha, Ramakrishna Mission, ISKCON, and Aurobindo Ashram are among the religious institutions that offer accommodation options across India.

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2.4.6 Medical Tourism

With the introduction of a new category of visa, the Medical Visa, the Indian government seeks to promote medical tourism in India. Afghans, Arabs, Southeast Asians, and increasingly Westerners arrive in droves in India for access to cheap quality medical services. Hospitals like the Apollo Group maintain information centres abroad and team up with tour companies to attract medical tourists to India. While patients recuperate in hospital, their relatives enjoy the tourist sights and go shopping. ITC Group even opened a hotel sharing its premises with a hospital in Thane near Mumbai in order to service medical tourists. The expertise of Indian doctors in modern medicine from heart surgery to cataract removal has put India on the world healthcare map. This cutting-edge medical expertise coupled with affordable prices makes this value proposition hard to resist and consequently there is an increased flow of people to India for medical services. India received 1.1 million medical tourists in 2009, registering a growth of 17% (India Brand Equity Foundation, 2010). The market for medical tourism in India is estimated at half a billion USD and is expected to grow to USD 3.29 billion by 2018 (Kumar, Singh, Saigal, and Cebula, 2009).

3. Innovations According to Functional Categories

Next to analysing providers of hospitality services based on their categorisation, an analysis of various functions in the industry offers valuable additional insights.

3.1 Organisational Level

Also on the organisational level, the Indian hospitality sector is witnessing far-reaching changes. The hotel industry in India is gradually developing away from the classical ownership model and franchising, which until now actually never really took off in India, increasingly to management models, thereby instilling more professionalism in the industry. To fuel the expansion of their hotel chains, branded companies around the world consistently offer franchise services. In contrast to many restaurant chains in India such as Nirula's, Pizza Hut, and Domino's Pizza, hotels have been reluctant to adopt the model. Concerns about product consistency and quality management prevented leading hotel chains like Taj Hotels and Oberoi Hotels to jump on the trend of franchising. Others, such as Carlson Hospitality and the Intercontinental Hotels Group (IHG), withdrew from the franchise model in India after initial forays, choosing to focus on management tie-ups instead.

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3.2 Hotel Construction

While the potential of investing in the Indian hotel industry is great, there are several constraints for the interested investor, such as high construction costs, a lack of international standard products that can be sourced locally, and the spiralling real estate prices. High development costs pose a serious challenge for anyone looking to build a hotel in India. Land costs have increasingly become the main factor in the cost calculations for any project. Whereas property prices in India generally constitute from 25% to 50% of the cost of developing hotels, they only account for 15% to 20% of project cost overseas. The emergence of Modular Hotels in India speeds up the construction process massively and leads to impressive cost savings. The modular approach also allows flexible extension of the property and allows for rapid dismantling and transfer of modules to other locations, for example, to close demand supply gaps. As an example, Ibis, Accors economy brand, has engineered an innovative building process to construct their hotels in India quickly and at minimum costs.

3.3 Mixed Usage

Mixed-use developments incorporating residential, retail, entertainment, hospitality, and corporate offices are fast emerging in Indian metropolises. Hotels that are a part of larger projects encompassing other revenue generating assets have much potential in India. A good example is the Mall Hotels coming up in India, such as the Hilton Garden Inn in Saket, New Delhi.

3.4 Technology
The Indian hospitality industry has changed tremendously in recent years. Technological innovations might very well be the biggest driver behind this change. Speeding up decision-making, facilitating guest reservations, widening information access, improving payment options, and managing outsourcing processes, technological innovations lead to ever higher efficiency levels. Technology in hotels is increasingly giving them a cutting edge over their competition. Rooms become multi-functionary and can be used flexibly, as an entertainment centre or as an office. Existing hotels face the choice of huge modernisation costs or being left behind. The advent of the Internet has opened up many avenues for the hotel industry, most importantly the ability to conduct client bookings. It is reported that by now 25 percent of all reservations are made online in India, thus making it a key tool in room occupancy fulfilment. The Internet also has revolutionised the marketing of hospitality services, which is especially evident in the increased marketing potential of niche products, such as NGOs offering accommodation in tribal villages or spiritual retreats deep inside the Himalayas.

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A decade ago, the most popular way of planning a trip was to visit a travel agency to get a rather readymade itinerary. With the advent of third party travel websites like Hotels.com and Expedia.com as well as the many home grown platforms such as Makemytrip.com and Yatra.com, information flows between hospitality service providers and their potential clients have improved massively. These distribution channels quickly gain in importance. Independent hospitality review and opinion websites like TripAdvisor have also become immensely popular, offering users the opportunity to see photos and read actual guest comments, etc., while the hotels themselves are able to showcase their products and services to a wider audience. Engaging customers in two-way communication via Social Networking websites such as Facebook allows the hospitality industry quickly react to customer needs and wants.

3.5 Unique Sales Points

Many higher end hotels in India are realising that their key USP in international competition is not their high-tech facilities, but rather their outstanding staff-to-guest ratios and the longstanding tradition of Indian hospitality as immortalised by "Atithi Devo Bhava". Hospitality is about serving the guests and to provide them with a "feel-good-effect". Personalised comprehensive service, such as suites having their own personal butler, gives guests that extra feel of being valued by their hosts.

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Hospitality Staff by Stuck in Customs (http://www.flickr.com/photos/stuckincustoms/2640815977/) Journeys to India can be complex and challenging. If any tourist destination asks for support in logistics, knowledge of culture, local connections, and insightful guides, it must be India. At the same time, the extra amount of support and attention needed is highly affordable in India. Drivers fluently speaking English, high-profile facilitators accompanying guests in tribal villages, staying in the home of a professor and his family or dining with the Maharajas in their family palace, in India the extraordinary becomes the rule rather than the exception.

3.6 Human Resources

The lack of skilled employees is frequently mentioned as one of the key obstacles to growth in the Indian hospitality industry. In analogy, hospitality service providers continuously complain about the lack of

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quality education institutes in India, thus forcing many talents to take entertainment or hospitality management degrees or even MBAs from foreign universities. However, Indian demographics continue to play into the hands of the hospitality industry, with an enormous English-speaking workforce continuously pushing into the labour market. And with the reverse brain drain taking up in steam, an increasing number of skilled hospitality professionals bring their international expertise back to the industry in India. Innovative solutions to the continued challenge of attracting and retaining trained hospitality staff take the form of Employee Stock Options, generous healthcare plans, and improved life-work balance. Better equipped and trained employees together with innovative management techniques will lead to a new way of organising hospitality firms. There will be less hierarchical layers, with more empowered, multi-skilled staff. Non-core functions will increasingly be outsourced, while the competence in core areas will continuously be built up by coaching and a more participative process (P.C. Pandey, 2003).

3.7 Corporate Social Responsibility

Also in the field of corporate social responsibility (CSR) the Indian hospitality industry is becoming more progressive and innovative. Today, many women will be found in management positions due to their often superior attitudes and attributes whereas senior citizens and migrants will also be part of the work force. The commitment to counter discrimination based on gender, age, religion, etc. is comparatively strong in the Indian hospitality industry. An example for this can be found in the recent drive by several major industry players to employ people with special challenges, such as those who are speech and hearing impaired. Enlisting the help of NGOs such as Enable India, hotels train differently abled people for the hospitality industry, many finding later employment with the hotel itself. In fact, motivation levels and quality of staff are so good that more and more companies are following these footsteps, also increasing their social responsibility along the way.

3.8 Diversification
Innovative concepts of diversification hold the key to survival in the hospitality industry in the long run. Fierce competition has led to innovative ideas by hotel majors, thereby delivering impressive hospitality products and services. Exotic spas, gorgeous golf courses, multi-cuisine fine dining, spacious conference and convention facilities are all among the growing list of facilities found in leading hotels. Hotels are adapting to innovative operating models by bringing in external brands of restaurants, spas, and lounges on lease or management contracts to capitalise on proven concepts that generate substantial revenue by attracting hotel guests and local residents. Cafes and bars which have high profit margins are increasing their presence in hotels and are quickly developing into core profit centres. A prominent example is Caf Coffee Day found at Ginger Hotels.

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Ananda Spa by blaiq (http://www.flickr.com/photos/blaiq/75116242/) Taking the example of India's most famous spa, Ananda Spa, one can feel the extent of diversification in the industry. Renovating the erstwhile palace of a local Maharaja in the Himalayas, Ananda Spa has created a spa resort that heavily draws on India's spirituality. Inviting "resident masters", such as those who teach Yoga and heal using Ayurveda, and combining and packaging spiritual wares with pure luxury, offers a promising revenue model.

3.9 Food and Beverages

With the deeper integration of India in global economic exchange and the freer flow of goods across borders, the Indian hospitality industry now has access to better products, such as imported foods and beverages. Until recently, five star hotel restaurants were considered the epitome of fine dining

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experiences in India and even now many of the best restaurants and bars are still located in India's five star hotels. The concept of high-end standalone restaurants remained a rare exception. By now, however, any new trend that emerges in any part of the world rapidly spreads to India, such as the latest fads of ice bars and ethnic lounges. With well travelled upwardly mobile consumers, new and trendy food concepts find an increasing following in India. The resulting manifold opportunities entice famed international chefs to move to India. At the same time, foreign tourists increasingly dare to sample the diversity of local food. Even many domestic guests seek for opportunities to dine on quality local delicacies, drink traditional beverages, and learn something of the culinary traditions of the locale.

3.10 Foreign versus Domestic Tourists

Earlier foreign tourist arrivals to India were highly lopsided, with a few countries such as the US and the UK accounting for the bulk of arrivals in India. In recent years, foreign tourist arrival figures have been diversifying. More and more people from Afghanistan, Bangladesh, Sri Lanka, and Nepal visit India now, as are people from Southeast Asian countries, South America, and Africa. Domestic tourism in India has been a widely neglected topic. Even today, the statistics on foreign travellers garner all the attention. However, of the total of 500 million trips taken in India per year, only about five million are from international visitors. Domestic travellers form the major component of revenue generation in the Indian travel industry (Thadani and Wij, 2009).

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Indian Family by Wen-Yan King (http://www.flickr.com/photos/medapt/430287982/) Tourism has taken Indians by storm. Indians travelling within the country have nearly doubled in the past decade. Besides business trips, the traditional pilgrimage tourism, and visiting relatives, the emerging Indian middle class with their rapidly rising disposable income are following suit and are discovering their myriad India. While family trips are still fairly dominant, the number of Free Individual Travellers (FIT) is increasing rapidly. The improved availability of quality hotels in the budget and mid market segment is also providing more cost-effective travel options, as Indians are very price sensitive (World Tourism Organization, 2006). With more Indians travelling internationally, there also is greater awareness of international brands and service standards. Consequently, Indian guests will become more discerning in coming years and will take a good room and a meal for granted, and will increasingly demand special travel experiences.

3.11 Innovation Diffusion

The diffusion of innovations can be analysed by exploring the existing communication channels in a social system, as avenues for communication and interaction create platforms for exchange. In India, the

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diffusion process is facilitated by its characteristic "bazaar mentality", with the manifold levels of interaction that occur between providers of one type of service or product. Notably, innovations occur mostly in places like Delhi and Mumbai, where the level of exchange with people of other cultural backgrounds is at the maximum, thus providing a stimulating environment for the hospitality industry. In some cases, the foreign influence is even more direct. In places such as Goa with large semi-resident expat communities, foreigners open hotels and restaurants featuring the hospitality specialties and diverse cuisines of their home countries. Others bring in their expertise working together with Indian partners or as foreign employees to local hospitality service providers.

4. Reading the Tea Leaves

India is today in the defining stages of the business of hospitality. Decisions taken today will massively impact the growth trajectory the industry will take. Reckoning the future of the Indian hospitality industry is a very difficult task, especially so due to the ever more rapidly changing market environment. According to World Travel and Tourism Council, India will be a tourism hotspot from 2009 to 2018, having the highest 10-year growth potential. Attempting to read the tea leaves, the Indian hospitality industry will experience a gradual consolidation process, especially in the unorganised sector. At the same time, more and more players are attracted to enter the field as profit margins and growth projections seem very promising. This increase in supply has the potential to benefit the hospitality industry as a whole, since new markets can be developed and more segments can be catered to than previously. More competition in the field also leads to better rates for clients and puts pressure on hospitality service providers to improve upon their quality and diversify their service offering. The guests of the future will become increasingly unpredictable. Social status and wealth will no longer be good predictors of the needs and objectives of the guests. That is why flexibility is becoming the key advantage in a highly volatile hospitality industry. Also technology will play an increasingly important role in the hospitality equation. Web-savvy India is in a good position to engage its international competition on search engine optimisation, web advertising, and e-marketing Many innovative concepts developed in the Indian market can also be easily adapted by other nations such as Nepal, Pakistan, China, and Brazil. One interesting innovation export might very well turn out to be the quality budget hotels that are mushrooming in India. While the possibilities for positive change seem endless, it will take an earnest effort, both from the industry's key stakeholders in the private sector as well as the relevant government authorities to truly harness the innovation potential of the Indian hospitality industry.

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5. Bibliography

Corporate Catalyst India. "Tourism and Hotel Industry in India". New Delhi, 2008. http://www.cci.in Gopal, R. and K. Shetty. "Innovative Entrepreneurship - The Key DNA For A Successful Turnaround In The Hospitality Business". Paper presented during the 11th Annual Convention of the Strategic Management Forum. Indian Institute of Technology Kanpur: Kanpur, 2008. Government of India - Ministry of Tourism. "Number of Classified Hotel Rooms in the Country". New Delhi, 2006. http://pib.nic.in/release/rel_print_page1.asp?relid=17402 India Brand Equity Foundation. "Tourism & Hospitality". Gurgaon, 2010. http://www.ibef.org/artdispview.aspx?in=74&art_id=26026&cat_id=120&page=3 Khanna, A. and M. Thadani. "Ten Trends Influencing Hospitality in India: How the Game is Changing". HVS: New Delhi, 2010. http://www.hvs.com/article/4364/ten-trends-influencing-hospitality-in-india-how-the-game-is Knowledge Must. "Unpublished Research Notes from Travel Must". New Delhi, 2010. http://www.knowledge-must.com Kumar, L., T. Singh, N. Saigal, and B. Cebula. "Dissecting the Indian Hospitality Industry", in "Perspective Volume 1". Technopak: Gurgaon, 2009. McKeown, M. "The Truth About Innovation". Prentice Hall: London, 2008. Pandey, P.C. "Predicting Future Human Capital In Indian Hospitality". Express Hotelier and Caterer Issue 20th October, 2003. Indian Express Group: Mumbai, 2003. http://www.expresshospitality.com/20031020/avenues01.shtml Pandey, T. "Agri-Tourism - Elixir for Rural India". Yes Bank and ASSOCHAM: New Delhi, 2009. http://www.assocham.org/events/recent/event_418/Tushar_Pandey.pdf Tandon, S. "Taj Group may open more brands of hotels". Business Line: Chennai, 03.04.2010. Thadani, M. and I. Wij. "Hotels in India - Trends & Opportunities". HVS: Gurgaon, 2009. World Tourism Organization. "India - The Asia and Pacific Intra-regional Outbound Series". Madrid: 2006. World Travel and Tourism Council. "WTTC Tourism Economic Research 2009 - India". London, 2009.

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