The combined forces of an economic recession and H1N1 epidemic are causing the hotel industry to suffer in a time

of great challenge. Business travel is down because of the recession and the pandemic has significantly reduced tourism. This paper considers three types of hoteliers in current market conditions in light of Porters theories. Now more than ever Porters well regarded thoughts on business strategy and the !nternet first published in "##1 are crucial to consider and they contribute to an analysis and criti$ue of the hotel industrys internet strategy. !n his Harvard Business %eview article of "##1 Porter said &To find the answer we need to look beyond the immediate market signals to the two fundamental factors that determine profitability' !ndustry structure which determines the profitability of the average competitor and sustainable competitive advantage which allows a company to outperform the average competitor( )Porter "##1*. This paper e+amines the five forces which impact competitiveness within and thus the profitability of a competitor in the hotel industry. ,rom the guidance provided in the ,ive ,actor -odel recommendations are made to enhance and refine internet strategy for the considered hotel chains.

Hotels The hotels chosen for this paper are' .intage !nns primarily located in Niagara/ on/the/0ake 1anada 2heraton Hotel chain and Best 3estern Hotel 1hain. &4very business must design a strategy for achieving its goals consisting of marketing strategy and compatible technological strategy and sourcing strategy(. )5otler 6 5eller "##7* &To identify rivals in the international hotel industry current practice is to use price segment and pro+imity( )-atthew "###*. !n previous work -ichael Porter outlined three additional generic strategies that could be used. These are' overall cost leadership differentiation and focus. &The point to be understood here is that any company can have a core competence but it is competitive competence which gives them a chance to win. ,or e+ample %it8/1arlton ,airmont 0oews ,our 2easons !ntern/1ontinental 3 Hotel Hotel 2ofitel 0e -eridien are ruling the hospitality industry. This is because of there ability to set up state of the art hotels and their ability to provide e+ceptional customer service with focus on customer relationship management. The customer relationship is a uni$ue selling point )92P*. The &2ervice( is both their core competitiveness and also their competitive competence( )Trehan "##:* Porters ,ive ,actor -odel ;ccording to Porter )"##1* the internet is an enabling technology that can be used within the conte+t of a good business strategy in any industry. ;lthough the !nternet alters industry structures and levels the competitive ground often dampening profitability in the industry it can be used to encourage and promote

greater profitability if properly implemented. The five forces that impact competitiveness which are outlined in Porters 1<=# work are' barriers to entry threat of substitutes bargaining power of buyers and sellers and the rivalry among e+isting competitors. !n "##1 Porter considered these factors in light of the internet technologies. The influence of the internet has been profound especially in the hotel industry. ;ccording to Porter each factor has a different relevance or impact on different businesses so they are presented below in order of impact for hotels. Porter indicates that the great parado+ of the internet is that the benefits it creates such as making information easily available reducing purchasing hassles and marketing which allow customers to find what is of interest are the very things that make it more difficult for companies to &capture those benefits as profits.( )"##1*. The most important determinant of a marketplaces profit potential is the intrinsic power of buyers and sellers. Threat of 2ubstitute >oods !n the hotel industry there is usually another hotel ?ust around the corner. They appear in all price ranges with varying levels of service and amenities. The constant challenge will always be to get the guest to choose your hotel over the competitor. The internet makes the overall market more efficient while e+panding the si8e of the potential market and creating new substitution threats. >iven the potency of this threat a superb internet presence is vital. ;nother ongoing threat is that another hotel chain may erode your customer base with a newly formulated internet approach or marketing campaign. This is supported by the following $uote from 0uck and 0ancaster )"##@*' &The development of value chain process analysis supported by collaborative event management over the !nternet the structuring and the sharing of customer focused value chain data powerfully enhance the performance of value chains and of electronic commerce.( Bargaining Power of Buyers Business persons choosing a hotel for business travel are savvy consumers and they are comfortable with computer technology. !t has become very simple for them to go online and book a hotel. They no longer need travel agents corporate travel consultants or middle men of any kind to determine where they will stay. Porters model predicts this elimination of intermediaries. Tourists are more and more capable of using the internet in the same way but in another fulfillment of Porters model they are more often bonding together in a novel way. They are finding internet businesses like cheaphotels.com which will negotiate or discover bargains for them. Both of these processes shift the bargaining power to the end user as the Porter model predicts and these same freedoms reduce the cost of switching so that loyalty is a thing of the past unless a particular hotel uses its one time opportunity when a customer stays at the

hotel to deeply impress the customer with a uni$ue and valuable differentiator. %ivalry among e+isting competitors The rivalry among competitors in the hotel industry is fierce. 3hen potential customers can learn about a hotel on line the internet reduces the differences among competitors. People tend to seek the best price for the best e+perience and the tendency is to reduce price to be competitive. The internet covers wide geographical areas so the market is widened increasing the number of competitors. ,or e+ample someone who wants to spend the day in the historic town of Niagara/on/the/'0ake can easily choose a hotel in a near by town if the amenities or the price are better. .ariable and fi+ed costs can be different in areas that are more e+pensive to live and work making it more difficult for a hotel in Niagara on the 0ake to reduce their prices to the level of one in nearby 2t. 1atharines. Barriers to 4ntry The initial investment in the hotel industry creates $uite a barrier to entry but certain barriers to entering the hotel market are reduced by the internet. ; presence on the internet reduces upstart marketing costs somewhat and gives the new competitor access to potential suppliers and resources. 4ven a bed and breakfast can use the websites of large chains to understand the key marketing concepts and the lures for customers. 2witching costs are usually nil for a consumer. )-cNurlin "##7* ; vital barrier would be differentiation. ; hotel that can differential itself by location by service amenities or some other $uality has the potential to attract and keep its clients. ;nother barrier to entry would be e+pertise. 9nfortunately in a mobile society employees fre$uently leave one hotel chain to work in another and they take that e+pertise in terms of training or of e+perience with them. !t is in the areas of e+pertise and of differentiation that a hotel can make the greatest impact on its client and thereby on its bottom line. !n fact many established companies have synergies between their established business and online technology. Bargaining power of suppliers 3hile this is not a substantial threat in the hotel industry it can have impact especially in the area of labor. 3ith an aging population there are fewer people to fill service industry ?obs and hotels which can attract e+cellent staff have a greater chance of providing e+cellent and e+ceptional e+periences to their clientele. ;s part of their internet strategy all hotel chains should have a section on recruitment for employment. The other supplies that are needed by hotels are also easier to attain through internet channels whether originated by the supplier or by the hotel chain. 3ith

their products in greater demand by greater numbers of hoteliers suppliers gain some measure of power by competition for their offerings. %ecommendations ;ll of the hotels listed above can benefit from internet applications that produce greater value in the value chain. The firms infastructure can benefit from financial and 4%P systems. 1ommunicating with investors can also be done by internet. Human resources can be managed by the internet as part of the overall strategy as well providing internet based self service personnel and benefits web based training internet based sharing of information and knowledge and electronic time and e+pense reporting. .alue can be increased by standardi8ing technology across multiple locations forming knowledge directories and allowing real time access to online booking information. ,inally every hotel could benefit by online inventory control and forecasting systems with suppliers. These improvements can all lead to greater profitability )Porter "##1* 4ach type of hotel needs to identify its uni$ue strengths and target market and align its internet strategy to support that identity 3ill the chain choose to be low cost or to command a premium priceA Bistinguishing oneself from the competition becomes vital. This can be enhanced by superior technology through superior inputs through better training of staff or through better management. Bifferentiation adds value but the internet makes it hard to maintain those distinctive strategic positions because it eases change to best practices and it improves operational effectiveness. Never the less such distinctions make the business more profitable. By its basic nature the hotel industry is fragmented. The internet makes it easier for travelers from far and wide to learn about the hotel or to order a room but the customer must still come to the hotel for the service. This makes it more likely that the profitability will be there for when sale is easy to transact and complete the profit margin usually decreases. Porter points out similar e+amples with %eal 4state and with furniture sales. Bealing directly is great for hotels. Cther than travel agencies who arranged hotel stays the hotel business has always been a face to face business and this normally sustains the economic value of the transaction. ,or all of these chains the internet complements rather than cannibali8es established ways of doing business. !t becomes one more link in the value chain. 4very chain listed below should use its website to attract employees and to communicate a philosophy of management. !n the employment section the designers must remember that they are communicating not only to potential employees but also communicating the service standards that the guests can e+pect.

CORPORATE SUSTAINABILITY AND SOCIAL RESPONSBILITY

As a part of Tatas; Indias premier business house; Taj Hotels, have always believed in society and environment being integral stakeholders in our business along with its shareholders, customers, vendors and others !ver the last decade, the movement towards ecologically sound tourism has gained urgency and importance across the globe and we recogni"e that responsible practices in vogue are as diverse as the geographies Taj promote corporate citi"enship through our strategic public#private partnerships which encourage building livelihoods of less#advantaged youth and women The causes they promote include reducing malnutrition, promoting indigenous artisans and craftsmen and enhancing employability of identified target groups by sharing our core competencies as a leading hospitality company Taj have the uni$ue scope and opportunity to develop raw potential into a skilled workforce that is immediately employable by various players in the industry A majority of its community projects are focused around e%tending its key strengths in food production, kitchen management, housekeeping, customer service and spas to promote economic empowerment of candidates from vulnerable socio#economic backgrounds The group is fully committed to the cause of building a sustainable environment by reducing the impact of its daily operations on the environment and improving operational efficiencies, resource conservation, reuse and recycling of key resources A glimpse of indicative projects undertaken by Taj group Tajs si%th &orporate 'ustainability (eport was submitted to the )nited *ations +lobal &ompact society in August, ,--. The )nited *ations +lobal &ompact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, safety / security, environment and anti#corruption This &orporate 'ustainability report also serves as their +(I 0+lobal (eporting Initiative1 as well as Triple 2ottom 3ine report The report focuses on identified priorities at IH&3 and responds to key stakeholder needs Taj plan to continue and further strengthen its commitment to the environment and societies in which we operate

EARTH
In an endeavour to reinstate its vision and efforts to boost sustainable tourism, Taj Hotels (esorts and 4alaces presented 5A(TH 05nvironment Awareness / (enewal at Taj Hotels1 this year Implementing schemes such as the +angroti +lacier &lean#)p 5%pedition, as well as designated 5arth rooms, which minimise environmental impact, Taj is one of Asias largest group of hotels to commit to energy conservation and environmental management 5A(TH has received certification from +reen +lobe, the only worldwide environmental certification program for travel and tourism

The Taj began a century ago with a single landmark 6 The Taj 7ahal 4alace Hotel, 7umbai Today, the various Taj hotels, in all their variety and historical richness, are recognised internationally as the symbols of true Indian hospitality The &ompanys history is integral to Indias emergence into the global business and leisure travel community; and looking to the future, Taj Hotels (esorts and 4alaces is well positioned to meet the increase in travel activity with the rapid e%pansion of the Indian economy

Porter's 5 Forces Model

The state of competition in an industry depends on five basic forces, which are diagrammed above The collective strength of these forces determines the ultimate profit potential of an industry 8hatever their collective strength , the corporate strategists goal is to find a position in the industry where his or her company can best defend itself against these forces or can influence them in its favor

Contendin Forces T!re"ts o# Entr$%

*ew entrants to an industry bring new capacity, the desire to gain market share, and often substantial sources &ompanies diversifying through ac$uisition into the industry from other markets often leverage their resources to cause a shake up The seriousness of the threat of entry depends on the barriers present nd on the reaction from e%isting competitors that the entrant can e%pect There are si% major sources of barriers to entry These are9 5conomies of scale 4roduct differentiation &apital re$uirements &ost disadvantages Independent of si"e Access to distribution channels +overnment policy

S&''liers%
'uppliers can e%ert bargaining power on participants in an industry by raising prices or reducing the $uality of purchased goods and services 4owerful suppliers, thereby, can s$uee"e profitability out of an industry unable to recover cost increases in its own prices The power of each important supplier group depends on a number of characteristics of its market situation and on the relative importance of its sales or purchases to the industry compared with its overall business A supplier group is powerful if it is dominated by a few companies

and is more concentrated than the industry it sells Also if it poses a credible threat of integrating forward into the industrys business This provides a check against the industrys ability to improve the terms on which it purchases

B&$ers%
&ustomers likewise can force down prices, demand higher $uality or more services, and play competitors off against each other# all at the e%pense of industry profits A buyer group is powerful if it is concentrated or purchases in large volume 3arge volume buyers are particularly potent forces if heavy fi%ed costs characteri"e the industry# as they do in metal containers, corn refining, and bulk chemicals, for e%ample# which raise the stakes to keep capacity filled The product it purchases from the industry are standard or undifferentiated The buyers, sure that they always can find alternative suppliers, may play one company against another, as they do in aluminium e%trusion Another case can be when the products the buyer purchases from the industry from a component of its product and represent a significant fraction of its cost The buyers are likely to shop for a favorable price and purchase selectively 8hen the products sold by the industry in $uestion is a small fraction of buyers costs, buyers are usually much less price sensitive

S&(stit&tes%
2y placing a ceiling on the prices it can charge, substitute products or services limit the potential of an industry )nless it can upgrade the $uality of the product or differentiate it somehow, the industry will suffer in earnings and possibly in growth 'ubstitutes not only limit profits in normal times but also reduce the bonana"a an industry can reap in boom times The producers of fiberglass insulation enjoyed unprecedented demand as a result of high energy costs and severe winter weather 2ut the industrys ability to raise prices was tempered by the plethora of insulation substitutes, including cellulose, rock wool and 'tyrofoam (ivalry of Taj among established firms9 !beroi hotels 3eela hotels IT& +rand 3e 7eridien 2argaining power of buyers is very low 2argaining power of suppliers is moderate Threat of new enterants9 :or Taj, competition in 7umbai has turned fierce as a result of new hotels, such as IT& +rand 7aratha, 3e 7eridien and Hyatt, coming up close to the

airport, and enjoying ta% benefits too However in 2angalore, Taj continues to remain at the *o ; position because of the booming IT sector and lack of five#star rooms, chiefly to accomodate international passengers 4otential 5ntrants +lobal hotel groups entry 2uyers +lobal tourists 7edical tourists Industrialist people 'ubstitutes 'mall lodges TH(5AT9 HI+H 0because of new class, 3ow otherwise1 &ustomers *eed +ood Hospitality Hygiene food and environment

S&ccess #"ctors #or T") !otels%

Technology related9#)sed of advance technology in hotel premises 7anufacturing# related9# High utili"ation of fi%ed assets <uality control know#how 'erving customer according to their specification =istribution#related9# 4resence of hotel chain at various places A strong network 7arketing related9# 2readth of product line and product selection 4ersonali"ed customer services

A well#known and well#respected brand name

S*OT An"l$sis o# TA+ Hotels

'trengths 9 2rand loyalty &redibility Huge (eputation 4atent protection 8eakness9 High cost service *ot proper network in semi# urban 3ack of safety measure !pportunity 9 (ising income +lobali"ation *ew +eographical location Threats 9 :luctuations in international tourist arrivals Increasing competition Terrorism

CONCLUSION
Taj Hotels (esorts and 4alaces is one of Asia>s largest and finest group of hotels The &ompany is rapidly emerging as a global brand by integrating an international network of lu%ury hotels within the chain Taj Hotels is part of the Tata +roup, India>s premier business house Taj 7ahal 4alace Hotel in 7umbai, India was the subject of many newscasts since *ovember ,?,,--@ The terrorist attacks not only killed and wounded many, but also caused major damage to the iconic hotel Tata, a pioneer industrialist and philanthropist, conceived the idea of building a hotel in the wake of the bubonic plague which had devastated 2ombay in the late ;@.-s Tata>s sole wish was to attract people to India, and incidentally to improve 2ombay The severely damaged hotel has to be rebuilt The si%th floor is gutted, and many of its restaurants, including the famous 8asabi, burnt and the splendid dome is shaken because of the many e%plosions The anti$ue chandeliers and priceless artwork are all lost forever

2ut the Taj 7ahal 4alace and Tower stands as an icon of the city of 7umbai, a symbol of both independence and dignity It will also stand in the future as a representation of the indomitable human spirit of the people of 7umbai displayed in the face of the greatest adversity

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Taj Hotels maintains leadership position on sustainability

Taj Hotels, (esorts and 4alaces 0Taj1 has e%tended its global partnership with 5arth&heck, the worlds leading sustainable tourism brand, to reinforce its commitment to delivering the highest level of sustainable operations and community engagement Taj is recognised as one of the worlds leading hotel groups, with .A hotels located in BB areas across India, with an additional ;? International hotels in the 7aldives, 7alaysia, Australia, )C, )'A, 2hutan, 'ir 3anka, Africa and the 7iddle 5ast Taj endeavours to achieve sustainable tourism through the delivery of a company#wide platform of environment initiatives These initiatives include, installing water recycling plants, generating biogas from organic waste and reaching out to the community through employment, employability education and entrepreneurship The group is also one of Asias largest hotel chains to commit to energy conservation and environmental management

The Indian Hotels &ompany 0IH&31 and its subsidiaries, collectively known as Taj Hotels (esorts and 4alaces, is one of Asia>s largest and finest group of hotels Incorporated by the founder of the Tata group, Damsetji Tata, the company opened its first property, the Taj 7ahal 4alace, in 2ombay in ;.-A The Taj, a symbol of Indian hospitality, completed its centenary year in ,--A Taj +roup comprises .A hotels in BA locations, including ,B +inger hotels across India, with an additional ;? international hotels in the 7aldives, 7alaysia, Australia, )C, )', 2hutan, 'ri 3anka, Africa and the 7iddle 5ast :rom world#renowned landmarks to modern business hotels, idyllic beach resorts to authentic grand palaces, each Taj hotel offers an unrivalled fusion of warm Indian hospitality, world#class service and modern lu%ury The most significant additions to the Taj portfolio have been The 4ierre, the iconic landmark hotel on *ew Eork>s :ifth Avenue, the Taj &ape Town in 'outh Africa and the latest Taj :alaknuma 4alace in Hyderabad In ;..A, the company established the Indian Institute of Hotel 7anagement in Aurangabad, 7aharashtra, in western India Are"s o# (&siness IH&3 operates in the lu%ury, upper upscale, upscale and value segments of the market through the following9

Taj is the flagship brand for the worlds most discerning travelers seeking authentic e%periences in lu%ury 2esides lu%urious living and fine dining, Taj Hotels also promise a whole new e%perience of tran$uility and total Fwellness through Diva 'pas, a uni$ue concept that brings together the wisdom and heritage of the Asian and Indian philosophy of wellness and well#being Taj 'afaris is India>s first and only wildlife lodges circuit that allows travelers to e%perience the unparalleled beauty of the Indian jungle amidst lu%urious surroundings Givanta by Taj provides the new generation of travelers a contemporary and creative hospitality e%perience that matches their work#hard, play#hard lifestyles The +ateway Hotel chain is a pan#India network of hotels and resorts that offers business and leisure travelers a contemporary hotel e%perience +inger is IH&3s revolutionary concept in hospitality for the value segment Taj Trade and Transport operates the chain of Taj 'alon and Taj Cha"ana lifestyle bouti$ues across selected properties of the Taj group Taj operated salons are currently operating at ;, locations in the group

The other areas of business include9 Taj Air, a lu%ury private jet operation and Taj Eachts, which can be used by guests in 7umbai and Cochi, Cerala The company also operates airline#catering services +oint ,ent&res- s&(sidi"ries- "ssoci"tes Taj 'ats Air &atering9 a joint venture with 'ingapore Airport Terminal 'ervices, a subsidiary

of 'ingapore Airlines, Taj'ats Air &atering is the largest airline catering service in 'outh Asia (oots &orporation9 a wholly owned subsidiary that operates the +inger chain of budget hotels in India Inditravel9 a subsidiary which offers end#to#end solutions for travel re$uirements, with operations spanning across cities and locations where the Taj group has a presence Inditravel meets multiple re$uirements, from lu%ury yachts in Cerala, to Daguars and 3and (overs in some of the locations Loc"tion IH&3s head office is in 7umbai, India Taj properties are located in Asia, )C, )', Australia and Africa

A(o&t IHCL
The Indian Hotels &ompany 3td is a subsidiary of Tata 'ons 3td It is mostly promoter driven with promoters contributing the largest part of the shareholding The detailed shareholding pattern is as given below

Exhibit 1: Share Holding Pattern of IHCL

7r (aymond 2ickson is the 7anaging =irector / &5! of the company 7r 2ickson brings in international hotel e%perience and was voted as one of the Top ;- 2est Hotel 7anagers by 3eaders 7aga"ine from ;..H#,--, I;J

.eneric Str"te ies

IH&3 follows a broad based differentiation strategy They have a differentiation strategy targeting the premium segment 2ut they have also e%panded their offerings internationally to target a broader segment

O'er"tion"l Per#or/"nce
The key operating characteristics of lu%ury hotel industry are occupancy percentage and average revenue per room As the hotel industry have their peak demand during the second half of a year, it is prudent for IH&3 to take necessary steps to improve the occupancy rate in the first half Their occupancy rate of ?HK is way better than the industry average of ?-K but their competitor 3eela Gentures is closing in by maintaining a better occupancy rate I,J Also, IH&3 desperately needs to improve its operational efficiency IH&3s !perating 5%penses 7argin of @AK compared to 3eelas ??K portrays this bad picture

Fin"nci"l Per#or/"nce
As it can be seen from the table below, the consolidated 4rofit after Ta% stood at 0?@ @H1 crores at the end of ,-;; registering a marginal increase of L. BA crores The increase in revenue was mainly on account of additional room capacity being added, higher occupancy, average room rates and revenue per available room 0(ev4ar1 =ecrease in debt proportion did also contribute towards the improvement of contribution margin (oom sales showed a healthy growth over the previous year as a result of higher room rates and occupancies :ood / 2everages grew by ;.K over the previous year IAJ

Exhibit 2: Comparative Financial Performance

Identi#ic"tion o# 0e$ Reso&rces

The G(I* framework has been used to have a resource based view of the firm and identify the key sources of IH&3s competitive advantage

Resource based View

The analysis of various resources of IH&3 has been done and the following five resources have been found to be vital in determining the competitive advantage of IH&3 over other players in the market These resources are being further analysed by applying the G(I* framework

Tangible %esources' Site & Location !ntangible %esources' Po itioning! "rand Strength 1apabilities' S#perior $#e t Servicing! %anagerial &i ion & '#dgement

Summary
The analysis of the resources and the conclusions on the competitive advantages offered by them are summari"ed as under The ability to provide competitive advantage for each sub# factor of G(I* has been given a score on B *et score gives us an appro%imate idea of the net competitive advantage offered by the resource

Exhibit (: S#mmar) of &*I+ ,nal) i

Thus Fsite and location and F2rand strength are two most critical resources available with IH&3

S&st"inin S&'erior Per#or/"nce% Tetr" T!re"t

Tetra threat framework has been deployed to diagnose the sustainability of superior performance of Taj hotels within the Indian 3u%ury Hotels space The resources considered are those identified through the G(I* analysis

The Threat of Imitation

The barriers to imitation for Taj hotels can be discussed under the following heads9

Exhibit -: "arrier to Imitation

:urther, 'ite 6 a key resource cant be imitated by its sheer nature T!e t!re"t o# i/it"tion c"n (e t!&s concl&ded "s (ein Moder"te1

The Threat of Substitution

The major substitutes that challenge the value#addition done by the key resources are 'ervice Apartments and &ompany owned guesthouses 'ervice apartments are flourishing currently due to rising needs of corporate and shortage of hotel rooms in most cities They result in saving of ,B#L-K as compared to the prevailing hotel prices and thus an economical option Taj operates some upmarket service apartments in 7umbai and as a result has a straddled response to this threat T!e t!re"t o# s&(stit&tion c"n (e t!&s ter/ed "s Lo2 to /oder"te1

The Threat of Holdup

The si"e of Tajs vendors is relatively small and conse$uently they have low bargaining power The buying power of lu%ury hotel patrons is very high because of largely undifferentiated products and very low switching costs However, Taj has been able to demonstrate over#average customer loyalty, thus, t!e t!re"t o# !old&' is not credi(le in t!e ne"r #&t&re1

The Threat of Slack

Industrial relations for the company have been cordial and no credible threat is envisaged on this front due to past records and motivated employees The employee motivation levels can be adjudged from the employee sacrifices during ,?M;; attacks T!e o,er"ll t!re"t o# sl"c3 c"n (e t!&s /"r3ed lo21

4"l&e C!"in An"l$sis

=ue to absence of clear flow of activities, an alternate value#chain for the hotel industry is drawn below

Exhibit .: &al#e chain ,nal) i of IHCL

The +uest :eedback 7anagement system in IH&3 helps develop new products and services It also measures guest perception of the 2rands through inclusion of 2rand specific parameters IH&3 continuously renovates their hotels and introduces various state of the art facilities such as Diva 'pa, 8ildlife 3odges, etc N'ervice#4rovidingO refers to the value addition from the core operations of the hotel =irect 5n$uiries and In#house reservation system are the most profitable channels of marketing due to the absence of third party commissions

Str"te ic Fit% Mc0inse$ 5S

The strategic fit of the organi"ation and its readiness for the future was tested using the 7cCinsey H' framework The current and past strategies propose a great fit with the other si% elements e%plaining the reasons for IH&3s balanced growth Strategy9 IH&3 e%panded its hori"on by broadening its international market reach and entering into management contracts in 7e%ico and 2ritish Girgin Islands for development of high end 3u%ury (esorts IH&3 also ac$uired *ew Eork based lu%ury hotel NThe 4ierreO in ,--B as part of its international e%pansion plan Structure9 The major stakeholders in IH&3 are promoters 0Tata 'ons 3td 1 and financial institutionsMbanks Accordingly, the major driving force in decision making is 7r (atan Tata, chairman of IH&3s board of directors Staff9 The recruitment process at IH&3 is completely undertaken by the H( department H( initiatives during the last year were focused on further enhancing the engagement within the workforce, sustaining workforce cost / productivity and enabling a responsive system to the business challenges through optimi"ed use of technology platforms Shared Values9 2usiness e%cellence has been embedded in Tata through processes and methodologies that enable Tata companies to continually improve operations and achieve the world#class mar$uee

Style9 IH&3 believes &orporate +overnance is a continuous journey to provide a congenial environment to harmonise the goals of ma%imi"ing the stakeholders> value and maintaining a customer#centric focus The internal audit process, through its uni$ue FTaj 4ositive Assurance 7odel, which is an objective methodology of providing a positive assurance based on the audits of operating units and corporate functions, is a convergence of 4rocess :ramework, (isk and &ontrol 7atri% and a 'coring 7atri% Skill9 H3G3 has e%cellent branding, positioning, communication and hospitality skills Their re#launch 'urprise &ampaign is appreciated by +uests Taj :orever &ampaign has been adjudged the best marketing programme in the world and awarded many 4ATA awards System9 The &ompany established the Taj 4ublic 'ervice 8elfare Trust 0The Trust1 in response to the terror attack on the city of 7umbai in ,--@ Also, IH&3 continues to voluntarily participate in the globally recognised &arbon =isclosure 4roject to demonstrate its commitment towards performance in climate change mitigation

0e$ As'ects
;1 The IH&3 was the only firm in the 3u%ury hotel industry to add close to ;B-- rooms across all segments This increase in capacity reflects the confidence and health of the firm especially in the face of the grim e%ogenous factors which will be discussed later , IH&3 has been successful in increasing its top line from (s ,,B?, BA million in ,-;- to (s ,,.;L .- million in ,-;; A1 The 3u%ury hotel industry is a capital intensive industry Hence IH&3s debt to e$uity ratio of ; ??, down from ; @. is good, showing stable growth and a promising future L1 The firm has an e%cellent dividend paying record of ;--K for the last four fiscal IH&3 is one of the highest dividends paying company in the hotel industry

Critic"l Iss&es6E7o eno&s #"ctors

The Indian Tourism / Hotel industry was badly hit during the ,--@#,--. lo("l recession It impacted the Indian tourism sector drastically, resulting in a decline in the number of foreign tourists, a major source of customers for the 3u%ury hotel segment in particular 8ith Indian hotels classified into si% categories according to the star rating assigned by the =epartment of Tourism, about A-K of the rooms fall under the :ive 'tar delu%e categories In addition many international investors have planned to make large scale investments in the hotel industry, which would add ?B,--- additional rooms in various hotels in India In light of the M&/("i "tt"c3s on ,?M;;, security has become an added concern for tourists This has combined to further decrease the number of foreign tourists travelling to India In particular this directly affected the patrons of IH&3 Though having many negative effects this also resulted in reinstating the motto, philosophy and commitment of the Taj +roup which earned a lot of respect and admiration on how it came out of the entire situation Another occurrence whose impact is still being felt is the letdown of the Co//on2e"lt! "/es 'even hotels were added by Taj in anticipation of the commonwealth games as well

as tariff rates were hiked marginally 2ut when the time came the inflow of tourists was e%tremely disappointing leaving Taj with e%cess unutili"ed capacity Though these factors were e%ogenous to IH&3 and affected the lu%ury hotel industry at large in India, Its effects were felt comparatively more by IH&3 due to its uni$ue positioning and e%istence

Reco//end"tions "nd Concl&sion

According to the Indian Tourism Industry Analysis report 6 Indias tourism and hospitality sector market shows the most potential in the world The Indian hospitality sector is e%pected to grow at the rate of @K between ,--H and ,-;H India saw an influ% of ;- million international tourists by ,-;-, up from just L .@ million in ,--H I?J8ith the potential and future growth of this industry we recommend the following for IH&3

,ully utili8e established infrastructure by increasing Cccupancy Percentage

As a result of the increase in capacity after the commonwealth games IH&3 should tap into the increasing tourists and increase its occupancy K Its premium image of IH&3 as well as its presence abroad should be leveraged

;s was seen from table 7 in the industry analysis report the occupancy rate for almost all types of lu+ury hotels are in the range of 7#F making them idle for half the time which is common in the hospitality sector. But their growth rate is e+pected to be at least G#F as shown in the graph below for the ne+t five years. !n keeping with this we would also recommend that Ta? e+pands its hotels given its good financial health combined with the robust and growing tourism industry. This e+pansion should be centred on upcoming tourist spots as well as commercial hotspots like >urgaon. %educe Cperating e+penses by borrowing other firms more efficient strategies.

The operating e%pense margin of IH&3 is much higher when compared with its competing firms In particular, 3eelas is ?? L@ whereas IH&3 is @A ;@ IH&3 should analyse its competitors practises in an attempt to reduce its overall operating e%pense margin In particular IH&3 should speed up the implementation of the use of the 2alance score card, as done by The 3eela which records its performance along the parameters of financial growth, guest satisfaction, strong internal processes, employee satisfaction and training The operational efficiency of the company is driven by the implementation of the 2alance 'core &ard
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7erger and ac$uisition The &ompany was incorporated in ;.-, and it opened its first hotel, The Taj 7ahal 4alace / Tower, 7umbai, in ;.-A The &ompany then undertook major e%pansion of The Taj 7ahal 4alace / Tower, 7umbai by constructing an adjacent tower block and increasing the number of rooms from ,,B to B?B rooms 8ith the completion of its initial public offering in the early ;.H-s, the &ompany began a long term programme of geographic e%pansion and development of new tourist destinations in India which led to its emergence as a leading hotel chain in India :rom the ;.H-s to the present day, the Taj +roup has played an important role in launching several of India>s key tourist destinations, working in close association with the Indian +overnment The Taj +roup has a philosophy of service e%cellence which entails providing consistently high levels of personali"ed service and innovative means of improving service $uality The Taj +roup has been active in converting former royal palaces in India into world class lu%ury hotels such as the Taj 3ake 4alace in )daipur, the (ambagh 4alace in Daipur and )maid 2hawan 4alace in Dodhpur In ;.HL, the Taj +roup opened India>s first international five star delu%e beach resort, the :ort Aguada 2each (esort in +oa The Taj +roup also began its business in metropolitan hotels in the ;.H-s, opening the five#star delu%e hotel Taj &oromandel in &hennai in ;.HL, ac$uiring an e$uity interest and operating contract for the Taj 4resident, a business hotel in 7umbai, in ;.HH, and opening the Taj 7ahal Hotel in =elhi in ;.H@ In ;.@-, the Taj +roup took its first step internationally by opening its first hotel outside India, the Taj 'heba Hotel in 'ana>a, Eemen and in the late ;.@-s, ac$uired interests in the &rown 4la"a # Dames &ourt, 3ondon and B; 2uckingham +ate 3u%ury 'uites and Apartments in 3ondon In ;.@L, the Taj +roup ac$uired under a license agreement each of The Taj 8est 5nd, 2angalore, Taj &onnemara, &hennai and 'avoy Hotel, !oty, with which the Taj +roup made its foray into 2angalore 8ith the opening of the five star delu%e hotel Taj 2engal in Colkata in ;.@.; the Taj +roup became the only hotel chain with a presence in the five major metropolitan cities of 7umbai, =elhi, Colkatta, 2angalore and &hennai &oncurrently with the e%pansion of its lu%ury hotel chain in the major metropolitan cities, the Taj +roup also e%panded its business hotels division in the major metropolitan and large secondary cities in India =uring the ;..-s, the Taj +roup continued to e%pand its geographic and market coverage in India It developed speciali"ed operations 0such as wildlife lodges1 and consolidated its position in established markets through the upgrading of e%isting properties and development of new properties Taj Cerala Hotels / (esorts 3imited was set up in the early ;..-s along with the Cerala Tourism =evelopment &orporation In ;..@ the Taj +roup opened the Taj 5%otica 2entota which strengthened the Taj +roup>s market position in 'ri 3anka In ,---, the launch of the B? acre Taj 5%otica, +oa and the Taj Hari 7ahal in Dodhpur were completed In ,---, the Taj +roup entered into a partnership with the +GC (eddy +roup to set up Taj +GC Hotels and (esorts 3imited and thereby obtained a prominent position in the market in the southern business city of Hyderabad, holding three hotels and a major share of the market In ,--;, the Taj +roup took on the management contract of Taj 4alace Hotel, =ubai, and has established itself as an up#market hotel in the 7iddle 5ast region The Taj 5%otica (esort / 'pa, 7aldives launched the Taj +roup into the premium lu%ury hotel market and

since its opening in Duly ,--,, has won several international awards The Taj +roup also obtained licenses to manage and operate two leisure hotels; the (awal#Cot, Daisalmer and )sha Ciran 4alace, +walior in !ctober ,--, In 'eptember ,--,, the Taj +roup ac$uired an e$uity interest in the former (egent Hotel in 2andra which gave the Taj +roup access to the midtown and *orth 7umbai market The hotel has since been renamed as the Taj 3ands 5nd, 7umbai In ,--A, the &ompany celebrated the centenary of the opening of its :lagship hotel, the Taj 7ahal 4alace / Tower, 7umbai In ,--L the Taj +roup opened 8ellington 7ews, its first lu%ury serviced apartment in 7umbai In the same year, the Taj +roup also launched the first of its Pvalue#for#moneyP hotels in 2angalore branded >+inger>, which division has ;; hotels in various locations in India and is owned through its wholly owned subsidiary In ,--B the &ompany ac$uired on lease The 4ierre, a renowned hotel in *ew Eork &ity, to enter the lu%ury end of the developed hotel markets internationally The &ompany entered into a management contract for Taj 5%otica in 4alm Island Dumeirah in =ubai to e%pand its e%isting presence in the )nited Arab 5mirates The &ompany enhanced its position as an operator of converted palaces by entering into a management contract for )maid 2hawan 4alace, Dodhpur in the princely state of (ajasthan in India The &ompany, through a subsidiary, ac$uired the erstwhile >8> hotel in 'ydney, Australia in :ebruary ,--? and renamed it as >2lue, 8oolloomooloo 2ay> To e%pand its presence in the )' market, the &ompany ac$uired in early ,--H (it" &arlton in 2oston and Taj &ampton 4lace in 'an :rancisco Hotels operated by the Taj +roup internationally are located in )', Australia, =ubai, 7aldives, 7alaysia, 'ri 3anka, the )nited Cingdom, 'outh Africa, 2hutan and Qambia 'cheme of Amalgamation 0P'chemeP1 !n !ctober ;,, ,--?, the 2oard of =irectors of the &ompany approved the 'cheme, under 'ections A.; to A.L of the &ompanies Act for the for the amalgamation of Indian (esorts Hotel 3imited, +ateway Hotels and +etaway (esorts 3imited, Cuteeram (esorts 4rivate 3imited, Asia 4acific Hotels 3imited, Taj 3ands 5nd 3imited 0Transferor &ompanies1 with the &ompany The 'cheme was approved by the respective High &ourts Rationale for the Scheme of Amalgamation The Transferor &ompanies and the &ompany were engaged in the leisure and business hotels as part of the Taj group of hotels A consolidation of the Transferor &ompanies and the &ompany was therefore e%pected to lead to greater synergy in operations, a more efficient utilisation of capital and create a stronger base for future growth of business in general and the &ompany in particular The amalgamation was e%pected to result in administrative rationali"ation, organi"ational efficiencies, and optimal utili"ation of various resources

&!(4!(AT5 +!G5(*A*&5 Taj has been practicing good &orporate +overnance even before 'ecurities 5%change 2oard of India 0'52I1 made it a mandatory re$uirement from ,--; !ut of more than B--companies listed with the 2ombay 'tock 5%change the &ompany is categori"ed as an PA +roupP &ompany which group comprises only ,-- companies and the criteria for selection is based on 7arket &apitalisation, 3i$uidity, Industry (epresentation, 3isted History and track record of &ompliance 2eing a TATA group &ompany, the &ompany goes beyond the mandatory re$uirements of &orporate +overnance and conducts business in a fair and transparent manner It maintains good investor relationships and endeavors to deliver to investor consistent $uality services Bo"rd o# Directors The &hairman of the &ompany is a *on 5%ecutive =irector The 2oard of =irectors of the &ompany comprises ;, =irectors, of which @ =irectors are *on 5%ecutive =irectors, ? of whom are Independent =irectors The &ompany has one 7anaging =irector and three 5%ecutive =irectors The 2oard of =irectors meet regularly and all information that is re$uired by statutes and the 3isting Agreement is placed before the 2oard and transacted &ommittees of the 2oard A&dit Co//ittee The Audit &ommittee comprises three Independent =irectors The members of the committee have the relevant e%perience in the field of finance, banking and accounting The Audit &ommittee meets at the end of every $uarter and reviews with the management the financial statements and results before submission to the 2oard of =irectors S!"re Tr"ns#er 8 S!"re!olders9In,estor .rie,"nce Co//ittee The &ommittee comprises three =irectors including the Gice # &hairman, the 7anaging =irector and an 5%ecutive =irector of the &ompany The &ommittee meets regularly and reviews the report submitted by the in#house share registry on the status of transfers, demats and investors grievances if any Re/&ner"tion Co//ittee The &ommittee comprises three *on 5%ecutives =irectors An Independent =irector chairs the committee The &ompany has a remuneration policy in place that is based on criteria such as industry benchmarks, the &ompany>s performance vis#R#vis the industry, performance track record of the =irector Insider Tr"inin The &ompany follows a strict code on Insider Trading mandated by the TATA +roup The process is closely monitored and adhered to strictly S!"re!older Rel"tions The &ompany has a state of art in#house share registry that is registered as a &ategory I (egistrar with '52I The &ompany has over ;,H?,--B members As on date appro%imately .HK of the 5$uity 'hare &apital of the &ompany has been demateriali"ed All correspondence and grievance received from shareholders are responded to within L@ hours All valid transfers are processed within H days of receipt All demat re$uests are processed within L@ hours of receipt

All en$uiries are recorded on the system and responded to immediately All the financial results are promptly reported to the 'tock e%change0s1 and published in leading newspapers The results are also simultaneously uploaded on the &ompany>s web site

&!(4!(AT5 '!&IA3 (5'4!*'I2I3ITE The Tata +roup has always held that what comes from the society, must, in reasonable measure, go back to it The Taj is proud to be a part of this legacy, and is deeply committed to serve the community 8e recogni"e that the community is not just another stakeholder in our businesses, but serving the community, especially the underprivileged sections, is central to our core values 8e further believe that serving people in the form of corporate volunteering has positive spin#offs by way of reviving a sense of bonding and the spirit of learning in our employees 3everaging our competencies The Taj uses its competencies in areas such as food production, housekeeping and laundry to develop and train Fraw people to enable their earning a livelihood :or e%ample partnering with *+!s to train underprivileged women housewives in hospitality, self#grooming and house#keeping 4romoting our culture +lobally, the Taj is synonymous to the culture and heritage of India and our Building Livelihoods theme is e%tended to the artisans and craftsmen of India The Taj, in association with F4aramparik Carigar identifies the artisans and craftsmen across India, in areas close in and around the location of our hotels and assigns projects to trainees who identify projects that the hotel can take forward The project provides our trainees with e%posure to the uni$ue arts and crafts of India It gives our trainees a uni$ue opportunity to live within the community and broaden their own outlook The project has a strong, long#term impact and creates a strong platform for volunteering

S*OT An"l$sis ; +roup comprises .A hotels in BB locations across India with an additional ;? international destinations , A L B ? 5mployee strength over ;A--- people The perfect e%perience of Indian lu%ury living 5mployee retention due to good brand image &onsidered to be the most premium hotel chain in India Top#of#the#mind brand recall

Stren t! *e"3ness

; 3imited market share due to tough competition from

international and domestic players means , Terrorist attacks left a $uestion over the security ; Introduce better membership plans , Improve hygiene standards A )pgrade to international methods of work ; !ther heritage properties , &ompetitors upgrading to international standards of work ethic A 5%pectation of clients in terms of technological development Co/'etition ; 3eela +roup of Hotels , !beroi Hotels and (esorts A Hyatt

O''ort&nit$

T!re"ts

Co/'etitors