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HOTEL INDUSTRY

The Hotel Industry comprises a major part of the Tourism industry. Historically
viewed as an industry providing a luxury service valuable to the economy only as a
foreign exchange earner, the industry today contributes directly to employment
(directly employing around 0.! million people", and indirectly facilitates tourism and
commerce. In the hospitality industry, #verage room rate (#$$" and occupancy are
the two most critical factors that determine the profitability, since most of the
marginal revenue gets added to the bottom%line. #$$ in turn depends upon location,
brand image, star rating, &uality of facilities, pricing of value added services,
complementary services offered and the seasonal factor. The hotels to manage and
invest their fund in India adopt many business strategies to establish their place of
business and create innovative service pac'ages to their custom. In a long%term
perspective, these measures bring significant financial returns.
(Hotels in India( has a shortage of !0,000 rooms fuelling hotel room rates
across India. )ith tremendous pull of opportunity, India is a destination for hotel
chains loo'ing for growth. *ue to such a huge potential available in this segment,
several global hotel chains li'e the Hilton, #ccor, +arriott International, ,erggruen
Hotels, -abana Hotels, .remier Travel Inn (.TI", Inter -ontinental Hotels group and
Hampshire among others have all announced major investment plans for the country.
The /overnment(s move to declare hotel and tourism industry as a high priority
sector with a provision for 00 per cent foreign direct investment (0*I" has also
provided a further impetus in attracting investments in to this industry.
The increase in the need for accommodation has hugely increased the demands
for hotels which in turn has boosted the growth of the hospitality sector in India
especially that of the hotel industry. 1ver the last decade and half the mad rush to
India for business opportunities has intensified and elevated room rates and occupancy
levels in India. The successful growth story of (Hotel Industry in India( seconds only to
-hina in #sia .acific. The Hotel Industry is inextricably lin'ed to the tourism industry
and the growth in the Indian tourism industry has fuelled the growth of Indian hotel
industry. The thriving economy and increased business opportunities in India have
acted as a boon for Indian hotel industry. The arrival of low cost airlines and the
associated price wars have given domestic tourists a host of options. The (Incredible
India( destination campaign and the recently launched (#tithi *evo ,havah( (#*,"
campaign have also helped in the growth of domestic and international tourism and
conse&uently the hotel industry.
Hotels in India are broadly classified into 2 categories (five star deluxe, five%
star, four star, three star, two star, one%star and heritage hotels" by the +inistry of
Tourism, /overnment of India, based on the general features and facilities offered.
Major players in the Indian Hotel Industry
The Hotel Industry mainly has following major players3
Hotel Chains
They comprise major players including Indian Hotels -ompany 4imited (the
Taj /roup" and associate companies, 5IH 4imited (the 1beroi /roup", IT- Hotels
4imited (the IT- )elcome /roup", Indian Tourism *evelopment -orporation (IT*-"
and Hotel -orporation of India (H-I" (the latter two being under the .ublic 6ector".
+ost of these chains had an established presence in one or more metro cities prior to
the tourism boom of the 780s. 6ubse&uent to the tourism boom, these chains
aggressively expanded their presence in other locations. The private players among
the hotel chains are industry leaders and have well%established brand identities across
the different industry segments.
Small Chains
They are companies that have come up after the tourism boom of the 780s and
770s. *ue to lac' of prior experience in the hotel industry, these players have
preferred to opt for operating9management arrangements with international players of
repute. 6ome of the companies in this category are Hotel 4eela :enture (with
;empins'i", #sian Hotels (Hyatt International -orporation", ,harat Hotels (formerly
with Holiday Inn and Hilton and now with Intercontinental". #s late entrants, most of
these hotel companies have fewer properties, compared with the big chains. However
most of these players have initiated expansion plans during the late 770s.
u!li" Se"tor Chains
IT*- and H-I, boast of some of the best locations in major cities but are
relative underperformers, as compared with their private sector counterparts.
International Hotel Chains
They are also loo'ing at India as a major growth destination. These chains are
establishing themselves in the Indian mar'et by entering into joint ventures with
Indian partners or by entering into management contracts or franchisee arrangements.
6ome of the players who have already entered or plan to enter the Indian mar'et
include +arriott, 6tarwood, ,erggruen Hotels, 5maar +/0. +ost of these chains
have ambitious expansion plans especially with a strong focus on the budget segment
and tier II cities.
Lo"ali#ed Hotel Companies
They are mainly comprise early entrants who have an established locali<ed
presence and who preferred not to expand during the tourism boom but focus on
building and catering to a loyal customer base.
$ey Consumer Se%ments
The mar'et for the hotel industry can be divided into the following 'ey
consumer segments based on purpose of visit3
The ,usiness Traveller
The 4eisure Traveller
#irline -abin -rew
TRENDS IN HOSIT&LITY INDUSTRY
Rapid 'ro(th in )a"ation O(nership
:acation ownership is the fastest growing segment of the lodging industry and
is li'ely to continue growing as the baby boomers enter their fifties and sixties in the
=.6.#. The )orld Tourism 1rgani<ation has called timeshares one of the fastest
growing sectors of the travel and tourism industry. Hospitality companies are adding
brand power to the concept with corporations li'e +arriott :acation -lub
International, the )alt *isney -ompany, Hilton Hotels, Hyatt Hotels, .romus
5mbassy 6uites, Inter%-ontinental and ever 0our 6easons participating in an industry
that has grown rapidly in recent years. $esort -ondominiums International ($-I", the
largest vacation ownership exchange (that allows members to exchange vacations with
other locations", has more than >.8 million member families living in >00 countries.
Three thousand seven%hundred participating resorts and members can exchange
vacation intervals for vacations at any participating resort. ?orth #merica remains the
global leader with nearly half of all the participating resorts and more than > million
owners. 5urope is second with approximately >> percent of owners worldwide and
more than ,000 resorts. Timeshare resorts are found around the globe in popular
vacation areas near beaches, rivers, la'es, and mountains, and even in major cities.
Ne( Mana%ement
The complex forces of capacity control, safety and security, capital movement,
and technology issues will re&uire a future management cadre that is able to adapt to
rapid%paced change across all the traditional functions of management.
The growing complexity of the customer9employee interaction, driven by
technology and the information age, will shape human resources needs in the future.
The customer, armed with more information, will expect frontline and other
hospitality staff to be at least as 'nowledgeable about the firm@s offerings as they are
themselves. This will be difficult in an industry characteri<ed by low%s'illed, low%paid
personnel and a high degree of cultural and behavioural diversity among its
employees.
)isionin% the *uture
+ajor forces driving change in the hospitality industry considers seven areas
decisive to the future development of the industry. 5ach is examined to determine the
scope and complexity of the issue and the timing of its impact. That is assets and
capital, health and safety, new management, mar'eting, distribution and capacity
management, technology, sustainable development.
Challen%es +or Hospitality Industry
Shorta%e o* s,illed employees
1ne of the greatest challenges plaguing the hospitality industry is the
unavailability of &uality wor'force in different s'ill levels. The hospitality industry
has failed to retain good professionals.
Retainin% -uality (or,*or"e
$etention of the wor'force through training and development in the hotel
industry is a problem and attrition levels are too high. 1ne of the reasons for this is
unattractive wage pac'ages. Though there is boom in the service sector, most of the
hotel management graduates are joining other sectors li'e retail and aviation.
Shorta%e o* rooms
The hotel industry is facing heavy shortage of rooms. It is estimated that the
current re&uirement is of ,!0,000 rooms. Though the new investment plan would add
!A,000 rooms by >0, the shortage will still persist.
Intense "ompetition and ima%e o* India
The industry is witnessing heightened competition with the arrival of new
players, new products and new systems. The competition from neighbouring countries
and negative perceptions about Indian tourism product constrains the growth of
tourism. The image of India as a country over run by poverty, political instability,
safety concerns and diseases also harms the tourism industry.
Customer e.pe"tations
#s India is emerging as a destination on the global travel map, expectations of
customers are rising. The companies have to focus on customer loyalty and repeat
purchases.
Manual !a",/end
Though most reputed chains have IT enabled systems for property
management, reservations, etc., almost all the data which actually ma'e the company
wor' are filled in manual log boo's or are simply not trac'ed.
Human resour"e de0elopment
6ome of the services re&uired in the tourism and hotel industries are highly
personali<ed, and no amount of automation can substitute for personal service
providers. India is focusing more on white collar jobs than blue collar jobs. The
shortage of blue collar employees will pose various threats to the industry.
Multi"ultural Issues
The newest trends and topics surrounding hospitality research and development
is the management of multicultural talent and the political landscape affecting the
hospitality industry. 0ranchise is becoming the biggest industry in the world, the
success of franchise lie in the understanding of ownership, internal and external
customer% and wor'force%related % and top legislative matters, insights of mar'eting
and promoting. )ith the development of globali<ation, multicultural issues are facing
and disturbing the industry operators. ,ringing the far corners of the world together is
part and parcel of what the hospitality sector does. ,lending amenities to cater for the
needs of the world@s different cultures is central to success for large, international
hospitality chains. -ultural issues have never before been such a crucial determinant
of how a large hospitality should operate. In some #sian cultures, for example, eye
contact is not sought, as it can ma'e guests feel uncomfortable, while in )estern
tradition it is e&uated with openness and honesty. This could be important in defining
how staff addresses themselves to certain #sian guests.
Dependen"e upon the Nation1s E"onomy
)hen the nation@s economy is good, business travel generally increases.
Hospitality occupancy rates and rac' rates increase, which results in higher profit
levels. The reverse is also true3 business travel slows when the economy slow. Then
occupancy and rac' rates decrease. *iscounts to increase occupancy are offered,
which yield lower revenues and profit decreases.
'lo!ali#ation
/lobali<ation impacts the lodging industry dramatically because it influences
the extent of which people travel both within the country and around the world.
Therefore, it is not only the economy of the nation, but also the economies of
individual countries, that play an increasingly larger role in the financial success of
lodging properties. To compete, they must pay closer attention to the trends of
globali<ation. The industry must reflect the re&uirements of the global village in many
aspects of its operations, including food, services, amenities, staffing policies and
training.
Opportunities in the Se"tor
Medi"al tourism
India is gradually gathering popularity as a health tourist destination. #t its
current pace of growth, healthcare tourism alone can ra'e over =6* .2 billion
additional revenues by >0>. +edical tourism is now a =6* >77 million industry, as
about 00,000 patients come each year. The country needs to exploit the cost
advantage it can offer to a health tourist, the study said. The biggest driver for
healthcare tourism is the disparity in costs.
B # heart surgery in the =6 costs =6* A0,000 as compared to =6* C,000 in India.
B # bone marrow transplant in the =6 costs =6* >!0,000 and =6* >C,000 in India.
)ith yoga, meditation, ayurveda, allopathy, and other systems of medicine, India
offers a uni&ue bas'et of services to an individual that is difficult to match by other
countries. -linical outcomes in India are at par with the world(s best centres since
India has internationally &ualified and experienced specialists.
SO23 TO CONCLUDE 3 -urrently, guest retention and repeat clientele is the name
of the game. Hotels those are able to provide guests a product where the service is
consistent and of a level re&uired by the target mar'et, will only survive. The Hotel
industry, always ready with innovative ambitious business plans and the spirited
management plotting the right strategies, is contributing its might to improve the
position of the 5conomy. The expected growth of the industry in future has provided
its players with an opportunity to invest in new technologies such as -$+ tools and
latest security systems, and to venture into niche tourism segments li'e +edical,
$eligious, -ruise, -asinos, +I-5 etc. India can also develop infrastructure to host
international conferences and trade shows, thus increasing its share of tourist traffic
from such activities 6o the role of multinational chains9groups of Hotels in the Indian
hospitality industry and their contribution to the Indian 5conomy is significant. There
have not been many exploratory researches in this area. . ,ut there is every need to
wor' on the economics for a proper planned growth at a macro level.