Introduction and overview of Hotel industry

Hospitality is about serving the guests to provide them with “feel-good-effect”. “Athithi devo
bhavha” (Guest is God) has been one of central tenets of Indian culture since times immemorial.
In India, the guest is treated with utmost warmth and respect and is provided the best services.
Today hospitality sector is one of the fastest growing sectors in India. 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.
Scope of Hospitality industry in India
The Tourism and Hospitality is one of the key industries in India, accounting for about 8.78% of
its workforce and around 6.20% of its Gross Domestic Product (GDP). Touted as one of the most
profitable industries of India, Tourism and Hospitality is one of the major earners of the
country’s foreign exchange. The key money spinner of the hospitality industry is accommodation
and as it is directly related to tourism- travel operators, attractions, and transportation also play a
major role.
The industry has a very good scope owing to the government initiatives for the tourism sector,
and positive influence of the demand supply scenario etc. The ratings attributed to each of the
hotels by the government are reviewed every five year. This measure instills the urge to maintain
and improve on the existing standards among hotel authorities. Lower tax constraints for medium
sized hotels are a positive measure for the hotel business while reforms introduced for the
aviation sector have resulted in better connectivity among nations.
India offers foreigners across the globe to explore some of the most diverse cultures, contours,
traditions, landscapes and cuisines. The innovative measures in the key areas like hotels, food,
beverages etc have been effective in attracting more tourists with each passing year. Rajasthan,
Kerala, Gujarat, Darjeeling, Nainital, Goa, Shimla, the leading travel destinations of India are
continuously trying to come up with innovations to attract travelers.
Asides from the leading travel destinations some small getaways like Mandarmani, Daman
Beach, Shantiniketan, and Balangir etc are gradually making a niche among tourists as well
thereby contributing to the hospitality industry. Thus it can be safely said that hospitality
industry of these getaways is definitely heading for a brighter future.
The presence of major international hotels like Radisson, Accor, Holiday Inn, Le Meridian has
boosted India’s prospects internationally and with the co operation from its government the
hospitality industry of India will definitely look forward to inviting more foreign investors in
future.
The top players in hospitality sector include the following:
ITC Hotels
Indian Hotels Company Ltd. (The Taj Hotels Resorts & Palaces)
Oberoi Hotels (East India Hotels)
Hotel Leela Venture
Asian Hotels Ltd.
Hotel corporation of India
ITDC Hotels
Radisson Blu
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, with Delhi and Mumbai being on top.
The average room rate (ARR) and occupancy rate (OC) are the two most critical factors that
determine profitability. ARR depends on location, brand image, star rating, quality of facilities
and services offered. The occupancy rate depends on other seasonal factors.
India is an ideal destination for tourists. Approximately 4.4 million tourists visit India every year.
Thus the growth prospects are very high.
In the hotel sector, a number of multinationals have strengthened their presence. Players like
Four Seasons are also likely to enter the Indian market in the near future. Moreover, Indian hotel
chains are also expanding internationally. A combination of all these factors could result in a
strong emergence of budget hotels, which could potentially lower the cost of travel and related
costs.
The industry can be classified into four segments:
5 Star and 5 Star Deluxe: These are mainly situated in the business districts of metro cities and
cater to business travelers and foreign tourists. These are considered to be very expensive. These
account for about 30% of the industry.
Heritage Hotels: These are characterized by less capital expenditure and greater affordability and
include running hotels in palaces, castles, forts, hunting lodges, etc.
Budget Hotels: Budget hotels cater mainly to domestic travelers who favor reasonably priced
accommodations with limited luxury. These are characterized by special seasonal offers and
good services.
Unclassified: These are low-priced motels spread throughout the country. A low-pricing policy is
their only selling point. This segment accounts for about 19 % of the industry.

Future of Hospitality Industry in India

In Asia pacific the Indian hotel industry is only second to that of China’s. According to the
predictions of The World Travel Organization the hospitality industry will assume a huge shape
by the year 2020 becoming almost triple in size.
Keeping the steady growth of this sector in view, it is estimated that in the coming years there
will be a huge absorption of Hotel management individuals thereby triggering impressive career
options for these students.
The key areas which are going to prove profitable for the Hospitality industry are:
Budget Hotels
Spas
Wildlife resorts
Service Apartments
Tier III cities
Indian Hospitality Industry- Future Trends
Hospitality industry is expected to be one of the major employers in India
Fierce competition between major players
Tendency to promote of Indian values and tradition to attract more tourists
Evaluation to be more behavior based
More foreign investment
Growth of Premium and luxury hotels
More innovations in services including accommodation, food, beverages etc

Literature review

Nadkarni, M.M. opines that due to neglect of buildings adequate infrastructure such as airports,
road transport, communication, etc., are the main reasons for a setback to hotel industry. He
points out that there still there is a shortage of rooms facilities in luxury and deluxe hotels. He
concludes by saying that there should be a proper tourism planning.

Malkarnekar, G.S. case study has observed that the accounting system of a company helps to
show the true state of affairs in hotel industry. He suggests that the management should use
operating charts for various departments to show profit / loss of various sections during different
quarters, revenues and various operating expenses of these departments shows their contribution
to the net earnings of the company.

Krishnaswamy, J. has suggested that in order to develop tourism, a country has to provide hotels
facility at various destinations. Further, he states that from the countries from which India used
to attract tourist have shown a slowdown in the growth rate. The slow down in the arrival of
tourist traffic is due to factors like political disturbances, rise in fuel cost, inflation and recession
are attributable to the slow growth rate of tourist arrivals.

Anand, M.M. in his study, makes an attempt to analyze the nature of this multidimensional
tourist plan whose activities range from the provision of comfortable lodging to facilitating a
visit to a national monument. He has examined the structure and working of the plan. He says
that the hotels and other supplementary accommodation are the core of the plan. According to
him, the first prerequisite for the development of hotel industry is the forecast of the future
demand, which would mean information about the number and type persons who would be
making use of the facilities. It is in terms of demand that the right supply, at right place, right
time and at right price is to be built up. 37 Failure to take into account future demand means
either accommodation bottlenecks, which may hit the tourist industry adversely, or excess
accommodation, which would result in loss to hotel industry. The wrong allocation of limited
resources for this purpose means that the whole economy is affected as these funds are denied to
other developmental sectors.

Singh, T.V in his study, has assessed hotels capacity at twelve different locations of tourist
importance in the State of Uttar Pradesh. The main findings of the study were that the domestic
tourists are neither choosey about accommodation nor they demand superior service. But the
foreign tourists demand better quality hotels. As such, there is a shortage of accommodation in
relation to foreign tourist

Bhatia, A.K. has made certain suggestion regarding the level of demand for accommodation
services. He suggest that while calculating the requirement of rooms, various variable are
required to be considered like duration of stay of a tourist and occupancy rates of tourist
accommodation. If the annual occupancy would be higher, then the number of rooms or beds
required for the visitors would be high and vice versa.