Main Features Of The Indian Hotel Industry Tourism Essay

The major players in the Indian hotel industry can be broadly classified into private players and public players. The major private players include Indian Hotels Company limited, East India Hotels Limited (The Oberoi group), Asian Hotels and ITC Hotels. ITDC and Hotel Corporation of India are the major public sector players. 

Sector Outlook

Hotel industry depends largely upon the foreign tourist arrivals further classified into business travelers (around 65% of the total foreign tourists) and leisure travelers. The following figures show that business as well as the leisure travelers (both domestic and international) formed major clientele for hotels in 2004.

Over the last two years, the hotel industry has seen higher growth rates due to greater number of tourist arrivals, higher occupancy rate (being around 75% in FY’06) and significant increase in average room rate (ARR). The major factors contributing to this growth include stable economic and political conditions, booming service industry, FDI inflow, infrastructure development, emphasis on tourism by the central as well as state governments and tax rationalization initiatives to bring down the tax rates in line with the international levels.

Some of the main features of the Indian hotel industry include the following:

· The industry is more dependent on metropolitan cities as they account for 75% to 80% of the revenues, with Delhi and Mumbai being on top. 

· The average room rate (ARR) and occupancy rate (OC) are the two most critical factors that determine profitability. ARR depends on location, brand image, star rating, quality of facilities and services offered. The occupancy rate depends on other seasonal factors. 

· India is an ideal destination for tourists. Approximately 4.4 million tourists visit India every year. Thus the growth prospects are very high. 

· In the hotel sector, a number of multinationals have strengthened their presence. Players like Four Seasons are also likely to enter the Indian market in the near future. Moreover, Indian hotel chains are also expanding internationally. A combination of all these factors could result in a strong emergence of budget hotels, which could potentially lower the cost of travel and related costs.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!
Find out more about our Essay Writing Service

The industry can be classified into four segments:

· 5 Star and 5 Star Deluxe. These are mainly situated in the business districts of metro cities and cater to business travelers and foreign tourists. These are considered to be very expensive. These account for about 30% of the industry. 

· Heritage Hotels. These are characterized by less capital expenditure and greater affordability and include running hotels in palaces, castles, forts, hunting lodges, etc. 

· Budget Hotels: Budget hotels cater mainly to domestic travelers who favor reasonably priced accommodations with limited luxury. These are characterized by special seasonal offers and good services. 

· Unclassified: These are low-priced motels spread throughout the country. A low-pricing policy is their only selling point. This segment accounts for about 19 % of the industry.

Trends In Hospitality Sector

Trends that will shape the future of hospitality sector are:

1. Low Cost Carriers

2. Budget Hotels

3. Service Apartments

4. Technology

5. Loyalty Travel

1. Low cost carriers: Travelers in general are more price sensitive to airfare than they are to hotel room rates. Often a low airfare will stimulate demand for travel even if hotel prices are increasing. LCCs are a good option for business travelers, as they have advantages like low costs, more options and connectivity.

2. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from the business travel segment. The average room rate (ARR) realized from business travelers is normally higher than from leisure travelers. Heightened demand and the healthy occupancy rates have resulted in an increase in the number of budget hotels. Some of the new players entering into this category of hotels include Hometel, Kamfotel, Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn. 

3. Service apartments: The concept of service apartments, though a recent phenomenon in India, is an established global concept. Villas in Spain, flats in the UK and apartment complexes in the US have all created a viable market for those who want more than just a room in a hotel. Service apartments are the latest trend in accommodation, offering the comfort and convenience of a home without the hassles of having to maintain or look after it. Ideally suited for medium-to-long staying guests, service apartments are a natural choice for corporate employees or expatriates relocating to a particular city, non-resident Indians visiting the country for long spells and foreigners visiting the city for long durations. 

4. Technology: Travel and technology have become inseparable. Technology is making its own advances with high-tech video conferencing facilities, web cameras and virtual reality mode of conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity, easy access to information, etc. are just a few areas where technology has completely changed the the way we travel. 

5. Loyalty travel:Today, airline-credit card company tie-ups have brought a whole range of benefits to the travelers. These include insurance cover, upgrades, free tickets, access to executive lounges, and a host of other goodies.

ITC Hotels Limited

ITC Hotels:

· ITC Hotel Maurya Sheraton & Towers, New Delhi

· ITC Hotel Grand Maratha Sheraton & Towers, Mumbai

· ITC Hotel Sonar Bangla Sheraton & Towers,Kolkata

· WelcomHotel Mughal Sheraton, Agra

· WelcomHeritage ( These hotels are spread over all over india and are currently operating in Rajasthan, Punjab, Himachal Pradesh, Madhya Pradesh, Uttaranchal, Jammu & Kashmir, West Bengal, Tamil Nadu, Haryana and Karnataka.)

MARKET CAPITALIZATION 

Month

High

Low

Average

July 2006

69470.81

61622.49

65132.68

August 2006

71935.59

63162.11

66907.27

September 2006

71616.29

68235.51

69865.82

October 2006

73136.79

69172.79

70595.60

November 2006

71870.11

66984.82

69353.40

December 2006

71557.75

63306.15

67001.52

Key Stats & Ratios

Quarterly

Annual 

(2006)

Annual 

(TTM)

Net Profit Margin

–

21.70%

–

Operating Margin

–

31.32%

–

EBITD Margin

–

34.70%

–

Return on Average Assets

–

18.35%

–

Return on Average Equity

–

26.75%

–

RECRUITMENT POLICY:

The potential candidates who are looking forward to build their career in ITC Hotels should possess several qualities like integrity, intellectual rigor, a ‘will do’ attitude, team skills, ability to think strategically, high energy, creativity and leadership.

For entry level, ITC relies on campus recruitments and visits various management and engineering institutes. Some of the institutes include IITs, IIMs, FMS, XLRI, etc.

ITC also provides summer internships. The internships are for a total of 8 weeks during April – July every year. For middle level opportunities, advertisements are placed on the company website and the interested and eligible candidates are invited to apply on-line. The middle management level provides opportunities in Marketing, Finance, Human Resources, Information Technology, Logistics and many more.

Indian Hotels Company

The Indian Hotels Company (IHC) is the parent company of Taj Hotels Resorts and Palaces. It was founded by Jamsetji N. Tata on December16, 1903. Currently the Taj Hotels Resorts and Palaces comprises 57 hotels at 40 locations across India. Additional 18 hotels are also being operated around the globe. During fiscal year 2006, the total number of hotels owned or managed by the Company was 75.

The Taj hotels are categorized as luxury, leisure and business hotels. The Taj Luxury Hotels offer a wide range of luxurious suites with modern fitness centres, rejuvenating spas, and well-equipped banquet and meeting facilities. The Taj Leisure Hotels offer a complete holiday package that can be enjoyed with the whole family.

It provides exciting activities ranging from sports, culture, environment, adventure, music, and entertainment. The Taj Business Hotels provide the finest standards of hospitality, which helps the business trips to be productive. They offer well-appointed rooms, telecommunication facilities, efficient service, specialty restaurants and lively bars, well-equipped business centres, and other conference facilities.

Management:

Chairman: Mr. Ratan N Tata

Managing Director & CEO: Mr. Raymond Bickson

Chief Operating Officer, Leisure Hotels: Ms. Jyoti Narang

Chief Operating Officer, Luxury Hotels: Mr. Abhijit Mukerji

Chief Operating Officer, Business Hotels: Mr. Jamshed S. Daboo

Vice President-Legal & Company secretary: Dev Bajpai

Chief Financial Officer: Mr. Anil P Goel 

Financial Data 

Key Stats & Ratios

Quarterly 

(Mar ’04)

Annual 

(2006)

Annual 

(TTM)

Net Profit Margin

4.86%

11.93%

5.03%

Operating Margin

8.24%

16.75%

7.77%

EBITD Margin

–

29.11%

23.33%

Return on Average Assets

–

5.32%

–

Return on Average Equity

–

15.48%

–

Market Capitalization in last 6 months (Rs.crores)

Month

High

Low

Average

July 2006

6983.18

5883.71

6640.63

August 2006

7536.56

6745.18

7229.90

September 2006

8093.45

7482.83

7835.64

October 2006

8576.75

7911.81

8146.62

November 2006

9046.91

8080.31

8681.29

December 2006

9444.76

8400.55

9001.56

Four new hotels in Bangalore: Taj Group invests Rs.1,000 crore

The Taj Group of Hotels will invest about Rs 1,000 crore for constructing four new hotels in Bangalore. It has submitted an Expression of Interest to Delhi Airport International Limited (DAIL). The company has also submitted an Expression of Interest for building a top-class hotel in the airport vicinity. Besides the company has been allocated a site at Greater Noida for building a hotel, while it is keen on entering into a management contract for a hotel in Gurgaon. The Group was also eyeing to enter hotel business overseas like Maldives, Mauritius, Colombo, Boston and Sydney. The Group is also planning to explore seven more locations in Mumbai and increase its total room capacity to 2,000 in the commercial capital in the next five years.

This expansion of its budget hotels will generate numerous jobs in the industry. The group has also taken up the renovation and management of Rail Yatri Niwas, the well-known Delhi budget hotel owned by the railways, on a 15-year lease. As part of the deal with the Indian Railway Catering and Tourism Corporation (IRCTC), which currently runs it, the Taj group will renovate the Yatri Niwas and add food courts within the complex. The makeover will be done on a redesign-operate-manage-transfer basis. The hotel will be run under the Taj group’s budget hotel brand, Ginger, which has hotels in Mysore, Bangalore, Thiruvananthapuram, Haridwar and Bhubaneshwar. Taj group of hotels will upgrade all four Rail Yatri Niwas hotels located in Delhi, Howrah, Ranchi and Puri. 

The Oberoi Group (EIH)

The Oberoi Group was founded in 1934 by Late Rai Bahadur M S Oberoi. The group owns and/or manages 32 hotels with 3,193 rooms under names of “Oberoi Hotels & Resorts” and “Trident Hilton”, a luxury backwater cruiser in Kerala and Oberoi Flight Services, a division of EIH that provides commercial in-flight catering and operates airport lounges and restaurants. It has branches in five countries, situated in two continents (Asia and Africa).

The chain operates the following hotels and resorts in India:

The Oberoi, New Delhi

Oberoi, Mumbai, Maharashtra

The Oberoi, Banglore, Karnataka

The Oberoi Amarvilas, Uttar Pradesh

The Oberoi Grand, Kolkata, West Bengal

The Oberoi Udaivilas, Udaipur, Rajasthan

The Oberoi Vanyavilas, Rajasthan

Wildflower Hall, Shimla, Himachal Pradesh

The Oberoi Cecil, Shimla, Himachal Pradesh

The Oberoi Motor Vessel Vrinda, Kerela.

The other businesses of EIH include:

· Mercury Car Rentals

· Corporate Air Charters

· EIH Press

· Mercury Travels

· Flight Catering 

MARKET CAPITALIZATION 

Key Stats & Ratios

Annual 

(2006)

Net Profit Margin

22.32%

Operating Margin

30.45%

EBITD Margin

48.13%

Return on Average Assets

8.81%

Return on Average Equity

21.09%

The market capitalization of EIH as on march 21, 2007 was Rs. 3,748.74 cr.

Oberoi Group ventures into Middle East hospitality industry

Oberoi Group will run two hotels in Abu Dhabi and Dubai to tap the growing Middle East tourism market. Oberoi will manage a city hotel as well as one resort property in the UAE capital. The company has also signed an agreement for a hotel in Dubai, which is part of a 800- million-dirham property project being developed by Rani International. The company’s development plans are focused on the Middle East and Asia. It has 32 hotels in five countries and is planning to open new properties in several locations, including Marrakesh, Muscat, Maldives, Cambodia and Thailand.

It is also planning to launch its luxury cruiser on the Nile, The Oberoi Zahra, in October this year with an idea to redefine the paradigm of luxury on Nile. The Oberoi Zahra, Luxury Nile Cruiser comes with 25 luxury suites and two Grand suites. The Grand suites have their own private decks and outdoor Jacuzzis. With the Indian economy growing fast, Oberoi is also looking at a number of new sites in India cities, including Hyderabad, Pune, Bangalore, New Delhi and Mumbai. It currently has 11 brand hotels in India. Oberoi was also ranked ninth among the top 10 leading chains, hotels, resorts and spas across the world, according to the 2007/2008 World’s Top Hotels, Resorts and Spas survey report released by Zagat Surveys. 

Radisson Hotels & Resorts

Radisson Hotels & Resorts: Radisson hotels are a worldwide chain of 435 hotels with a total of 102,000 guest rooms, in 61 countries. The first Radisson Hotel was built in 1909 and was purchased by Curt Carlson in 1962 and is still owned by his Carlson Companies. Radisson Hotels International is a fully owned subsidiary of the Carlson Hospitality Worldwide, which is one of the major operating groups of Carlson Companies Inc.Carlson Hospitality brands include – Regent International Hotels, Radisson Hotels Worldwide, Country Inns and Suites by Carlson, Park Hospitality, Carlson Vacation Ownership, and Carlson Lifestyle Living. Carlson companies also include the Carlson Wagonlit Travel, Carlson Leisure Group, Carlson Marketing Group and a worldwide marketing services company.

With more than 1520 hotel, resort, restaurant and cruise ship operations in 79 countries, Carlson Companies provide employment to 190,000 people in more than 140 countries. 

Scope Of Hospitality Sector

In 2003-04 the hospitality industry contributed only 2% of the GDP. However, it is projected to grow at a rate of 8.8% between 2007-16, which would place India as the second-fastest growing tourism market in the world. This year the number of tourists visiting India is estimated to have touched the figure of 4.4 million. With this huge figure, India is becoming the hottest tourist destination. The arrival of foreign tourists has shown a compounded annual growth of 6 per cent over the past 10 years. Besides, travel and tourism is the second highest foreign exchange earner for India. Moreover, it is also estimated that the tourism sector will account for nearly 5.3 per cent of GDP and 5.4 per cent of total employment.

GDP

Employment

Visitor Export

Personal T&T

Capital Investment

Govt. Expenditure

Outlook for 2006

7.80%

1.40%

10.90%

6.90 %

8.30%

7.70%

Outlook for 2007-2016

6.60%

1.00%

7.80%

6.70%

7.80%

6.60%

Future of hospitality sector:

To boost up the growth of tourism in India, the government has proposed to invest Rs. 520 crore in 2007-2008. Tourism in expected to grow further over the next few years due to the changes taking place on the demand and supply sides. The factors that will account for the further growth of tourism will include the following:

· Change in standards of living

· More disposable income

· Better education

· Long leisure time

· Aging population 

Owing to growth of tourism sector, infrastructure will improve, competition will increase, new products will come into markets and better services will be provided. Due to the rapid growth in tourism, the hotel industry is also booming. Many international players like Le Meridien and Accor are heading towards Indian markets to expand their business. With government’s full support in developing infrastructure, increase in demand, open sky policies and increased competition, the hospitality industry is getting consolidated and has many more opportunities to grow further.

Challenges For Hospitality Industry

1.Shortage of skilled employees:One of the greatest challenges plaguing the hospitality industry is the unavailability of quality workforce in different skill levels. The hospitality industry has failed to retain good professionals.

2.Retaining quality workforce:Retention of the workforce through training and development in the hotel industry is a problem and attrition levels are too high. One of the reasons for this is unattractive wage packages. Though there is boom in the service sector, most of the hotel management graduates are joining other sectors like retail and aviation.

3. Shortage of rooms: The hotel industry is facing heavy shortage of rooms. It is estimated that the current requirement is of 1,50,000 rooms. Though the new investment plan would add 53,000 rooms by 2011, the shortage will still persist. 

4. Intense competition and image of India: The industry is witnessing heightened competition with the arrival of new players, new products and new systems. The competition from neighboring countries and negative perceptions about Indian tourism product constrains the growth of tourism. The image of India as a country overrun by poverty, political instability, safety concerns and diseases also harms the tourism industry. 

5. Customer expectations: As India is emerging as a destination on the global travel map, expectations of customers are rising. The companies have to focus on customer loyalty and repeat purchases. 

6. Manual back-end: Though most reputed chains have IT enabled systems for property management, reservations, etc., almost all the data which actually make the company work are filled in manual log books or are simply not tracked. 

7. Human resource development: Some of the services required in the tourism and hotel industries are highly personalized, and no amount of automation can substitute for personal service providers. India is focusing more on white collar jobs than blue collar jobs. The shortage of blue collar employees will pose various threats to the industry.