Effects Of Recession In The Indian Hotel Market Tourism Essay

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The hospitality industry consists of companies within the food services, accommodations, recreation, and entertainment sectors. The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an amusement park consists of multiple groups such as facility maintenance, direct operations (servers, housekeepers, porters, kitchen workers, bartenders, etc.), management, marketing, and human resources.

Hotel and hospitality industries are among the biggest employment generators in the country. Towards propelling its growth, while the government should confer infrastructure status to the hotel industries, several taxation issues also need to be rationalized. The government's decision to substantially upgrade 28 regional airports in smaller towns and privatization & expansion of Delhi and Mumbai airport has improved the business prospects of hotel industry in India. Also, the upgrading of national highways connecting various parts of India has opened new avenues for the development of budget hotels in India. Couple this with the availability of qualified human resources and the hospitality sector has already got great growth prospects!

The Hotel Industry comprises a major part of the Tourism industry. Historically viewed as an industry providing a luxury service valuable to the economy only as a foreign exchange earner, the industry today contributes directly to employment (directly employing around 0.15 million people), and indirectly facilitates tourism and commerce. Prior to the 1980s, the Indian hotel industry was a slow-growing industry, consisting primarily of relatively static, single-hotel companies.

The Indian Hotel Market Outlook Report, India Digest 2008 (brought out by Jones Lang LaSalle Hotels) states in an assuring manner that the impact is expected to be short term. The Indian economy has withstood such upheavals in the past so there is nothing to panic about.

Organizations that want to effectively take note of the recessionary trends and protect their business will have to take on some hard decisions like 'back to basic' kind of planning, and ensure that input costs are maintained at levels that would continue to give them the profit margins without sacrificing the quality of delivery or the products.

The hospitality industry should work on training, preventive maintenance, multi-skill, employee exposure, cross training and such measures that are non-financial and would enhance guest satisfaction. Staff retrenchment, cost cutting, travel and advertisement cuts may show savings in the short run but would certainly damage the long term growth of the hospitality industry. The next 18 to 24 months are testing times for the industry, but hoteliers with a proven track record will take things in their stride and come out of the recession with learning and experience.

Increased interest in the Indian markets, improved international access coupled with the modernizing of major airports will definitely boost hotel industry in India.

The Mumbai terrorist attacks, on top of a global economic recession, have come as a double whammy for India's hotel & tourism industry. For example, only 14 of 90 rooms were occupied at one of the top luxury hotels in India's most popular tourist destination, Agra, on Thursday. And on Wednesday, the northern Indian city saw only about 2,000 people visiting the Taj Mahal, the white marble tomb built by a medieval emperor for his beloved queen. Usually in the high tourist season of Indian winter the monument draws more than 15,000 visitors each day.

There were 40 to 45 per cent cancellations since November 26, the night armed gunmen unleashed three days of mayhem in India's financial hub, Mumbai, killing more than 170 people and injuring over 300. Most of the cancellations are from the US, Britain and France.

As this was the beginning of the high tourist season in India (November to March), there was already a drop in business of about 15 per cent with the recession in the western countries, Japan, Australia, where the high-end tourists mainly come from. Now with these attacks it has probably dropped by at least another 10 per cent.

Travel advisories put out by several countries warning of a high terrorist threat throughout India and specifically mentioning the attacks on the luxury hotels have added to the negative impact.

The hotels are employing private security agencies to bolster an increased armed police presence at the entrances and perimeters. Staff have been asked to be alert and vigilant.

Even though a growing awareness of the value of modern, incorporated systems, many properties still do not take advantage of them as fully as they might to maximize revenue opportunities.  Many also fail to support and secure them to the extent appropriate to the value of their data and to the legal consequences of that data becoming stolen or corrupted.  A significant factor restricting wider adoption is the challenge of improving the systems' ease of use as they continue to grow in functionality, in both operational and guest-facing areas.  All of these issues support a trend to outsourcing the more complex operational functions and system security to expert, central staff, either corporate or third party.

The difficulty of the hotel environment, which traditionally has required many different systems to interact with each other, a lack of awareness of how much efficiency could be improved through the use of modern integrated systems, a historic preference for investing funds in FF&E rather than in the systems themselves or in regular training for their users, and the difficulty of providing comprehensive, expert technical support at the individual property level for the multiple systems used there. 

Hospitality management systems have evolved into stylish, well integrated, multi-discipline tools capable of helping properties of all types and sizes attract more guests, generate more revenue and reach much-improved levels of efficiency.  Years of development in expanding the capabilities of individual systems, together with improvements in both interface technology and vendor cooperation, have produced far more comprehensive and better-integrated systems that can now cover virtually all areas of even a complex resort property or a multi-property chain.  This brings obvious benefits from having more complete and accurate data, both operationally and in regard to guests' profile and history information. 

However, many properties handicap themselves through hanging on to systems well past their competitively useful life, greatly restricting their ability to implement such revenue-enhancing measures as taking Internet reservations, performing effective rate/revenue management, collecting more detailed guest data for customer relationship management and targeted marketing, and so on.  Sometimes this comes from a lack of appreciation of their potential upside, but there is also often apprehension about the difficulty of integrating older but still valuable systems into a more modern, integrated whole


The impact of changing demographics on travel trends is also far reaching no sector in travel, tourism and hospitality remains unaffected. Whether the subject is the gradual retirement of baby boomers, rampant globalization and its impact on business travel, or the increased demand for pragmatic travel, the spectacular worldwide shift in demographics poses both challenges and opportunities. These recent and ongoing changes in the demographic environment hold major implications for the hospitality industry in particular. With regard to product and service offerings, hoteliers need to begin a strategy that addresses multi-generational needs, wants and desires. Now, more than ever, hoteliers must offer design and amenities that cater to the special needs of aging clients (Baby Boomers), as well as younger travelers (Gen-X and Gen-Y), who have high expectations in regard to design and technology.

The traditional practice of brand standardization flies in the face of this. Hoteliers must adapt and look for ways to enhance all guest experiences regardless of generation. On January 1, 2006 the first of America's seventy-eight million baby boomers turned sixty-years old, while the last one turned forty. In fact, nearly 8,000 boomers are turning sixty on a daily basis, and according to US Census Bureau statistics, the number of boomers expected to be living in the year 2030 is 57.8 million. This is the year boomers will be between ages 66 and 84. What does this milestone mean for hoteliers? It means changing the way we have traditionally connected with the so-called 'senior' market. Primarily for the reason that boomers will not 'grow old' quietly as previous generations have. This is the age band that has, and will continue to redefine the traditional ideas of aging. Boomers will be more active in their retirement, firmly believing that 50s and 60s are now middle age. This is primarily due to longer life expectancies and important improvements to overall health and well-being.



The key success factors for the Hotel Industry are mentioned as follows:

Site and Location

This can be measured the most critical factor in determining the success of a hotel property. In addition to identifying a city, the site location within the city also assumes significance and issues like distance from the Central Business District (for metro hotels) and connectivity (access to roads, proximity to airports) assume importance.


Equally important is the positioning of the hotel according to the target guest segment. For example, business hotels set up to cater to the high yielding corporate clientele in metro cities would have a distinct competitive advantage over facilities targeted towards leisure travelers in the same city for attracting business travelers.

Financial Flexibility

Development of hotels is a highly capital intensive activity and new hotel properties, typically, have a high break-even point. Therefore, financial flexibility is essential, especially during early years of operations.

Brand Equity

Branded hotels can be further classify into chain hotels and independent hotels. Chain hotels would typically be affiliated to one of the large national or international hotel chains. Association with a hotel chains allows the property to be branded with one of the chain brands. In such cases the property benefits from the equity of the chain brand and promotion and advertising efforts made by the chain no only in India but also overseas. This way the property is able to attract tourists from areas where independent hotels may not be able to reach effectively


In this research I have covered the introduction of hotel industry and the problems which are facing by the hotel and the hospitality industry. The main problems which are affecting the industry are financial recession, the terrorism, sophisticated and advancing technology, changing demographics and the impact on travel trends. The other points are those factors which are influencing the probability of new venture and its success in the industry. The last point which I have covered is the key factors for a successful hotel venture or the critical success factor for the hotel industry. In short, evaluating all these points, we can say that a successful venture in this hospitality field comes from distinct application of all these points in all aspects.