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Market shares

Market shares The Taj Hotel's market positioning and competitive Market Efficiency Marketing position refers to the

The Taj Hotel's market positioning and competitive Market Efficiency Marketing position refers to the location of a brand which is relative to its competitors in the customer's mind. A hotel's positioning is based on the special features or attributes like food and beverage service and particular

comforts like airport convenience. They have positioned themselves as a high end luxury segment. It has made its consumers to feel the taste of the royalty in the modern world. This made the group different from their world wide competitors Hilton, Oberoi and Marriott groups. They have scattered worldwide in the countries like Australia, Bhutan, Malaysia, Maldives, South Africa, England, Sri Lanka and US. Strategy A hotel's business strategy has two basic differentiation, they are market emphasis or a cost emphasis. In this situation hotel follows the hybrid strategy which blends the strategy of market

emphasis and cost emphasis. A critical issue facing the market emphasis is to differentiate themselves from the competitor. The business class segment is comparatively generate profit high than the other segment in the hotel business. This specific is highly price sensitive when compared to the luxury and leisure segment. By utilising the strategy of exploring the business class they have placed their Taj Presidency hotels in both the metro cities and also in small towns. The Taj marked out the three separate entities like Taj group, business, leisure and luxury. The concept of these sub brands have come into

existence in early 1990's where the management operation was completely different. The territory is scattered geographically according to the three divisions. Segmentation Taj group has classified their service into three different categories and they are Business, Leisure and luxury. They have categorised their business and created their sub-brands in the early and in themed of nineties, the period was 1990 - 2000. Taj group have showcased them as a luxury hotel among their competitors. They are the pioneer of this business and continuously achieving the standard and increased their benchmark. They are

targeting their own audience who has been their customer for a long time. The Oberoi Hotel's market positioning and competitive Market Efficiency Marketing Strategy

• Their marketing strategy's

objective is to communicate

the unique set of services that they offer to discerning hotel guests.

• They attempt to direct the

focus of their guests to the issues of quality and value for the money a supposed to

simply the bottom line costs associated with their stay.

• Their marketing strategy

will allow us to communicate about brand values, develop close working relationships with their customers and suppliers and to identify the

needs of their guests in an effective manner.

• Continued differentiation

and growth are two goals they have set for them. Growth will take place by targeting new areas of business within both local and national communities.

Value Proposition

• Oberoi Hotels offers the

best, most personalized service for the corporate traveller.

• They include business

essentials in every room, such as a nice desk, internet connection,wireless access, and provide easy to access meeting rooms with all

audio-visual and technology

needs as they will as catering for longer meetings.

Positioning • The Oberoi Hotels is positioned as a five star plus, business traveler's hotel, strategically located and offering a high level of personal service.

• Their focus is on offering their guests added value and differentiating ourselves in their levels of personal service. They provide a quality hotel experience where guests are valued, respected and their business is truly appreciated

WHAT ARE THE KEYS TO PROFITABILITY IN THE INDUSTRY?

What are the main competitive forces and factors within those forces which determine potential profitability in the industry? The Hotel Industry in most metropolitan cities in the world is characterized by high capital costs and a high proportion of fixed costs to total costs. The high capital costs require that from the outset the project must be managed to achieve the most cost-effective use of resources applied to construction, furnishing and equipment, pre-operational expenses and finance. Hotels also been built to an optimum size, approximately 500 rooms, in order to benefit from the economies

of scale. Hotels must also aim to fill their rooms as profitably as possible, both through room occupancy levels and the relative tariffs applied.

WHAT IS A HOTELʼS COMPETITIVE ADVANTAGE AND COMPETITIVE POSITION?

Competition in the Hotel Industry anywhere in the world is intense within strategic groups subject to the level of industry growth. Industry growth in major cities, capitals or financial centers is high at present partly due to the travelers from tourist groups, business and independent leisure travelers, resulting in

low levels of jockeying. Competitive position involves Cost and Differentiation. There are no switching costs, which could increase potential jockeying. Product differentiation can be high ranging from budget hotels to deluxe hotels. Hotel operators wish to exploit to establish customer loyalty, image and differentiation. Fixed costs are high in the industry and consequently high room occupancy rates are critical. Competition would, therefore, be very fierce in a situation of oversupply of hotel rooms. Capacity is augmented in large increments in recent years due to some major international events such as

Olympia Games, Expo or World Cup.

Competitorsʼ reaction is expected to be fragmented, haphazard and insignificant, especially as the common market is forecast to be one of the more buoyant segments among total arrivals in the coming future. The key issue remains that whether there are any further sites in the immediate vicinity of any big cities which may be purchased by other business groups commanding similar capital resources to any hotel operator which will pose significant potential future competition.

WHAT ARE OTHER MAJOR

INCOME STREAMS FOR HOTEL OPERATORS (key success factors)?

Income from any hotel project can be safeguarded by six major income streams apart from room sales:

(1)Food and Beverage is one of the important income sources. A large restaurant serving Western or local food or a coffee shop serving buffet must be planned for any hotel project. These will attract considerate non-hotel resident business including banquet facilities. By world standards F&B income is a very large component of the total hotel income in the Hotel Industry as a whole.

(2) Exhibitions and Conventions can provide steady rental and service income for any hotel.

(3) Entertainment such as Cinemas, Concerts and Business Function Room Facilities are likely to receive heavy patronage. (4) Commercial and Shopping Complex must be planned. The shopping space with retail shops selling luxury merchandises, watches and jewelry can provide recurrent rental income. (5) Neon-Signage can be planned which will further diversity income.

(6) Car-parking Service can be another major income

source.

WHAT IS THE HOTELʼS BUSINESS STRATEGY?

Porter (1980) indicated that intensity of rivalry is dependent on number and size of direct competitors, rate of growth of the industry, product differentiation and switching costs, fixed and running costs, capacity augmentation, exit barriers and diversity. If jockeying for position in a higher strategic

group became more intense in a position of oversupply, hotels might be diverted to another segment of the market, forcing hotels to cut margins unless it has established sufficient differentiation to maintain its own position within its strategic group.

The Hotel Industry in any major cities in the world contains very high exit barriers. Once in, it is very difficult to get out. There is considerable diversity in the strategy and aims of companies owning hotels. For example, an airline entering the hotel industry may see its hotel operations as ancillary to its core business of selling air travel.

Similarly, a property developer engaged primarily in property development and investment, may have a different objective and strategy from a company whose core business is hotel ownership/management.

The corporate structure of the company holding the hotel can be designed from the tax planning angle with a view to being able to sell this development at much reduced rates of stamp duty and legal expenses. The company can keep the options open either to sell before completion or to keep the hotel project as a long term investment.

Professional trade bodies

ABOUT FHRAI ( Federation of hotel and Restaurant Association of India):

FHRAI is the voice of the Hospitality Industry and provides an interface between the Hospitality Industry, Political Leadership, Academics, International Associations and other Stake Holders. FHRAI is committed to the progress of the Industry through the various activities like education and training, research and publication, Annual Convention to promote interaction with Government officials, political leaders and stake holders of the Industry. FHRAI is managed by the Executive Committee

headed by the elected President having a tenure of one year. The Executive Committee comprises of members from the four Regional Associations. The day-to-day business is conducted by the Secretariat headed by the Secretary General. Benefits:

Discount Cards Our hotel and restaurant members receive two membership discount cards entitling them to 30% discount on rooms and F&B in all member establishments. Magazine Our monthly FHRAI Magazine is a highly acclaimed premium publication for the

hospitality industry. It provides vital updates on legal matters and government policies, besides featuring insightful articles on contemporary trends in the Indian and global hospitality sector. Legal Relief We continuously monitor various legal and regulatory developments and obtain timely and effective redressal for our members. Representation & Lobbying As the authentic voice of the hospitality industry in India, FHRAI actively engages with the Central and State governments on a multitude of issues and robustly represents the views and collective concerns of our members.

Website The FHRAI website www.fhrai.com, is a comprehensive portal which gives our members access to details of the member establishments, latest industry news, event updates, electronic copies of the current and back- issues of the FHRAI Magazine and other indispensable resources. Laws governing Hotel Industry The laws that govern the Hotel Industry can be classified into the following broad categories. Establishment and Commissioning of Hotels The first head of laws that govern the hotel industry include the laws regarding

commissioning and construction of hotels, restaurants, guest houses and other establishments of such kind. These laws also include laws such as Foreign Exchange Management Act, Industrial Licensing Policies, and land laws, etc. Hotel insurance policies, especially the customized ones can fulfil the growing needs of the hotel industry. It can cover all its establishments ranging from spa to guest houses and apartments, bed and breakfasts, etc. Other insurance policies such as the standard insurance policy would cover risks and damages arising from accidents, fire, natural calamity, etc.

The operation, management, and maintenance of Hotel Industry The second head of laws that govern the working of hotel industry is related to matters such as management, maintenance and the operational activities of hotels. Such laws include insurance laws, laws regarding safety and security of workers, food and hygiene standards, obtaining licenses, Food and Drug Administration Act, Shops and Establishment Act, etc. For example, Acts such as the Food Adulteration Act would prohibit the sale of substandard food items thereby protecting the

customers from the potential harm caused by poisonous food and protecting their interest by eliminating the fraudulent practices. The Food Safety and Standards Act would set up criteria for manufacture, storage, distribution and sale and trade of food substances so that they remain fit for human consumption for a considerable period. The Legal Metrology Act would regulate the use of standards of weights and measures. The Copyright Act would protect the rights relating to expression in the form of literature, drama, music, art or architectural works. In fact, hotels are required to take such copyright licenses before

they organize any event such as plays or musical shows, etc. Taxation, Employment, and Contracts in Hotel Industry The third set of laws that govern the working of a hotel are related to the contracts that it enters into with other enterprises or employment contracts, for example, the Apprentice Act, Employees State Insurance Act, etc. These laws also include the manner in which such entities are taxed. Taxes may include income tax, service tax, expenditure tax, excise duty, luxury tax, entertainment tax, value added tax, etc. Legislations such as the Shops and Establishment Act or the Employees State Insurance

Act would aim at regulating the relationship between employers and employees in the hotel. The former would lay certain statutory obligations on the employers in matters related to wages, work hours, holidays, paid leaves, provision for payment for overtime work, etc. The latter is a social security scheme that would mandate the employers to protect the interest of the workers in times of contingencies such as sickness, maternity leaves, physical impairment or injuries occurring from the workplace, subsequent medical care. The Provident Fund Act mandates the creation of provident fund schemes for the employees.

The Apprentices Act shall govern the working of apprentices in the Hotel Industry. Other laws governing Hotel Industry Other laws that may govern the working of hotels may include local law norms or other local land norms or guidelines issued by the tourism industry such as approval of hotels at project stage and classification & reclassification of hotels, guidelines for classification of heritage hotels, Time Share Resorts (TSR), Stand Alone Restaurants, guidelines for apartment hotels, guidelines for approval of guest houses, Hospitality Development and Promotion Board,

implementing a transparent system for the effective monitoring of hotel projects, ensuring timely accrual of approvals / clearances / NOCs by the multiple agencies and facilitating the implementation of hotel projects, expeditious clearances, etc. will enable completion of hotel projects in time leading to enhancement of room availability for the tourists. Hotel & Restaurant Approval & Classification Committee The Hotel and Restaurant Approval & Classification Committee inspects and assesses the hotels based on the kind of facilities that they provide. The two categories of hotels that they inspect are first, hotel

projects that are approved at the implementation stage and secondly, the operational hotels which are classified into various categories. About the former, the Ministry of Tourism after certain documentation provides project approvals that shall remain valid for five years. Once the hotel reaches its operative stage, the approval ceases to exist within three months. The respective hotel must apply for the classification during these three months. Once the classification is obtained, it becomes valid for 5 years. FINANCIAL RATIOS Current Ratio:

The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows:

Current Ratio= Current Asset/Current Liabilities

The Current Ratio of Taj Hotel is 0.75 while the Current Ratio of Oberoi Hotel is 6.81. This means that Oberoi Hotel has enough short term resources to meet its short term obligations.

Earnings per Share (EPS):

Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. EPS is calculated as:

EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares The EPS of Taj Hotel is 42.18 and the EPS of Oberoi Hotel is 26.23, which means that Oberoi Hotel is more profitable than Taj Hotel. This reveals that Oberoi Hotel is the most efficient company in terms of generating Earnings Per Share. Operating Profit Margin:

The operating profit margin

ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It is also expressed as a percentage of sales and then shows the efficiency of a company controlling the costs and expenses associated with business operations. Furthermore, it is the return achieved from standard operations and does not include unique or one time transactions. Operating profit margin = Operating income ÷ Total revenue The Operating Profit Margin of Taj Hotel is 21.89% and that of Oberoi Hotel is 51.86%. Oberoi Hotel is highly successful in

controlling the expenses by registering the OPM of 51.86%. Hence, Oberoi Hotel is the most efficient in controlling expenses when compared to the other company. Debt Equity Ratio:

Debt/Equity (D/E) Ratio, calculated by dividing a companyʼs total liabilities by its stockholders' equity, is a debt ratio used to measure a company's financial leverage. The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholdersʼ equity. The formula for calculating D/E ratios is:

Debt/Equity Ratio = Total Liabilities / Shareholders' Equity

The Debt Equity Ratio of Taj Hotel is 0.63 while that of Oberoi Hotel is 0.02 which indicates that Taj Hotel has more debt comparatively Oberoi Hotel. Return On Net Worth:

Return on Net Worth is a ratio developed from the perspective of the investor and not the company. By looking at this, the investor sees if entire net profit was passed on to him, how much return he would be getting. It explains the efficiency of the shareholdersʼ capital to generate profit. RONW = Net Income / Shareholdersʼ Equity The RONW for Taj Hotel is 2.86% and that of Oberoi Hotel is 7.80%. Oberoi Hotel has a reasonable yield

compared to Taj Hotel. Fixed Assets Turnover Ratio:

The fixed-asset turnover

ratio is, in general, used by analysts to measure operating performance. It is

a ratio of net sales to fixed

assets. This ratio specifically

measures how able a company is to generate net sales from fixed-asset investments, namely property, plant and equipment (PP&E), net of

depreciation. In a general sense, a higher fixed-asset turnover ratio indicates that

a company has more

effectively utilized investment in fixed assets to generate revenue. The fixed-asset turnover ratio is calculated as:

Fixed Assets Turnover Ratio of Taj Hotel is 0.56 and that of Oberoi Hotel is 3.39. Hence, Oberoi Hotel is the most efficient company in managing their investments in fixed assets.