GURU NANAK INSTUTUTE

OF
MANAGEMENT STUDIES


PESTEL & PORTERS FIVE FORCES MODEL ANALYSIS
ON HOTEL INDUSTRIES IN INDIA (TAJ)


Submitted To: Miss. Annie Pillai
Subject: Marketing Application



Submitted by: Bhavin R. Bhanushali
Roll No: B-04
MMS B
Year: 2013-14









PESTEL Analysis

Traditionally PESTEL analysis was known as the Pest analysis and only in the modern times
did the use of the word PESTEL came into being.
Social part of the PEST is split into environmental factors too as those have a significant role
in the strategic management these days. Along with that economic factors are split into legal
factors for the same previously mentioned reason.

PESTEL Analysis of Hotel Industries in India

Political Environment:
These refer to government policy such as the degree of intervention in the economy.
Hotel industry has a basic backbone of the government support without which
it wont be able to sustain the competitive world.
Government charges huge amount of tax from the star and luxury category of
hotels and thus has a huge impact with the political changes that occur.
Any small step taken by the government by changing some law it would
seriously affect the hotel industry.
The hotel industry is getting huge incentives and the state governments are
supporting the development of the hotels and their growth.
This infect answers the questions how are Indian Hotels are planning to
expand in the economic crunch time.

Economic:
There include interest rates, taxation changes, economic growth, inflation and
exchange rates. As you will see throughout the Foundations of Economics book economic
change can have a major impact on a firms behaviour.
Mumbai being the financial capital of India has many foreign tourists arriving
with the whole and sole purpose of meetings, conferences etc. thus Hotels in
Mumbai try to capitalise on the foreign travellers who are seen to bring more
money to spend along with increasing amount of expectations from the hotels.
As seen in the recent past the guests are willing to pay for the services they get
and the more the guests pay the more would the hotel and the industry would
prosper.
With the increase in the paying power of the guests the need for the good and
luxurious hotels becomes massive.
The per capita income in India also has rose to a new extent enabling the
common man to go to luxurious hotels to have a lunch or a dinner.
Economy of India faced one of the most minimal drop in the whole world
because of the controlled and the sound financial system in the country.
This helped hotels to only concentrate on the foreign travellers which had
reduced and the local market being stable was much of a relief to the Indian
Hotel Industry.

Social:
Changes in social trends can impact on the demand for a firms products and the
availability and willingness of individuals to work.
Vits being situated near the airport sees the maximum amount of guests who
are in for the business meetings and conferences.
There are very few FIT guests seen in the hotel as compared to the BTC guests
[Bill to Company Guests] and the business travellers.
This explains the reason why the hotel could be seen having single room
guests or a twin bedroom guests more than the double bedroom guests. Being
the Business hotel it has maximum males arrivals compared to female arrivals.
The Vits could also be seen having layover guests many a times which
becomes the revenge generator for the hotels in the slack period of time.
Seeing the ratio of the various classes of guests of VITS it could be easily said
that the Hotel must strive for the FIT and the group check-ins by linking the
VITS to the travel agencies in and outside India. This could probably balance
the demographic ratio of arriving guests.

Technological:
As said before the technology used in VITS is way below the standards when it comes
to Hotel management software and the Mini Bar system. Some Technologies used are quite
old and need to be replaced with the new ones in the technological market.
For example: If a hotel used the printed KOT and BOT and the stewards had
to give it themselves to each of the departments. It could be substituted with
the direct computerized sending of KOT and BOT to the kitchen or the Bar.
Technology always has been seen to have reduced the manpower and the
energy required by the people. It would always be a boon to mankind and the
technological upgrades would also help to show the advances and the progress
of the property.
VITS does not have the Wi-Fi installed instead they provide internet
connection to every room personally which should be made Wi-Fi which
would reduce the guest complaints about the in room facilities complaints and
thus VITS could find many guests happy and satisfied with a thought of you
get what you pay for.

Environmental Factors:
The growing desire to protect the environment is having an impact on many
industries such as the Hotel, Travel & Transportation industries and the general move
towards more environmentally friendly products and processes is affecting demand patterns
and creating business opportunities.
Being an environmental friendly hotel this factor becomes the most important
to the property.
Basically when we talk about the environmental factors affecting the business
of the hotel the only thing that comes into our minds is the floods which
Mumbai saw in 2005 and the heavy rains and showers across Mumbai. The
period from June September is the only period of time when such factors
play a role and there are very few things which could be done by the hotel
about it.
Generally what is done in such factors is to let the guests know the situation
outside and making them aware would help them for the troubles they may
face when they would be in those heavy rains.
Another environmental factor could be an earthquake or any other natural
factor which directly affects the occupancy of the hotel and the sales.
The solution or the rules of the hotels in India are that they do the drills for the
emergency situations frequently to help employees understand what is
supposed to be done in hard and emergency conditions.

Legal Factors:
There are related to the legal environment in which firms operate. In recent years in the UK
there have been many significant legal changes that have affected firms behaviour.
This also includes the health and safety laws, the recent outbreak of the Swine
Flu [H1N1 virus] would have been the upcoming serious factors for the Vlts
and the service they could have provided is the free check-up of the incoming
guest for the swine flu.
As of now India does not have age discrimination law but does have the
disability discrimination law and every star hotel is supposed to provide a
room for the disabled guests and having special facilities for the blind dead
and the leg or hand impaired people.
This room is generally located on the first floor near the lift entrance and is
always taken care of in a special way.




PORTERS FIVE FORCES MODEL

Porters model is based on the insight that a corporate strategy should meet the
opportunities and threats in the organizations external environment. Especially, competitive
strategy should base on and understanding of industry structures and the way they change.
Porter has identified five competitive forces that shape every industry and every
market. These forces determine the intensity of competition and hence the profitability and
attractiveness of an industry. The objective of corporate strategy should be to modify these
competitive forces in a way that improves the position of the organization. Porters model
supports analysis of the driving forces in an industry. Based on the information derived from
the Five Forces Analysis, management can decide how to influence or to exploit particular
characteristics of their industry.

1. BARGAINING POWER OF SUPPLIERS:
The term Suppliers comprises all sources for inputs that are needed in order to
provide goods or services.

The high class hotels are operating by few hotel chains like: - TAJ, EIH, ITC
& THE LEELA PLACE so they have a control over the industry.
There are no substitutes for spas and five star hotels.
The hotels customers are fragmented, so they have to reduce their bargaining
power to attract the customers.
The Taj, ITC & Oberoi are having various rates and tariffs. Because they are
having their own brand image.
The hotel chains are operating different services like Spas, Boatels, Resorts,
City Centres, Heritage Hotels, Etc.

2. BARGAINING POWER OF CUSTOMERS:
Similarly, the bargaining power of customers determines how much customer
can impose pressure on margins and volumes.

The hotel industry is one of the most invested in its fixed assets. So they are
trying to recover their amount quickly.
The suppliers are providing better information about them to attract the
customers. Here the buyers are highly informed.
If the hotel price changes are moderate, the customers have low margins and
are price-sensitive.
Some unseasoned timing the hotels are offering discounts and incentives to
reduce the bargaining power of buyer.

3. THREAT OF NEW ENTRANTS
The competition in an industry will be the higher; the easier it is for other
companies to enter this industry. In such a situation, new entrants could change major
determinants of the market environment (e.g. market shares, prices, customer loyalty)
at any time. There is always a latent pressure for reaction and adjustment for existing
players in this industry.

The foreign hotel chains are tied up with Indian hotels to reduce the initial cost
and using the latters brand name.
Brand loyalty of customers like TAJ, ITC, and LEELA PALACE affects the
new entrants.
Access to raw materials and Distribution channels are controlled by Existing
players like TAJ, ITC and LEELA PALACE.
The cost of land in India is high at 50% of total project cost as against 15%
abroad. This acts as a major deterrent to the Indian hotel industry.
In India the expenditure tax, luxury tax and sales tax inflate the hotel bill by
over 30%. Effective tax in the South East Asian countries works out to only 4-
5%.

4. THREAT OF SUBSTITUTES
A threat from substitutes exists if there are alternative products with lower
prices of better performance parameters for the same purpose. They could potentially
attract a significant proportion of market volume and hence reduce the potential sales
volume for existing players. This category also relates to complementary products.

Brand loyalty of customers (TAJ, ITC, LEELA PALACE, etc.) is dominating
the substitutes.
The hotel relationship with customer and costs also the reasons to switching to
substitutes.
The price variation of same class hotel service from various brands is one of
the reasons to choose a substitute.
The present demand and supply of hotel rooms is one of the reasons to choose
a substitute.
More fixed cost and switching costs affects the business.







5. COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS
This force describes the intensity of competition between existing players
(companies) in an industry. High competitive pressure results in pressure on prices,
margins, and hence, on profitability for every single company in the industry.

The top competitors in hotel industry are having the same services like five
star, spas, boatels and motels, heritage hotels and palaces.
The healthy competition among the all players is helping to increase the
industry growth.
Intense in metro cities, slowly picking up in secondary cities.


BCG MATRIX














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