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Chance

Firm
strategy
structure
and Rivalry

Factor
Conditions

Demand
Conditions

PortersDiamond
DiamondModel
Model
Porters
Tourismand
andHospitality
Hospitality
Tourism
Industry
Chance
Industry
Exchange Rate Risks

Risk of Natural Calamities

Demand Conditions

Related and
Supporting
Industries

Government

Governme
nt

100% FDI is allowed under the automatic route in


tourism and hospitality, subject to applicable
regulations and laws
The Tourism Ministry has set up a Hospitality
Development and Promotion Board, which will
monitor
and
facilitate
hotel
project
clearances/approvals
The governments collective spending on the
tourism and hospitality sector is estimated to be
USD2.4 billion in 2015

Domestic
expenditure
on
tourism
has
grown
significantly; the market has reached USD96.7 billion in
2015 and USD332.4 billion in 2025, representing a
CAGR of 6.3 per cent during 200815
100% FDI is allowed in tourism sector which will help
in development of hotels, resorts and recreational
facilities
Campaigns such as Incredible India and Athithi Devo
Bhava were launched to harness the tourism industrys
potential
Introduction of E tourist Visa and M tourist visa for
medical tourism has significantly boosted the tourism
sector. Growth of 1987.9 per cent was registered
during the month of October 2015 as a total of 56477
tourists had arrived on E Tourist Visa as against a
total of 2705 tourists during the month of October
2014
In June 2014, the Indian government approved 150
countries under the Visa on Arrival scheme to attract

Factor Conditions
India offers geographical
diversity,
attractive
beaches,
30
World
Heritage Sites and 25
biogeographic zones
India
has
a
diverse
portfolio of niche tourism
products

cruises,
adventure,
medical,
wellness, sports, MICE,
ecotourism, film, rural and
religious tourism
The
countrys
big
coastline is dotted with a
number
of
attractive
beaches
The
countrys
rich
heritage is reflected in
various temples, majestic
forts, pleasure gardens,
religious
monuments,
museums, art galleries
and urban and rural sites
India is recognized as a
destination for spiritual
tourism
Infrastructure
development
is
not

Firm Strategy , Structure and


Rivalry

There is huge competition in the


industry due to the presence of
large number of small and
unorganized players
Low switching cost among the
customers and price sensitivity
lead to increased competition
Entry is easy as it is not capital
intensive, but a player needs to
achieve economies of scale and
access to distribution channel to
compete
There is the threat of forward
integration; for instance, the
airline starts selling directly to
customers. The cost of switching
suppliers is also low
Low
switching
cost
gives
customer high bargaining power.
Customers are price sensitive
and have information about the
services being provided
The four major segments and
their respective major players
are:
Online
BookingMakemytrip,
yatra, cleartrip,ixigo
Hotel- Taj, ITC, Oberoi, Mariott

Related and supporting Industries

Airlines
Low cost airlines--growth in low cost
airlines to lower tourism costs and increase
spending on domestic tourism
Increase in international flight operators--newer JVs in collaboration with international
flight operators in 2015(JVs such as Air Asia
and Tata SIA). Entry of Etihad and Vistara.
Increasing number of airports and Higher
passenger traffic- By 2020, passenger traffic
at Indian airports is expected to rise to 450
million from 160 million currently
Healthcare
The presence of world-class hospitals and
skilled medical professionals makes India a
preferred destination for medical tourism
Indias earnings from medical tourism could
exceed USD8 billion by 2020
Tour operators are teaming up with hospitals
to tap this market
Software
Over 70 per cent of air tickets are now being
booked online in the country
A number of online travel and tour operators,
which provide better prices and options to
consumers, have emerged in India such as
makemy trip, yatra.com, goibibo etc.

Bargaining Power of

Buyers: High

Buyers are fragmented


Diverse profiles of retail
buyer and corporate buyer
Switching costs for buyers is not
high
as
brand
loyalty
is
low/diminishing
Customers are price sensitive and
have
information
about
the
services
being provided
Luxury
segment
is
brand
conscious to and willing to pay a
premium
for great
experience
Bargaining
Power
of and
service
quality Moderate
Suppliers:
Forward integration by suppliers
like airlines selling direct to
customers
Attempts by suppliers to sell
packages and complex itineraries
not very successful
While suppliers concentrated in
some areas like domestic airlines,
there is widespread fragmentation
in hotels, tour operators, car
rentals etc.
There is no significant cost to

PortersFive
Five
Porters
Force
Analysis
Force Analysis
Competitive Rivalry : High
Highly Fragmented Industry
Organized
players
would
barely have 15-20% of the
marketplace
Most of organized players are
present in metros & mini-metros
Large disposable incomes in
towns like Lucknow, Jaipur,
Coimbatore etc. serviced by
family run unorganized players
Industry rivalry is intense but not
cut throat
Rivalry Intense because of low
switching costs, low levels of
product
differentiation,
perishability
of
products
diversity of rivals
Rivalry is not cut throat since exit
barriers are not high, fixed
costs are not high, market
growth is good

Threat of Substitutes: Low

India is witnessing a growth of


discretionary spend as % of income
from 30% in 2005 to around 70% by
2025. Travel , being a discretionary
spend poised to gain.
Travel has moved up the list of
household spending priorities
Unlikely to be substituted by a
durable purchase or investments
Education & Recreation will occupy
9% share of wallet in 2025 as
compared to 5% now.

Threat of New Entrants:


Moderate

There are low level of proprietary


travel knowledge and asset
specificity. This makes it relatively
easier for new players to enter
industry and does not provoke very
aggressive rivalry from existing
players
Low minimum efficient level allow
entry of small startups, however
significant scale is necessary to
negotiate profitable deals
Due to a fragmented market ,