SECTORAL ANALYSIS AND GROWTH PATH OF HOTEL INDUSTRY IN INDIA

Live Project Submitted to the Indian Institute of Finance in Partial fulfillment of the requirements of

MANAGEMENT OF BUSINESS FINANCE
By

PRATEEK KAUSHIK 4108100100
Under the Supervision of
Corporate Guide Mr. Varun Taneja AVP, Indiabulls securities ltd. First floor, Hamilton house Barakhamba road, C.P New Delhi - 110091 Academic Guide Prof. Deepak Bansal Faculty, IIF 45 A, KP – III, Greater Noida Uttar Pradesh- 201306

INDIAN INSTITUTE OF FINANCE
DELHI, NOIDA, GREATER NOIDA

MAY, 2010

i

Preface
As a part of MBF programme I have undertaken a live project on the topic Sectoral analysis and growth path of hotel industry in India. The project undertaken is a study of different functions which may help to discover better structures in hotel and hospitality industry keeping in mind the ever-changing domestic and global tourism and markets. Though the project deals in detail with the marketing analysis of the subject matter but the study has also taken due consideration of the financial aspects and a study of Working capital management and ratio analysis of 3 companies has been done. This project is divided into 8 chapters and they are given as under: Chapter 1: Introduction of Project and Company Chapter 2: Review of Literature includes previous works on the capital structure. Chapter 3: Methodology includes the techniques used to achieve objective. Chapter 4: Financial Analysis Chapter 5: Marketing Analysis Chapter 6: Conclusion. Chapter 7: Bibliography Chapter 8: Annexures

ii

Declaration

This is to certify that “Live project on Sectoral analysis and growth path of hotel industry in India” was carried out by Prateek Kaushik as a part of the requirements of six-semester two year full time post graduate programme - Management of Business Finance (MBF). This study is being submitted for approval to the Indian Institute of Finance.

I declare that the form and content of the above mentioned project are original and have not submitted in part or full, for any other degree or diploma of this or any other

organization/Institute/University. I shall remain solely responsible for any infringement of copyright, patents and trademarks.

Name: Prateek Kaushik Enrollment No.:4108100100

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Certificate

This is to certify that the Live Project titled “Sectoral analysis and growth path of hotel industry in India” was carried out by “Prateek Kaushik” bearing Enrollment No. 4108100100, of Indian Institute of Finance, Greater Noida, as a part of the requirements of MBF (2008-2010). This study is being pursued under my guidance and supervision.

Date:

Prof. Deepak Bansal Indian Institute of Finance Delhi & Greater Noida

iv

Acknowledgement
This project has been a whirlwind experience on the evolving and ever growing hospitality and tourism industry and the various functions that support its growth. The research work undertaken has given me an insight into the strengths and weaknesses of the industry and has enriched both the project and my mind with knowledge. My sole objective is that reader of this project gets the first hand experience of the significance of current status of hotel industry in India, its major growth drivers, the overall potential of the industry and the capabilities present which needs to be addressed and harnessed.

I acknowledge my gratitude and indebtness to my internal project guide Prof. Deepak Bansal & Dr. J.D Agarwal chairman of Indian Institute of finance, Delhi who gave me the opportunity to pursue this project.

I express my deep gratitude to my Corporate Guide Mr. Varun Taneja of Indiabulls Securities Pvt. Ltd., who was a source of continuous guidance and inspiration to me.

Last but not the least, I would like to thank all my faculty members and my friends, for their cooperation in completing my project work.

Prateek Kaushik
4108100100

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Executive Summary

As a part of MBF Programme, a student has to pursue a live project duly approved by the Academic and Corporate Guide. I had the privilege of undertaking project on Equity Research and WCM of Top Hotel groups in India. The project has been undertaken to study the hotel industry and identify the correct measures to harness and capitalize the opportunities that the industry would present in future.

My project is divided into Six Chapters and they are given as under. 

Chapter one of the study contains, concept of Equity research and importance of the subject in the present scenario. The main focus of this chapter is to give overview of the main topics of the project as it deals with the introduction of some important aspects i.e. the project, Company and the hotel industry in general.

Chapter two deals with review of literature on Equity research, Hotel operations, Drivers & trends in hospitality industry and Fundamental analysis. Importance of this chapter is in regard to discussing some of the empirical works on the chosen subject of project.

Chapter three deals with objective of the study, research methodology and brief review of other related literature. The main idea of this chapter is to give an overview of the research methodology and analysis techniques used in the project.

Chapter four deals with analysis & interpretations. Main Analysis and interpretation of the results, Analysis has been done on the basis of Technical analysis technique of equity research and Working capital management & Ratio analysis.

 

In Chapter five Marketing analysis of the subject concerned has been done in detail. Chapter Six deals with summary of major findings and discussions of results.

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LIST OF FIGURES
Figure no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Figure title Segmentation – Hospitality Industry Hotel properties – Market Share Breakup of Hotel Revenues – IHCL ITC Group – Segmentation Of Hotels Porter’s Analysis of ITC Hotels Crème’ De Crème’ MACD Graph of IHCL’s stock MACD Graph of EIH’s stock MACD Graph of ITC’s stock Categories – Hotels Hotel Categories – Rooms Available Analysis of Tourism Industry Product Potential – Metropolitan Cities of India Revenue Structure Cost & Expenses as % of Total Revenue Porter’s 5 Force Model Page no. 14 23 37 53 55 57 97 103 109 117 122 126 131 169 170 178

LIST OF TABLES
Table no. I II III IV V VI VII Table Description Rooms available for sale in India ITC properties with Starwood & Sheraton Economic Analysis Existing & Proposed room supply in India Foreign Tourists Arrivals Foreign Exchange Earnings Performance analysis – Hotel Industry Page no. 18 56 75 123 149 149 186

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LIST OF ANNEXURES

  

Taj Group of Hotels – Financials Oberoi Group of Hotels – Financials Imperial Tobacco Company - Financials

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TABLE OF CONTENTS

Preface Declaration Certificate Acknowledgement Executive Summary List of figures List of tables List of Annexures Chapter 1. 1.1 1.2 1.3 1.4 1.4.1 1.4.2 1.4.3 Introduction Introduction to the project Introduction to Indiabulls securities Ltd. Introduction to Hotel & Hospitality industry Introduction to hotel companies analysed Taj Group of Hotels Oberoi Group of Hotels Imperial Tobacco Company

ii iii iv v vi vii vii viii 1 2 4 13 24 24 38 46

Chapter 2.

Review of Literature

60

Chapter 3. 3.1 3.2 3.3

Research Methodology Introduction to Technical Analysis Sources of Data Collection EIC Analysis

72 73 74 75

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3.4 3.5

An Overview of Ratio Analysis Working Capital Management

77 89

Chapter 4. 4.1 4.1.1 4.1.2 4.1.3 4.2 4.2.1 4.2.2 4.2.3 4.3 4.3.1 4.3.2 4.3.3

Financial Analysis IHCL Ratio Analysis Working Capital Position Technical Analysis using MACD EIH Ltd. Ratio Analysis Working Capital Position Technical Analysis using MACD ITC Ltd. Ratio Analysis Working Capital Position Technical Analysis using MACD

91 92 92 96 97 98 98 102 103 104 104 108 109

Chapter 5. 5.1 5.2 5.3 5.4 5.5 5.6 5.7

Marketing Analysis All About Hotels Hotel Industry – Present Scenario Sex Tourism Growth Prospects Environmental Issues Government Policies Technology of Praduction & Distribution

110 111 121 140 153 156 158 168

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5.8 5.9 5.10 5.11 5.12

Marketing & Branding Innovation Porter’s 5 Force Model Pestal Model SWOT Analysis

174 177 178 182 188

Chapter 6.

Analysis & Findings

192

Chapter 7.

Bibliography

202

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