to study the market feasibility of 5 star hotels
TRANSCRIPT
Service sector industry is growing in India and it contributes 57 % of total GDP (Central
Statistical Organization, India). Hospitality is one of the service sector industries which are
booming.
Presently, in all category of hotels in India around 1, 10,000 rooms are available which is
expected to increase by 100 percent by year 2015 (HVS, 2007). All global players had planned to
INTRODUCTION-
tap Indian market and big player like Starwood, Hilton Group, Westin and Accor had already
either directly invested in India or they made collaboration with any Indian company. Also IT &
ITES2 and low cost domestic airline fueled hotel industry in India.
Hospitality is all about offering warmth to someone who looks for help at a strange or unfriendly
the commercial context refers to the activity of hotels, restaurants, catering, inn, resorts or clubs
who make a vocation of treating tourists. Helped With unique efforts by government and all
other stakeholders, including hotel owners, resort managers, tour and travel operators and
employees who work in the sector, Indian hospitality industry has gained a level of acceptance
world over. It has yet to go miles for recognition as a world leader of hospitality. Many take
Indian hospitality service not for its quality of service but India being a cheap destination for
leisure tourism with unlimited tourism and untapped business prospects, in the coming year’s
Indian hospitality is seeing green pastures of growth. Availability of qualified human resources
and untapped geographical resources give great prospects to the hospitality industry. The number
of tourists coming to India is growing year after year. Likewise, internal tourism is another area
with great potentials.
Major Highlights of Hospitality Industry The Indian hotel industry, a significant stakeholder of the tourism sector, witnessed the
trickledown effect of the global crisis.
No of foreign tourist arrival in India is around 5.11 million in 2009 (Ministry of Tourism).
Foreign Tourist Arrivals in India during the Month of July 2010 were 4.52 lakh as compared
to FTAs of 4.35 lakh during the month of July 2009 and 4.32 lakh in July 2008.
Foreign Exchange earning from tourism during the month of July 2010 were Rs.5444 crore
as compared to Rs.4983 crore in July 2009 and Rs.3870 crore in July 2008.
Over 42,000 new rooms are expected to be added to current inventory across 10 cities by
end-2012.
According to an estimate, international tourist inflow in India by 2020 would be 10 million
(World Trade Organization, 2002). This makes the country one of the fastest growing tourist
destinations in the world. India accounts for 0.5% of world tourism (HVS, 2007). Strong GDP
growth, improving infrastructure, confidence in the country’s economic prospects, open sky
policy and the 'Incredible India' campaign has improved the outlook for India. This positive
outlook would increase the tourist arrival in the country. Hence hotel industry is expected to be
the major beneficiary. Even domestic tourism is gaining momentum. Rising disposable incomes,
cheaper airfares and better connectivity would continue to increase the demand for rooms. Many
international hotel chains either have or are on the lookout for setting up shop in the country.
This clearly shows that India is on the international tourism radar. The five star hotel segments
have grown the fastest during the last five years clocking a CAGR 3 of 12% (World Trade
Organization, 2002).
Indian Hotel Industry- An Overview
Economic liberalization has given a new impetus to the hospitality industry. The current gap
between supply and demand expected to widen further as the economy opens and grows
(DATAMONITOR, 2009). The country is ranked fourth among the world’s must see countries
(HVS, 2007).
The financial year 2008/09 was an unforgettable one for the Indian tourism industry with the
Mumbai terror attacks and the global economic downturn affecting the industry’s performance.
The hotel industry, too, observed an overall decline in occupancy and Revenue per Available
room (RevPAR) in most cities in India. Indian Hotels industry has successfully passed the
downturn. The recovery started in the latter half of FY'10 (October 2009) with steady increase in
the foreign tourist arrivals better than expected and completely recover in by the end peak season
(March 2010). Foreign Tourist Arrivals (FTAs) to India has grown 1.7% to 3.54 lakh for the
month of April 2010 over 3.48 lakh in April
2009. Foreign exchange earnings (FEE) during
April 2010 recorded impressive 11.3%% rise in
Indian rupee terms to Rs 4518 crore from Rs
3773 crore in April 2009. World Travel and
Tourism Council, India, data says, India ranks
18th in business travel and will be among the top
5 in this decade. The hotel and tourism industry’s
contribution to the Indian economy by way of foreign direct investments (FDI) inflows were
pegged at US$ 2.1 billion from April 2000 to March 2010, according to the Department of
Industrial Policy and Promotion (DIPP). According to industry data, India is expected to double
the number of branded hotel rooms from 100,000 now in just three years.
Indian Economy and Hotel Industry:
India’s GDP recorded a growth rate of 6.7% for the financial
year 2008-09 (Central Statistical Organization, India) after
recording growth above 9% for three consecutive years. The
economic recovery of the country can be further kept on
course by a stable political environment provided by the
Congress-led United Progressive Alliance (UPA) returning to
power through a comfortable majority in the general elections
last year. Policies of the newly elected government of
leaning towards disinvestment and infrastructure
development have helped sustain economic growth. The
increased spending on infrastructure development will
boost the tourism industry and backbone of tourism i.e. Hospitality will also grow.
Although the last year began under high inflationary pressures, there were concerns about
negative inflation towards the year end. This financial year saw low inflation levels and even
fears of deflation due to the dropping of the WPI. In its downward slide from the previous year's
all-time high of 12.38 % (August 2008), W PI for June 2009 turned negative (-1.3%) The drop in
commodity prices can benefit hotel developers, who can take advantage of cheaper construction
materials. This week period is probably the best time to make investments into the hotel sector.
Leading macroeconomic indicators GDP are correlated to the performance of the hotel industry.
However, though the hotel industry is amongst the first to be hit by a downturn, it is amongst the
slowest to recover since the spending on travel is considered as discretionary for most leisure
travelers and some business ones as well. The increased spending on infrastructure
development will boost the tourism industry and backbone of tourism i.e. Hospitality will
also grow.
The driving forceIf the country is able to sustain its economic growth especially in the service sector, it will have a
direct influence on the hotel industry. This is directly related to the incoming foreign
investments, not just in the hotels but the economy as a whole. Also equally important is the fact
that India has now discovered the power of marketing and with campaigns like Incredible India,
there are also the various large scales regional and global events like the upcoming
Commonwealth Games, Asian Games and the recent Indian Premiere League that builds interest
about the nation... Apart from these external factors there are other factors where the industry can
be given a great boost. For instance if land prices became more realistic, the process of getting
approvals and licenses to build and operate hotels are streamlined, together with strong
infrastructure development and investment and more tax/levy incentives being provided to build
hotels, it would prove very fruitful for the industry.
Performance of Tourism Sector during July 2010
Ministry of Tourism compiles monthly estimates of Foreign Tourist Arrivals (FTAs) in
India and Foreign Exchange Earnings (FEE) from tourism on the basis of data received from
major airports. Following are the important highlights, as regards these two important indicators
of tourism sector for July 2010.
Foreign Tourist Arrivals (FTAs) in India: FTAs in India during the Month of July 2010 were 4.52 lakh as compared to FTAs of
4.35 lakh during the month of July 2009 and 4.32 lakh in July 2008.
There has been a growth of 4.1 % in July 2010 over July 2009 as compared to a growth
of 0.6 % registered in July 2009 over July 2008.
The growth of 4.1 % in July 2010 is lower than the growth of 8.0 % in June 2010. But the
number of FTAs in July, 2010 increased to 4.52 lakh from 3.70 lakh in June, 2010.
FTAs during the period January-July 2010 were 30.85 lakh with a growth rate of 9.8 %,
as compared to the FTAs of 28.10 lakh and a negative growth rate of 7.6 % during
January-July 2009 over the corresponding period of 2008.
Foreign Exchange Earnings (FEE) from Tourism in Indian Rupee terms and
US $ terms
FEE from tourism during the month of July 2010 were Rs.5444 crore as compared
to Rs.4983 crore in July 2009 and Rs.3870 crore in July 2008.
The growth rate in FEE in Rupee terms in July 2010 over July 2009 was 9.3 % as
compared to growth rate of 28.8 % in July 2009 over July 2008.
FEE during the period January-July 2010 were Rs.36817 crore with a growth rate
of 24.1 %, as compared to FEE of Rs.29676 crore with a negative growth of 0.1
% during January -July 2009 over the corresponding period of 2008.
FEE in US$ terms during the month of July 2010 were US$ 1163 million as
compared to FEE of US$ 1028 million during the month of July 2009 and US$
904 million in July 2008.
The growth rate in FEE in US$ terms in July 2010 over July 2009 was 13.1 %.
FEE during the period January-July 2010 were US$ 8005 million with a growth
rate of 32.6 % as compared to FEE of US$ 6035 million with a negative growth
of 17.2 % during January - July 2009 over the corresponding period of 2008.
Progress of “Tourist Visa on Arrival” (VoA) Scheme: January – July, 2010As a facilitative measure to attract more foreign tourists to India, Government has launched a
Scheme of “Visa on Arrival” (VoA) from January 2010 for citizens of five countries, viz.
Finland, Japan, Luxembourg, New Zealand and Singapore, visiting India for tourism purposes.
During the period January-July 2010, total number of VoAs issued under this Scheme
was 3516.
The number of visas issued under this scheme, during January-July 2010 for nationals of
the five countries were Singapore (1164), New Zealand (856), Finland (847), Japan (625)
and Luxembourg (24).
Total number of VoAs issued during July, 2010 were 365 with country wise breakup as
Finland (45), Japan (104), New Zealand (88), Singapore (124) and Luxemburg (4).
During the seven month period of January–July, 2010, the maximum number of VoAs
were issued at Delhi airport (1838), followed by Mumbai (769), Chennai (727) and
Kolkata (182).
Key Parameter to Measure Hotel Industry Health-Three key parameter in measuring industry health like Occupancy rate, Average Room Rate
(ARR) and Revenue per Available Room (RevPAR) are showing improving signs(Source: HVS
Hotel in India)
Revenue per Available Room
(RevPAR) A performance metric in the hotel
industry, which is calculated by
multiplying a hotel's average daily room
rate (ADR) by its occupancy rate. It may
also be calculated by dividing a hotel's
total guestroom revenue by the room
count and the number of days in the
period being measured. The reason for downturn in 2008-09 is global downturn and Mumbai
attack but the tourist arrival rate shows that in 2010 will improve the condition.
Occupancy Level of Different Category of Hotels in India:
Average Room Rate of Different Category of Hotel
Trend and opportunity of Indian Hotel
Hotel- Definition
Commercial establishment providing lodging, meals, and other guest services. (Business Dictionary.com)
A hotel is an establishment that provides lodging, usually on a short-term basis.
Type of Hotel:
Source: Ministry of Tourism
HOTEL- Meaning, Classification, Analysis
A description about Classification
Category Typical Location Target Customers 5 star Deluxe Restricted to the 4th largest metro
areas and other major cities Foreign business and leisure travelers, senior biz executives and senior govt. officials
3 star & 4 star Located in major cities as well as tourist destinations
Middle level biz executive and leisure travelers
One star & 2 star
Located in major cities as well as tourist destinations
Domestic tourists
Heritage It comprises of odd places, forts ,residences converted in to hotels,Eg.Jaipur,Mysore
Primarily foreign leisure travelers
As per the Travel and Tourism Competitiveness Report 2009 by the World Economic Forum, India is ranked 11th in the Asia Pacific region and 62nd overall, moving up three places on the list of the world's attractive destinations. It is ranked the 14th best tourist destination for its natural resources and 24th for its cultural resources, with many World Heritage sites, both natural and cultural, rich fauna, and strong creative industries in the country. India also bagged 37th rank for its air transport network. The India travel and tourism industry ranked 5th in the long-term (10-year) growth and is expected to be the second largest employer in the world by 2019.
S
W
O
TAnalysis
Of
Hotel
Industry
Strengths
Variety of Hotels in India
International players in the market such as
Taj and Oberoi & International Chains
Cheap manpower cost
A readymade tourist destination with the
resources
Natural and cultural diversity
Government support
Weaknesses
The cost of land in India is high at 50% of total project cost as against 15% abroad.
High tax structure in the industry makes the industry worse off than it’s international.
SUPPLY GAP- Only 97,000 hotel rooms are available in India today.
Limited value added services
Poor support infrastructure
Susceptible to political events.
Opportunities
Demand between the national and the
inbound tourists can be easily managed due
to difference in the period of holidays.
In the long-term the hotel industry in India
has latent potential for growth.
Unique experience in heritage hotels.
Rising income level of domestic and
international tourist.
Globalization and Liberalization of business
houses that increase business tourism in
India.
Common Wealth Games
Software services sector pushing the Indian
economy skywards, more and more IT
professionals are flocking to Indian metro
cities
Hotels in India' has a shortage of 150,000
rooms fueling hotel room rates across India.
Banking on the government’s initiative of
upgrading and expanding the country’s
infrastructure like airports, national
highways etc, and the tourism and
hospitality industry is bound to get a bounce
in its growth.
The government has allowed 100 per cent
foreign investment under the automatic
route in the hotel and tourism related
industry.
The Government of India has announced a
scheme of granting Tourist Visa on Arrival
(T-VoA) for the citizens of Finland, Japan,
Luxembourg, New Zealand and Singapore.
The scheme is valid for citizens of the above
mentioned countries planning to visit India
on single entry strictly for the purpose of
tourism and for a short period of up to a
maximum of 30 days
The tourism master plan, the first for
Karnataka, envisages initiatives to attract
private investment ranging from US$ 2.2
billion to US$ 4.4 billion in the next three to
five years. The plan is prepared based on the
Vision 2020 document prepared and adopted
by the Karnataka State Planning Board. The
state government aims to generate 200,000
jobs in the tourism sector in the next five
years. The master plan is aimed at making
Karnataka the number one destination for
tourism in the country by 2020, according to
Mr G Janardhan Reddy, Minister for
Tourism and Infrastructure Development
Growing popularity of medical tourism in
India.
Threats
Guest houses replace the hotels.
Political turbulence in the area reduces tourist traffic and thus the business of the hotels
Changing trends in the west demand similar changes in India
The economic conditions of a country have a direct impact on the earnings in hotel industry.
Lack of training man power in the hotel industry.
Fluctuations in international tourist arrivals.
Increasing competition among international
tourism destination.
global economic slowdown
terrorist attacks at Mumbai
Swine flu
Volcanic eruption in Iceland
In India, Opportunity of hotel industry is very huge. It calles for right marketing strategy and
govt support. India, as tourist destination, is very popular.
The hotel industry is dependent on tourism and travel industries, and together they constitute the
hospitality industry. The demand variation in the hotel industry depends on various factors like
the economy, socio-political conditions, government regulations, business cycle, weather and
seasonal changes, festivals etc. The hotel service is a perishable service with a fixed or limited
supply. It is characterized by high investment and low variable costs.
Pricing, promotion, place, process, people and physical evidence, all have to be handled with
discretion and innovativeness. The recent trends in the hotel industry owing to the technological
developments and the changing demographics have had a major impact on the way hoteliers
conduct their business. The Indian hotel industry has also come of age and is ready to set new
standards in customer service.
Marketing Mix for Hotel Industry………
The above chart shows you the possible marketing mix for a hotel Industry. To meet the global
standards and customer expectations, service providers in the hotel industry have to adopt
technological developments. They also have to be customer-oriented in their approach if they
have to withstand the competition in the market, which has further increased with the entry of
global players. Marketers have to adopt the marketing mix elements to suit their marketing
needs. For example, the product should carry more augmented services to differentiate itself
from other service packages in the market.
ProductRoom and leaisure servicesFoods Saloon and SpaAmenitiesBrand nameQualitySafetyother value added servicesPriceRoom Charges Discount offerseasonal FairDuties and texesspecial packagePrice flexibilityPrice discriminationPricing strategy (skim, penetration, etc.)PlaceLocation Market coverage Safe and convenient locationsEasily reachable and associated with marketTransportation FacilityNear to Acciliary organization, such as Hospital, market, banks etc.PromotionPromotional strategy (push, pull, etc.)AdvertisingPublic relations & publicityTravel Agents commissionHoardingsSponsoring of EventsAdvertisements in Travel GuidesWord of MouthViral Marketing