KIRLOSKAR INSTITUTE OF ADVANCED MANAGEMENT STUDIES

A Kirloskar Group Enterprise

Structured Industry Analysis of Hotel Industry

Created By -
Swati Dadhich
Sonali Pandey
Sudipta Sarangi
Vinit Joshi
Divyanshu Tripathi

25-Dec-19 1
 DEFINITION OF INDUSTRY

• Travel & Tourism

Provides
• Hotel heritage,
contributecultural, medical,
to overall tourism
• Hospitality Industry Receiving
business andsports
entertaining a guest with
experience by accommodatingmain
and tourism. The people
• Hotel Industry goodwill.
objective In commercial context:
are:
• Classification
• Activity of hotels restaurants,
• Classification of Industry By Government Of India Done by To develop
Ministry Of&Tourism.
promote tourism
Two broad
• catering,
Maintain
categories:
inn, resorts or clubs
competitiveness of India
• Who makedestination
a vacation of treating
• Travel & Tourism  Hospitality  Hotel • as
Startourist
Category: 5*, 4*, 3*, 2* & 1*
•• tourists
Expand
Heritage Category: existing
& Improve Heritagetourism
Grand,
• Rationale: Booming Sector, +ve impact of economic growth, Highest FDI in product ( Empl. & Eco. Gr)
Heritage Basic & Heritage Classic
BRIC Nation, Increase in Foreign and Domestic Tourism

PROFESSIONAL BODIES ROLES AND HIGHLIGHTS • Act as an interface between Hotel Industry,
• Political Leadership,
To plan, promote andAcademics,
protect by International
lawful means, the
• FHRAI (Federation of Hotel & Restaurant Associations and other Stake
interests of the Hotel Industry. Holders.
•• Performs
To secure various activities
Industries like in
due place education &
Indian Economy.
Association of India)
• training, research
To help raise & publication,
the standards, annual
growth, convention
efficiency and
• HAI (Hotel Association of India) to promote interaction with Government
image of the Industry both in India and abroad officials,
political leaders & stake holders of industry.

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 ECONOMIC FORCES

Demand Estimates: • Demand Rate > Supply Rate

• Luxury Segment 8% (2014-18), 6% • Demand=Supply (2024-25)
(2018-20) (Supply=Constant)

Supply Estimates: • Increase in Occupancy 64%  68%

• Luxury Segment 5% (2018-20) (Fiscal 2018  Fiscal 2022)

Supply Constraint: Shortage of trained Human Resources, especially at managerial

and supervisory level due to unattractive disbursement of salaries.

Factors Affecting Demand: 4. Number of visitor arrivals

1. Workforce of Hotel Company 5. Travel propensity indexes
2. Location and Accessibility 6. Seasonality
3. Types of facilities available 7. International events conducted

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Company Details & Competition

Brand Strategies

1) Brand Elements - Logos, Tagline, Pricing Strategy, Objectives

2) Online Presence - Facebook, Twitter, LinkedIn, Instagram
3) Initiatives taken - Some Key Initiatives by Taj HOTEL NAME CEO / CMD
TAJ HOTEL PUNEET CHHATWAL
MARRIOTT HOTEL ARNE M. SORENSON
FORTUNE PARK HOTEL SAMIR M.C.
CEO/CMD of top 2 and bottom 2 players
GINGER HOTEL DEEPIKA RAO
Leadership traits of top 2 players -

TAJ - PUNEET CHHATWAL MARRIOTT - ARNE M SORENSON

STRENGTHS Simplified, synergized & scaled Strategic Vision
INITIATIVES Ama Trails & Stays Acquired Starwood at $13 Bn

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CSR INITIATIVES BY -
Taj – 1) Building Institutions to teach the forgottens.
2) Uses Renewable energy and water effective infrastructure to reduce emissions
Marriott – Organises M-Day for its shareholders and employees.
Fortune Park – Participates in Swachh Bharat Mission.

PHILOSOPHY OF SOCIAL INCLUSION-

• Taj - 14 Taj-Tata STRIVE skill training centers and 15 hotels offering Golden
Threshold Programme in partnership with Tata Institute of Social Sciences.
• Taj Public Service Welfare Trust (TPSWT)

INCLINATION AND POLICIES

• Taj – Works to maximize resource efficiency in each hotel by ensuring that water
and energy are used judiciously and waste is reduced.
• Marriott - Expects suppliers to operate in an environmentally responsible manner
by complying fully with all applicable international, federal, regional, state and local
environmental laws, ordinances and regulations.
• Fortune Park – Are working in order to reduce the emission of Greenhouse Gases.

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Controlling Ministry – Ministry of Tourism

Regulatory Bodies in Hotel Tourism –

 The Hotel and Restaurant Approval
and Classification Committee
 Department of Tourism
 Food Authority of India
 Ministry of Tourism
i) Police License / Registration
Licenses
ii) Registration under the Luxury Tax Act
iii) Registration under the Sales Tax Act
iv) Registration under the Contract Labour Act
v) Registration under the Pollution Control Act

Legislations i) The Legal Metrology Act

ii) Copyrights Act
iii) The Foreign Exchange Management Act (FEMA)
iv) Hotel Insurance Policies

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Module 3…………...

Territory Wise Classification Of Regulatory Bodies  National – i) HRACC ii) Dept. of Tourism iii) FAI iv) Ministry of Tourism

 Regional – i) HRANI ii) SIHRA iii) HRAEI iv) HRAWI

Legal Violations By The Hotels? TAJ

 Consumer Rights violation : Taj Group Hotel in Guwahati accused of Racial profiling and
Issues Affecting The Industry & The Hotels harassment
• Change
Irregularities in payment of salaries in marketing trends and dynamics
at Taj Hotel
• Operational issues
Promotions Based On The Hotel Industry ITC accused Taj of copying their tag line
• Change in guest expectations
1. Go • Irregular
Live With a cash inflows
Great Website
MARRIOTT • Data security challenges
2. Differentiate Yourself From The Rest
Data breach – A fine 0f 123 million
• Maintaining
USD for giving
onlineout personal data
reputation
3. Promote Yourself With Online Travel Agencies
Violation of Consumer Protection • Losing
Act, 1986 –
loyal customers
Rs 25000
4. Global Distribution Systems fine for levying 18% GST
• Change
5. Appoint a SalesinRep
technology
and Reap The Rewards
FORTUNE PARK 6. Get Savvy With Social Media
7. Keep an Eye
Fortune Park Hotels v/s Department on Reviews
of Income Tax and Recommendations

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MODULE 4 : FINANCIAL ANALYSIS:
IDENTIFICATION OF PROFITABILITY OF LAST 4 YEARS OF THE SELECTED • Sick player means sick unit as 2015-16
one that 2016-17
2014-15 2015-16
had existed for
2017-18
2014-15
COMPANIES at least five years and had incurred accumulated losses
equal to or exceeding270.19
TAJ its entire net worth at the end of
IDENTIFICATION OF REVENUES OF LAST 4 YEARS OF THE SELECTED TAJ 181.11 288.44 291.62
184.65 189.28 300.12
192.19
any financial year.
COMPANIES MARRIOTT 174.19
260.11 177.11
277.61 181.22
281.19 184.29
290.88
• GINGER
In the 132.322014-15
hotel industry179.51
GINGER from 138.29 143.20
to 2017-18,
182.11 147.22
188.41 there
192.33
IDENTIFICATION OF SICK PLAYERS, IF ANY
wasFORTUNE
no lossesPARK
incurred by the top
126.13 2 and130.22
129.19 bottom 2132.85
FORTUNE
players. 168.18 171.66 173.72 176.96
IDENTIFICATION OF KEY FACTORS AFFECTING THE COST REVENUE PARK
CENTERS
Revenue Centres
• Reservations (Staff guarantees reservation in return take amount of deposit or full payment)
• Concierge (Additional info-Helping with restaurants reservations, selling tickets to shows, showing directions)
• Communications (In charge of in-house, guest communications and emergency centres)
• Housekeeping ( Laundry services. Extra charge for washing and drying customer clothes)
Cost Centres
• Front Office (Selling and up-selling room, maintaining balanced guest accounts, other services like handling mail etc)
• House Keeping (Staff responsible for cleanliness of Hotels)
• Guest Services (Greet, Escort, Allocating room, taking guest luggage to room)
• Security (Guest safety and loss prevention)

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 RATIO & FINANCIAL HEALTH

TAJ 2018 2017 2016 2015

TAJ
NET PROFIT MARGIN 7.28 3.92 3.04 0.79 • Net Profit margin is increasing year on year (YOY) basis and Taj has the highest NP margin compared to
DEBT EQUITY RATIO 0.52 0.63 0.72 0.82 selected players of the same industry.
ASSET TURNOVER RATIO 38.53 35.83 36.89 34.11 • The debt amount on Taj is also reducing year on year which is beneficial for the company, this leads to
RETURN ON ASSET 3.82 2..76 0.58 0.49 generation of more profit for the company and increase in the stakeholder’s trust in terms of investment.

MARRIOTT 2018 2017 2016 2015 MARRIOTT

NET PROFIT MARGIN 5.12 2.44 2.12 1.23 • Net Profit margin is increasing year on year (YOY) basis, but on a small scale. Higher the net profit margin, the
DEBT EQUITY RATIO 0.68 0.73 0.88 0.98 more is the profit to the company. On a slow pace, the profit margin of Marriott is also increasing.
ASSET TURNOVER RATIO 33.12 30.11 34.31 31.98 • Asset turnover ratio of Marriott was up to mark, there were no fully utilised resources, this may be one of the
reasons that leads to reduced growth of their profit margin.
RETURN ON ASSET
TAJ- 2.27 1.05 0.49 0.36

GINGER
GINGER 2018 2017 2016 2015
• As Ginger hotels come under bottom 2 hotels, so the profit margin of Ginger is lower than Taj and Marriott,
NET PROFIT MARGIN 1.06 0.96 0.78 0.55 but there was increase in the profit margins year on year which is a positive sign for the company as well as
DEBT EQUITY RATIO 0.53 0.78 0.85 1.20 for the existing investors
ASSET TURNOVER RATIO 34.12 32.49 29.33 27.12 • The debt ratio is also reducing because Ginger hotels come under the Tata group. As it is associated with Tata
RETURN ON ASSET 3.33 2.15 2.03 1.08 group, the company wants it to be debt free as long as possible.

FORTUNE PARK 2018 2017 2016 2015

NET PROFIT MARGIN 0.99 0.83 0.69 0.42 FORTUNE PARK
DEBT EQUITY RATIO 0.74 0.86 0.92 1.29 Fortune Park works better in terms of debt equity ratio, net profit margin and in asset turnover ratio, all these
ASSET TURNOVER RATIO 31.64 30.12 28.22 24.36 ratio works positively for the company and it shows that it’s a growing company and the company’s financial
RETURN ON ASSET 2.29 2.02 1.87 0.97 health is stable because there have been no losses in recent 4 years and its growing year on year.

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Key Issues In The Fiscal Policy  They were taxed three times more under GST than some of the
other overseas markets.
 Earlier, the hotels and lodges below Rs 1000 a day were
Since the introduction of GST, Hotel Industry faced some key exempted from the tax, within the limit of Rs 2500 – 7500 were
issues:- taxed at 18% and 28% tax rate was applicable for the rate above
Rs 7500.
Strategic Alliances
*Current scenario – 28% slab is reduced to 18% and the original
• Taj Hotels Resorts & Palaces And Shangri-La Hotels 18% slab is reduced to 12% under new GST amendment.
• To broaden the reach and offer more unique experiences to guests (Warmer Welcomes)
• Taj Hotels Resorts & Palaces & SATS (Singapore Airport Terminal Services)
• To become market leader in Indian airline catering
• Marriott International & Alibaba Group
• To offer an innovative and convenient check-in alternative for Chinese travellers

Merger and Acquisition

• Marriott International acquired Delta Hotels and Resorts
• Expansion in Canada
• Marriott International acquired Starwood Hotels & Resorts Worldwide
• Cutting the competition to become an undisputed market leader in US
1st Gen Entrepreneurs & Their Philosophies
TAJ
First Generation Jamsetji Nusserwanji Tata
Entrepreneurs
Their Built with a vision to change
Philosophies for the face of hospitality industry
future of in India, keeping luxury as the
business prime factor, its values now rest
activities on 6 pillars which are –
Nobility
Sincere Care Homage to Local
Culture
Sensorial Journeys, Pioneering
Spirit, and Authenticity
MARRIOTT
J. Willard Marriott
Started with the intention to
serve Good food and Good
service at a fair price to quench
people’s thirst, Marriott has
come a long way which changed
its philosophy to Keep people
first because they believe that if
their executives are happy, their
guests will leave their hotel with
a satisfactory tone.
FORTUNE PARK
ITC LTD.
In the market of luxury hotels
Fortune Park was started with
a philosophy to provide
quality accommodation at
affordable rates.it provides
business and leisure travellers
a wide choice of destinations
and accommodation
GINGER
IHCL
Unlike Taj, Ginger was started
with a philosophy of giving away
Lean Luxury at affordable rates,
keeping in mind the mid
segment travellers and
customers.

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