The Hospitality Industry Tamilnadu Tourism Essay

This study has analysed the trends of the hospitality industry with special importance on Tamilnadu where the researcher has aimed at helping and growing the family business. This is done to get a better understanding of the Chennai’s market place, along with many other important cities in the state making it possible to go on board on selected strategies to effectively reach the local consumers.

As Mohanty (2008) says, Hospitality is all about offering and comforting someone by all means to their needs. Good support from customers can be achieved by receiving and entertaining each and every single guest. In commercial context point of view, the word Hospitality refers to hotels, resorts, restaurants, clubs, catering etc.

In today’s world Economic Growth of a country depends on Hospitality industry along with Industrial and Agriculture. Tourism and Hotel sector is a widely expanding and booming segment in the market, and this industry offers huge job prospects to Indians.

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Due to globalisation there has been immense growth in Hospitality segment in India, especially in the metro and cosmopolitan cities. This has resulted in demand for well qualified and experienced candidates from this field in India and Overseas. India has become a ideal place of tourism and is the only country in the world with different cultures, languages and diverse topography along with political stability.

India has become the place for Information technology companies and as Purushottaman (2005) says India has propelled to the top of the world in both Information Technology (IT) and Information Technologies enabled Services sector (ITES). Many MNC’s from all around the world have opened their operations throughout India especially in South India. Initially Bangalore served as the Indian operations head office for many companies but then later on Chennai, capital of Tamilnadu state is becoming a business hub for major MNC’s. This is due to involvement of many foreigners coming to India for business development. As a part of business development, business travels boomed to high and due to this the Hospitality sector developed along with more profitability. Nearly 50% of occupancy in all the hotels in major cities of Tamilnadu like Chennai, Madurai, Coimbatore, Trichy, Tuticorin, Tirunelveli have come from business travellers. In this particular research, the author has evaluated the development of the hotel industry with a focus on above mentioned cities in Tamil nadu, India.

The performance of Hotel Industry is back on its development and growth path as it had been in decline for the past two years (i.e.) 2008 & 2009 due to global economic recession, which affected the hospitality business in India. According to HVS 2009 report, the foreign arrivals have declined by 20% in 2008 – 2009, resulting in decline of occupancy and performance of hotel industry throughout India. All the major cities in India like Mumbai, Chennai, Delhi, Bangalore, and Kolkata had an average of 10% marginal decline in occupancy rate. According to FHRAI and HVS 2009 report, though the industry has faced decline in performance, the demand for the industry will immensely grow from 2010 and has reported that an average 5% growth will be recorded from 2010. In Tamilnadu though the industry faced decline in its capital, Coimbatore and Ootacamand has raised its status to become one of the 12 major cities in India after the metro cities. According to HVS 2009 report, the occupancy rate of Hotels at Coimbatore, Madurai in Tamilnadu has increased by 5% respectively, though the industry on a whole has faced decline. So this clearly indicates the rise of demand for Hotel industry in Tamilnadu. In Industrial aspect all the cities in Tamilnadu has developed along different businesses. In last year several new projects have been announced in Chennai, Coimbatore, Madurai, Ootacamund which is due to higher growth market and more are required to ease the current situation. General occupancy rate and cost of rooms is high in major cities as the demand for rooms have increased but then the number of available rooms is less than the demand (HVS International survey, 2004

).

India economy has boomed in the last 5 to 6 years which is due to flourishment in IT sector, Finance, Banking, Telecom , Biotechnolgy, Real estate, Retailing etc. As Joshi (2005) denotes many major hubs in the country lacks quality hotels and rooms. Though the industry has developed a lot in the previous decade still there is demand for number of rooms required is under lack. He also denoted that India will become one of the world’s fastest growing tourism market and as suggested by him, the number of foreign tourists have increased in the year 2006 and 2007.

SWOT ANALYSIS of Hotel Industry in Tamilnadu.

STRENGTHS

Natural and cultural diversity: India on a whole is very rich in cultural heritage and values. While considering the state of Tamilnadu, its heritage and history dates back to B.C., it has many historic places and monuments. The state pocess three main tourist spots in the country namely Oatacamund, Kodaikanal, Courtrallam and it’s the place where Rameswaram lies, one of two most spiritually important places in India for Hindu’s community. The state is along the southern coastal line of the country and has got many beautiful and sunny beaches along is shore. The state has become the region for business as it has got all the transportation means required and the state capital has one of the busiest ports in India. The state has got 8 national sanctuaries, and it has got many hills station including Ootacamund & Kodaikanal.

Demand Supply gap: There has always been a mismatch between demand and supply of rooms in Indian Hotel Industry. This has been the reason for higher room tariffs and the level of occupancy. The demand is raised a lot as India is hosting the 2010 Commonwealth games, and most importantly the demand for Chennai will increase due to 2011 Cricket World Cup in India. Many star categorized hotels have come in important cities of Tamilnadu in the last decade.

Economical Growth: India’s economy is growing to new heights and been predicted to be second after China by 2050. India has now become a part of G20 nations which in turn denotes the growth of the Indian economy. Chennai city being one of the major business hubs of India is Bourne to immense growth in near future due to increase IT firms, growing Industry in numbers, government tourism development, and other business activities. Coimbatore, the other city in Tamilnadu which was initially a hub for textile industry has now turning out to be IT hub with many MNC’s started to have their operations there. Due to industrial and automobile growth, the state of Tamilnadu has now become more occupied with the state having 6 different automobile company plants. Overall the International and domestic economic growth has brought in huge opportunity for Hotel Industry in Tamilnadu. Many huge player in the global market with global chain have started to walk in to Chennai market and along the state (tamilnadu).

Weakness

Slow Implementation- Growth in the tourism sector is considerably slow when compared to other departments. Though the market needs have increased, the adequate infrastructure facility for Hotel Industry is still lacking. Lack of proper manpower has always been an issue in the industry.

Regional Imbalance: Regional Imbalance of hotels is prevailing a lot throughout India and that prevails in Tamilnadu also. Still some of the tourist spots in Tamilnadu, there isn’t adequate number of rooms for to increase the demand and develop that region to be major tourist spot. Due to this, those tourist spot regions are still under developing schemes and they lack the actual demand which they are capable of producing.

Capital Intensive: Initial cost involved in Hotel construction project (i.e.) cost of land is very high and contributes 50% of the total project cost, whereas in other countries it is around 15%. This operates as a major restriction to the Indian hotel Industry, with Tamilnadu being no exemption to this context.

Long Gestation Period: Due to lack of proper government development scheme being actuated many rural tourist spots with cultural importance and heritage places lack hotels. This is due to long gestation period for the hotel to get back its breakeven point and also the future growth of the firm is under immense doubt. As mentioned earlier land cost being high in India, time period for Hotel development needs to be very fast in order flourish in the market. As of now this long growth period is making a full stop to Hotel Industry development in those areas.

Oppurtunities

Rising Income: The tendency of spending has increased among Indians due to rise in income levels. People of different age groups are bound to spend on different purchases and are more bound to spend on leisure tourism on a whole.

Economy Rise: As stated in The Financial express (2008), Overall Indian Hotel Industry is going through a healthy growth phase due to rising economy which has made many foreign companies and investors to enter India, which in turn has raised the occupancy in Hotels. Thus due to economy rise government have implied many schemes to develop tourism. It has also stated that in Conde Nast Travaller ranking, India is been ranked 4th among 167 countries in most preferred travel destinations. This denoted that India has making its mark on global tourism sector.

Threats

Global Recession: In the last couple of years though the market for Hotel Industry has increased, the occupancy level has decreased due to global recession. Due to this situation, the percentage of business travellers dropped heavily as the company’s restricted the travel expense for its employees. The dependency level on foreign tourists is always risky, as the economic depression has affected in all the developed companies and developing countries across the world. Hence there has been a huge fluctuation in International tourism.

Rising Competition: Major International Hotel chains are entering Indian market as it is becoming the destination for economical growth. The existing market players are also bringing in lot of new facilities and offers to attract customers. Hence striving a place in customer mind will prove to be a hectic job. Thus there will be a rise in competition among the exciting Hotel market.

.

Aim:

The main of this research is to explore the fundamental factors influencing the performance of the Hotel Industry in India, with special emphasis on Tamilnadu.

Personal aims include:

Preparation for myself in this hospitality line which will guide me to develop my family business to new heights in the market.

To encourage Hoteliers make best use of the information resources gathered in this research.

The need for the study emerges as more and more Hotel chains have started involving themselves in different type of complex business models and also they emphasize the need for cost-efficiency.

Objectives:

To assess the past and present performance of Hotels in Tamilnadu.

To categorize the core factors of the identified trends.

To understand the future growth opportunities for the hospitality sector in Tamilnadu.

To provide proposals for the further development on this sector with regards to the state of Tamilnadu.

Literature Review

The term Hotel in British law is defined as the place where a bonafide traveller can receive food and shelter provided he is in a position to for it and is fit condition to receive (Yashroy.U, 2008).

The origin of hotels came to India from British people. Until late 1920’s all the hotels in India were maintained by British and Swiss people. The fact of Chennai being a metropolitan city dates back to 1639 when Chennai was used as main port for trading by East India Company which was maintained by British (Chennai Hotels, 2007).

In current industrial world, one of the most successful industries is Hotel Industry. Demand has always been more than supply in all the cities. As FDI restrictions been eased off by government many MNC’s have opened their operation in India especially in Tamilnadu. Indian economy rise in global market and rise of business activities in India has insisted for a need of quality hotel rooms for corporate and industrial people. This trend of hospitality development is significant all over India. Leisure travelling has increased in India, which also contributes to the factor of growth in Hotel Industry. Almost all the major hotel players in the world have their operations in India, which itself indicates the growth of Hotel Industry in India.

While considering the state of Tamilnadu Chennai, Coimbatore, Madurai, Trichy, Tuticorin are the major cities and Ootacamund, Kodaikanal, Courtrallam, Yercaud, Kanyakumari are the main tourist spots in the state. Demand supply mismatch has increased along all the above mentioned places in terms of Hotel rooms.

In the last few years the number of inbound tourists (foreign tourist) has increased and has been around 4.9 million in 2007, while outbound tourists (Indian going on foreign tour) have been around 8.3 million in 2006 (ITOPC, 2008). In the outbound tourists segment lot of travel has been business travel while others have been leisure travel segment. Since both the inbound and outbound tourism has increased, the need for quality hotels in India has been rising. India being a country of wide culture and composite of world class heritage is the main reason for its tourist attraction in the global arena.

Considering the tourism in Tamilnadu, the domestic leisure travel is based on seasonality for the tourist spots and for cities is based on full swing business travel. Beside the rise in income level of the people has been a main reason for rise of leisure tourism in Tamilnadu. But still the majority of Star class hotels are used for business travels and Budget hotels are used for leisure travel.

Inbound Tourism Statistics

Foreign Tourists In India (Number)

2001

2002

2003

2004

2005

2006

2007

2008

January

283750

228150

274215

337345

385977

459489

532088

584765

February

262306

227529

262692

331697

369844

439090

498806

560658

March

248965

225558

218473

293185

352094

391009

444186

509926

April

185338

155378

160941

223884

248416

309208

333945

369677

May

151098

132998

141508

185502

225394

255008

267758

290785

June

176716

143100

176324

223122

246970

278370

310104

344526

July

224432

186432

225359

272456

307870

337332

377474

–

August

196517

161477

204940

253301

273856

304387

360089

–

September

162326

151721

191339

226773

257184

297891

325893

–

October

181605

212191

260569

307447

347757

391399

440715

–

November

209685

243566

290583

385238

423837

442413

510987

–

December

–

–

319271

417527

479411

541571

575148

–

Total

2282738

2073025

2726214

3457477

3918610

4447167

4977193

2660337

Source: Ministry of tourism, Govt.of India (ITOPC, 2008).

Domestic Travel Statistics

Tourists Statistics – Tamil Nadu

Year

Domestic Tourists

2004

42279838

2005

43213228

2006

58340008

Source : Ministry of tourism, Govt. of India (ITOPC, 2008).

Outbound Tourism Statistics

Statistics of Indian National Going Abroad

Year

No of Outbound Indians

Percentage Change over the previos year

2000

4415513

7.3

2001

4564477

3.4

2002

4940244

8.2

2003

5350896

8.3

2004

6212809

16.1

2005

7184501

15.6

2006

8339614

16.1

Source: Ministry of tourism, Govt. of India (ITOPC, 2008).

The categories of hotels in India are of five segments. Those segments are Premium & Luxury segments, Mid Market Segment, Heritage Hotels, Resorts, Budget Hotels, and Unclassified Hotels.

Premium and Luxury Segment

This segment is based on major players in the local and International market. The whole slot in this segment comprises of 5 -star and 5 -star deluxe hotels which mainly serves business travellers and upmarket foreign travellers. These hotels fall into luxury segment and they offer a high quality and higher range of services. They tariffs and other service cost in considered to be expensive and is situated only in metro cities and major tourist spots. This segment alone contributed 30% of total number of rooms back in 2004. When comparing with Tamilnadu’s context, it contributes 15 % of total number of rooms which is nearly half to the national segment ratio (Bhatia, 2004).

Mid-Market Segment

This segment is based on local players in the market and small chain of hotels within the domestic market. The 3star and 4star hotels falls under this segment, and they mainly cater to the average domestic and foreign leisure traveller, along with domestic business travellers as they nearly offer all the services as of premium hotels under low cost than the premium as the tax component for this sector is less than that of luxury and premium segments. This segment contributes 30% of the total number of rooms in Chennai, Coimbatore, and Madurai – major cities in Tamilnadu (HVS International, 2009).

Budget Segment

This segment has emerged due to liberalisation in economy and is been mainly catered to middle class people with higher disposable income. This class comprises of 1 star and 2 star hotel. This type of hotels holds the major percentage of existence in the state of Tamilnadu. This segment caters for domestic travellers who prefer reasonably priced accommodation with limited luxury, and offers special seasonal discounts for domestic tourist packages. Low cost and good service is the main forefront of this hotel segment.

Heritage Segment

This segment is classified in the recent years to denote the hotels in palaces, castles, forts, and other buildings which were constructed before 1950. These traditional structures symbolise the ambience and luxury lifestyle of the past golden era (Ghosh, 2005). They have come to limelight with their lesser initial capital and for mirroring the traditional lifestyle of the past. These values have proved to be a major point of attraction and business for these hotels. While considering the context of Tamilnadu there are more than 10 hotels in existence (HHIMT, 2006).

Unclassified or Other Segments

This segment of hotels and motels are spread out throughout the country. If taken into account these contribute 50% of room’s occupancy in India. Their main point of sales income is low pricing policy. However some of them came into prominence on account due to increase in tourist congestion in major cities and tourist spots. These hotels officially now contribute 19% of the Industry.

Performance measures in hotel management

The performance of hotel property and chains can be measured in several ways. The simple method would be evaluating room rates and occupancy ratios. Another important measure with regards to occupancy rates is the Average Daily Room Rate (ARR). This is manipulated by dividing the revenue with the total number of rooms occupied. This occupancy ratio is also relatively important as that of ARR because it is an important indicator of profitability. The rate of occupancy is manipulated with number of rooms occupied by number of rooms available (Sola et.al, 1997, p.85).

Market concept of Hotels

As mentioned by many authors, Hotel is an commercial hospitality institution which offers services and loads of facilities to its customers on various cost factors aspects (Ghosh, 2005).

Facilities

Service

Location

Price

Image

(Source: Ghosh, 2005, p.131)

All the five factors denoted in the factor are the terms related to hotel marketing concept. The term Location refers the geographic location of the hotel whether is the hotel is present in a city, rural area, or a tourist spot etc. It denotes to attractive features of the form, accessibility to the hotel, convenience factor, along with the surroundings. The term facilities refers to classy rooms, restaurants, leisure features, bars, banquet halls and recreation facilities (Weissinger, 2000). . The term Service refers to the quality of the facilities offered and the extent to which it reaches to the consumers, availability of that service offered (Hoque, 2002). Price factor implies the value given to its facilities and services offered to customers. The Image is a vital marketing factor as it portrays the hotel in the market and to the customers. This image is obtained from the above mentioned factors. For to maintain this factor all other factor have to be streamlined (Ghosh, 2005).

Performance of Hotels in Tamilnadu

The main focus the occupancy patterns of hotels two major metropolitan cities and two major tourist spots of Tamilnadu.

The two major cities to be discussed are Chennai and Coimbatore and the two major tourist spots are Ootacamund and Kodaikanal.

The percentage of occupancy rate in Chennai has risen by 12% in the current 2009 -2010 financial year after a decline in 2008 – 09 by 13% due to global recession. While in the case of Coimbatore, though the industry was also affected by recession in 2009, it dropped only by 5 % considering its growth ratio for the past decade with an average rise of 6% per year. The industry has also risen in current 2009 – 10 financial year by 10%. Both the cities are expected to have 16 new hotels, commercial serviced apartments for MNC’s over the next 5 years. Both the cities have become an IT hub in the southern part o India. Chennai is amongst the seven major metropolitan cities, while Coimbatore and Ootacamund has become one amongst the twelve other major cities in the Hospitality and Industrial growth list (HVS&FHRAI survey, 2009).

The performance of Hotel Industry in Chennai city saw a decline in first half of 2009 as there was cost cutting activities taken by IT & ITeS sectors and other business sectors along with decline in travel and entertainment. Though there was decline the city had the opening of two new star hotel property Taj Mount road & Lemon Tree. The industry by the end of 2009 saw a rise in occupancies as the businesses boomed again and many new projects associated with travel and occupancy was announced. As mentioned earlier Chennai has always had a steady rise in Hotel Industry (HVS&FHRAI survey, 2009).

The performance of Hotel Industry in Coimbatore has been growing with steady Growth phase and Demand. Coimbatore is popularly known as Manchester of the south. The city itself is based on diversified economy consisting auto – ancillary sector, textile sector, textile manufacturing and majorly in the past 6 years service sector has boomed in the city. The lower cost business operations have raised the city to prominence as a business destination in Tamilnadu and now across India. The occupancy rate has risen from 64 % in 2005 to 79% in 2009 though had a drop to 72% in the start of 2009 due to global recession. Coimbatore also has close proximity to Nligiris which implies that the demand for the Leisure segment will rise in the next few years. The current Star rated occupancy of 350 rooms is expected to rise to nearly 875 rooms which add pressure to the need of upgrade with the performance of hotels in a short term (Times, 2009).

The existence of Ootacamund or in short term called Ooty, one of the major tourist destinations in India and has clearly marked as one amongst the other twelve major cities in India with its tourism Industrial growth. It is one of the primary hills station in South India. It is easily accessible via road and railways from Coimbatore, Chennai & Bangalore. Ooty has retained its name as a Hills station tourist destination and hence many innovative and eco friendly hotels have come up nearby to the wildlife destinations. It is surrounded by natural sceneries, lakes, wildlife sanctuaries and many others. Domestic travel to this destination is being increasing at a higher pace (Kumar, 2010). The hotel occupancy has increased from 44% in 2005 to 59% in 2009 (HVS&FHRAI survey, 2009).

Kodaikanal is another major hill station in Tamilnadu. Tough Kodaikanal is categorised under developing urban areas, it still remains untouched by urban development and dense population as that of Ooty. It has got access from all the major cities in Tamilnadu and from Kerala as well. Though the number of Hotels in Kodaikanal is less than that of Ooty, they offer iunparelled experience in terms of comfort and services. It is surrounded by hills, huge lake, and number of parks, museums, and heritage places. There are two five star hotels, three four star hotels, more than 10 three star hotels in Kodaikanal. It is an intense developing tourist spot in India (Agarwal, 2007)

Principle factors for growth of Hotels in India (Tamilnadu)

The factors which influence the occupancy rate of Hotels , and their average room cost across the country are Domestic travel, International Arrivals, Health and Medical tourism, Business travel, MICE – Meetings. Incentives. Conferences. Exhibitons.

The Domestic travel is the vast growing market in India. Domestic Guests market is considered to be the most important segment for Indian hotel Industry, which accounted to 71.7 % of all guests in 2004- 05 (HVS, 2006).

The effective guidance role for domestic travel is played by Budget airline, or low cost carriers. These have played a vital role in short business trips, short visits etc. Due to this a person from Chennai can go to Delhi in the morning, do his work over there and come back in the same day evening. This has made people’s work more convenient and easier than before, initially the cost factor played a vital role in choosing airlines. They were only used by higher business people as the ticket fare was costlier but then after the entry budget airlines in the market the frequency of air travel and the number of domestic travellers has been increasing from the initial entry period. The number of destinations has increased due to rising air trafiic. So connectivity to various destinations from one single destination is now very much possible. Now all the major private carriers, government carriers, and other small players in the market deal with budget airlines. They are Jetlite, Jetkonnect, Spice Jet, Simplifly deccan, Air India Domestic formerly Indian Airlines, Go air, Paramount, Indigo and other new players which are in the queue for launch (Goyal, 2009).

Tourists Statistics – Tamil Nadu

Year

Domestic Tourists

2004

42279838

2005

43213228

2006

58340008

Source: Ministry of tourism, Govt. of India (ITOPC, 2008)

International arrivals have been increasing steadily as the Business travels due to MNC’s, leisure trips, and other trips have increased. Many Private and Government Indian carriers are now been operated to various destinations in the world which plays a vital role for the rise in International arrivals. Governments tourism scheme Incredible India is the most successful plan implemented by tourism ministry. This campaign has brought in many foreigners. This particular scheme has offered many advantages for tour packages. Hence the tour operators are doing aggressive marketing and attractive package offers to attract foreign tourists to India. The table below suggest that year 2008 has attracted around 5.4 million tourists from around the world, which is 5.6% more than previous year. The estimated foreign exchange earnings generated in the year 2008 was 50730 crores which are 14.4 % more than that of the previous year. The foreign exchange earning in terms of US dollars was 11747 US million$ which is 9.3% rise than the previous year. Hence the rate of tourist’s arrival and the income has increased which in turn has resulted in growth of Indian hotel industry. In accordance to an official review the impressive inflow is one of the main reason for the rise in airline passengers, which in turn as the result of intensive advertising campaign done by the Ministry of tourism (Travel & Tourism, 2005).

Year

Foreign

Tourists

Arrivals

(in nos.)

Percentage

Change Over Previous Year

Estimated Foreign Exchange Earnings (Rs. In Crore)

Percentage of Change Over Previous Year

Estimated Foreign

Exchange

(in Million US$)

Percentage Over Previous Year

1999

2481928

—

12951

—-

3009

—–

2000

2649378

6.7

15626

20.6

3460

15.0

2001

2537282

-4.2

15083

-3.5

3198

-7.6

2002

2384364

-6.0

15064

-0.1

3103

-3.0

2003

2726214

14.3

20729

37.6

4463

43.8

2004

3457477

26.8

27944

34.8

6170

38.2

2005

3918610

13.3

33123

18.5

7493

21.4

2006

4447167

13.5

39025

17.8

8634

15.2

2007

5081504

14.3

44360

13.7

10729

24.3

2008

5366966

5.6

50730

14.4

11747

9.3

Source: Ministry Of Tourism India (2009).

Medical tourism has now become one of the developing concepts whereby people from foreign countries come to India for medical treatment and relaxation. Major surgery treatments include Heart surgery, Plastic surgery, transplant surgery, Cosmetic surgery and Dental care. Patients from all