Strategic

Analysis for
Intercontinental
Hotel Groups
Table of Contents
Figures...................................................................................................................................................3

Tables....................................................................................................................................................3

International Sectorial Analysis.............................................................................................................3

International Markets by Geography: Europe....................................................................................5

International Markets by Geography: Asia Pacific............................................................................6

International Markets by Geography: Americas................................................................................6

International Markets by Geography: Africa.....................................................................................7

International Markets by Geography: Middle East............................................................................7

Correlation Between Major Factors Affecting Tourism....................................................................9

Overview of Major Projects in Pipeline Globally..............................................................................9

National Competitive Environment.....................................................................................................10

Strengths:.........................................................................................................................................10

Oberoi hotels...............................................................................................................................10

Taj Hotels....................................................................................................................................11

Weaknesses.....................................................................................................................................12

Oberoi hotels...............................................................................................................................12

Taj Hotels....................................................................................................................................12

Sales Figures of major competitors..................................................................................................13

Net profit of major competitors.......................................................................................................13

Threat of Substitutes from Shared Economy (Airbnb and OYO)....................................................13

Airbnb..........................................................................................................................................13

Industry Performance in the Last Two Years......................................................................................15

Performance of Hotels - Overall Average........................................................................................16

Industry Margins.............................................................................................................................16

Growth in Occupancy Rates and RevPar by Hotel Category...........................................................16

Technology and Regulatory Shifts in the Sector..................................................................................17

 Mobile Applications....................................................................................................................17

Big Data Analytics.......................................................................................................................18

Artificial intelligence (AI)...........................................................................................................18

Technological changes by competitors............................................................................................19

India Hotels Company Limited....................................................................................................19

Hyatt Hotels.................................................................................................................................19

Airbnb..........................................................................................................................................19

Regulatory Shifts.............................................................................................................................20

Industry Structural Analysis................................................................................................................21

A. PEST Analysis............................................................................................................................21

I. Variables / Factors Considered.................................................................................................21

ll. Cause - Effect Relationship.....................................................................................................22

lll. Actionable factors and corresponding strategic actions and assumptions...............................28

B-1. Key questions about competitors.............................................................................................32

l. Strengths...................................................................................................................................33

ll. Weaknesses.............................................................................................................................34

III. Sales Figures of major competitors........................................................................................35

IV. Net profit of major competitors.............................................................................................35

V. Extent of Entry of New firms in the Industry..........................................................................35

B-2. Critical success factors.............................................................................................................37

C-1. Porter’s 5 forces analysis for the hospitality industry..............................................................38

I. Bargaining Power of Suppliers (Low)......................................................................................38

II. Bargaining Power of Buyers (High)........................................................................................38

III. Threat of Substitutes (Low)...................................................................................................38

IV. Threat of New Entrants (Moderately High)...........................................................................39

V. Rivalry among existing competitors (High)............................................................................40

C-2. Broad strategic actions to uphold/ curtail competitive forces...................................................41

I. Bargaining Power of Suppliers (Low)......................................................................................41

 II. Bargaining Power of Buyers (High)........................................................................................41

III. Threat of Substitutes (Low)...................................................................................................42

IV. Threat of New Entrants (Moderately High)...........................................................................42

V. Rivalry among existing competitors (High)............................................................................42

Vision/ Mission and Relative Performance Targets for the Company.................................................43

5 Year Impact with Year wise Milestones............................................................................................43

IMPLEMENTATION...........................................................................................................................45

1. INTEREST OF STAKEHOLDERS...............................................................................................45

Biometrics....................................................................................................................................46

Expansion of customer base............................................................................................................47

Franchise Model..........................................................................................................................47

Loyalty Programme......................................................................................................................47

Talent Management....................................................................................................................48

Integrated GM Ready Programme...............................................................................................49

References...........................................................................................................................................50

Appendix.............................................................................................................................................50

Figures
Figure 1: Tourism Market Size by Country...........................................................................................4
Figure 2 : World Tourism Data..............................................................................................................8
Figure 3 : Correlation Matrix between Tourism Index and Various Factors Affecting It......................9
Figure 4 : Sales Figures of Major Competitors....................................................................................12
Figure 5 : Net Profit of Major Competitors.........................................................................................12
Figure 6 : AirBnB Statistics.................................................................................................................13
Figure 7 : Performance of Hotels - Overall average............................................................................15
Figure 8 :Industry Sales and Margins..................................................................................................15
Tables
Table 1 : Estimated Growth and Economic Impact of Tourism and Hospitality Industry......................4
Table 2 : Economic Contribution of Travel and Tourism Growth.........................................................5
Table 3 : International Market Europe...................................................................................................5
Table 4 : International Market Asia Pacific...........................................................................................6
Table 5 : International Market Americas...............................................................................................6
Table 6 : International Market Africa....................................................................................................7
Table 7 : International Market Middle East...........................................................................................7
Table 8: Why do you use Airbnb?.......................................................................................................14
Table 9: Occupancy Rate by Hotel Category.......................................................................................16
Table 10 : RevPAR by Hotel Category................................................................................................16

International Sectorial Analysis

Robust economic growth and buoyant consumer spending globally was adequately reflected
in the performance of global travel and tourism industry in 2017. WTTC [ CITATION
WTCC2018 \l 16393 ] estimates the sector direct growth stood at 4.6% in the year and
outperformed global economic growth for the 7th year in the row.

Branded hotel groups have fuelled growth of the industry by diversifying geographically.
Emerging markets are the key growth feeders, with Asia Pacific at the forefront showing a
growth rate of 11.5% in its supply chain. Middle East and Africa also showed promising
growth with 7.2 % and 3.8% respectively. European and North America account for 70% of
the global market share but are continuing to lose market share from one year to
next[ CITATION Hot18 \l 16393 ].
 Figure 1: Tourism Market Size by Country[CITATION htt \l 16393 ]

[ CITATION WTCC2018 \l 16393 ]From the below table you can see that in direct contribution of
this sector to global GDP is set to rise by 4.0 % in 2017-18. WTTC estimates that the sectors
contribution to GDP will increase by 3.8% annually between 2018 and 2028.

World 2018 Real 2018-2028 % of Total (Annualized Real

Growth Growth)
Direct Contribution to 4 3.8
GDP
Total Contribution to 4 3.8
GDP
Direct Contribution to 2.4 2.2
employment
Total Contribution to 3.0 2.5
employment
Visitor Exports 3.9 4.1
Domestic Spending 4.1 3.9
Leisure Spending 4.1 4.1
Business Spending 3.8 3.2
Capital Investment 4.8 4.3
Table 1 : Estimated Growth and Economic Impact of Tourism and Hospitality Industry[ CITATION WTCC2018 \l 16393 ]

World (Growth %) 2018 (Growth %) Forecast 2028 (Growth %)

Internal Tourism 3.9 4.1
Consumption
Capital Investment 4.8 4.3
 Government Collective 2.8 2.8
Spending
Table 2 : Economic Contribution of Travel and Tourism Growth[ CITATION WTCC2018 \l 16393 ]

The demand for international tourists is expected to grow at a rapid pace of 7% (according to
UNWTO World Tourism Barometer) along with rise of internal tourism consumption to
4.1% between 2018 and 2028 (according to WTTC Report 2018).

This is commendable and reflects the steady expansion in this sector in the next 10 years.

International Markets by Geography: Europe

Remarkable Growth led by Southern Mediterranean Regions

Region Arrivals Receipt Top Global Global

Growth Rate Growth Rate Destinations Tourist Share Receipt
(2017-2018) (2017-2018) (2017-2018) Share
(2017-2018)
Europe 8% 8% Turkey, 51% 39%
France,
Belgium,
Russia and UK
Table 3 : International Market Europe

Reasons: Travel increased from virtually all Europe’s source market fuelling inbound growth.

Southern Mediterranean Europe led results driven by recovery of Europe and continued
strength of other traditional and emerging destinations

Western Europe: Recovery from previous security incidents

Central and Eastern Europe: Increased outbound demand from Russia

Northern Europe: Depreciation of British Pound, making the destination more affordable
[ CITATION UNW18 \l 16393 ]
International Markets by Geography: Asia Pacific
Continued growth fuelled by solid intra-regional demand

Region Arrivals Receipt Top Global Global

Growth Rate Growth Rate Destinations Tourist Share Receipt
Share
Asia Pacific 6% 3% Japan, 24% 29%
Vietnam,
Republic of
Korea,
Australia, New
Zealand, India
Table 4 : International Market Asia Pacific

Reasons:

Growing Purchasing power in emerging economy markets, increased air connectivity, more
affordable travel and enhanced visa facilitation continue to fuel terrorism from within and
outside the region. Positive results in south Asia were largely driven by performance of India,
the subregion’s largest destination, which benefitted from western source markets and
simpler visa procedures. [ CITATION UNW18 \l 16393 ]

International Markets by Geography: Americas

Positive results across most destinations

Region Arrivals Receipt Top Global Global

Growth Rate Growth Rate Destinations Tourist Share Receipt
Share
The Americas 5% 1% Argentina, 16% 24%
Brazil,
Nicaragua,
Dominican
Republic,
Jamaica
Table 5 : International Market Americas

Reasons:
Strong interregional demand, robust regional growth along with Hurricanes affected growth
rate of the region [ CITATION UNW18 \l 16393 ]

International Markets by Geography: Africa

Strong recovery in North Africa drives regions’ results

Region Arrivals Receipt Top Global Global

Growth Growth Destinations Tourist Receipt
Rate Rate Share Share
Africa 9% 8% Tunisia, 5% 3%
Morocco,
Kenya,
Mauritius,
Zimbabwe,
Seychelles
Table 6 : International Market Africa

Reasons: Continued recovery in North Africa and solid growth in most destinations along
with strong increase in receipts. [ CITATION UNW18 \l 16393 ]

International Markets by Geography: Middle East

Rebounding from 2016 with a strong increase in Income

Region Arrivals Receipt Top Global Global

Growth Growth Destinations Tourist Receipt
Rate Rate Share Share
Middle East 5% 13% Egypt, Dubai, 5% 3%
Lebanon
Table 7 : International Market Middle East

Reasons: Mixed reasons with strong rebound in some and sustained growth in others.
[ CITATION UNW18 \l 16393 ]
 Figure 2 : World Tourism Data[ CITATION UNW18 \l 16393 ]

Correlation Between Major Factors Affecting Tourism

 Figure 3 : Correlation Matrix between Tourism Index and Various Factors Affecting It[CITATION WTT \l 16393 ]

The correlation indexes are calculated through World Travel and Tourism Report on factors
affecting tourism and show the major factors and how they affect each other and tourism in
general.

Overview of Major Projects in Pipeline Globally

Company Pipeline Comments
Marriott International 465000 rooms (31 March The group is on track to achieve
2018) worldwide room additions of
5.5% to 6 %. In the first quarter,
it signed contracts with nearly
20,000 rooms, with nearly half
of these rooms in the luxury and
the upper scale tiers.
Hilton 355000 rooms (31 March Nearly 187,000 rooms in the
2018) pipeline or more than half were
located outside the US.
IHG 252000 rooms (31 March 45% under construction
2018)
Jin Jiang 190000 rooms (30 April --
2017)
AccorHotels 161000 rooms (December Takin a more selective approach
2017) towards development based on
luxury, lifestyle, resource and
residential projects.
Wyndham Hotel Groups 148200 rooms (31 58% are international and 68%
December 2017) are under construction.
Table 8 : Global Hospitality Projects Pipeline[ CITATION Hot181 \l 16393 ]

National Competitive Environment

Below is a description of major competitors of Intercontinental Hotel Groups in India

Strengths:
Oberoi hotels

 Strategy: Oberoi prides itself in providing differentiated services compared to its

competition and has a well-established differentiation strategy. They provide
differentiated but also ensure that they maintain the same standards of performance all
throughout their chain of hotels.
 Structure: The structure in Oberoi hotels is a flat and a decentralized structure which
makes it easier for employees to perform as a team and gives them a competitive edge
over its peers in this respect. This respectful culture of the company is one of the major
reasons it can provide an amicable atmosphere in its hotels.
 Staff: Oberoi industries makes sure that it has a specialized and experienced
workforce who are motivated and highly skilled and can face any challenge faced by
them. It has a well-trained team who are proud of their hotel and respect the values of
the company and promote the brand values
 Shared Values: Oberoi group has a well-defined set of values which it communicates
to all its employees and makes sure that they are clear in the minds of the employees
and are adhered to at every point in time.
 Reputation: The Oberoi group enjoys a strong reputation within the local markets,
corporates and travel trade markets for reliability, exemplary service and quality.

Taj Hotels

 Catering to multiple segments: The Taj Group of Hotels has something that caters
to all segment. While the Taj Vivanta caters to the upper upscale segment, Taj the
luxury segment, Gateway the upscale and Ginger the economy segment. This ensures
that irrespective of income status all customers choose a Taj Hotel for their stay.
 Business Philosophy: The business philosophy of the Taj has primarily based on the
premise that not everyone is the same. Thus through clearly segmenting the market the
hotel has been able to clearly differentiate their offering not just to cater to different
income segments but also to different cultures.
 Amenities: The Taj Group of Hotels has a host of facilities in all their hotels. Their
hotels have a host of facilities for guests like rooms, spas, Jacuzzi, multi-cuisine
 restaurants, swimming pools, pubs, resto cafes, fitness centres and banquet hall. Some
of their hotels also have mega convention centres with facilities to host conferences for
a huge gathering.
 Customer Loyalty programs: Quite unlike other hotel chains who look at loyalty
programs in the Taj Group the customer is given a chance to earn points from all stays
in all properties of the group. The key feature of their loyalty program is the automatic
upgrade to a higher-class hotel within the group. For example, a customer who has
been frequently staying in a Ginger Hotel may get an upgrade to the Taj Vivanta or Taj
if they have sufficient loyalty points.
 Service Differentiation: The Taj research team has identified around 155 touch
points in customer service from the moment a customer enters into their property till
the time they leave from there where there is a face to face interaction. The hotel chain
has ensured that in each of these points there is a clear service difference.
 Focus on the business class: The hotel chain realized the scope for growth in
business class travel and thus opened Taj Residency a business class hotel. The hotel
chain also moved out to smaller towns and cities and this expansion has helped to
increase the customer base of the business

Weaknesses
Oberoi hotels

 Strategy: Their differentiation strategy needs to be more clearly communicated

externally i.e. within local and national markets.
 Systems: Interdepartmental communications is not up to the mark and detailed and
smooth handover is not facilitated under the current operating procedure.
 Staff: Seasonal change-over require training and orientation of staff to adapt to the
change in season-specific needs of the customers.
 Facilities: As observed by customer feedback, certain rooms require renovation and
upgrade with regards to their technical equipment, such as high-speed Internet access
and laptop links. Given how a number of the occupants of these rooms are working
professionals, there is an imminent need to work on and improve these facilities.
Taj Hotels

 Customer Relationships: Hotels today need to be on their toes in terms of customer

relationship management. The key to success today is a compilation of information of
customers which enables them to understand them better and give personalized
services. This is proving to be extremely costly for Taj.
 Unequal growth across segments: While the economy and upper upscale segment
were registering good growth, the luxury segment was still lagging. However, the
maintenance and upkeep costs of the luxury hotels are relatively higher and the returns
low. The hotel has been pumping money from their medium segments for the upkeep
of their luxury hotels.
 The high cost of maintenance: The maintenance costs of hotels are growing and
with a network of almost 100 hotels across India and other properties in countries like
Bhutan, Malaysia, Maldives, Nepal, South Africa, Sri Lanka, UAE, UK, USA, and
Zambia the cost of maintenance is becoming unaffordable.

Sales Figures of major competitors

Figure 4 : Sales Figures of Major Competitors

Net profit of major competitors

Figure 5 : Net Profit of Major Competitors

Threat of Substitutes from Shared Economy (Airbnb and OYO)

Airbnb
Airbnb has properties listed in more than 81,000 cities over 191 countries – a scale achieved
over just a few years because of its role as just an intermediary.
Airbnb’s revenue comes from the fee they charge the host as well as the guest. Currently, the
company charges a service fee of 3% of the booking amount to hosts and 0-20% of the
booking amount to guests.

Key drivers of value

Number of listings: The total number of listings on Airbnb at the end of 2016 stood at 3.5
million and 4.2 million at the end of 2017 respectively. With global expansion, attracting
more hosts in existing cities, this figure will cross 5.3 million by the end of 2018.

Average rent per guest arrival: This figure grew from $157 in 2016 to roughly $174 in
2017, which is most likely explained by an increase in average duration of stay and a growing
share of more expensive accommodations. This trend will continue in 2018, leading to an
average rent of $185 for the year.[CITATION Jef \l 16393 ]
 Figure 6 : AirBnB Statistics

Table 9: Why do you use Airbnb?

Industry Performance in the Last Two Years

[ CITATION Equ18 \l 16393 ] The hotel industry in India thrives largely due to the growth in
tourism and travel. Due to the increase in tourism with rising foreign and domestic tourists,
hotel sector is bound to grow. There is an emergence of budget hotels in India to cater to
much of the population who seek affordable stay. International companies are also
increasingly looking at setting up such hotels. Imbalance in increase in tourists both domestic
and foreign not been supported with equal number of rooms is a latent source of opportunity
for growth.

 According to IBEF, the tourism & hospitality sector’s direct contribution to GDP
surged by 23.6% in 2017, raising the share of the industry (direct & indirect) was Rs
5.9 trillion (US$ 91.3 billion)
 According to the data released by Department of Industrial Policy and Promotion
(DIPP), the hotel and tourism sector attracted around US$ 10.6 billion of FDI between
April 2000 and September 2017.
 India's Tourism sector has been performing well with Foreign Tourist Arrivals (FTAs)
growing by 9.7% to 8.8 million.
 The Overall average Occupancy rates (ORs) increased by about 180 basis points y-o-
y during FY18 in 11 major cities in India. ORs increased from 64.8% in FY17 to
 66.6%% in FY18 on back of increased demand from domestic and foreign travellers
for business and leisure activities.

However, the average room rates (ARRs) increased by only about 1.6% during the same
period to Rs 5,759 per day due to stiff competition faced by players in the market. This
increase in ORs and ARRs led to the all India RevPAR performance of major markets to
record a growth of about 4.4% over the preceding fiscal and reach Rs 3,837 per day in FY18.

Performance of Hotels - Overall Average

Figure 7 : Performance of Hotels - Overall average[ CITATION Hot182 \l 16393 ]

Industry Margins

Figure 8 :Industry Sales and Margins[ CITATION Hot182 \l 16393 ]

Growth in Occupancy Rates and RevPar by Hotel Category
[ CITATION Hot182 \l 16393 ] Occupancy rate is the ratio of rented or used space to the total
amount of available space. The category-wise occupancy rates for the hotel industry are given
below which will help understand the performance of the industry.

Category 2017-18 12-month change CAGR 10 years

5-star deluxe 66.1% 1.8% 0.5%
5-star 66.5% 3.8% 0.9%
4-star 67.8% 2.8% 1.0%
3-star 67.2% 3.1% 1.8%
2-star 61.8% -1.4% -0.8%
Overall 66.6% 2.7% 1.0%
Table 10: Occupancy Rate by Hotel Category[ CITATION Hot182 \l 16393 ]

Revenue per available room is a performance metric used in the hotel industry by multiplying
the hotel’s average daily room rate by its occupancy rate. It incorporates both room rates and
occupancy and is thus a good reflection of how well a hotel is able to fill its rooms and how
much it is able to charge.

Category 2017-18 12-month change CAGR 10 years

5 stars deluxe 6874 4.8 3.8
5 stars 4097 5.7 3.9
4 stars 3149 5.9 4.8
3 stars 2126 8.2 6
2 stars 1374 7 3.6
Overall 3837 4.3 3.1
Table 11 : RevPAR by Hotel Category[ CITATION Hot182 \l 16393 ]

Technology and Regulatory Shifts in the Sector

Mobile Applications

[CITATION KPM181 \l 16393 ] According to a recent survey conducted by Google, customers are
now more comfortable researching, booking and planning their entire trip on a mobile device
rather than the traditional offline sources. India tops this list with 87% of travellers preferring
to plan their travel using mobile applications.
Various hotel chains are focused on generating direct hotel bookings using their own
websites and mobile applications and in turn avoiding the intermediary commissions and
increase revenue through secondary services.

Big Data Analytics

In the hospitality industry, big data is majorly used in large OTAs and branded hotel chains
who have, started using data to cull-out insights that can help improve customer satisfaction
and optimize their operations.

Travelers generate a large amount of data while traveling which is being used by these hotel
chains to in turn improve their services by personalizing services and at the same time
employ dynamic pricing to increase their profits. Use of big data also helps the hotels to
gauge the future demand and prepare for it accordingly.

For example, Marriott International uses data gained from various sources such as internal
systems and surveys, public sources and other third-party research organisations to make
properly analysed and informed decisions for the future and optimize their functions.
[ CITATION KPM18 \l 16393 ]

Artificial intelligence (AI)

Use of AI in this industry allows 24x7 customer interaction and these tools are also capable
of adapting through learning the responses of the customers so that they can perform better
and better every time.

This trend of using Artificial Intelligence has picked up recently in the hospitality industry to
improve customer satisfaction by using robots for customer support.

For example, Hilton Worldwide has a robot named ‘Connie’, which converses with guests
and tells them about various features and amenities that the hotel has to offer and also
informs them about the local tourist attractions as a personal travel guide. It obtains data from
sources like Watson which is a cognitive computing platform and WayBlazer which is an AI
driven travel recommendation platform, to gather data and help the guests plan their trips.
[ CITATION KPM18 \l 16393 ]
Technological changes by competitors

India Hotels Company Limited

IHCL is now migrating their systems into cloud infrastructure which aims to aid them in
building resilience in their functioning. To have a comprehensive round the clock security
systems, IHCL has moved to Security as a Service with Tata Consultancy Services which is
one of the leaders in this industry.

IHCL also uses data analytics to collect customer data and provide customized and
professional services by identifying problems and gaps. Analytics as they claim, also helps
them take more informed decisions about revenue management and business development as
well. [ CITATION KPM18 \l 16393 ]

Hyatt Hotels
[ CITATION KPM18 \l 16393 ]Hyatt stores and processes data of companies, customers and
colleagues etc. both at onsite facilities and at third party facilities such as third party owned
cloud environment. They rely on information and technology systems for various functions of
their business including, reservations, communications, payments etc. For uninterrupted and
efficient operations, Hyatt hotels has their own central reservations system which allows its
customers to book hotels directly, through travel agents and also online through their own
website.

Airbnb
[ CITATION KPM18 \l 16393 ]Airbnb is experimenting with VR and working on ways to
incorporate it into users’ travel planning experience, wherein they can virtually get inside a
house or a city and explore it through 360-degree photos and 3D scans, allowing them to
envision the experience that can be expected in real. Moreover, VR could enable travellers to
share such experiences — taking travel planning beyond spreadsheets, e-mails and messages.
Similarly, using AR, Airbnb is also looking into ways that can help travellers navigate
through daily challenges and make travel more seamless, in addition to making it more
immersive. For example, AR could be used to provide users with instant language
translations for queries such as how to operate a hotel room’s air conditioning or the stories
behind things and places one visits.

Regulatory Shifts

Major issues for most of the industries in India are related to multiple windows of clearances,
even for the hotel industry. Hoteliers face regulatory constraint at every step in the process of
development of hotels beginning from land acquisition stage (for which laws differ from
state-to state) to approval by various ministries & association on various matters. A company
requires approximately 100 clearances for setting up an upscale category hotel in India. The
clearances have to be taken from multiple government bodies. It is tedious and a time-
consuming process. Below are the regulatory changes that have recently been introduced in
the industry:

 Foreign Investment - 100% FDI has been allowed in Hospitality and Tourism industry
which has enabled major players like Hilton, Accor and Intercontinental Hotels Group
to take up major ventures in India.
 Government Schemes - Under budget 2017-18, the government allocated $142.78
million for Swadesh Darshan scheme. Also, under National Tourism Policy $14.7
million was allocated for promotion and publicity of various programmes under
Ministry Tourism.
 Tax Incentives - Investment linked deduction for establishing new hotels in 2-star
category, thus permitting a 100% deduction in investments of capital nature. Also, a
five-year tax holiday has been given to organizations that set up hotels, resorts and
convention centres at specific destinations, subject to fulfilment with the agreed
conditions.
 Ease of Doing Business - A big jump in India’s ranking in the World Bank’s Ease of
Doing Business Index to 77 from 100, resulting from, among other factors, a marked
improvement in key port infrastructure. This would help improve external trade which
would go a long way in improving the country’s image in the global market, as an
easy and dependable place to commercially engage in.
  Increase in Taxes on Luxury Resorts - The 28% tax on luxury hotels with tariffs of Rs
7500 and above makes India one of the most taxed countries in the world for hotels
but the government is of the view that the slab applies to very few hotels in the
country.
 Government Red Tape - 180 permits are required to build one hotel anywhere in
India. It takes 7 years to open a five-star hotel in India. That capital sits and (remains)
unused for 7 years. It is really expensive.

Industry Structural Analysis

A. PEST Analysis

I. Variables / Factors Considered

Below are the key economic, social, political, technological and competitive forces that we
have considered:

1. Economic Forces

1. Propensity of people to spend

2. Consumption Patterns w.r.t Domestic and Foreign Tourists
3. Foreign Investment
4. Foreign Exchange Earnings through Tourism
5. Booming Airline Industry

2. Political, Governmental and Legal Forces

1. Government Schemes
2. Budget Allocation
3. Visa Initiatives
4. Tax Incentives
5. Ease of Doing Business
6. Increase in taxes on luxury products/services
 7. Government Red Tape

3. Social, Cultural, Demographic and Natural Forces

1. Increasing Foreign Tourist Arrivals

2. Increasing Per Capita Income
3. Increasing Popularity of Niche Tourism Industries
4. Increase in Revenues from Leisure and Business Segment
5. Crime Rates in India

4. Technological Forces

1. Increasing Online Travel Bookings

2. Growing Credit and Debit Card Penetration
3. Slower than Expected Online Penetration Rates

ll. Cause - Effect Relationship

S.No. Variable/Cause Effect

1 Economic
1.1 Increasing Propensity of people to spend India’s middle-class population of
nearly 50 million is expected to
grow steadily over the next decade
to 200mn by 2020 and 475mn by
2030. The increasing disposable
income of growing middle class has
led to more families and individuals
planning both domestic and
international vacations at least once
a year.
1.2 Consumption Patterns Domestic travel revenues are
estimated at US$ 183.48 billion in
2016 are anticipated to further
increase to US$ 203.3 billion by
2026.
Revenues earned from foreign
 visitors are estimated at US$ 25.02
billion in 2016 & are projected to
further increase to US$ 40.11 billion
by 2026.
Out of total Indian travellers, in
2016,17 per cent people were in the
age bracket 18-24 years, compared
to 12 per cent in the previous year,
which was mainly due to the
increasing usage of smartphones by
the young travellers
1.3 Foreign Investment 100% FDI is allowed in Hospitality
and Tourism industry which has
enabled major players like Hilton,
Accor and Intercontinental Hotels
Group to take up major ventures in
India.
1.4 Foreign Exchange Earnings through During January-November 2017,
Tourism India has earned foreign exchange
of US$ 24.655 billion from tourism.
Foreign Exchange Earnings through
tourism during the month of August
2017 were US$2.176 billion as
compared to US$1.875 billion in
August 2016 and USD 1.752 billion
in August 2015.
1.5 Booming Airline Industry By 2020, passenger traffic at Indian
airports is expected to increase to
450 million people in comparison
with around 223.61 million people
in 2016. Growth in low-cost airlines
is expected to lower tourism costs &
increase domestic spending on
tourism. Low cost flights under the

2 Political, Governmental and Legal
2.1 Government Schemes (IBEF Slide 25)
2.2 Budget Allocation (Business Standard
https://www.business-
standard.com/article/pti-stories/tourism-
ministry-bags-rs-2-150-crore-grant-in-
budget-2018-19-118020101992_1.html)
2.3 Visa Initiatives (IBEF Slide 25)
2.4 Tax Incentives (IBEF Slide 26)
Ude Desh ka Aam Naagrik (UDAN)
scheme are expected to connect
underserved regions in the country
and promote domestic tourism.
Under budget 2017-18, the
government allocated $142.78
million for Swadesh Darshan
scheme.
Also, under National Tourism
Policy $14.7 million was allocated
for promotion and publicity of
various programmes under Ministry
Tourism.
Ministry of Tourism received a 21%
jump from previous budget
allocation.
Infrastructure projects budget
allocation increased by 16%, within
this PRASAD (Pilgrimage
Rejuvenation and Spiritual
Augmentation) received a 50%
increase. The budget for marketing
of tourist initiatives received a 52%
and 50% increase for foreign and
domestic promotions respectively.
Since, April 2017 this facility has
been made available to 161
countries which has led to a growth
of 67.3% in tourist arrivals
Investment linked deduction for
establishing new hotels in 2-star
category, thus permitting a 100%
deduction in investments of capital
nature. Also, a five-year tax holiday
 has been given to organizations that
set up hotels, resorts and convention
centres at specific destinations,
subject to fulfilment with the agreed
conditions.
2.5 Ease of Doing Business A big jump in India’s ranking in the
World Bank’s Ease of Doing
Business Index to 77 from 100 ,
resulting from, among other factors,
a marked improvement in key port
infrastructure helping the external
trade would go a long way in
improving the country’s image in
the global market , as an easy and
dependable place to commercially
engage in .
2.6 Increase in Taxes on Luxury Resorts The 28% tax on luxury hotels with
tariffs of Rs 7500 and above makes
India one of the most taxed
countries in the world for hotels but
the government is of the view that
the slab applies to very few hotels in
the country. 
2.7 Government Red Tape 180 permits are required to build
one hotel anywhere in India. It takes
7 years to open a five-star hotel in
India. That capital sits and (remains)
unused for 7 years. It is really
expensive.
3 Social, Cultural, Demographic and
Natural
3.1 Increasing Foreign Tourist Arrivals (IBEF Foreign tourist arrivals into to the
Slide 11) country are forecast to increase at a
CAGR of 7.1 percent till 2025
3.2 Increasing Per Capita Income (IBEF Slide Boost in demand as per capita
 23) income is expected to increase at a
CAGR of 7.33 percent over 2014-18
3.3 Increasing Popularity of Niche Tourism Adventure tourism is one of the
Industries most popular segments of tourism
(https://www.theseus.fi/bitstream/ industry. Owing to India’s enormous
handle/10024/120326/ geophysical diversity, it has
Fedorova_Alina.pdf?sequence=1) progressed well over the years.
The revenue generated from
adventure sports has increased to
1815.21 crores.
Affordable lodging rates, a relaxed
overall atmosphere, the spreading
popularisation of Indian gurus,
philosophies, culture and practices
in the West, and the influences of
Western writers, musicians and
celebrities who travelled to India
can all be considered as factors that
shaped India’s image as one of the
spiritual magnets of the world. In
last one/two years we have noticed a
growth of 6-7 percent in terms of
top-level corporate travellers
coming for spiritual rejuvenation.
There are groups as well as
individuals who take these trips.
3.4 Security / Crime Rates in India According to Global Peace Index
Report 2017 India is the 4th most
dangerous country for women
travellers.
3.5 Increase in Revenues from Leisure and Leisure travel spending reached Rs
Business Segment 12,079 billion (US$ 179.7 billion) in
2016 US$ 386.3 billion by 2027.
Business travel revenues were Rs
 689 billion (US$ 10.25 billion) in
2016 & are projected to increase to
US$ 23.3 billion by 2027
4 Technological
4.1 Increasing Online Travel Bookings Driven by the availability of cheap
smartphones and affordable internet
data plans, the number of mobile
internet users in India is expected to
reach 213mn by June 2015. With
41% of travel gross bookings taking
place online, the increasing internet
and mobile internet penetrations
rates could play a vital role in the
Indian online travel market growth
story.
4.2 Growing Credit and Debit Card Online travel will become more
Penetration(https://tinyurl.com/yd3z3uzc) popular as people become aware of
the benefits and ease of using plastic
cash. Card usage remains low in
India with debit cards at 32% and
credit cards at about 2%. People
tend to spend more when paying
with credit cards / online
transactions according to Forbes
survey.
4.3 Slower than Expected Online Penetration The online hotel segment in India is
Rates under penetrated with only 10%
accepting hotel bookings online,
while the overall user base of people
seeking information on hotels online
was very high. India is home to the
third largest internet user-base
worldwide. However, its internet
penetration rate at 17% is much
lower than the average 34% across
 several aspiring countries.
According to a report by BCG, the
number of internet users in India is
estimated to reach 580mn in 2018
from 205mn in 2014, primarily led
by affordable access and improved
awareness. This indicates significant
potential for growth over the next
few years.

lll. Actionable factors and corresponding strategic actions and assumptions

Sr.No Factor Classification Actions Assumptions

.
1. Foreign Direct Opportunit 1.Increase Footprint 1. Government
Investment y 2. Upgradation of won’t change FDI
https://tinyurl.com/ basic facilities and policies in the near
y8n25yyp modernizing them future
2. FDI will bring in
more business and
international
travellers from
developed countries
who are used to
certain level of
facilities which
Indian tourism
industry does not
offer
2. Booming Airline Opportunit 1.Increase visibility 1. The airline
Industry y at airports for industry will cater to
greater inflow of people having higher
customers disposable income
 2.Tie Up with online 2. Advertisements
aggregators to offer and discounts will
discounts/packages increase their
with specific airlines likelihood to visit
some place in India
3. Government Schemes Opportunit 1.Expand to newer 1. The new markets
y geographies where are not already
higher tourist influx saturated and entry
is being caused by barrier is relatively
the government low.
schemes 2. Providing
2.Design packages packages to such
for customers customers (attracted
attracted due to to schemes like
schemes like PRASAD and
PRASAD (spiritual Swadesh Darshan)
tourism) and can be done at
Swadesh Darshan profitably
(adventure tourism) competitive prices
to provide a compared to existing
customized local players
experience.
4. Tax Incentives Opportunit 1.Improve 1. India’s sustains its
y penetration in expected growth rate
growing tier 2-3 for the coming few
cities by opening years and India’s
hotels and utilizing growth becomes
the tax rebate more uniform (not
provided by the limited to tier -1
government. cities)
2. Instead of raising 2. Banks provide
capital through loans easily and at
equity market, raise an affordable
capital through bank interest rate
 borrowings.
5. Increasing Online Opportunit 1.Improve online Online presence of
Travel Bookings y presence and be some hotels is weak
available on apps because of their
like Yatra, MMT unwillingness to pay
and Cleartrip. commissions to
2.Pay commissions OTAs (seems heavy
to aggregators to to them 18-20% Ref:
establish a strong Economic times Dec
supply channel. 24-18)
6. Shortage of Threat 1.Establish training 1. The shortage is
Experienced centres aimed at due to shortage of
Personnel producing qualified training centres and
individuals not due to non-
2.Tie up with availability of
existing training interested
institutes and candidates.
provide them with
specific course
requirements.
7. Security/Crime Rates Threat 1.Deploy additional 1.Controll of crimes
in India security personnel in these sensitive
for tourists places(Delhi –capital
especially in cities of India, and Goa-
like Delhi, Goa etc. fun capital of India)
where the crime will paint a better
rates are high. picture of India
2. Educate people 2. People’s rational
about the various decision making
ways government process is hindered
has taken steps by availability bias.
towards addressing Thus few incidents
the current security over shadow the
threat recent developments
 and progress made
by the Indian legal
system. Thus,
educating and
advertising the
recent steps taken by
government towards
addressing the
current security
threat will build
confidence among
travellers.
8. Millennials’ Threat 1.Orient marketing 1. Indian marketing
Inclination towards campaigns to entice campaigns are more
foreign travel millennials dedicated towards
Ref websites: 2. Develop and family and not
https://tinyurl.com/ promote local Indian directed towards
yba2b4o3 and international millennials.
https://tinyurl.com/ cuisines.This is 2.Millenials will
y95spatn because most value cuisines
millennials decide available in India at
on their holiday par with that
destination based on available in foreign
what they want to destinations
eat.
9. Government Red Threat 1.Lobbying with 1.Lobbying would
Tape government to help in streamlining
streamline the hotel the process
business set up 2. Acquiring hotels
process will have
2.Acquire existing comparatively less
hotels instead of red tape and
starting from scratch bureaucracy
involved than that of
 building from
scratch.
10. Increase in Taxes on Threat 1. Enhance 1. Increase in
Luxury Hotels operational operational
effectiveness by effectiveness would
using latest help hotels to reduce
technologies like their room fare and
solar power, AI thus avoid the 28%
powered lighting luxury tax to an
systems, temperature extent.
controls etc. 2.Dynamic pricing
2. Use dynamic based on data
pricing to enhance analytics would
revenue ensure that
management maximum can be
derived from the
customers.

B-1. Key questions about competitors

l. Strengths
Oberoi hotels

 Strategy: Oberoi prides itself in providing differentiated services compared to its

competition and has a well-established differentiation strategy. They provide
differentiated but also ensure that they maintain the same standards of performance all
throughout their chain of hotels.
 Structure: The structure in Oberoi hotels is a flat and a decentralized structure which
makes it easier for employees to perform as a team and gives them a competitive edge
over its peers in this respect. This respectful culture of the company is one of the major
reasons it can provide an amicable atmosphere in its hotels.
 Staff: Oberoi industries makes sure that it has a specialized and experienced
workforce who are motivated and highly skilled and can face any challenge faced by
 them. It has a well-trained team who are proud of their hotel and respect the values of
the company and promote the brand values
 Shared Values: Oberoi group has a well-defined set of values which it communicates
to all its employees and makes sure that they are clear in the minds of the employees
and are adhered to at every point in time.
 Reputation: The Oberoi group enjoys a strong reputation within the local markets,
corporates and travel trade markets for reliability, exemplary service and quality.

Taj Hotels

 Catering to multiple segments: The Taj Group of Hotels has something that caters
to all segment. While the TajVivanta caters to the upper upscale segment, Taj the
luxury segment, Gateway the upscale and Ginger the economy segment. This ensures
that irrespective of income status all customers choose a Taj Hotel for their stay.
 Business Philosophy: The business philosophy of the Taj has primarily based on the
premise that not everyone is the same. Thus through clearly segmenting the market the
hotel has been able to clearly differentiate their offering not just to cater to different
income segments but also to different cultures.
 Amenities: The Taj Group of Hotels has a host of facilities in all their hotels. Their
hotels have a host of facilities for guests like rooms, spas, Jacuzzi, multi-cuisine
restaurants, swimming pools, pubs, resto cafes, fitness centers and banquet hall. Some
of their hotels also have mega convention centers with facilities to host conferences for
a huge gathering.
 Customer Loyalty programs: Quite unlike other hotel chains who look at loyalty
programs in the Taj Group the customer is given a chance to earn points from all stays
in all properties of the group. The key feature of their loyalty program is the automatic
upgrade to a higher class hotel within the group. For example, a customer who has
been frequently staying in a Ginger Hotel may get an upgrade to the TajVivanta or Taj
if they have sufficient loyalty points.
 Service Differentiation: The Tajresearch team has identified around 155 touch points
in customer service from the moment a customer enters into their property till the time
they leave from there where there is a face to face interaction. The hotel chain has
ensured that in each of these points there is a clear service difference.
  Focus on the business class: The hotel chain realized the scope for growth in
business class travel and thus opened Taj Residency a business class hotel. The hotel
chain also moved out to smaller towns and cities and this expansion has helped to
increase the customer base of the business

ll. Weaknesses
Oberoi hotels

 Strategy: Their differentiation strategy needs to be more clearly communicated

externally i.e. within local and national markets.
 Systems: Interdepartmental communications is not up to the mark and detailed and
smooth handover is not facilitated under the current operating procedure.
 Staff: Seasonal change-over require training and orientation of staff to adapt to the
change in season-specific needs of the customers.
 Facilities: As observed by customer feedback, certain rooms require renovation and
upgrade with regards to their technical equipment, such as high-speed Internet access
and laptop links. Given how a number of the occupants of these rooms are working
professionals, there is an imminent need to work on and improve these facilities.

Taj Hotels

 Customer Relationships: Hotels today need to be on their toes in terms of customer

relationship management. The key to success today is a compilation of information of
customers which enables them to understand them better and give personalized
services. This is proving to be extremely costly for Taj.
 Unequal growth across segments: While the economy and upper upscale segment
were registering good growth, the luxury segment was still lagging. However, the
maintenance and upkeep costs of the luxury hotels are relatively higher and the returns
low. The hotel has been pumping money from their medium segments for the upkeep
of their luxury hotels.
 The high cost of maintenance: The maintenance costs of hotels are growing and
with a network of almost 100 hotels across India and other properties in countries like
Bhutan, Malaysia, Maldives, Nepal, South Africa, Sri Lanka, UAE, UK, USA, and
Zambia the cost of maintenance is becoming unaffordable.
III. Sales Figures of major competitors

IV. Net profit of major competitors

V. Extent of Entry of New firms in the Industry

In 2002, international brands accounted for under 20% of the 25,000 branded rooms in India.
Today, international chains account for more than 50% of the current supply of 1,23,000
branded rooms and by 2020, they are said to account for 76% of the supply.
Five of the eight biggest hotel brands in India in terms of room inventory are global brands.
In 2016, international hotel brands signed up 11,831 keys, compared to 4,781 keys by
domestic brands. In 2017, international brands signed up 8,868 rooms, compared to 7,152 by
the domestic chains 
Radisson, for example, has very high expansion plans in mind as well. “In the last two years,
we signed for 14 hotels. We are on track to achieve our target of nine openings for 2018, and
we expect to round up the year with 100 hotels,” says Raj Rana, CEO, South Asia, Radisson
Hotel Group. 

"There are lots of reasons to believe in investing ahead of the curve in India and making sure
we are fully deployed from the property resources and leadership in sales perspective to drive
expansion here. When you look at the trends in India- we yielded a 10% revenue per
available room growth last year on year growth last year and we are on track for a 14%
revenue per available growth this year.”- Navjit Ahluwalia, senior VP and country head
Hilton, India.

Taj InnerCircle recently entered a strategic alliance with Shangri-La Hotels & Resorts, which,
for the first time, gave Indian customers access to 200 hotels across 131 destinations in 27
countries and going forward, are looking to forge new alliances with partners both within and
outside the group,” says Venkatesh. 

Among other measures, local chains have tried revamping their digital channels and
reservation systems in a bid to counter their foreign peers and online travel agents, considered
a boon for the hotels business. 

The existing room supply for the country grew by 5.5% in FY16 totaling to 113,622 rooms
(as of 31 March 2016). This considers the 5,619 new rooms that entered various markets
during the year, as well an expansion of the existing properties.

The future supply landscape is ever-changing and subject to several external forces that may
often delay project openings. It is noteworthy that the pipeline for proposed supply totaled
114,466 rooms back in FY08 – the highest in a decade, whereas in FY16 it contracted
significantly to just 56,912 rooms

B-2. Critical success factors

From the above analysis, the following factors can be concluded to be critical for the success
of any firm in the hospitality industry –

1. Invariability in quality standards across various properties of a hotel chain

2. Highly trained and skilled workforce.

3. Customer relations

4. Fully operational and maintained facilities

5. Presence and popularity among OTAs (due to increasing threat of foreign entrants)
C-1. Porter’s 5 forces analysis for the hospitality industry

I. Bargaining Power of Suppliers (Low)

The external agencies that help a hotel to deliver its services are categorized as suppliers.
These include raw material suppliers for food and beverages, house-keeping staff supplied on
contract, database management companies, etc. They hold low power due to/ in case of the
following factors –

1. Hotels purchase their offerings in high volume

2. Companies that supply raw material and house-keeping labourers on contract lack
proper differentiation from offerings of other companies.
3. There is a high number of competitors with similar offerings in the market.
4. Few buyer make up for majority of the sales of these suppliers.

It caps the price of various commodities in the market and promotes more fierce competition
in those sectors.

II. Bargaining Power of Buyers (High)

In the hospitality industry, the ones who avail the services offered by the hotel are the buyers.
They hold high power due to/ in case of the following factors –

1. Large volumes of services availed.

Example. Companies have contracts with Luxury hotels etc. for its employees
2. Negligible switching cost for individual buyers
3. 25% bookings in India are now done using OTA. OTAs are backed by investor’s
funds. Hence, they allow deep discounts which promote more buyers to avail services
at competitive prices.

It impacts the profitability of the hospitality industry

III. Threat of Substitutes (Low)

The products/ services which satisfy the same needs as satisfied by the services in the
existing industry pose a threat to this industry. It is observed that the hospitality industry is
used by the customers for celebration, business, relaxation and rejuvenation. So, we observe
that the following services can be substitute services serving the same needs—

1. Meditation and Yoga workshops in the locality: Customers might use it to relax and
rejuvenate instead of going for a outstation visit hence reducing revenue generated by
the hospitality industry.
2. Pubs and breweries: Destination parties are boiling down to quick catch ups and
celebrations in pubs and breweries leading to a reduction in the revenue generated by
the hospitality industry.
3. Booming domestic air travel: A portion of the loyal customers of business hotels now
make quick one day trips to their business locations reducing the need to stay back at
that location and hence reducing revenue generated by the hospitality industry.
4. Access to continental cuisines: It has slightly reduced the urge of foodies to travel to
locations to try the local cuisine.

All these factors contribute in reducing the revenues generated by the hospitality industry.
However, their impact can be graded to be negligible to low and hence the threat of
substitutes in the hospitality industry is low.

IV. Threat of New Entrants (Moderately High)

The initial capital investment required to enter this industry is high. The cost of land
procurement, setting up the requisite infrastructure, hiring the right manpower and the
subsequent maintenance costs are all high. The industry, however, faces threat from the
following:

1. Global hotel chains like InterContinental Hotels Groups, Accor, etc. entering into the
Indian market. This poses a threat to the domestic industry because the standards and
quality of services delivered by hotels under such brand names is not easily matched
by the domestic hotel chains.
2. Since the initial capital requirement is significant, smaller players cannot easily enter
the industry. The cost of exiting the industry are also quite high and thus act as a
deterrent.
V. Rivalry among existing competitors (High)

The competition in the industry is quite high. The nature of competition varies with the stage
of the business cycle, among other factors. Currently, the demand exceeds supply and thus,
there is market share to be captured.

1. Competitors are numerous or are roughly equal in size and power – In the luxury
hotel segment, Indian Hotels Company Limited (Taj Group) and EIH (Oberoi Group)
are the major competitors of ITC Hotels although they are much larger in size than
ITC Hotel Group. Other competitors that are more comparable in terms of size are
Sarovar Hotels, the Claridges, Lemon Tree.
2. Industry growth is slow – the industry is growing at a healthy pace and accounts for
7.5% of the GDP. The demand is rising at a higher pace than the supply. Hence, there
is market share yet to be captured.
3. High fixed or storage cost – proportion of fixed costs in total costs is particularly high
for hospitality industry. The competition to maintain high occupancy rates, fill rooms
as profitably as possible and to apply tariffs accordingly is fierce.
4. The product or service lacks differentiation or switching costs – there are practically
no switching costs for buyers and product differentiation varies, ranging from high in
case of luxury hotels to low in case of budget hotels.
5. Exit barriers are high – exit barriers are high in hospitality as the assets are specialised
i.e. they have a particular location and due to high proportion of fixed cost, sunk cost
is also high which makes it difficult for a company to exit the industry.
6. Shifting rivalry – when the industry is in maturity, competition becomes fiercer.
Currently, there is excess demand in the market which needs to be addressed and the
companies are competing for market share. With the booming of budget hotels, the
dynamics of competition in the industry have evolved.
7. Exit barriers and entry barriers – entry as well as exit barriers are high in the
hospitality industry. The implication of this is that the industry is a high risk, high
return industry.
C-2. Broad strategic actions to uphold/ curtail competitive forces

I. Bargaining Power of Suppliers (Low)

This has to be kept low to achieve greater operating profits. Strategic actions to be taken up
for the same are as follows –

1. If our purchases (by amount) drop, the procurement management team shall chalk out a
plan to purchase multiple products from the same buyer, upholding our power over
those buyers in the long run. Example. When the demand for a specific fruit juice
drops, the hotels procure lesser amount of those fruits. However, the procurement team
shall ensure that orders of compensating amounts to be given out to the suppliers in the
form of other fruit orders to uphold our bargaining power over them.
2. Substitute suppliers should be evaluated as per the supplier evaluation procedure laid
out by the hotel and be kept ready in case the current supplier tries to exercise power in
some particular situation.

II. Bargaining Power of Buyers (High)

This should be curtailed to achieve greater operating profits. Strategic actions to be taken up
for the same are as follows –

1. Increase reach among small and medium size companies so that the hotels get the
power to dictate some of their terms and generate profits along with revenues. This
can be done by deploying on-field sales persons to pull in potent customers for whom
the main deterrent of going to hotels is the high prices and offer them competitive
pricing under certain contract terms.
2. Rate contracts to be set up with companies along with clauses of a minimum fixed
number of rooms/ services to be availed in the contract period.
3. Encourage advance payments for companies and individual buyers by offering instant
payment discounts. This shall lock them in and hence decrease their bargaining
power.
III. Threat of Substitutes (Low)

This has to be kept low to ensure protection from cannibalizing from substitute products or
services. Strategic actions to be taken up for the same are as follows –

1. Perform forward business integration to encompass and provide services that substitute
products provide. Example. Threat from meditation and Yoga workshops can be
curtailed by the hotel having its own workshop. So, the people seeking to attend these
workshops only for relaxation purpose may take a step forward to attend this workshop
at the hotels with a view of greater value addition rather than not turning up at the hotel
due to lack of such workshops.
2. In case the threat from low key entrants increases, we can enter the budget hotels range
by bringing up a line of such hotels Example: The Orchid Group of Hotels came up with
a low-key restaurant chain ‘Kamat’s’ to capture the customers moving away from their
luxury restaurants established near highways.

IV. Threat of New Entrants (Moderately High)

This has to be kept low for existing firms wanting to safeguard their market share. Strategic
actions to be taken up for the same are as follows –

1. Lobby with the government to raise barriers to entry for potential new entrants.
2. Acquire greater market share through expansion in order to saturate the market.
Entering into a market that has reached maturity is not an attractive business proposition
and hence, will reduce the number of players willing to enter the market.
3. Identify current need gap and move to fill the gap before a new entrant identifies it
and enters to service it.

V. Rivalry among existing competitors (High)

This has to be kept low to achieve greater operating profits. Strategic actions to be taken up
for the same are as follows –
1. Form strategic alliances with competitors to increase bargaining power against suppliers
and buyers. This will also result in better economies of scale for each company that is a
party to the alliance and will improve the productive capacity of the industry as a whole.
2. Buyout the smaller players in the market to reduce and to limit the competition to only a
few large firms in the industry.

Vision/ Mission and Relative Performance Targets for the Company

R1: Our vision is to become the best hospitality company in the world to satisfy the global
customers’ hospitality demands by creating high quality hospitality services and hotels that
use sustainable business models

R1: At IHG, we leverage our global presence, responsible and talented people, technology,
innovation orientation and a strong sustainability culture to deliver best-in-class hospitality
every day, while safeguarding, respecting, recognizing and satisfying the interests of each
stakeholder.

5 Year Impact with Year wise Milestones

Current Scenario 5 Year targeted scenario

Interest of stakeholders
High width of product
offerings catering to
various demographics.
Focus on customized and
culturally fit services. A
Unique Product/
balance between
Service offerings
customization (as per
market insights) and
consistency in services is
difficult
[ CITATION IHG \l 16393 ]
Biometrics Currently unavailable
Furniture personalization in booked
rooms using 360 degree view (360 deg.
view of rooms already available on
website. Tagging and rearrangement
options to be programmed in the app)
Food ordering from the room using the
IHG App, personalization of food tastes
by using artificial intelligence based on
customer profiling.
Customers will have an option to have a
biometric database in the company when
 they enroll into the loyalty programme of
the hotel. Check-in can be done only
using the biometric data once the database
is updated. Same biometric data shall be
active on the doors of the rooms as soon
as customer approves the check-in at the
reception.
Expansion of customer base
Currently IHG has 6000 Total number of rooms offered to the
rooms in India with focus customers should grow by 8% (market
on mid-market brands. trend of increase in supply). Therefore,
Growth through
[ CITATION Eco \l 16393 ] room offered at the end of 2024 shall be
Franchise Model
8500.
[ CITATION AME \l 16393 ]

IHG Rewards club offers

discounted tariffs to
members, complimentary
nights, reward points to
spend on additional books
or shopping online from
Loyalty IHGs collection, give In India, a minimum of 20 lakh entities
Programme points as gift cards. It has should be added to the loyalty programme
100 million enrolled
members. The rewards can
be used in any of the 5200
IHG managed/ owned/
franchised properties
[ CITATION IHG18 \l 16393 ]
Talent Management
Remuneration 70% linked to Operating 50% linked to earnings per share
Plan for General income 25% linked to increase in no. of rooms
Managers 15% linked to spearheading 25% linked to unique product
and following resource development/ increase in programme
management programme engagement ratios/ sustainability goals.
 15% linked to new system
implementation
(Annual report)
GM Ready programme
already in operation to train
Integrated GM aspirants for emerging GM
Ready Programme roles in newly signed
properties
[ CITATION Sma \l 16393 ]
Develop an integrated 18 months fast
track full time course—
3 training modules distributed across 3
semesters

IMPLEMENTATION
INTEREST OF STAKEHOLDERS
1.1 Unique Product/ service offerings
1.1.1. Year 1 shall involve need analysis, ideation, internal review
1.1.2. Year 2 shall mark the beginning of the software development and planning for a
pilot project. 3D images of the projects planned for the pilot implementation
shall be taken and the furniture and articles in the room shall be tagged.
1.1.3. Alternatives of rearrangement shall be programmed. Also, the food menu shall
be uploaded on the Mobile Application.
1.1.4. Year 3 shall involve pilot testing and customer review on the first idea and
implementation. Necessary revisions shall be made in the software. The first
revision of the software and implementation plan shall be run in the same
location and conditions till the mid of 4th year in Crowne Plaza and
Intercontinental Hotel
1.1.5. Second half of the 4th year shall mark the advent of real time implementation of
the software. This shall continue till the mid of 5th year .
1.1.6. Year 5 will witness full scale operation and rigorous evaluation of the system
under full load condition
1.1.7. Food and taste preferences as per customer profiles shall be saved in the self-
learning algorithm of the application and customized food dishes shall be
delivered. The accuracy of the application to gauge expectations of the
customers shall increase over time.
Biometrics
Currently every visitor has to go through the check-in process that involves visitor identity
verification and allotment of room. Instead of this cumbersome process each time a loyal
customer checks in, a biometric system can be devised. The ‘Smart Check In’ process can be
done only once and can be saved on IHG Concerto. This customer can then check-in only
using a touch on a fingerprint scanner mounted on a pedestal in a kiosk (similar to an ATM
machine) or through a face scan, the response to which shall be displayed on a screen in form
of check-in time and date, allotted room number, allotted concierge to escort the luggage and
assist in a tour to the room. The implementation shall be guided by the following steps:

1. Year 1 shall involve need analysis, ideation, internal review

2. Year 2 shall mark the beginning of the software development and planning for a pilot
project.it will involve involve pilot testing and customer review on the first idea and
implementation. Necessary revisions shall be made in the software. The first revision
of the software and implementation plan shall be run in the same location and
conditions till the end of 2nd Year
3. Year 3 shall involve pilot testing and customer review on the first idea and
implementation. Necessary revisions shall be made in the software. The first revision
of the software and implementation plan shall be run in the same location and
conditions till the mid of 3rd year. Second half of the 3rd year shall mark the advent of
real time implementation of the software.
4. The 4th year shall mark the advent of implementing it in Crowne Plaza Hotel.
5. Year 5 will witness full scale operation and rigorous evaluation of the system under
full load condition in Holiday Inn Hotels

Expansion of customer base

Franchise Model
IHG shall stick to its mission of being asset-lean during expansion by increasing the number
of managed and franchised properties in India. The economic times article states that there
are 6000 rooms being offered by IHG group hotels in India in 2019. A report by American
Express on Global Business Travel cited that there is an 8%* increase in the number of rooms
being offered in India. Assuming that an increase in IHG properties in India shall match the
increase in supply of rooms in India , the following trend can be observed. Hence, reaching
8500 rooms by 2024 shall be quite an achievable target.

Number of rooms offered in India

10000
8000
6000
4000
2000
0
2020 2021 2022 2023 2024

Number of rooms offered in India

Loyalty Programme
The worldwide average occupancy rate of IHG is 80%. Assuming the same for India,
80% occupancy for rooms available for guests with 3 days as the average length of stay
translates to 40 lakh visitors in 5 years [(occupancy rate)*(360/average length of
stay)*(number of rooms)]. Assuming 50~60% enroll for the loyalty programme, in 5
years, a minimum of 20 lakhs entities should be added to the loyalty programme

Loyalty Programme in India

1200000
1000000
800000
600000
400000
200000
0
2020 2021 2022 2023 2024

Number of visitors
Number of loyalty programme subscribers

Talent Management
Remuneration Plan
For effective implementation of any strategy, the top management has to be motivated by the
objective that this strategy will accomplish. Tying up more remuneration to the
implementation of the prevalent strategy of the company, the following targets have been
proposed

3.1 50% linked to earnings per share (will increase the responsibility on the directors to
redesign the capital structure)
3.2 25% linked to increase in no. of rooms (will instill a sense of urgency in the
expansion plan)
3.3 25% linked to unique product development/ increase in programme engagement
ratios/ sustainability goals. (will improve efforts in these areas which otherwise may
be neglected due to daily operational activities)

Chart Title
12

10

0
2020 2021 2022 2023 2024

Revised income
Increase in renumeration due to increased leniency

This change shall not be absorbed smoothly unless this decrease is implemented step by step

1. Decrease the operating income component of compensation by 5% each year.

2. Increase leniency of evaluation in 2020 such that there is almost no change in the total
compensation of these directors.
3. As years pass, the leniency of evaluation should go on decreasing and be brought to
normal stringency of evaluation by 2024.
4. Meanwhile the directors will get adapted to the revised compensation plan and also
sense that the leniency is decreasing year on year and hence they shall tightly tie all
their activities around the strategy of the company, ensuring smooth implementation
and expected outcomes.
Integrated GM Ready Programme
An integrated academic course can be designed and delivered in collaboration with a
hotel management institute. The course shall be an 18 months’ fast track full time course.
The implementation of this integrated programme shall be done in the following steps—
1. Year 1 shall mark the ideation and timeline of this course. The course contents shall
be derived from the existing programmes like IHG Academy, IHG green engage, IHG
future leaders programme and GM ready programme and training on IHG Green
Engage, IHG Concerto etc.
2. In year 2, the approval process for sanction of the funds shall be carried out. The
course shall thereafter be concretized in terms of course content, duration and mode of
delivery.
3. In year 3, a list of colleges shall be drawn and an evaluation process shall be initiated.
By the end of year 3, the colleges where the course shall be delivered will be finalized
4. In year 4, IHG veterans shall conduct a comprehensive training of the faculty at the
shortlisted colleges.
5. In year 5, the first batch for the course shall be enrolled and the results and value
addition shall be critically evaluated.

The tentative course structure shall be as follows

1. Technical training based on IHG Academy and IHG future leaders programme
2. Technical training as per functionality (Operations/ Sales/ Finance/ Sustainability)
3. Delivery of GM Ready Programme, Training on IHG Green Engage, IHG Concerto
etc.

The advantages of this course shall be as follows—

1. Assured job at IHG for 3 years after the course.

2. All jobs opening after this course shall be assistant managerial levels
3. All candidates who have successfully completed this course become a certified
instructor of all the IHG training programmes.

Format for Quarterly Review Mechanism

Factors on which evaluation is to be done are as follows:
1. Company revenue growth in the mainstream (Holiday Inn and Holiday Inn Express)
and upscale hotels (Crown Plaza).
2. Revisit of customers enrolled in loyalty programs
 3. Customer feedback and online reviews (Social Media Analytics)
4. Profitability Ratio ( Operating and Net profit Ratios)
5. Growth in profits from additional rooms built

References
AMEX . (n.d.). https://www.amexglobalbusinesstravel.com/content/uploads/2018/07/GBT-
Monitor_Report-Final.pdf. Retrieved from AMEX Global Business Travel.

Care Ratings. (2018). http://www.careratings.com/upload/NewsFiles/SplAnalysis/Report%20on

%20Indian%20Hotels%20Industry.pdf. Retrieved from www.careratings.com.

Economic Times. (n.d.). https://economictimes.indiatimes.com/industry/services/hotels-/-

restaurants/ihg-plans-to-tap-mid-market-brands-in-india/articleshow/66662754.cms?
from=mdr. Retrieved from Economic Times.

Equity Master. (2018). https://www.equitymaster.com/research-it/sector-info/hotels/Hotels-Sector-

Analysis-Report.asp . Retrieved from https://www.equitymaster.com.

Hong, J. (2018). Rise of the Sharing Economy and the Future of Travel and Tourism Industry. Journal
of Hotel and Business Management.

Hotel Analyst . (2018). The Global Hotel Report 2018.

Hotel Analyst. (2018). The Global Hotel Report 2018.

Hotelivate. (2018). 2018 Indian Hospitality Trends and Opportunities.

https://www.visualcapitalist.com/map-worlds-top-countries-tourism/. (n.d.). Retrieved from Visual

Capitalist.

IHG. (n.d.). https://www.ihg.com/content/us/en/about/brands. Retrieved from IHG.

IHGPLC. (2018). https://www.ihgplc.com/en/about-us/our-strategy. Retrieved from IHGLPC.

KPMG. (2018). Expedition 3.0 : Travel and Hospitality gone Digital.

KPMG. (2018). Expedition 3.0 : Travel and Hospitality Gone Digital.

Small Business. (n.d.). https://smallbusiness.chron.com/customer-service-training-catering-

hospitality-industry-60917.html. Retrieved from Small Business Chron.

UNWTO. (2018). UNWTO Tourism Highlights 2018.

World Travel and Tourism Council. (2018). Travel and Tourism Economic Impact 2018 World.

WTTC. (2018). Tourism As A Driver of Peace Report Summary.

Appendix

Exhibit: Estimates and forecasts for the Hospitality Industry[ CITATION WTCC2018 \l 16393 ]

Exhibit: Growth in International Markets[ CITATION Hot18 \l 16393 ]

Exhibit: Regional Results, Africa Region and Americas[ CITATION UNW18 \l 16393 ]
Exhibit: Regional Results, Asia Pacific Region and Europe Region[ CITATION UNW18 \l
16393 ]
 Exhibit: Regional Results, Middle East Region[ CITATION UNW18 \l 16393 ]

Exhibit: Economic Impact of Global Travel and Tourism[ CITATION WTCC2018 \l 16393 ]
 Exhibit: 360-degree view by Airbnb[ CITATION KPM18 \l 16393 ]

Exhibit: Mobile Application usage in Hospitality and India[ CITATION Hot182 \l 16393 ]
Exhibit: Artificial Intelligence in Hotels and Hilton’s Connie[ CITATION KPM18 \l 16393
]

Exhibit: Big Data usage in Hospitality[ CITATION KPM181 \l 16393 ]

Exhibit: Technology usage in Hyatt[ CITATION KPM18 \l 16393 ]

 Exhibit: Technological Expansion in IHCL[ CITATION KPM181 \l 16393 ]

Exhibit: Use of mobile applications in Hospitality[ CITATION KPM18 \l 16393 ]

 Exhibit: Occupancy Rates[ CITATION Car18 \l 16393 ]

Exhibit: Hotel Sector Analysis [ CITATION Equ18 \l 16393 ]

 Exhibit: Industry Sales and Margins Table [ CITATION Car18 \l 16393 ]

Exhibit: Performance of Hotels Overall Average[ CITATION Car18 \l 16393 ]

Exhibit: [ CITATION Hot182 \l 16393 ]