Hotel Industry

Executive Summary
With foreign traffic in the country crossing the 4-million-mark in 2005-06, the hotel industry has reached new heights. The revenue per available room (RevPAR) increased by a phenomenal 33 per cent in 2005-06 to Rs 4,859 as compared with the previous year. With disposable incomes having gone up, the leisure destinations have benefited and with heightened industrial activity, business destinations have witnessed a healthy surge in business traffic. In 2005-06, although both leisure travel and domestic business travel were on the upswing, it was the foreign business travel that grew the fastest. This trend is expected to be sustained over the next 5 years, the number of incoming travellers is expected to grow at a CAGR of 10 per cent, and a big chunk of those are likely to be foreign business travellers. With the macro-economic variables expected to remain positive and the performance of the Indian economy expected to be impressive over the next 5 years, the room demand is expected to grow at a CAGR of 10 per cent over the next 5 years. In the coming years demand is expected to outpace the supply.

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Hotel Industry Due to the growing demand the various players in India are undertaking huge capital expenditure to support the increasing demand. But they have to face a number of problems in India like bad infrastructure, high taxes, non affordable overcoming rooms, the improper maintenance, the etc. For is above problems government

undertaking measures like tourism promotion, development of hotel management institutes, etc.

Industry Structure
Introduction Tourism is a major contributor to the economy According to World Travel and Tourism Council (WTTC), the world travel and tourism industry is expected to contribute 3.6 per cent to Gross Domestic Product (GDP) in 2006 (US $1,754.5 billion), rising in nominal value terms to US $2,969.4 billion (3.6 per cent of total) by 2016. The world travel and tourism economy employment is estimated at 23.4 million jobs in 2006, 8.7 per cent of total employment or 1 in every 11.5 jobs and by 2016 this should total 27.9 million jobs, 9 per cent of total employment or 1 in every 11.1 jobs. The 7.6 million travel and tourism industry jobs account for 2.8 per cent of total employment in 2006 and are forecast to total 8.9 million jobs or 2.9 per cent of the total

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Hotel Industry by 2016. A study by the World Tourism Organization shows that domestic tourism inflows, which are largely focused on rural destinations, are at least 10 times greater than international tourist inflows. According to WTTC, the Indian travel and tourism economy is ranked 22nd in absolute size worldwide, 156th in relative contribution to national economies and 3rd in long term (10 year) growth that has been estimated (174 countries are estimated by WTTC). The tourism sector is one of India's largest net foreign exchange earners and employers of manpower. According to the Department of Tourism (DoT), at present, the sector employs 42 million people (18 million directly and 24 million indirectly). In addition, for every Rs 1 million invested in the hotels and restaurants sector, 89 new jobs are created as compared with 13 jobs in the manufacturing sector and 45 jobs in the agriculture sector. Forecasts by that in 2006, India's travel and WTTC reveal is tourism industry

expected to generate $53.5 billion of economic activity, and contribute 5.3 per cent to the total GDP and 5.4 per cent to the country's total employment.

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Hotel Industry
Tra v e l & Tourisma s a % of t ot a l GDP & Em ploy m e nt (2 0 0 6 ) 16 14 12 10 8 6 4 2 0 Ma la yisa Tha ila nd China S ri La nka Indonesia India 14 .6 12.6 10 .7

14 .3

1 3.7 1 0 .2

9.6 7.9

8 .7 7 .2 .4 5.3 5

GDP Employment

Foreign tourist arrivals on an upward trend In 2005, India attracted 3.85 million international tourists, who stayed for an average three days. The total represented a 14 per cent jump over the previous year, highlighting the fact that arrivals per annum have increased significantly. Industry Characteristics Seasonality The hotel industry's premium segment is largely dependent on foreign tourist inflows. Tourist inflows, especially international leisure tourist inflows, are seasonal in nature. Due to summer and monsoon seasons, tourist arrivals from April-September are lower than from October-March (60 per cent of the annual arrivals). However, business travel tends to be less seasonal.

Business

traveller:

The

business

offered

by

this

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Hotel Industry segment is less seasonal, and travellers usually stay in premium segment hotels. This segment is highly dependent on the country's economic scenario. Leisure traveller: The business offered by this segment is highly seasonal and tends to increase during the October to March period.

Airline

crew:

This

segment

provides

an

assured

occupancy for hotels that have contracts with airlines. Hotels offer this segment a discount of nearly 40-50 per cent. Hence in cities where the demand for rooms is increasing, leading to the ARRs moving up, one will find a reduction in the airline crew. A survey conducted by the Federation of Hotel and Restaurant Association of India (FHRAI), in 5-D and 5-star segments, states that of the total reservation in 2004-05, the maximum reservations came from business travellers, while
5-D

5 - Star
3% 36% 61%
74%

22%

4%

Busines s Travellers Leis ure Travellers Airline Crew

the least came from airline crew. Capital-intensive The high cost of land and development make the hotel
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Hotel Industry industry capital-intensive. The cost of setting up a hotel varies, depending on the location, size and star category. Land costs vary by location and also within the location. The average cost of constructing a hotel (excluding the land cost) is Rs 6-7 million per room in the premium segment and Rs 3-4 million per room in the budget segment. The gestation period for the construction of a hotel is 3-4 years. Manpower/labour-intensive The hotel and restaurant sector is also labour-intensive. On an average, the employee-to-room ratio is around 1.8:1 in India as compared with 1.5:1 globally. Value Chain

Players in Hospitality Sector

Owner Manager

Franchisor

Distribution Channels

Owner In the hospitality industry, the owner owns the underlying asset. In return, the owner earns gross revenues or rental

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Hotel Industry fees. An owner earns gross revenues if he manages and franchises his property and lease rental fees if he leases the underlying asset. Manager A manager manages the hotel operations. In return, he earns management and operation fees, which are also known as incentive fees. Franchiser A franchiser is a hotel company, which 'brands' or 'flags' its property. In return, the franchiser receives franchise fees. Most hotel franchise agreements are valid for 10-25 years. A 'franchise' is an agreement between a hotel company and a hotel owner, whereby the hotel company provides: Brand name Expertise Reservation system Technical assistance Design assistance Pre-opening training Fees (initial fees, royalty fees, advertising and

In return, a developer or investor provides: marketing fees, reservation fees) Property and construction, and Operation according to standards

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Hotel Industry Options for operating a hotel in India In India, the options available to operate a hotel property are as follows: Owner cum manager cum franchiser Owner cum manager, and franchiser Owner and manager cum franchiser Owner cum franchiser, and manager Owner and lessee Owner and licensee

Of these various options, the option of managing and franchising a hotel ensures high returns on investment with a minimum risk. Hence an increasing number of hotel companies are venturing into managing and franchising hotels in order to increase their profitability. Management contracts A management contract is an agreement between a management company (operator) and a property owner (investor), whereby the operator assumes complete responsibility for managing the hotel. For this service, the operator is paid a fee. The owner has little or no say in the operational policies, procedures and day-to-day management, but the owner is financially responsible for the property and must replenish operating capital if necessary. A management contract differs from a lease in that under a management contract the residual income (or
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Hotel Industry loss) after payment of rent goes to the operator.

Distribution Channels
GDS Marketing Alliances

CRS

Booker

Travel Agent

Internet

Reservation and distribution channels Globally, electronic bookings (GDS plus Internet) account for a major share of hotel reservation. However, the usage of the same is very low in India. For instance, according to a TravelCLICK survey, involving 33 major hotels chains and brands, in 2004, electronic bookings accounted for 58 per cent of the total global hotel reservations. In contrast, the share of electronic bookings in India was less than 25 per cent. Over the medium to long term, the share of electronic bookings in India is expected to rise, as more players increase their focus on IT initiatives. Global Distribution System (GDS) A Global Distribution System (GDS) is a network of electronic

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Hotel Industry reservation systems used by buyers (travel agents and the public) and sellers (hotels, airlines, car rental companies, etc) to exchange travel-related services. These systems have become supermarkets, linking buyers and sellers and allowing reservations to be made quickly and easily. According to sources, internationally, GDS accounts for over 55 per cent of the bookings made for city- based hotels. The primary advantage of GDS for travel agents is that it offers single-point access for reservations on all airlines, and other neutral travel-related display. products, in a format known as (In neutral display, screens display

availability across several carriers. However, neutral displays can vary across GDS.) The airline industry created the first GDS in the 1960s as a way to keep track of flight schedules, availability and prices. Currently, although most of the major international airlines have an equity stake in companies providing GDS, most airlines also sell their products through other GDS. Marketing agreements and the availability of sophisticated communication links enable the sale of products through multiple GDS. These communication links operate at a high speed and use electronic data interface (EDI) messaging techniques. Hence products can be sold on a real-time basis. (Advanced systems even offer last seat availability on airlines.) Currently, there are four major GDS systems: Amadeus,

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Hotel Industry Galileo, Sabre, and Worldspan. There are several smaller or regional GDS, including SITA's Sahara, Infini (Japan), Axess (Japan), Tapas (Korea), Fantasia (South Pacific), and Abacus (Asia-Pacific) that serve interests or specific regions or countries.

Centralized reservation system (CRS) hotel companies, especially hotel chains, have

Many

installed a reservation system, connecting all properties. Booker The travel manager, executive assistants or secretaries, who are the link between the traveller and the hotel/airline, generally make corporate bookings. Tour agent/Travel agent (booking via a GDS/CRS) In the US in the mid-1990s, profits of travel agencies were adversely affected, as airlines and hotels sold their products directly to consumers through the Internet and direct negotiations with consumers. In addition, commissions and were reduced, and a ceiling on commissions was introduced. Hence, travel agents, such as American Express been based charging a travel fixed fee and for the Carlson Wagonlit, altered their fee structure and have services rendered. known as travel Such fee-based travel agents differ from commissionagents are management companies. Major players in the US travel industry include American Express, Carlson Wagonlit and WorldTravel.

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Hotel Industry Marketing alliances

Hotel properties/chains are often associated with marketing alliances. These alliances provide the hotel direct access to reservation network, promotion and Internet coverage. Major marketing alliances include Leading Hotels of the World, Leading Small Hotels of the World and airline tie-ups. Other alliances include small luxury hotels of the world, and Relais and Chateaux. Hotels also have promotional tie-ups with airlines. For instance, hotels could provide free accommodation for points accumulated under the 'frequent flyer schemes' of airlines. Internet The use of the Internet in making hotel reservations has increased due to increased Internet penetration and costeffective access. Travel and tourism reportedly forms the second largest category of products sold through the Internet. The primary elements for the extensive usage of the Internet in travel bookings are as follows: the absence of geographical limitations to the market connection between buyers and sellers) huge (direct

reductions in transaction and processing costs 24x7x365 availability a reduction in fixed sales outlets a reduction in clerical errors and administration costs the variety of products that can be delivered over the
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Hotel Industry network, and

the support provided to customer relationships

Industry Costs
Operating costs The expenditure incurred by hotels can be divided into two broad categories: fixed and variable costs. The variable component is linked to the occupancy and the facility usage (use of food and beverage and other leisure facilities) that produced the known level of revenue or expense. Fixed costs include:

Administrative and general expenses (a small portion is Property taxes, and Insurance. Room expenses Direct expenses for food and beverage (F&B), and Management fees

variable)

Variable costs include:

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Hotel Industry There are some items that are classified as semi-fixed expenses since they include both fixed variable portions. They include:

Energy costs Payroll Operation and maintenance expenses

The key expenses incurred in operating a hotel include employee costs, F&B costs, and fuel, light and power (FLP) costs. Of the total costs (excluding indirect costs), employee costs account for 30 per cent; F&B, 14 per cent; and FLP, 12 per cent. Employee costs Employee costs, which form the largest cost component in the hotel industry, are the key costs monitored in this sector. Reducing manpower will reduce employee costs. Company Limited) implemented voluntary For instance, in the past, EIH Ltd and IHCL (Indian Hotels retirement schemes, which led to a decrease in the employee cost. In India, the manpower-to-room ratio of 1.8 per room is higher than the international norm of 1.5 per room. India's higher manpower ratio is attributed to the availability of low-cost manpower and the reluctance of domestic manpower to undertake multi-skilled, low valueadded tasks.

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Hotel Industry

F&B costs It consists of costs incurred for the operation of a hotel's food, beverage and banquet facilities. In addition to employee costs incurred in F&B operations, F&B costs also include the cost of F&B supplies, kitchen stewarding expenses department (such as cleaning supplies), and service costs (laundering napkins and tablecloths,

printing menu cards, and entertainment expenses). Capital costs A hotel project is capital-intensive with a gestation period of 3-3.5 years. The project's capital intensity varies according to the category of the hotel, the type of the property (business/leisure) and the location. On an average, the capital cost for setting up a premium segment hotel (excluding land cost) is around Rs 6-7 million, whereas the cost of a budget hotel (excluding land cost) is around Rs 3-4 million. For instance, for EIH, The Rajvilas property without land costed around Rs 12.5 million per room; for Hotel Leela venture, The Leela Palace Bangalore costed around Rs 12.5 million per room, excluding the cost of land, whereas a Trident hotel would cost Rs 60 to 70 lakh per room. The cost for building the structure of the hotels would be constant across cities; however, the overall capital cost would

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Hotel Industry accordingly increase depending on the cost of land in a particular city. The major capital costs for a new hotel include civil works, plant and machinery, and interiors (which accounts for the major costs). If the land cost is included, these three costs account for nearly 70 per cent of the total costs. Particulars Civil Works Plant and Machinery Interiors % of Cost Excluding Land 40 20 40

The gestation period for the construction of a new premium segment hotel is 27-30 months. However, in most hotel projects, the schedule is prolonged to 36-42 months for a variety of reasons such as lack of funds and change in planning. Particulars Foundation Work Super Structure Interiors No. of Months 68 12 89

Segment Wise Contribution Margin

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Hotel Industry Room contribution Room contribution primarily depends on average room rates since costs such as manpower and energy, which are associated with rooms, are not significant. An increase in the average room rate (ARR) results in the direct increase in room contribution. Room contribution is the highest, and it accounts for over 80 per cent of the total revenue. F&B contribution F&B contribution depends on F&B revenue and cost. F&B revenue includes income from room service, restaurant and banqueting activity. Banqueting accounts for a significant portion of the total F&B revenue. The revenue from room service is directly dependent on the room occupancy in the property. An indicative level of F&B margins (excluding banqueting facilities) is 45-50 per cent. F&B margins are very low as compared to room margins, thereby reducing overall margins in case of hotels focusing on F&B. However, hotels having a higher share of revenues from banqueting services, earn higher F&B margins due to lower F&B costs. For instance, in Mumbai, F&B revenues and margins of Taj Land's End is expected to be higher due to the higher share of banqueting revenues. As regards budget hotels, it has been observed that they face intense competition from standalone restaurants as

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Hotel Industry compared to premium segment hotels that are in a better position to compete with standalone restaurants. This is to do with the type of clientele visiting premium segment hotels who prefer to have their dinner at the hotel itself rather than visiting a restaurant outside. customers from outside. Also, it is found that in cities where the demand for rooms is driven by the IT/ITES sectors, the hotels' F&B segment tend to face immense competition from standalone restaurants, as the clientele tends to be youngsters who prefer to visit these standalone restaurants rather than visiting the hotel restaurants. Also, premium segment hotels are able to attract a large amount of

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Hotel Industry

Segmentation of Hotels
Classification of hotels Hotels can be classified based on the size of the rooms and the types of amenities offered. The Department of Tourism (DoT) has classified hotels into seven categories: heritage hotels, 5-star deluxe (5-D), 5-star, 4-star, 3-star, 2-star and 1-star. Heritage hotels include old palaces and havelis, which have been converted into hotels. The DoT also reclassifies hotels every 3 years and is responsible for the classification of 5-D, 5-star and 4-star hotels, while the state governments are responsible for the classification of 1-star, 2-star and 3-star hotels. The classification ensures the suitability of hotels for tourists. Classified hotels are also entitled to benefits such as interest subsidies, income tax benefits, imports, and easy availability of telephone and LPG connections. In order to classify hotels, the DoT, along with representatives from the

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Hotel Industry Central government, the travel and tourism industry, the hotel industry and various catering institutes, has set up a Hotels and Restaurants Approvals and Classifications Committee (HRACC). Due to the lengthy process involved in classification, a significant percentage of rooms remain unclassified. In addition, some owners have shown lack of interest and unwillingness to seek classification. However, over the years, the number of unclassified rooms is declining.

Segme nt Premiu m

Budget

Catego Target ry Around 50% of 5 D, Foreign these hotels 5 Business & are Star Leisure concentrated travellers, in the four Senior metros Business Executives & top government officials Located in 3 Middle-level major cities as Star, 4 business well as small Star executives cities and and tourist leisure destinations travellers
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Location

Rates Highest ARRs due to highest level of services quality

Offer few facilities and charge lower than the

Hotel Industry premium Segment Econom Located in 1 Largely y major cities as Star, 2 targeted well as small Star domestic cities and tourists tourist destinations Heritag e Heritage hotels comprise old palaces, havelis, castles, forts & residences, constructed prior to 1950, converted into hotels largely located in leisure tourist destinations like Jaipur. Heritag Foreign e leisure Grand, travellers heritag e Classic Minimum at facilities. Charges are lower than that of the budget segment ARRs are lower than that of hotels in the premium segment

The location of a hotel is important as it influences the business mix of the hotel in terms of business and tourist traffic. In addition, it also influences the revenue mix of the hotel in terms of foreign exchange and rupee earnings. Types of hotel companies Hotel companies can be classified on the basis of: the number of properties operated

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Hotel Industry the type of property (premium/budget), and the type of player (foreign/domestic) Classification Hotel Chains Characteristics These companies operate hotels across segments and have brands associated with each segment Examples Domestic hotel chains: Indian Hotels, EIH & ITC Welcomgroup Foreign hotel chains: Carlson Hospitality, Hyatt and Marriott Asian Hotels and Hotel Leelaventure till last year were operating as single/dual chains. However, with their expansion they are currently operating three properties each.

Single Hotels

Dual These companies operate single/dual properties in India. Revenue flow from such properties is limited as compared to hotel chains where revenues are contributed by various properties across segments.

Given that all the major players in the industry have expanded and will continue to expand operations in diverse locations across the country, the structure of the industry is expected to shift entirely towards hotel chains. Classification based on the type of property Hotel companies can be categorized as premium and budget on the basis of the classification of their properties. Most

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Hotel Industry hotel chains have a presence across segments, with the aim of catering to a wider market. Premium segment Some hotel companies have brands catering only to the premium segment. The main domestic players catering to the premium segment include Asian Hotels, Bharat Hotels and Hotel Leelaventure. The main foreign players in India who cater to the premium segment include Hyatt and Le Meridien. In the case of other domestic players such as EIH, Indian Hotels, ITC Welcomgroup, and The Park Hotel, over 65 per cent of the total rooms were in the premium segment. In the case of other foreign players such as Bass, Carlson Hospitality Worldwide and Marriott, over 75 per cent of the total rooms were in the premium segment. Budget segment Most budget hotels in India are independently owned and not branded. According to industry sources, internationally, 80-85 per cent of hotels in the budget segment are branded, while in India, only 15 per cent of budget hotels are branded. Most major hotel companies in India have brands that cater only to the budget segment. (Foreign players such as Best

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Hotel Industry Western, Days Inn, Choice Hotels International and Accor cater only to the budget segment). In the medium to long term, the number of hotels and rooms in the budget segment is expected to increase due to the need for low-priced accommodation (as a result of a reduction in corporate travel budgets). On an average, hotels in the budget segment charge Rs 1,200-3,000 per room, per day. The average cost for setting up a budget hotel (80-100 rooms) ranges from Rs 3 to Rs 5 million per room as against Rs 7-8 million per room for a hotel in the premium segment. Classification based on the type of player In the past few years, the presence of foreign players has increased significantly. Most foreign players, who have a presence in India, operate hotels through the franchisee and management contracts route. For instance, the share of foreign brands in Mumbai has increased from 23 per cent in 2000 to 60 per cent in 2004.

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Hotel Industry

Hotel Concepts
Ecotel
An ecotel is an exclusive group of inns, hotels, or resorts that define the concept of environmental responsibility within the hospitality industry. All certified hotels have to pass a multilevel inspection by Hospitality Valuation Services (HVS) International, the international ecotel-accreditation agency. A hotel receives a five-globe certification only after it meets the five criteria and fulfils the norms specified by the agency. The five criteria are environmental solid waste management, energy commitment, water efficiency,

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Hotel Industry conservation, and employee environmental education and community involvement. Since its establishment in 1994, over 1,100 hotels from over 30 countries have applied for the ecotel certification. However, to date, less than 5 per cent have been certified. In Asia, The Orchid Hotel, Mumbai, was the first to receive the ecotel award.

Resorts
Resorts cater to the leisure needs of a tourist. Usually located at hill stations or seashores, resorts can be further classified into hill resorts, health resorts, beach resorts, summer resorts and winter resorts. Most resorts located at hill stations have well-defined off and peak season periods. Hence their revenue inflows keep fluctuating. Among business destinations, resorts are rates usually during characterized by higher occupancy

weekends as compared with weekdays.

Motels
In general, motels are located along highways connecting important cities. The significant features distinguishing motel from a hotel are: adequate parking facilities
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Hotel Industry cottage motels) short duration of stay KTDC's Motel Aaram Motel Kuttippuram, Kannur, Motel Motel Aaram Aaram Kayamkulam, Aaram style accommodation (provided by most

Athirappally, Motel Aaram Erimayur Palakkad and Motel Aaram Palaruvi are some of the motels in India.

Floatels
A floatel is a floating hotel or a boat operating as a hotel. For example: The Oberoi Motor Vessel Vrinda.

Boutique Hotels
The typical boutique hotel has less than 100 guest rooms, limited service, one or no boardroom, and food and beverage is generally outsourced. The emphasis in boutique hotels is on selling guest rooms (where the profit margins are significantly higher than in banquets and meetings) by enticing a guest with its high design and lower rates. In general, boutique hotels are characterized by a high percentage of repeat clientele. Reportedly, there are around 500 boutique hotels worldwide. Some of the international boutique hotels include MeliaComfort Boutique Hotels, Hotel Punta Islita, W Hotels, Zoo Hotels, Ian Schrager Hotels, Scotsman Hotels, Bvlgari Hotels, Myhotel, The Kimpton
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Group,

Joie

de

Vivre

Hotel Industry Hospitality, Orient-Express, Park Hyatt, Sofitel Demeure Hotels and Amanresorts. In India, all the properties of The Park Hotel (Delhi, Kolkata, Visakhapatnam and Bangalore) are boutique hotels.

Timesharing Industry
The timeshare concept as an innovative way for increasing holiday choice took root in Europe in the 1970s. Instead of booking a week or two at a resort every year, or purchasing a holiday property outright, timeshare offers buyers the ability to buy rights of occupancy in a property, typically in multiples of one week, for a set period. Once consumers have purchased their holiday time, they can use it, pass it to friends or relatives, or rent it out. The timeshare industry offers various purchase options to meet consumers' demand for vacation variety and flexibility. The availability of these purchase options varies by resorts. Some of the purchase options include:
Fixed week: Timeshare units sold for use during a

specific week of the year.

Floating week: This could be any week reserved for the

timeshare owner during a certain season of the year.

Fractional:

Ownership

is

sold

in

multiple

week

packages, usually 4 or 5 weeks each year or as a quarter share (13 weeks). This type of purchase option

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Hotel Industry is largely offered in destinations such as ski, beach and island resorts.
Vacation clubs: Instead of purchasing a timeshare in a

certain size of unit at a particular resort, vacation club members purchase the opportunity to use a variety of timeshare accommodation at various resort locations, usually within one developer's chain of resorts. Some of the clubs operate on a points system.
Points

system: These offer timeshare owners the

flexibility to purchase points, which can be used as currency, to reserve timeshare accommodation of various sizes, during different seasons and for varying periods. These points are also used for other travel products such as airfare, hotel stays and car rentals.
Deeded agreements: These allow the timeshare owner

to use his/her vacation interval forever like buying a house. Under this agreement, the owner could rent, sell, exchange or will to successors his/her vacation interval. These agreements could be for fixed or floating weeks.
Right to use agreements: These specify that ownership

of the resort remain with the developer. The developer gives the purchaser the right to use the specified resort accommodation for a certain number of years, usually ranging from 10 to 50 years, after which all rights return to the developer. These agreements can be for

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Hotel Industry either fixed or floating weeks and are also part of the vacation club or point-based memberships.
Biennial

ownership agreements

or

alternate the

year of

ownership: a resort

These

allow

use

ownership product every other year and costs less than annual ownership at comparable resorts. Timeshare owners have the option to holiday in different resorts (in addition to those affiliated with the timeshare company) if their membership is affiliated to an exchange company. Among the existing exchange companies, Resort Condominiums International (RCI) and Interval International are the major players. RCI, a wholly-owned subsidiary of Cendant Corporation, is the world leader in the timeshare market, controlling over 85 per cent of the market.

Service Apartments
This is a concept that is slowly gaining ground in the industry. Service apartments mainly target expatriates and long-duration visitors, both business and leisure. Service apartments offer all the luxuries of a five-star hotel, but at far more competitive rates, and in addition, give the "at home" feel. As more and more quality-conscious expatriates come to India and stay for longer durations, they find that 5-star

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Hotel Industry service apartments offer them just what they require in terms of price, lifestyle and convenience. These apartments are ideal for people who do not have to stay long enough to set up a home, but also stay long enough to want to live a more normal lifestyle, even while experiencing the creature comforts that a 5-star hotel affords. This is an ideal accommodation even for foreigners who prefer the "home away from home" experience at service apartments instead of "cramped" hotel rooms. The world over, service apartments are preferred to hotels for the following reasons: Business executives who come with their families find them safe, convenient, affordable and well maintained. They are larger than hotel rooms No rental deposit is required in this case, unlike ordinary residential leases, which typically bind people for a year or more and require an 11-month rental deposit. They are beneficial for companies, who can rent a service apartment and can accommodate several of their employees there at one time. Some small and medium enterprises retain service apartments in key cities for their roving representatives (sales and marketing personnel, for instance).

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Hotel Industry Residents do not have to pay electricity, water, government taxes, management fees or any other service bills, and there are no hidden costs for housekeeping the clock). They are a valid proposition for medium- to long-term travellers. Premium service apartments are becoming popular among senior executives of corporate, who are unable to find wellfurnished flats for the period of their stay. IT and ITES sectors are the main demand drivers, and service apartments are found to be extremely popular among such firms since many of them are cost-savvy. Other categories of visitors who are attracted by such accommodation are people working on short-term projects, or visiting a city for purposes of higher education or medical treatment. Although this concept is fast catching up in business destinations, but it does not seem to be becoming a threat to the existing premium segment hotels, because the average hotel stay period is still 2-3 days, for which the hotels are still the best bet. Over the medium term, we see more and more demand for such apartments. services (the apartments are fully furnished and housekeeping service is available round

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Hotel Industry Service apartments can enjoy a good degree of success in cities such as the four metros, Bangalore and Hyderabad, which thrive on business travellers.

Player Profile
ASIAN HOTELS LIMITED
Background Asian Hotels Ltd (AHL) was promoted by three non-resident Indians, Sushil Gupta, Shiv Jatia and Arun K Saraf, in 1980. AHL commenced operations with the Hyatt Regency Hotel in New Delhi in 1983 with 385 rooms. Subsequently, the room base was expanded and is now 518 rooms. In 1981, AHL entered into a technical services and sales Kong and Ltd. marketing agreement with Hyatt of Hong (Since then it has been renamed Hyatt

International Asia-Pacific Ltd.) The agreement expired in 1993, but AHL renewed it for 15 years with effect from January 1, 1994. The agreement with Hyatt also covers the company's new properties in Kolkata and Mumbai. The Kolkata property commenced full-fledged operations from

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Hotel Industry the last quarter of 2002-03, while the Mumbai property started full-fledged operations from the start of 2003-04. City-wise properties of Asian hotels Location Property Delhi Hyatt Regency Kolkata Hyatt Regency Mumbai Hyatt Regency Total Asian Hotels: Key financial indicators No. of rooms 518 235 397 1,150

Mar-02 Mar-03 Mar-04 Mar-05 Operating incomes (Rs 927 1067 2039 2581 million) Operating margin (Per 25.5 20.9 30.0 35.5 cent) Net margin (Per cent) 14.0 9.0 2.5 9.9 RoCE (Per cent) 3.8 3.1 6.9 11.7 Gearing (Times) 0.87 1.13 1.14 0.93 Interest coverage 106.2 6.2 2.0 3.8 (Times) Amongst the smaller players in the industry AHL has a presence only in the premium segment. It is a relatively Mumbai. small player in the hotel industry with properties in the metros, namely, Delhi, Kolkata and This is further indicated by the company's relatively marginal overall market share. However, it is a dominant player in Delhi. Moreover, it has plans to set up properties in Bangalore, Chennai and Pune, which if implemented will result in an improvement in its overall market share.

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Hotel Industry Strong Hyatt brand results in high share of foreign guests AHL has signed an agreement with Hyatt International for 15 years, with effect from January 1, 1994, for sales, marketing and management services. It operates under the strong international brand 'Hyatt', which has earned it a large share of foreign travellers (business and leisure). The high proportion of foreign business travellers has resulted in relatively higher ARRs for the company, as foreign business travellers are dollar denominated, which are higher than rupee-based tariffs. Strong presence in the metros: a positive AHL has all of its properties located in the metros. The company had just one property in Delhi until 2001-02, but it has commissioned properties in Mumbai and Kolkata from 2002-03. Hotels in the metros primarily serve the business segment and thereby their occupancy rates are much higher than hotels in leisure segments. Higher occupancy rates result in relatively lower incidence of fixed overheads and in the scenario of improving ARRs, result in increased profitability. In addition, due to its presence in the metros, the company is in a relatively better position to increase its income from the F&B segment. The higher share of revenues from the F&B segment helps in diversifying the business risk.

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Hotel Industry

RoCE highest in the industry, margins to improve significantly AHL's operating and net margins are higher than that of its peers and are next to leader Leelaventure Limited. Operating margins have gone up over the years, primarily due to an increase in ARRs and occupancy rates and are expected to improve further in the medium term, with the expected increase in ARRs and occupancy rates. Net margins have grown and are also expected to grow appreciably going forward, in line with increase in operating profits and a reduction in interest costs. capital employed (RoCE) is highest in Its return on the industry,

improving to 11.7 per cent in 2004-05 from 6.9 per cent in 2003-04. With no further capex in 2004-05, unlike other players in the industry, AHL's RoCE improved significantly due to no further infusion of funds. Also, over the medium term, the company will not need to raise any debts as funds would be required only for minor renovations across its properties for which internal accruals would suffice, thereby leading to better gearing. Besides, with no additional debts to be raised, interest costs are expected to fall. With operating profits also expected to improve, AHL's interest coverage ratio would also improve significantly.

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Hotel Industry

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Hotel Industry

BHARAT HOTELS
Background Bharat Hotels owns and operates seven properties in country's metro and leisure destinations, offering more than 1,500 rooms under the "The Grand" brand names. Moreover, the company has a management and franchise tie-up with Hotel Inter-Continental of the Bass Group of Hotels. The company operates four properties under the "InterContinental" brand and the remaining three properties under the "The Grand "brand. City-Wise properties of Bharat Hotel Ltd Location New Delhi Mumbai Bangalore Srinagar Goa Udaipur Khajuraho Total Property No. rooms The 444 403 183 131 255 55 48 1519 of

Inter-Continental Grand Inter-Continental The Grand The Grand Ashok Inter-Continental The Grand Palace Inter-Continental The Grand The Grand Vilas Palace The Grand Temple View

Bharat Hotels: Operating Performance 2003 04 Occupancy Rate 48 (%) ARR (Rs. / day) 3279 RevPAR (Rs. / 1565 2004 05 53 4719 2490 2005 06 64 5814 3717

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Hotel Industry day) Bharat Hotels: Key financial indicators Mar-02 Mar-03 Mar-04 Mar-05 Operating incomes (Rs 546 736 1056 1857 million) Operating margin (Per 28.3 13.61 16.69 24.12 cent) Net margin (Per cent) -1.5 0.1 0.0 1.7 RoCE (Per cent) 0.13 0.49 0.48 2.32 Gearing (Times) 1.01 1.27 0.59 0.53 Interest coverage 6.0 4.2 5.2 8.1 (Times) Presence in the metros to increase profitability The company already has a presence in Delhi and Mumbai, and it has recently entered Kolkata by acquiring the Great Eastern Hotel, which is expected to commission operations in 2007. Hotels in the metros primarily serve the business segment and thereby their occupancy rates are much higher than hotels in the leisure segments. Higher occupancy rates result in relatively lower incidence of fixed overheads and in the scenario of improving ARRs, result in increased profitability. In addition, due to its presence in metros, the company is in a relatively better position to increase its income from the F&B segment. The higher share of revenues from F&B segment helps in diversifying the business risk. Net margins the lowest in the industry

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Hotel Industry The operating margins of the company are relatively lower as compared per to peers available like Asian Hotels and Hotel Leelaventure, primarily due to relatively lower RevPARs (revenues room). In spite of average operating margins, the net margins of the company were very low in 2004-05 on account of an increase in interest costs. The interest costs were high due to increase in debt to fund the new properties in Mumbai and Goa. With huge capex undertaken, the RoCE of the company has been the lowest in the industry. Expanding its presence across cities in India By 2007: To have hotels in Kolkata (acquired Great Eastern Hotel), Bekal in Kerala and Ahmedabad (currently under construction) By 2009: To expand to Chennai, Jaipur, Hyderabad, Amritsar, Chandigarh and Noida.

EIH LIMITED
Background Founded by Rai Bahadur M S Oberoi as The East India Hotels Limited in 1949, EIH is the largest company in the Oberoi Group. It operates hotels under the 'Oberoi' and 'Trident' brands. The 'Oberoi' hotels are luxury hotels in the premium segment, serving foreign and domestic business, and leisure travellers. The 'Trident' hotels are high- quality, mediumpriced hotels, and have been accorded a 4 or 5-star rating.

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Hotel Industry Currently, the company operates 2,828 rooms in the country, spread across 19 domestic properties. EIH Hotels: Operating Performance 2003 04 Occupancy Rate 58 (%) ARR (Rs. / day) 4940 RevPAR (Rs. / 2848 day) 2004 05 67 5845 3889 2005 06 66 7472 4901

EIH Hotels: Key financial indicators Mar-02 Mar-03 Mar-04 Mar-05 Operating incomes (Rs 4128 4218 4907 6110 million) Operating margin (Per 20.6 17.3 21.2 26.4 cent) Net margin (Per cent) 6.1 3.6 4.5 5.4 RoCE (Per cent) 4.3 3.6 4.7 8.3 Gearing (Times) 0.83 1.1 1.3 1.3 Interest coverage 3.28 2.63 2.51 2.2 (Times) Amongst the larger players in the industry EIH is the third largest hotel chain in India, after the Taj Group of Hotels and ITC Welcomgroup. Indian Hotels Corporation Ltd (IHCL), which owns the Taj brand, is the biggest player. EIH's favorable business position in the luxury hotel industry emanates from its strong brand equity, relatively large scale of operations and the favorable geographic mix of its properties. The Oberoi and Trident brands continue to be associated with luxury and
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Hotel Industry high levels of comfort and service quality, which are the differentiating factors in the 5-star hotel segment. The largest share of its revenues comes from its Mumbai properties, properties. Lack of asset diversification to weaken market followed by its Delhi and Bangalore

position (in value terms) in the medium term EIH's high dependence on its Mumbai properties shows weak asset diversification. The company's properties in Mumbai (The Oberoi and The Hilton Towers) accounted for around 47 per cent of the room revenues in 2003-04. EIH's Bangalore and Delhi properties will register a higher growth in RevPARs than its Mumbai and Kolkata properties, due to intense competition from Indian Hotels (Taj Group), ITC Hotels, JW Marriot and Hyatt Regency (Asian Group). The increasing competition in Mumbai will continue to exert pressure on the company's market position. EIH to adopt management contract route for growth EIH has decided to pursue an active growth strategy by acquiring management contracts in India and abroad. It is currently looking at purely managed Trident hotels in cities such as Hyderabad, New Delhi, Kolkata, Pune and Ahmedabad. Building a new hotel is a capital-intensive

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Hotel Industry venture. By entering into management contracts, EIH can increase its revenue directly without affecting its cash flows. EIH's plans to expand in Thailand, Cambodia and Dubai to provide greater brand visibility EIH is now negotiating for suitable Greenfield hotel projects (through the management contract route) in Thailand, Cambodia and Dubai three places where the group does not have a presence. A presence in international markets will give EIH greater brand visibility and help enhance its distribution strengths. Net margins and RoCE lowest in the industry Although EIH has moderate operating margins of 26.4 per cent, its net margins are the lowest in the industry at 5.4 per cent. In spite of having moderate operating margins, its net margins were low due to an increase in the interest costs. The interest costs increased following the deferment of the Trident project, due to which interest costs were not capitalized. While the company's RoCE has improved significantly from 4.7 per cent in 2003-04 to 8.3 per cent in 2004-05, its RoCE is the lowest in the industry. The primary reason for this is the substantial capital blocked in the Trident project at Bandra-Kurla complex (EIH has already spent around Rs 3,100 million).

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Hotel Industry Financial flexibility to remain constrained The company's expansion plans over the next 2 years are outlined below: Setting up a 5-star deluxe hotel in Bangalore, with an inventory of 200 rooms and a service apartment, with an inventory of 100 rooms. The project is expected to cost around Rs 2,500 million Commencing work on 'The Trident' at Bandra-Kurla complex, with an inventory of 440 rooms. The project will cost around Rs 6,500 million (EIH has already spent around Rs 3,100 million on this project).

HOTEL LEELAVENTURE LIMITED

Background Leela Scottish Lace is the key promoter of Hotel Leelaventure Ltd (HLVL). After the equity issue in March 2005, its stake has reduced from 68.5 per cent to below 50 per cent. HLVL has a presence only in the premium segment, with properties in Mumbai, Goa, Bangalore and Kerala. All the properties are owned and operated by the company. However, for its Mumbai and Bangalore properties, it has a management and franchisee agreement with Kempinski, and it has a collaboration agreement with GHM (Mauritius) for its Goa property. Besides, HLVL has signed a management agreement with Ambience Hotels and Resorts Limited to manage a 5-star deluxe hotel, with 319 guestrooms and

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Hotel Industry suites and 90 serviced residences, which is under

construction at Gurgaon. Hotel Leelaventure: Operating Performance 2003 04 Occupancy Rate 67 (%) ARR (Rs. / day) 5766 RevPAR (Rs. / 3879 day) 2004 05 76 7516 5714 2005 06 77 9778 7543

Hotel Leelaventure: Key financial indicators Mar-02 Mar-03 Mar-04 Mar-05 Operating incomes (Rs 871 1352 1976 2662 million) Operating margin (Per 24.8 23.7 42.2 48.6 cent) Net margin (Per cent) -3.0 11.7 4.0 17.2 RoCE (Per cent) 1.6 6.1 6 9.1 Gearing (Times) 3.15 3.08 2.76 1.59 Interest coverage 1.6 1.5 1.6 2.3 (Times)

A relatively small player in the industry HLVL is a relatively small player in the hotel industry, with a presence in the premium segment (5-D and 5-star) in Mumbai, Bangalore, Goa and Kerala. The Bangalore property accounts for a large part of the company's revenues. HLVL's property in Bangalore has been performing
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Hotel Industry extremely well, and it tops the market there in terms of RevPARs. Strong presence in Bangalore The Leela is the strongest player in the Bangalore market. The Leela was the first to hike room rates in the Bangalore market, and the other players slowly followed suit. In terms of RevPARs, The Leela and Taj West End will be in the same band in comparison with ITC Windsor Manor, Le Meridien and Taj Residency, which are in the lower band. The Leela Palace Kempinski, Bangalore, is the leader in the Bangalore market. The company has plans to add another 120 rooms to its Bangalore property, which is expected to be operational in the second half of 2006-07. This will further improve HLVL's competitive position in the market and will continue to be a major revenue generator for the company. HLVL to continue to have the highest operating margins in the industry; net margins to improve marginally HLVL's operating margins have been traditionally the highest in the industry. HLVL's operating margins rose to 48.6 per cent in 2004-05 from 42.2 per cent in 2003-04. The relative high RevPARs earned by the Bangalore property has resulted in higher margins for the company, followed by its Mumbai and Goa properties. Over the medium term, HLVL's

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Hotel Industry phenomenal operating margins will be maintained with the expected increase in ARRs and occupancy rates. In line with HLVL's operating margins, its net margins are expected to improve slightly. Financial flexibility to be 'average' over the medium term The company's expansion plans are outlined below: Adding 120 rooms to its Bangalore property, thereby increasing its inventory from the current 254 rooms to 374 rooms Setting up a hotel in Chennai, with an inventory of 260280 rooms Setting up a hotel in Hyderabad, with an inventory of around 300 rooms Setting up a hotel in Pune, with an inventory of around 260 rooms Completion of construction of the hotel in Udaipur, which has been under construction for a couple of years

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Hotel Industry

INDIAN HOTELS COMPANY LIMITED

Background Indian Hotels Company Ltd (IHCL), incorporated in 1902 by Jamshedji Tata, became a public limited company in 1958. IHCL operates its hotels under the "Taj Hotels and Palaces" brand. Currently, IHCL is the largest hotel company in India in terms of its both revenues and number and of rooms. Through subsidiaries, associates management

contracts, IHCL operates 71 properties with 8,680 rooms in India and abroad and more than 200 food and beverage outlets. IHCL: Operating Performance 2003 04 Occupancy Rate 71 (%) ARR (Rs. / day) 4531 RevPAR (Rs. / 3233 day) IHCL: Key financial indicators Mar-02 Mar-03 Mar-04 Mar-05 Operating incomes (Rs 5852 5763 6668 8580 million) Operating margin (Per 18.2 17.7 15.6 23.4 cent) Net margin (Per cent) -4.4 5.8 6.5 11.5 RoCE (Per cent) 3.5 6.4 5.5 8.4 Gearing (Times) 0.83 0.81 1.59 0.91 Interest coverage 1.62 2.43 3.34 4.26 (Times) 2004 05 76 5627 4273 2005 06 77 7289 5600

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Hotel Industry

A leader in the industry IHCL is the market leader in the hotel industry, while its Taj Group of Hotels enjoys a strong brand presence. The group operates around 71 properties with 8,680 rooms. IHCL's strong brand position and extensive reach within the country and overseas gives it a competitive edge. The company has been upgrading and renovating its existing properties and expanding its presence through management contracts and investment in associates and affiliates. IHCL is expected to maintain its dominance over the medium term and be in the forefront in major cities. Entering into management performance. Continues to be in the forefront in major cities Nearly 65 per cent of IHCL's revenues come from five cities: Bangalore, Mumbai, Delhi, Chennai and Kolkata. Across all the cities, IHCL continues to be in the forefront in most cities due to its strong brand image (except in Bangalore, where it is next only to market leader, The Leela Palace, and Delhi, where it is behind the market leader, Hotel Imperial). Clear leader in South Mumbai in terms of RevPARs The Taj group and the Oberoi group have targeted different clienteles and positioned their two properties contracts would boost IHCL's overall

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Hotel Industry differently. Thus, Taj Mahal Palace and The Oberoi aim to maximize RevPARs by having high ARRs, while Taj Mahal Towers and Hilton Towers maximize occupancies to drive RevPARs. However, the Taj Mahal Palace is ahead of The Oberoi and The Taj Mahal Tower, too, is ahead of the Hilton Towers in terms of RevPARs, indicating that IHCL's properties are in the forefront as compared to the properties of its competitor, EIH. Expanding presence across segments IHCL launched its 'GINGER' (earlier 'indiOne' and now renamed 'GINGER') brand of hotel in June 2004 in Bangalore and later in Haridwar in March 2006. Encouraged by its success, IHCL plans to launch more such hotels in Bhubaneswar, Pune, Mysore, Durgapur, Thiruvananthapuram and Goa by the end of 2006 and in the cities of Agartala, Tirupur, Pondicherry and Nashik over the medium term. However, these hotels are being launched via its 100 per cent subsidiary, Roots Corporation Ltd. Hence this will not affect IHCL's (standalone) revenues, but will definitely strengthen its market position. Revenues highest in the industry, but operating margins the lowest Although IHCL has the highest revenues in the industry, its operating margins are the lowest at 23.4 per cent. The

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Hotel Industry primary reason is IHCL's pan-India presence. Although its

operating margins have improved, its net margins worsened due to the phenomenal increase in interest costs (Rs 1,079.3 million in 2004-05 from Rs 560.3 million in 2003-04), following the commissioning of Taj Wellington Mews (service apartment) in September 2004.

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ITC LTD.
Background Established in 1910, ITC today is one of India's largest cigarette manufacturing company with a dominating market share of nearly 80 per cent. Over the years, ITC has diversified into multi-business portfolio, covering Agri-business, hotels, paperboards and specialty papers, packaging, packaged foods and confectionery, branded apparel, greetings cards and other FMCG products. ITC entered the hotel business in 1975. Today, it has over 66 hotels across India, which includes super deluxe and 5-star hotels. ITC has a marketing and franchise agreement with Sheraton Hotels and Resorts worldwide. With effect from April 1, 2004, ITC Ltd merged its subsidiaries, ITC Hotels and Ansal Hotels, with itself. The main objectives for merging its hotel subsidiaries with itself was to minimize tax outgo on consultancy services rendered between these units, synergize operations under an 'umbrella brand' and also take advantage of the tax benefits arising out of the accumulated losses of Ansal Hotels.

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Hotel Industry

Revenue Break up (2004 - 05)

7.4 4.3 4.2 9.1

Cigarettes A gri - Business Paper H otel O thers

74.9

ITC Ltd: Operating Performance 2003 04 Occupancy Rate 65 (%) ARR (Rs. / day) 4100 RevPAR (Rs. / 2656 day) ITC Ltd: Key financial indicators Mar-03 Mar-04 Mar-05 Operating incomes (Rs 1921 2575 5730 million) Operating margin (Per 5.3 12.6 24.6 cent) RoCE (Per cent) 1.1 3.3 10.1 2004 05 70 4948 3488 2005 06 71 6594 4708

Relatively

strong

player

with

presence

across

different segments

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Hotel Industry The ITC Welcomgroup is the second largest hotel chain in India, next only to Indian Hotels. The group has over 60 properties and spread across the either country. directly The or ITC through Welcomgroup has a presence in the premium, budget heritage segments, subsidiaries and joint ventures. The hotels are branded under four main categories: ITC prefixed hotels in the super deluxe category, the WelcomHotel brand for 5star hotels, Fortune Hotels for the mid-market segment, and WelcomHeritage for palaces, forts, havelis and resorts at leisure tourist destinations. Increasing presence in business, mid-market and heritage segment ITC Ltd has a major presence in the leisure segment. It has strengthened its presence in the business segment as well in the last 3-4 years, with the addition of the ITC Grand Maratha (Mumbai) and ITC Sonar Bangla (Kolkata). ITC's second hotel in Mumbai, in the ITC Grand Central, commenced operations 2004-05. This has further

strengthened the company's position in Mumbai. Significant improvement of revenues and operating margins ITC Ltd's revenues from the hotel business have improved significantly with the increase in occupancy rates and

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Hotel Industry average room rates (ARRs) across all its properties. The operating margins have improved with the increase in the ARRs. With increase in profitability, the RoCE of the company has increased over the years.

India and the World Market

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Hotel Industry

Tourism industry witnesses rapid growth worldwide Over the past has few had years, to the travel with and a tourism of industry contend series

unprecedented challenges. International events such as terrorism and SARS, and economic turbulence have led to significant changes in travel and tourism demand. According to the World Travel and Tourism Council (WTTC), in 2006, the world travel and tourism demand is expected to the tune of US $6,477.2 billion, a growth of 4.6 per cent over 2005. In 2006, the travel and tourism industry should contribute 3.6 per cent to worldwide GDP. Travel and Tourism Demand 2006 (US $) US $ mn European Union North America Northeast Asia Central & Eastern Europe Southeast Asia Latin America Middle East Sub Saharan Africa South Asia Others Entire World 2,149,36 9 1,982,17 8 1,078,26 9 244,631 235,611 163,362 147,565 75,346 72,297 328,591 6,477,21
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% of total demand 33.18 30.6 16.65 3.78 3.64 2.52 2.28 1.16 1.12 5.07 100

Hotel Industry 9 Out of the total demand of US $6,477.2 billion, the travel and tourism demand in South Asia is expected to amount to US $72.3 billion, only a 1.12 per cent of the total world demand.

South Asia's market share of the world total demand 2006 (%)
1%

99% South Asia Rest of the World

The demand for India's travel and tourism is expected to amount to US $53.54 billion in 2006, thereby accounting for only 0.8 per cent of the world travel and tourism demand. However, India's market share of South Asia's total demand and of the world travel and tourism demand has been on an uptrend. Reasons for India's negligible market share of the world's travel and tourism demand
High taxes render Indian market uncompetitive

for overseas travellers: In India, the cost of travel and hotel facilities is high due to the high taxes levied
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Hotel Industry on ATF (aviation turbine fuel), rooms, and F&B. These taxes account for a significant portion of the total travel cost and compare unfavorably with the lower taxes levied in competing destinations, discouraging tourists, especially leisure travellers.
Poor infrastructure:

Accommodation infrastructure

has witnessed the slowest growth. The availability of hotel rooms is still only a half of the number required to host even a modest target of 5 million visitors.
Non-affordable hotel rooms: Currently, a 6 nights/7

days package to India costs around 30 per cent more as compared to other countries in South and South-East Asia, while a premium segment hotel room is 25-30 per cent dearer.
Air connectivity though better than in the past

not comparable to other countries: International airfare to India is higher than to Malaysia or Thailand since there are more scheduled carriers to these two countries, and they also have a large movement of charter operations, which keeps competition levels high and air fares low. In addition, high landing charges, fuel taxes and high operational costs have resulted in high airfares in India.
Improper maintenance of monuments and other

places of tourist interest: Increasing evidence shows that an integrated approach to tourism planning and

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Hotel Industry management is now required to achieve the type of responsible tourism, which sustains the wellbeing of the land, culture, environment and biodiversity of the place being visited.
Lack of awareness and information on India's

tourism potential: Although the government is laying emphasis on promoting India as a tourist destination, it still needs to go a long way to compete with other countries. Besides, high price of land, complex building by-laws and absence of single window clearance have been the major disincentives in this sector. However, the industry is being benefited by some positive measures Focus on the development of tourist destinations and circuits In Union Budget 2006-07, the government has focused on developing 15 tourist destinations and circuits, development of 50 villages with core competency in handicrafts, handlooms and culture. Development of hotel management institutions
In Union Budget 2006-07, the government has focused

on the development of four new institutes of hotel management. This is expected to improve the availability of skilled manpower.

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Hotel Industry Increasing focus on tourism promotion CONCLUSION: Though belated, India, is attempting to focus on tourism promotion and enhancing the visibility of its destinations by:
Vigorously marketing India as a safe destination Entering into bilateral co-operation agreements with

tourism ministries of various other countries

Bibliography

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Hotel Industry The following are the secondary source of information referred to for the purpose of data collection Search Engines: www.google.com www.altavista.com Websites: www.ibef.org www.dreamgains.com www.fhrai.com Magazines & Newspaper: Newspaper The Economic Times The FHRAI magazine

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