Introduction to hotel industry

Structure of the industry.

 Hotels in India are broadly classified into

segments by the ministry of tourism, government of India. The rating are given based on general features and facilities offered. These ratings are reviewed every 5 years.

FORMS 30% OF INDUSTRY ITC, TAJ GROUP, OBEROI GROUP, ITDC

Eg :

BUILT OVER 18000 sq.m AREA

STAR RATED HOTELS

DELUXE & 5 : LUXURY AT HIGH PRICE , 27 % GOVT. APPROVED ROOMS

&1 : AROUND TOURIST SPOT, PREFERRED BY DOMESTIC TOURIST

& 3 : FOR MIDDLE LEVEL BUSINESS EXECUTIVES/LEISURE TRAVELLERS

STAR RATED HOTELS

HERITAGE HOTELS HERITAGE CLASSIC

5 5 4 3
HERITAGE GRAND

DELUXE

2 1

BUDGET HOTELS

HERITAGE

HOTELS
FACILITY HOTELS

BUSINESS HOTELS
AIRPORT HOTELS HONEYMOON HOTELS LUXURY BUSINESS LEISURE

RESORTS
MOTELS UNCLASSIFIED GUEST HOUSES LODGE

HERITAGE HOTELS
HERITAGE CLASSIC: HOTELS CONSTRUCTED BETWEEN 1920 - 1935 HERITAGE GRAND: HOTELS CONSTRUCTED PRIOR TO 1920 HERITAGE:

HOTELS CONSTRUCTED AROUND 1935 1950

CHARACTERISED BY LESSER CAPITAL EXPENDITURE AND AFFORDABILITY . OPERATE FROM FORTS, PALACES, CASTLES, RIVER LODGES, HERITAGE BUILDINGS ETC.

FACILITY HOTELS
BUSINESS HOTELS
SPECIALLY EQUIPED WITH CONFERENCE ROOMS, SEMINAR HALLS, INTERNET FACILITIES ETC. TO SUIT THE CORPORATE GUESTS. Eg: INTER-CONTINENTAL, CROWNE PLAZA LOCATED NEAR AIRPORTS AND SUITABLE FOR SHORT STAY TRAVELLERS. ARE FOUND NEAR ALL MAJOR CITY AIRPORTS. HONEYMOON HOTELS MOSTLY LOCATED AT HILL STATIONS AND SPECIALLY FASCILITATED TO SUIT THE COMFORTS OF HONEYMOON COUPLES. Eg. HOTEL WOODVILLE PALACE, CARLTON HOTEL, HOTEL HONEYMOON INN ETC.

AIRPORT HOTELS

Key consumer segments.

 The business traveler: the business traveler is a

business man or corporate executive traveling for business proposes. This segment includes corporates, both foreign and domestic, who open offices in hotels for start-ups ,corporates who make a extended stay either for a long duration project or waiting for permanent accommodation.

 The leisure traveler: the leisure traveler is a indian or

foreign traveler whose primary purpose of visit is holiday and sight-seeing.

Airline cabin crew: airline cabin crew forms another

important segment because of the repetitive and guranteed nature of the business they provide.

SWOT Analysis.

Strengths :

India's rich cultural heritage: with a historical backdrop

of 5,500 years, India is one big package of culture and legend which never fails to captivate the imagination of the visitor. Along with natural splendors like the Himalayas, the indo-gangetic plains, topical forests and long coastline. A visit to the country is a changing spectacle of religions ,customs, festivals , sights and sounds.

 Demand-supply gap: Indian hotel industry is currently

facing a mismatch between the demand and supply of rooms leading to higher room rates and occupancy levels. With 95,000 odd rooms in the country, the size of the hotel industry represents an abysmal figure for India's size and growth prospects. Though new capacity are expected to come in the next 5 years, demand will outpace sully in the short to medium term.

 Government support: Till a few years ago, the Indian

government had a total apathy towards promotion of tourism. In fact, the industry did not find a place in the governments fund allocation. Things have, however, witnessed a change. The government seems to have realized the importance of tourism and is willing to spend towards the development of the industry. The Incredible India campaign is a product of this realization. The focus on infrastructure, modernisation of airports, open sky policy, development of new tourist destinations and circuits, more fund allocation towards tourism are some of the initiatives taken by the government to promote tourism. The Indian hotel industry stands to gain from this proactiveness shown by the government.

 Poor support infrastructure: India is currently

spending a miniscule amount compared with its needs, on infrastructure. China is spending seven times as much as India on infrastructure (excluding real estate) in absolute terms. In 2003, total capital spending on electricity, roads, airports, seaports and telecom was US$150 bn in China (10.6% of GDP) compared with US$21 bn in India (3.5% of GDP). However, over the past 2-3 years, the government has realized the importance of infrastructure and has focused on improving it.

 Rising Income: While there has been much talk about

Opportunities.

record number of foreign tourist arrivals, very little has actually been said or done about domestic tourism, which, according to our estimates, has registered a 40% annual growth in the last three years and is currently estimated at 300 m travelers. Per capita income grew by an impressive 7.1% in 2005, while Gross Domestic Savings touched an all time high of 28%. Significantly, the present-day consumption boom in India has been influenced more by higher disposable income rather than lower savings. This is good news, as income induced spending is likely to sustain itself for a longer period. Higher disposable incomes are also expected to enhance the concept of traveling for leisure.

 Open sky benefits: The opening up of the aviation industry in India

brings exciting opportunities for the hotel industry (airlines transport around 80% of international tourists). Increased airline activity has stimulated demand and has helped to improve India's troubled infrastructure. Increased competition among airline companies will further lead to the development of new and improved services. Also the open skies policy has benefited both international and domestic travel. New business opportunities: We believe that, over the next three to five years, the biggest surge in accommodation demand is expected to come from commercial zones that are being developed in metro suburbs and secondary markets. Mixed-use development projects that include retail and commercial space have also gained momentum in the last 24 months and will continue to be an attractive option. This provides a unique opportunity for hospitality projects. Also the new concept, which is going to gain importance is that of budget hotels (started by Indian Hotels Ginger, the erstwhile Indione). Due to their inherent nature of operation, associated costs and flexibility, budget hotels will be better suited to withstand the next economic downturn as and when it takes place

 Event risk: Dependency on foreign tourism can be a

Threats.

double-edged sword as travel decisions are based on global patterns and events that happen elsewhere can have serious impact the performance. Events like 9/11, SARS outbreak and Afghanistan and Iraq wars have severely impacted the tourism industry in the past and the threat remains. Increasing competition: Global hospitality majors like the Four Seasons, Shangri-La and Aman Resorts are all making their entry into the Indian market. They are not the only ones who are turning their attention to India. The Hilton Group is deciding on a comeback and has tied up with the Oberoi Group. Two other groups - the Carlson Group and the Marriott chain are furiously hunting for new hotels in India's top cities. This will increase the competition for the existing Indian hotel majors.

 The outlook for the hospitality market in India is optimistic

and will continue to remain so, in our opinion. The economys buoyancy, initiatives to improve infrastructure, growth in the aviation and real estate sectors and easing of restrictions on foreign investment will fuel demand for hotels across star categories in the majority of markets. Indias hotel industry is increasingly being viewed as investment-worthy, both within the country and outside, and several international chains are keen to establish or enhance their presence here. We anticipate that, over the next three to five years, India will emerge as one of the worlds fastest growing tourism markets and will be hard to ignore.

Major market players.

THE MAJOR PLAYERS IN THE HOTEL INDUSTRY CAN BE BROADLY CLASSIFIED INTO Public Players AND Private Players. PUBLIC SECTOR PLAYERS: ITDC HOTELS Hotel Corporation Of India PRIVATE SECTOR PLAYERS: ITC HOTELS INDIAN HOTELS COMPANY LTD.(THE TAJ HOTELS RESORTS & PALACES) OBEROI HOTELS (EAST INDIA HOTELS) Hotel Leela Venture Asian Hotels Ltd. Radisson Hotels & Resorts

ITC HOTEL GROUP SEGMENTATION

SUPER DELUXE LUXURY HOTEL 5 STAR HOTEL BUDGET HOTEL HERITAGE HOTEL

ITC HOTELS LUXURY COLLECTI -ON:

SUPER DELUXE LOCATED AT STRATEGIC BUSINESS & LEISURE LOCATIONS

ITC SHERATON HOTELS:

WELCOM HOTELS:

FORTUNE HOTELS:

WELCOM HERITAGE:

OFFER COMFORT SERVICE TO GLOBAL TRAVELLER AND A CHANCE TO CONNECT

5 STAR SPECIALLY FOR THE BUSINESS & LEISURE TRAVELLER

FULL SERVICE PROPERTIE S ALL OVER INDIA IDEAL FOR BUDGET TRAVELLER

CHAIN OF PALACES, FORTS, HAVELIS & RESORTS

ITC: DEVELOPMENTS
ITC-WELCOMGROUP HAS PIONEERED THE CONCEPT OF "BRANDED ACCOMMODATION" IN THE HOSPITALITY INDUSTRY. BRANDING LED TO THE SEGMENTATION OF ROOMS WHICH WERE TERMED AS BRANDED EXECUTIVE CLUB, THE TOWERS AND ITC ONE. IN 2007, ITC-WELCOMGROUP TIED UP WITH STARWOOD TO LAUNCH ITS PREMIUM BRAND, THE LUXURY COLLECTION.

THE COMPANY HAS MORE THAN 75 HOTELS IN INDIA WITH ABOUT 5,500 ROOMS AND IS DEVELOPING 27 MORE PROPERTIES THAT WILL ADD ABOUT 3,000 ROOMS.

THE TAJ GROUP OF HOTELS SEGMENTATION

TAJ LUXURY HOTELS

TAJ PALACE, TAJ MAHAL, TAJ BENGAL, TAJ WEST END OFFER FINEST STANDARD OF HOSPITALITY & SERVICE

TAJ BUSINESS HOTELS:

TAJ PRESIDENT, TAJ RESIDENCY, TAJ CONNEMARA, TAJ BLUE DIAMOND OFFER MULTI CUISINE RESTAURANTS & BEST BUSINESS FASCILITIES

TAJ LEISURE HOTELS:

TAJ BEACH RESORT, TAJ CULTURAL CENTRE, TAJ GARDEN RETREATS
LOCATED AT BEACH RESORTS, PALACES, PILGRIM CENTRES ETC.

TAJ : DEVELOPMENTS
TAJ HOTELS, RESORTS AND PALACES COMPRISES 57 HOTELS IN 40 LOCATIONS ACROSS INDIA WITH AN ADDITIONAL 18 INTERNATIONAL HOTELS. TAJ WAS THE FIRST TO INTRODUCE SICHUAN, THAI, ITALIAN, MEXICAN, AND CALIFORNIAN CUISINE INTO THE COUNTRY. THE TRAVEL DAILY NEWS REPORTED THAT THE TAJ GROUP OF HOTELS HAD A TURN OVER OF RS. 1823.18 CRORES WITH THE YEAR ENDING ON MARCH 31, 2008.

THE OBEROI GROUP OF HOTELS

THE OBEROI HILTON THE OBEROI GRAND HOTEL THE TRIDENT HOTEL THE WILDFLOWER HALL THE HOTEL AMAR VILAS

Intense competition and image of India

Shortage of skilled employees

Retaining quality workforce

Manual back-end

CHALLENGES FOR HOTEL INDUSTRY

Shortage of rooms

Human resource development

Lack of adequate infrastructure development

CASE STUDY Abstract Indian Hotel Company Limited (IHCL), the leading Indian hospitality concern, has joined hands with C.K.Prahalad to launch indiOne, a new concept that will redefine the hotel industry and provide the company with a new growth opportunity. The caselet outlines the reasons for IHCL's entry into the budget hotels segment and provides details on the indiOne concept. Further, the caselet explains the design and implementation of the concept. It discusses the implementation challenges and the future plans of IHCL for this venture. Issues: Budget hotels and its viability in Indian hospitality market. New product development in hospitality industry. Importance of segmentation and targeting in hospitality services.

 In a absolute competitive market the

profitability of almost all the organization is under pressure largely due to recession in US and UK market also .All organization therefore are trying to control the operating expenses and expenses in hospitality area are major concern and therefore most of the organization are interested in going budget hotels to control their expenses.