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GBP FINAL REPORT

Group 9

Construction Industry
Hospitality Industry
Health Care Industry
Pharmaceutical Industry

Manjeera Constructions
Mahindra Holidays & Resorts India Ltd.
Noida Medicare Centre Ltd.
Medinova Diagnostic Services Ltd.
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1. Introduction about the Economy

India is likely to be the third largest economy with a GDP size of

$15 trillion by 2030.The economy of India is currently the world’s
fourth largest in terms of real GDP (purchasing power parity) after
the USA, China and Japan and the second fastest growing major
economy in the world after China.

The major focus has been on the agriculture sector. This is

because Indian economy is based on agriculture. 52% of the total
population of India depends on agriculture.

2. Introduction about the Hospitality Industry:

The hospitality industry is a broad category of fields within the

service industry that includes lodging food and drink service,
event planning, theme parks, transportation ,cruise line, traveling
and additional fields within the tourism Industry.

The hospitality industry is an industry that depends on the

availability of leisure time and disposable income.This industry is
one of the largest and most rapidly growing industries in the
world, and is influenced by ups and downs in the economy.
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3. Brief History:

The hotel industry in India existed even in the era of the Indus
Valley Civilisation as people travelled then primarily for the
purpose of trade as well as religious pilgrimages. The old texts
and

literature, including Hindu mythology has references to provision

of accommodation and food to travellers.

India was famous for gold, precious stones, spices and silks and
trade existed with countries like Malaysia, China, Japan, Greece
and Italy. Travellers used animals for covering distances on land
and boats to cross seas and rivers.

Ancient Indian philosophy says that “atithi devo bhava” which

means that the guest is god. Though there was no organised
hospitality industry in India at that time, travellers and guests got
accommodation in lodging houses known as “dharamshalas”.

After the British formally left India the hotel industry continued to
flourish rapidly. The Taj and Oberoi groups that were already
present on the scene continued their rise by taking over properties
that had been set up by the erstwhile colonial masters and
expanded their business overseas as well.
The Government of India started The Ashok Hotel in 1956, one of
the largest and most luxurious hotels in New Delhi, popular
amongst tourists as well as businessmen. The Indian Tourism
Development Corporation (ITDC) was constituted in 1966, which
opened more hotels as well as related services across the country.
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4. Economy and Industry Information:

• Estimated size of the industry: India is the most digitally-

advanced traveller nation in terms digital tools used for
planning the travel, booking and experiencing the
journey.India’s rise in middle class and increasing disposable
income has increased the support in domestic tourism.

- During 2018, foreign tourist arrivals (FTAs) in India stood at

10.56 million, achieving a growth rate of 5.20 per cent year-on-
year. FTAs in January 2019 stood at 1.10 million, up 5.30 per
cent compared to 1.05 million year-on-year. During May 2019,
arrivals through e-tourist visa increased by 21.70 per cent year-
on-year to 1.23 million.
- The travel & tourism sector in India accounted for 8 per cent of
the total employment opportunities generated in the country in
2017, providing employment to around 41.6 million people
during the same year. The number is expected to rise by 2 per
cent annum to 52.3 million jobs by 2028.
- International hotel chains are increasing their presence in the
country, as it will account for around 47 per cent share in the
Tourism & Hospitality sector of India by 2020 & 50 per cent by
2022

• Is the industry seasonal?

Yes. Domestic travellers travel mostly during summer vacation
and during public holidays. International travellers travel in
December mostly for a trip. Whereas, business travellers often
travel when required increasing the demand for hospitality
industry.
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• Scope
According to India Brand Equity Foundation (IBEF),
the tourism and hospitality sector's direct contribution
to GDP surged by 23.6% in 2017, raising the share of
the industry (direct & indirect) to Rs5.9 trillion ($91.3
billion).

5. Market Information

• Products offered in the industry

The hospitality industry is a large umbrella industry that contains
several different divisions of businesses:
• Air and land travel
• Hotel
• Food and beverage
• Entertainment such as movies/theatre/sports
• Tourist attractions

6. Company Information
• major players/businesses in the industry:
- Indian Hotels
- EIH(Oberoi Group)

• Top 2 from the industry as per market share

Name Last Price Location Found Total Assets
Indian Hotels 146.55 USA,UK,India ,etc 1903 5,738.34
EIH 154.45 Mumbai, Delhi, etc 1934 3,289.61
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Hyderabad ,Mumbai,
Chalet Hotels 325.65 1986 2,855.53
etc.

• Current operational/management trends within the

industry
Management Efficiency Ratios
Inventory Turnover Ratio 163.19
Debtors Turnover Ratio 0.91
Investments Turnover Ratio 163.19
Total Assets Turnover Ratio 3.16
Asset Turnover Ratio 1.73

• Management Efficiency
Mahindra Holidays Peer Average Good/Bad

1.Return on Equity(%) 1.00 -7.63 Good

2.Return on Assets(%) 0.86 -39.60 good

3.Return on Capital (%) 25.27 4.20 Good

4. Fixed Assets Turnover 1.89 0.75 Moderate

• Profitability Ratio
Mahindra Holidays Peer Average Good/Bad

Growth Profit Margin(%) 2.89 3.86 Moderate

Operating Profit Margin(%) 7.42 12.55 Moderate

Net Profit Margin(%) 2.69 -18.42 Good

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• Liquidity Ratio
Mahindra Holidays Peer Average Good/Bad

Quick Ratio 0.48 1.17 Bad

Current Ratio 0.67 1.35 Bad

Cash Ratio 0.01 0.16 Bad

• Solvency
Mahindra Holidays Peer average Good/bad

Debt Equity Ratio N/A 2.02 Good

7. PESTEL Analysis
Political Factors: Hotel Industry has the support of
the government to sustain the competitive world.
Government charges great amount of tax on the
luxury and star category of hotels. Political changes
have a greater impact on the hotel industry because of
the government. Any small step taken by the
government will affect the industry very deeply.

Economic Factors: Economic change leaves a

significant impact on the behavior of the firm. All the
capital states or province of every country receive
tourists for the purpose of conferences, workshops,
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business dealing and other purposes. In last few years

many guests paid extra for their demands to be met
and when they pay more the industry automatically
grows. With the increase in arrival of guests even the
service provided also needs to be luxurious and good.
Social Factors: Changes in social factors impact the
demand for firm's services and products. Like the
economic trends, social trends shake the tourism
industry. There has been a shift in Customers
preference these past few years in favour of private
accommodations. The rise of Airbnb is a challenge for
the hotel segment. There are other social factors that
affect the global hospitality industry and customers
preference plays a major role in it.

Technological Factors: The technology used must

be beyond standard especially when it comes to hotel
management. The software used by the hotels help to
meet all needs of staff members and customers. Hotels
which are embedded with high end technology are
considered to be safe and easy to reach. Technology
helps to reduce the work and enhance the results.
Many places do not provide Wi-Fi facility but guests
prefer accommodation in places with Wi-Fi. So,
technology is a external factor which would affect
hotel industry.

Environmental Factors: The environmental and

weather changes have direct impact on the industry.
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Most of the environmental factors that affect the

industry are mostly flood, storm or heavy rain. These
factors play a vital role especially in monsoon
seasons. Hotel industry has to take proper measures
for such factors and take control over it on time.
Natural factors such as earthquake affect the hotel
sales.

Legal Factors: The legal pressures and challenges in

the tourism environment are big. Airlines have
focused a lot on making air travel safer. For brands
operating in several nations, it is important that they
are familiar with all the local laws. Staff training has
also become more and more important to prevent any
legal hassles. Cities and nations that are considered
safer and have lower crime level, see tourists in larger
numbers.

8. SWOT ANALYSIS

Strength: There are more than 1000 classified hotels

with a room availability of around 97,000 rooms
which can easily cope with the demand of tourists.
Furthermore, there are also a number of international
names in the market which meet the needs of
international tourists on their visit to India. In
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addition, there are many tourist attractions and the

cost of labor is low in comparison with the rest of the
world, thus, providing better margins for hotel owners
and higher growth potential in the industry.

Weakness: One major restraint to the hotel industry

of India is the cost of land, which is as high as 50% of
the total project cost, against a low 15% abroad. The
country also has a higher tax structure as compared to
other countries which inflates the hotel expense a
great deal. Furthermore, the services offered by some
hotels are limited and not comparable to world
standards.

Opportunities: The country boasts a number of

attractions and has unmatchable diverse cultural
destinations making it an ideal destination for
tourists. As a result, the number of inbound tourists
is expected to increase at a quick rate, further
pushing the demand for hotels. Additionally, the
demand for both national and inbound tourists can
easily be managed as the peak season. For
international tourists, arrival is between September
and March, while most national tourists prefer to
wait until school holidays, which are during the
summer months.
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Threats: Several hotels in India are being replaced by

guesthouses, thus, adversely affecting the hotel
industry. Political unrest in the country also plays its
part in reducing tourist traffic and consequently
affects business of the hospitality industry. The
country’s economic condition has a direct impact on
the earnings of hotels. As a result, the staff might not
be trained well enough to meet international
standards.

9. Porter’s 5 forces Competitive Strategy for

Industry Analysis (Diamond Model)

Rivalry level among existing firms

The rivalry in the hotel industry is intense because the
cost of production differentiation and switching costs
are low and the business growth required is greater
than the rate at which the business is growing. In an
industry such as this where there is high capital costs,
the pressure to sell the capacity by price cutting is
high and the competition becomes intense.
Threat of new entrants
The hotel industry globally is characterised by high
capital costs i.e. the total cost that is required to
project a commercially operable status. The hotel has
to make sure that the high capital cost is gaining its
worth in the form of output and the resources are used
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to it utmost potential. The existing hotel chains have

an advantage over local entrepreneurs in this industry
as far the brand image and customer loyalty are
concerned.
The new entrants have to be conscious about target
market and quality service. As the hotels run on
product differentiation, the entrants have to invest in
the innovation of the services that are provided to the
customers.
Tariffs are determined on the basis of differentiation
in location, management and guest ratios. The new
entrants will be at disadvantage as the best locations
are limited in the metropolitan cities.

Buyer’s bargaining power

When the concentration of the buyers is higher than
the market players then the industry is subjected to the
high power of buyers. In hotel industry such is the
case. Certain groups of buyers exercise power over
the hotel industry when the purchasing of hotel rooms
in bulk is required. These groups include tour

operators, domestic and international airlines and

convention organisers and participants. Where
business travellers are concerned the differentiation
becomes significant and the hotels are under pressure
to keep their brand unique. On the other hand when
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leisure travellers and tourists are taken into

consideration, the hotels have to compete in prices.

Seller’s bargaining power

The power of suppliers over hotel industry is
relatively low. The hotel industry is only subjected to
the power of the labor, trained staff and personnel and
the industry has a huge demand of them. (Cheng,
2013).Hotels are not subjected to the bargaining
power of suppliers and it has low and indirect pressure
on their competitiveness. In order to be in the leading
league a hotel has to maintain a cost advantage over
its rivals and be innovative about differentiating itself
in its own strategic group.

Threat of substitute products

The threat of the substitutes in hotel industry is
relatively low. Except in the times of recession the
hotel industry can thrive without the threat. However
people looking for cheap accommodation can easily
opt to live in hostels, motels or with relatives. This
market is price sensitive and the hotel's target

audience becomes the cost conscious people.

However in case of accommodating large group of
people like travelling groups and business travellers.
The hotel doesn't face a threat of substitute however it
faces competition of differentiation.
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