TERM PAPER STRATEGIC MANAGEMENT

TOPIC:
Apply the Porter's five forces model on Hospitality Industry and analyze the attractiveness of the Industry for Investment purpose

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SUBMITTED TO: Mr. VISHWAS CHAKRANARAYAN

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ACKNOWLEDGEMENT

When emotions are profound, words sometimes are not sufficient to express our thanks and gratitude. With these words, I am trying to express my extreme gratitude and sincere thanks to Mr. VISHWAS C my course tutor and guide who helped and provided the very much enthusiasm and consistent encouragement required for the completion of my project. I gratefully acknowledge and thanks to him for providing enough support and help to accomplish this project. The successful completion of my project is the blessing of my teachers, parents and sincere advice of my friends.

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HOSPITALITY INDUSTRY AN OVERVIEW

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Hospitality is all about offering warmth to someone who looks for help at a strange or unfriendly the commercial context refers to the activity of hotels, restaurants, catering, inn, resorts or clubs who make a vocation of treating tourists. Helped With unique efforts by government and all other stakeholders, including hotel owners, resort managers, tour and travel operators and employees who work in the sector, Indian hospitality industry has gained a level of acceptance world over, it has yet to go miles for recognition as a world leader of hospitality. Many take Indian hospitality service not for its quality of service but India being a cheap destination for leisure tourism with unlimited tourism and untapped business prospects, in the coming years Indian hospitality is seeing green pastures of growth. Availability of qualified human resources and untapped geographical resources give great prospects to the hospitality industry. The number of tourists coming to India is growing year after year. Likewise, internal tourism is another area with great potentials. The hospitality industry is a 3.5 trillion dollar service sector within the global economy. It is an umbrella term for a broad variety of service industries including, but not limited to, hotels, food service, casinos, and tourism. The hospitality industry is very diverse and global. The industry is cyclical; dictated by the fluctuations that occur with an economy every year. Today hospitality sector is one of the fastest growing sectors in India. Despite the economic turbulence along with factors like the swine flu in 2009 there were signs of revival in the hospitality industrial sector towards the end of the year. The 2010 Budget for the Hospitality Industry expectations are embedded for growth oriented policies ahead in the year. This industry is however expecting tax benefits along with better infrastructural facilities like better roads and increased connectivity with airports and railway stations and roadways. A chief recommendation of the hospitality industry associations to the Indian government is the creation of a national Commission on Tourism. In this way there will be a concerted effort towards a comprehensive growth of the hospitality industry. Other expectations of the hospitality industry include a better connectivity to tourist destinations and construction of better and new roadways. There are expectations by the Indian hotel industry that reeled a lot under the after effects of the Mumbai terrorist attacks of 26th November 2008. They are looking for a balanced tax structure in the 2010 Budget for hospitality industry. This will help them to sustain the competitive markets of other south East Asian countries.

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Atithi Devo Bhavo (guest is God)

We have all heard this phrase many times during our childhood from our parents and grandparents. We can also find its presence in the earliest Vedas and religious epics. Hospitality is deep-rooted in our traditions and comes as an integral part of our heritage. In very simple terms, hospitality is the art of being warm to strangers and has been Derived from the Latin word hospitalitem, this means friendliness to guests. The hospitality industry covers a diverse range of establishments in the form of accommodation, food and drinks. It includes:-

The concept of hospitality business started when people started traveling away on business and they needed a place away from home which could cater to all their needs. Today hospitality has evolved from the basic food and accommodation industry and taken a very important position in almost all businesses. In fact, it has become a huge industry and drives economies across the globe. The scope of hospitality/ service industry today is far more than one could have ever imagined a few years back. Earlier people who graduated from a Hotel School could get employed either in Hotels, Cruises or Airlines. But service is the BUZZ word for all businesses today. Be it the Retail Sector, Banking Industry, BPO, Telecom world, Real Estate or any other
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sector having direct customer contact, a person with hospitality background has an edge above the rest, because of their sheer capability of understanding the needs of a customer better and handling difficult customers/ situations efficiently. Hotel industry depends largely upon the foreign tourist arrivals further classified into business travelers (around 65% of the total foreign tourists) and leisure travelers. The following figures show that business as well as the leisure travelers (both domestic and international) formed major clientele for hotels in 2004. Over the last two years, the hotel industry has seen higher growth rates due to greater number of tourist arrivals, higher occupancy rate (being around 75% in FY'06) and significant increase in average room rate (ARR).

Accommodation
Hotels, Residential Public houses Motels Resorts Sanatorium

Bars & Clubs

Nightclubs Public houses Restaurants

Travel and Tourism

Travel Agents Airline Cabin Staff Travel technology

Service and Support

Accountancy Occupational Health and Spa

Future-wise
The driving force behind these will be global brand standards and therefore they will have standard specifications creating a degree of uniformity and standardization in certain limited
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and mid-market hotel segments. Differentiations in product type will evolve more at the higher end of the market with: boutique hotels resorts
convention centers

The need to differentiate design will play an important role. Various brands and operators will play a larger role in driving design standards, getting involved at early project planning stages. As hotel segments cater to specific demand segments, design typologies will be more customized to suit travelers lifestyle. Equal importance will also be given to green-building concepts in terms of development and operations, which will go beyond cost-saving, placating the demands from both investors and customers... In addition, 'green-conscious' business and corporate groups will patronize hotels and brands that support green concepts. Besides all this, the reliance on technology will move beyond Wi-Fi and internet requirements to tools to support sales and marketing as well as yield management. Even basic interiors will be upgraded with the use of technology like self check-in and information kiosks. This will also revamp sales and marketing as international brands will leverage their central reservation systems and will initiate networks with third party reservation agencies. In addition, systems will become more sophisticated and targeted, customizing sales and marketing efforts for each targeted traveler. F&B, an area of immense importance within a hotel will also evolve, especially for the select-service hotel categories. However when discussing service, which is the main play of this industry, it has to be understood that the growth phase is still on and the market is currently undersupplied in terms of trained hotel staff to cater to the large supply pipeline.

The driving force

If the country is able to sustain its economic growth especially in the service sector, it will have a direct influence on the hotel industry. This is directly related to the incoming foreign investments, not just in the hotels but the economy as a whole. Also equally important is the fact that India has now discovered the power of marketing and with campaigns like Incredible India, there are also the various large scales regional and global events like the upcoming Commonwealth Games, Asian Games and the recent Indian Premiere League that builds interest about the nation... Apart from these external factors there are other factors where the industry can be given a great boost. For instance if land prices became more realistic, the process of getting approvals and licenses to build and operate hotels are streamlined, together
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with strong infrastructure development and investment and more tax/levy incentives being provided to build hotels, it would prove very fruitful for the industry

SWOT ANALYSIS
STRENGTHS 1. Natural and cultural diversity: India has a rich cultural heritage. The "unity in diversity" tag attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala, snow capped Himalayas and the quiescent lakes are incredible. 2. Demand-supply gap: Indian hotel industry is facing a mismatch between the demand and supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to the rapid expansion of the sector 3. Government support: The government has realized the importance of tourism and has proposed a budget of Rs. 540 crore for the development of the industry. The priority is being given to the development of the infrastructure and of new tourist destinations and circuits. The Department of Tourism (DOT) has already started the "Incredible India" campaign for the promotion of tourism in India. 4. Increase in the market share: India's share in international tourism and hospitality market is expected to increase over the long-term. New budget and star hotels are being established. Moreover, foreign hospitality players are heading towards Indian markets. WEAKNESSES 1. Poor support infrastructure: Though the government is taking necessary steps, many more things need to be done to improve the infrastructure. In 2003, the total expenditure made in this regard was US $150 billion in China compared to US$ 21 billion in India. 2. Slow implementation: The lack of adequate recognition for the tourism industry has been hampering its growth prospects. Whatever steps are being taken by the government are implemented at a slower pace. 3. Susceptible to political events: The internal security scenario and social unrest also hamper the foreign tourist arrival rates.

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OPPORTUNITIES 1. Rising income: Owing to the rise in income levels, Indians have more spare money to spend, which is expected to enhance leisure tourism. 2. Open sky benefits: With the open sky policy, the travel and tourism industry has seen an increase in business. Increased airline activity has stimulated demand and has helped improve the infrastructure. It has benefited both international and domestic travels. THREATS 1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists can be risky, as there are wide fluctuations in international tourism. Domestic tourism needs to be given equal importance and measures should be taken to promote it. 2. Increasing competition: Several international majors like the Four Seasons, Shangri-La and Amman Resorts are entering the Indian markets. Two other groups - the Carlson Group and the Marriott chain - are also looking forward to join this race. This will increase the competition for the existing Indian hotel majors

TRENDS IN HOSPITALITY SECTOR

Trends that will shape the future of hospitality sector are: 1. Low Cost Carriers 2. Budget Hotels 3. Service Apartments 4. Technology 5. Loyalty Travel 1. Low cost carriers: Travelers in general are more price sensitive to airfare than they are to hotel room rates. Often a low airfare will stimulate demand for travel even if hotel prices are increasing. LCCs are a good option for business travelers, as they have advantages like low costs, more options and connectivity. 2. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from the business travel segment. The average room rate (ARR) realized from business travelers is normally higher than from leisure travelers.
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Heightened demand and the healthy occupancy rates have resulted in an increase in the number of budget hotels. Some of the new players entering into this category of hotels include Hometel, Kamfotel, Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn. 3. Service apartments: The concept of service apartments, though a recent phenomenon in India, is an established global concept. Villas in Spain, flats in the UK and apartment complexes in the US have all created a viable market for those who want more than just a room in a hotel. Service apartments are the latest trend in accommodation, offering the comfort and convenience of a home without the hassles of having to maintain or look after it. Ideally suited for medium-to-long staying guests, service apartments are a natural choice for corporate employees or expatriates relocating to a particular city, non-resident Indians visiting the country for long spells and foreigners visiting the city for long durations. 4. Technology: Travel and technology have become inseparable. Technology is making its own advances with high-tech video conferencing facilities, web cameras and virtual reality mode of conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity, easy access to information, etc. are just a few areas where technology has completely changed the way we travel. 5. Loyalty travel: Today, airline-credit card company tie-ups have brought a whole range of benefits to the travelers. These include insurance cover, upgrades, free tickets, access to executive lounges, and a host of other Goodies.

CHALLENGES FOR HOSPITALITY INDUSTRY

1. Shortage of skilled employees: One of the greatest challenges plaguing the hospitality industry is the unavailability of quality workforce in different skill levels. The hospitality industry has failed to retain good professionals. 2. Retaining quality workforce: Retention of the workforce through training and development in the hotel industry is a problem and attrition levels are too high. One of the reasons for this is unattractive wage packages. Though there is boom in the service sector, most of the hotel management graduates are joining other sectors like retail and aviation. 3. Shortage of rooms: The hotel industry is facing heavy shortage of rooms. It is estimated that the current requirement is of 1, 50,000 rooms. Though the new investment plan would add 53,000 rooms by 2011, the shortage will still persist. 4. Intense competition and image of India: The industry is witnessing heightened competition with the arrival of new players, new products and new systems. The competition
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from neighboring countries and negative perceptions about Indian tourism product constrains the growth of tourism. The image of India as a country overrun by poverty, political instability, safety concerns and diseases also harms the tourism industry. 5. Customer expectations: As India is emerging as a destination on the global travel map, expectations of customers are rising. The companies have to focus on customer loyalty and repeat purchases. 6. Manual back-end: Though most reputed chains have IT enabled systems for property management, reservations, etc., almost all the data which actually make the company work are filled in manual log books or are simply not tracked. 7. Human resource development: Some of the services required in the tourism and hotel industries are highly personalized, and no amount of automation can substitute for personal service providers. India is focusing more on white collar jobs than blue collar jobs. The shortage of blue collar employees will pose various threats to the industry.

Literature Review
Bhatnagar Prabhash in his article states that the increase in the need for accommodation has hugely increased the demands for hotels which in turn has boosted the growth of the hospitality sector in India especially that of the hotel industry. Over the last decade and half the mad rush to India for business opportunities has intensified and elevated room rates and occupancy levels
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in India. The successful growth story of 'Hotel Industry in India' seconds only to China in Asia Pacific. The Hotel Industry is inextricably linked to the tourism industry and the growth in the Indian tourism industry has fuelled the growth of Indian hotel industry. The thriving economy and increased business opportunities in India have acted as a boon for Indian hotel industry. The arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. The 'Incredible India' destination campaign and the recently launched 'Atithi Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and international tourism and consequently the hotel industry.

Renuka R UP Publications Oct 2010 Hospitality services are playing an important role

in the Indian economy. This industry is also facing many problems which must be considered very seriously. The present study covers the role of hotel services in Tamil Nadu and the impact of tourism in India's economic development. The present condition of this industry shows that India has got bright future, because of the tremendous developments taking place in this service industry. Amenities and technology key hotel differentiators for business travellers November 15, 2010 | Hospitality Industry A new Deloitte survey found that the overall hotel experience is important to a majority of business travellers. Roughly two-thirds of respondents said they often work in their room and they also expect a lot more from a hotel than just a clean room and comfortable bed. Business travellers are anticipating an increase in corporate travel for 2011a welcomed boost in customer demand for the hospitality and travel sectorsaccording to a new survey from Deloitte.By the end of 2011, 80 percent of business travellers surveyed predict they will take more or the same number of business trips than they did in 2010, with a similar number (79 percent) of respondents indicating that they will also spend more or the same. When asked how their 2010 travel levels would net out, the majority of these business travel survey respondents (71 percent) said they anticipated taking more or the same number of business trips. Only 29 percent of business travellers expected less travel in 2010.

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More from Amex on hotel pricing trends for 2011 November 12, 2010 | Hospitality Industry As hotels negotiate rates for 2011, they will have to consider several factors. The hotel pricing predictions reflected a tightrope that hotel sales teams are walking - raising rates to reflect demand, yet being competitive to attract guests. Corporate hotel rates will be more challenging to negotiate in 2011, Manning said, because business are cautiously returning to road. They know they have to travel, but they are budgeting wisely and hotels dont want to alienate them. One of the tactics we saw in the recession were hotels trading down, for economic and perception reasons, Christa Degnan Manning, director expert insights and research at American Express Business Travel said. Now, [guests are] looking for level of service, amenities and experiences they had in the past.

Mansbach David and Kolton Jeffrey Friday, 30th April 2010 Hotel Restaurant Solutions - Turning a Headache into an Opportunity; In this unprecedented economy where hotel occupancy and rates are significantly down, hotel owner/operators are forced to closely review EVERY aspect of their operation to squeeze out profitability opportunities. If approached correctly, an area of great opportunity can be that of outsourcing property restaurant operations to a professional restaurant brand/operator. CHIPP by HVS Executive Search highlights critical issues to consider when outsourcing a hotels restaurant operations to a professional restaurant brand/operator. Currently there are over 50,000 hotel properties operating in the United States, most of which offer restaurant options to their guests. While most of these are profitable at a departmental level, when all of the hotels restaurant expenses are properly accounted for, a vast majority of venues are unprofitable. In addition, most lodging owners/operators consider the running of their hotel restaurant to be a necessary evil, as the operational and managerial demands far outweigh the related revenue streams. However, when done correctly, an effective hotel restaurant will generate greater restaurant sales and profitability, enhance REVPAR and increase asset value. The key is to retain the benefits of the restaurant operations, while outsourcing the headaches.

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PORTERS FIVE FORCE MODEL

Porter's five forces is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven down to zero. Three of Porter's five forces refer to competition from external sources. The remainder are internal threats. It is useful to use Porter's five forces in conjunction with SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally, requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

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Porter's five competitive forces

Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are The threat of entry of new competitors (new entrants) The threat of substitutes The bargaining power of buyers The bargaining power of suppliers The degree of rivalry between existing competitors

Threat of New Entrants New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include Economies of scale Capital / investment requirements

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Customer switching costs Access to industry distribution channels The likelihood of retaliation from existing industry players

Threat of Substitutes The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products depends on: Buyers' willingness to substitute The relative price and performance of substitutes The costs of switching to substitutes

Bargaining Power of Suppliers Suppliers are the businesses that supply materials & other products into the industry. The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company's profitability. If suppliers have high bargaining power over a company, then in theory the company's industry is less attractive. The bargaining power of suppliers will be high when: There are many buyers and few dominant suppliers There are undifferentiated, highly valued products Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers threatening to set up their own retail outlets) Buyers do not threaten to integrate backwards into supply The industry is not a key customer group to the suppliers

Bargaining Power of Buyers Buyers are the people / organisations who create demand in an industry The bargaining power of buyers is greater when
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There are few dominant buyers and many sellers in the industry Products are standardised Buyers threaten to integrate backward into the industry Suppliers do not threaten to integrate forward into the buyer's industry The industry is not a key supplying group for buyers

Intensity of Rivalry The intensity of rivalry between competitors in an industry will depend on: The structure of competition - for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an industry has a clear market leader The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting Degree of differentiation - industries where products are commodities (e.g. steel, coal) have greater rivalry; industries where competitors can differentiate their products have less rivalry Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a significant cost associated with the decision to buy a product from an alternative supplier Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where competitors are "milking" profits in a mature industry, the degree of rivalry is less Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down factories) - then competitors tend to exhibit greater rivalry.

PORTERS FIVE FORCES MODEL OF HOSPITALITY INDUSTRY:

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Hospitality industry mainly consists of Hotel industry and Travel and Tourism industry. There are different kinds of forces which have impact on hospitality industry alike other industries.

According to the latest customer loyalty report, the tourism and hospitality industry is going through a better phase in comparison to the recession phase that was intense just a year back. However, two factors are exerting pressure on the hospitality industry, and these are:

Increased competition, and Retaining loyal customers

Increased competition As in any sector, increased number of players is creating increased competition among various segments of tourism and hospitality industry. To gain upper hand in the competition, players are offering attractive schemes and prices to the customers. This has opened various options for the customers and they are indeed trying to make the best of the money they spend. This is causing attrition of the loyal customers and they are willing to shift from old service providers to the new ones who are providing better options at the same or even less prices. The medium and small players may have to cut down on its profits in order to get the chunk of customers. Retaining loyal customers Increased competition has had its effect on the retention of old and loyal customers of hotel and tourism industry. It has become difficult for the medium and small operators to retain old customers. It is more difficult for them as their brand promotion and advertising budgets are often restricted and these will not guarantee effective return on investments. Though, retaining loyal customers require less effort than fetching new customers, it is equally easy to lose old customers if no proper strategies are implemented in this regard.

Introduction of Hotels
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Hotel Industry in India has witnessed tremendous boom in years. Hotel Industry is inextricably linked to the tourism industry and the Growth in the Indian tourism industry has fuelled the growth of Indian Hotel industry. The thriving economy and increased business Opportunities in India have acted as a boon for Indian hotel industry. The Arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. The 'Incredible India' destination campaign and the recently launched 'Atithi Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and international tourism and consequently the hotel industry.

According to a report, Hotel Industry in India currently has supply of 110,000 rooms and there is a shortage of 150,000 rooms fuelling hotel room rates across India. According to estimates demand is going to exceed supply by at least 100% over the next 2 years. The future scenario of Indian hotel industry looks extremely rosy. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years. 1.2 List of players in the industry Taj Group Inter Continental Le Meridien Group of Hotels Oberoi Group of Hotels The Park Group of Hotels Welcome Heritage Group of Hotels ITC Welcome group of Hotels 1.3 Categorization of players in the industry

Based on location
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City centre: Generally located in the heart of city within a short distance from business centre, shopping arcade. Rates are normally high due to their location advantages. They have high traffic on weekdays and the occupancy is generally high. Motels: They are located primarily on highways, they provide lodging to highway travelers and also provide ample parking space. The length of stay is usually overnight. Suburban hotels: They are located in suburban areas, it generally have high traffic on weekend. It is ideal for budget travelers. In this type of hotel rates are moderately low. Airport hotels: These hotels are set up near by the airport. They have transit guest who stay over between flights. Resort hotels: They are also termed as health resort or beach hill resort and so depending on their position and location. They cater a person who wants to relax, enjoy themselves at hill station. Most resort work to full capacity during peak season. Sales and revenue fluctuate from season to season. Floating hotels: As name implies these hotels are established on luxury liners or ship. It is located on river, sea or big lakes. In cruise ships, rooms are generally small and all furniture is fixed down. It has long stay guest. Boatels: A house boat hotels is referred as boatels. The shikaras of Kashmir and kettuvallam of Kerala are houseboats in India which offers luxurious accommodation to travelers. Rotels: These novel variants are hotel on wheel. Our very own "palace on wheels" and "Deccan Odessey" is trains providing a luxurious hotel atmosphere. Their interior is done like hotel room. They are normally used by small group of travelers.

Based on Size of Property

The main yardstick for the categorization of hotel is by size the number of rooms available in the hotel.

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Small hotel: hotel with 100 rooms and less may be termed as small hotels. Medium sized hotel: hotel which has 100-300 rooms is known as medium sized hotel. Large hotels: hotel which have more than 300 rooms are termed as large hotels. Mega hotels: are those hotels with more than 1000 rooms. Chain hotels: these are the groups that have hotels in much number of locations in India and international venues.

Based on the Level of Service

Hotels may be classified into economy, and luxury hotels on the basis of the level of service they offer. Economy/ Budget hotels: These hotels meet the basic need of the guest by providing comfortable and clean room for a comfortable stay. Mid market hotels: It is suite hotel that offers small living room with appropriate furniture and small bed room with king sized bed. Luxury hotels: These offer world class service providing restaurant and lounges, concierge service, meeting rooms, dining facilities. Bath linen is provided to the guest and is replaced accordingly. These guest rooms contains furnishing, artwork etc. prime market for these hotels are celebrities, business executives and high ranking political figures. Example: Hyatt Regency, New Delhi

Based on the Length of Stay

Hotel can be classified into transient, residential and semi residential hotels depending on the stay of a guest.
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Transient Hotel: These are the hotel where guest stays for a day or even less, they are usually five star hotels. The occupancy rate is usually very high. These hotels are situated near airport. Residential hotels: These are the hotel where guest can stay for a minimum period of one month and up to a year. The rent can be paid on monthly or quarterly basis. They provide sitting room, bed room and kitchenette. Semi residential hotels: These hotels incorporate features of both transient and residential hotel.

Based on Theme
Depending on theme hotel may be classified into Heritage hotels, Ecotels, Boutique hotels and Spas. Heritage hotel: In this hotel a guest is graciously welcomed, offered room that have their own history, serve traditional cuisine and are entertained by folk artist. These hotels put their best efforts to give the glimpse of their region. Example: Jai Mahal palace in Jaipur. Ecotels: these are environment friendly hotels these hotel use eco friendly items in the room. Example: Orchid Mumbai is Asia first and most popular five star Ecotels. Boutique hotels: This hotel provides exceptional accommodation, furniture in a themed and stylish manner and caters to corporate travelers. Example: In India the park Bangalore is a boutique hotel. Spas: is a resort which provide therapeutic bath and massage along with other features of luxury hotels in India Ananda spa in Himalaya are the most popular Spa.

Based on Target Market

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Commercial hotel: They are situated in the heart of the city in busy commercial areas so as to get good and high business. They cater mostly businessmen. Convention hotels: These hotels have large convention complex and cater to people attending a convention, conference Resort hotels: These leisure hotels are mainly for vacationers who want to relax and enjoy with their family. The occupancy varies as per season. The atmosphere is more relaxed. These are spread out in vast areas so many resorts have solar powered carts for the transport of guest. Suite hotels: These hotel offer rooms that may include compact kitchenette. They cater to people who are relocating act as like lawyers, executives who are away from home for a long business stay. Casino hotels: Hotel with predominantly gambling facilities comes under this category, they have guest room and food and operation too. These hotels tend to cater leisure and vacation travelers. Gambling activities at some casino hotels operate 24 hours a day and 365 days.

Brief profile of players in the Industry Best Hotel Chains of India

Mentioned below are the significant hotel chains of India, Taj Group of hotels in India: The most popular name that is almost synonymous to hospitality in India is that of the Taj Group. Offering the best hotels across various genres like business hotels, heritage resorts, luxury hotels and even sea resorts, the Taj Group is definitely the best in the field. The Oberoi Group of Hotels in India: One of the most prominent names among the hotel chains of India is the Oberoi Group. It also owns several properties in exotic places like Australia and Mauritius. With its world class facilities and efficient staff to manage and play
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the perfect Indian hosts, the Oberoi hotels is no doubt a great feather on the grand cap of tourism in India. Le Meridien Group of Hotels: The Le Meridien Group of Hotels has played an instrumental role in playing the perfect host to the millions of tourists and guests coming here. It is a luxury brand of great fame and reflects the inherent. Le Meridien touches of elegance and class through all its properties in India. It is no wonder one of the exclusive hotel chains of India. Best Western Group: A world famous name when it comes to hospitality and service, the Best Western Group owns several properties across India. Each of the hotels has been equipped with numerous features to enable a cozy comfortable stay to the guest.

Five Forces Model on Hotels

It is not possible to apply Five Forces Model on the whole Hospitality Industry as the study will not reveal the real purpose of study, if we take example of Tourism Industry it is not easy to find out the impact of Five Forces on whole industry like impact of customers, impact of competitors etc. In order to make my study more effective and reasonable I have applied the Five force model on various hotels in India so that the impact of these forces on hotels can be analysed. It is easy to relate these forces on a chain of hotels rather applying it on the whole industry.

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Threat of New Entrants

The entry barriers to the hotel industry are relatively high. An expensive start-up cost consisting of property, hotel and staff are just the beginning. In order to compete against many of the corporate leaders one would need extensive amounts of advertising and marketing campaigns. However at this particular time low interest rates and more investors have helped many new entrances to occur in this industry. Although it seems positive for the industry with extremely low interest rates and more financial leverage, it may become a threat as the hotel industry becomes over crowded. The threat of new entrants is dependent upon the barriers to new entry into an industry. These include; Economies of scale and experience The opportunities for product differentiation The amount of capital required to buy into the industry Access to distribution channels

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%.

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Threat of Substitutes
Substitute industries provide competing product offers that perform the same function. An example is the convenience eating-out market which competes against substitute convenient eat-at-home products marketed by supermarkets. Continual developments in technology keep changing potential threat from substitute products. The threat of substitutes in hospitality industry (hotel) mostly depends upon; Buyers' willingness to substitute The relative price and performance of substitutes The costs of switching to substitutes

The other issue is whether a particular resource is specific to the firm. Some resources are necessary to conduct business, but their possession does no more than bring a firm up to the industry's status quo. For example, restaurants need resources such as cash registers, servers, and kitchen equipment. Although these resources are necessary; possessing them brings a firm up to the status quo. Even if a firm is able to acquire a special kind of kitchen equipment that reduces energy consumption and food-preparation time, such equipment would lead to competitive advantage only if other firms do not acquire the same equipment. Once most restaurants possess the resource, it becomes the status quo. Therefore, competitive advantage can result only from resources and capabilities that are relatively rare. 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 services from various brands is one of the reasons to choose a substitute.
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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.

Bargaining Power of Suppliers

The bargaining power of suppliers is severely limited just because the power of hotel chain buyers is so immense. The switching cost for a hotel chain from one supplier to another is fairly small. Suppliers including employees can influence the attractiveness and profitability of sector by increasing their prices (or wages) and thereby increasing industry costs and reducing profit margins. Powerful suppliers are those organizations that control the supply of goods to the hospitality industry. A list of suppliers who provide various supplies to hotels is as follows;
Beverages Paper Products Cleaning Printing Consultants Promotional Materials Design Renovations Construction Photography Food Restaurant Food Service Equipment Security Furniture Fixtures and Equipment Supply Companies Guestroom Technology Maintenance Tele Communications Outsourcing Uniforms

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A hotel needs to keep good relations with each and every above mentioned supplier in order to have timely demands fulfilled if they increase the prices of their respective supplies it will have definite impact on the profitability so alternate options should be always available. This varies from country to country. Examples include monopoly suppliers controlling electricity, gas, or water supplies; oligopoly suppliers, which are concentrations of only a few major suppliers; and powerful trade unions, which can negotiate improved pay and conditions on behalf of the workforce. Suppliers tend to have great economic power if there are only a few suppliers that provide the precise type of good or service that is needed. They are also powerful if there is a high level of differentiation across suppliers, or if they are not particularly concerned about selling to you because you are not a large customer to them. 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 PALACE 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 Centers, Heritage HOTELS, etc.

Bargaining Power of Buyers This force reflects the strength of the bargaining position, particularly regarding price, which customers have over suppliers. Customers who purchase larger volumes of bed-nights and seats and who have low switching costs (i.e. it is easy to change the company product or service) leverage a strong bargaining force in the competitive environment. For example, tour operators, who book thousands of customers in to hotels, have strong bargaining position and can demand lower prices from hotels. Customers have a weaker bargaining position if demand is high and capacity low, but when demand is variable and capacity high the customers have a stronger
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bargaining position. However, individual customers who book and consume hospitality products have strong bargaining power. The bargaining power of customers is so strong. Low switching cost are the leading contributing factor to this power because there are many similar hotel accommodations. A firm with few customers runs the risk of considerable revenue loss should a single customer depart. Such a situation gives a customer economic power. In general, customers are relatively powerful if they are few or if they make large purchases. The bargaining power of customers determines how much customers 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 timings the hotels are offering discounts and incentives to reduce the bargaining power of buyers.

Intensity of Rivalry Rivalry that occurs within this industry is becoming more intense as the number of new entries increase. Another contributing factor to the high rivalry within this industry is the fact that there are few differentiating factors between hotels. Within the different segments there factors such as price, quality, service and reward attributes, but all of these are easily copied limiting a sustainable competitive advantage. The number of close substitutes is rising due to this increase in rivalry. For each segment there are several competing companies who offer the same attributes making differentiation difficult. Rivalry varies between industries and sectors. The character of rivalry varies, and includes; Conflict(efforts to destroy competitors), Competition (to provide better solutions to customers problems) Coexistence (rivals allow each other to operate in different segments)

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Cooperation (rivals cooperate in some activities such as purchasing) Collusion (illegal cooperation to fix prices and produce a managed market).

The rivalry is depending upon the number of dominant players, the level of profitability, levels of demand and capacity, and the personalities of competitors. In hospitality markets whilst competition in intense, most people working in the industry have good personal relationships with rivals working for competitors. Competitors have economic power based on their ability to compete. Competitors with disproportionately strong resource bases can be aggressive and create a strong rivalry. It is important to define the nature of rivalry in each market, as well as the industry as a whole. The key to rivalry in some hotel markets is pricing, for example, whereas in others it may be brand differentiation. In still other markets a key to success is locating near existing hotel properties. Firms that have multiple properties in different markets are often competing against some of the same firms in several markets, a situation called multipoint competition. In that situation, it is important to evaluate the effects of strategic moves in one market on possible competitor responses in other markets. To identify rivals in the hotel industry, current practice is to use price, segment and proximity. Using price and segment to identify rivals can be problematic due to price discounting. Additionally, a clear way to measure proximity does not exist. Network analysis and affiliation matrices, in particular, are used to show managers a simple, systematic way to quantify proximity. Affiliation matrices give managers a simple, numeric value to distinguish between primary and secondary competitors. Managers should also compare chains on other competitive dimensions to distinguish their relative competitive threat. Results suggest there will be more than one competitive dimension to distinguish between rivals. 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.

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Attractiveness of the Industry for Investment purpose

MARKET SHARES
The tourism in India has seen a steep decline over last 12 months and the effects of that have seen Hospitality Industry in India cut to half. ASSOCHAM recently released the report on the performance of Hospitality Industry. Mumbai terrorist attack combined with the global slowdown, have severely impacted the bottom line to the extent of 64 per cent of the Indian hospitality sector, as per the analysis carried out by the Associated Chamber of Commerce and Industry of India (ASSOCHAM). Here are some of the key findings of the report:

The average net profit of 10 hotels has declined by 65 per cent in Q4 FY 09 as compared to the Q3 FY 09. Out of these 10 hotels, in Q4 FY 09, 8 hotels have registered decline in net profit on sequential basis. The interest cost of 10 hotels went up by 51.65 per cent in the fourth quarter of FY 09. The fall in total income was about 4.47 per cent as compared to the third quarter of FY 09. The total expenditure in fourth quarter of FY 09 rose by 7.47 as compared to the third quarter of FY 09.

The share of Travel & Tourism industry to the global GDP was 6.48% in the year 2007 with value of US$ 3,493.19 billion and industry demand contributed to 13.21% of global GDP in 2007. Middle East was the fastest-growing region in terms of arrivals of international tourists during 2007.
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 According to the report by World Travel and Tourism Council, India currently ranks 18th in business travel and will be among the top 5 nations by the end of 2010. ASSOCHAM has projected that Medical Tourism is likely to become the leading foreign exchange earner for India India is now emerging as one of the hot destinations for medicaland tourism after Singapore, Thailand, Hong Kong, Malaysia, Philippines, Columbia

While the inflow of foreign tourist came down sharply and the rates shrieked, there has been a rise in expenses as based on profitability and cost parameters of the hotels on the quarterly results posted by hotel companies listed on the Bombay Stock Exchange (BSE) from 1st April-25th- May 2009. The total income of such hotels, which included income from operation and other income also, registered average decline by 4.47 per cent in Q4 FY 09 as compared to the Q3 FY 09. The income from operation also showed the average decline by 4.63 per cent during Q4 FY 09. Hotel companies such as TAJGVK Hotels & Resorts Limited has registered decline in net profit by 41.49 per cent in Q4 FY 09 as compared to the Q3 FY 09 followed the Jaypee Hotels Limited which registered decline in net profit by 44.86 per cent during the same period. The other hotels which registered major decline in net profit were Oriental Hotels Limited (28.34 per cent), Jindal Hotel Limited (58.12 per cent) and Howard Hotels Limited (57.28 per cent).
Performance Analysis of Hotel Industry

Parameters Income from Operation Total Income Employee Cost Fuel, Power and Light Total Expenditure Interest Net Profit 32 | P a g e

Per cent Change -4.63 -4.47 7.47 11.28 19.84 51.65 -64.80

Source: Corporate Announcements for the year ending 2008-09 The cost of power, fuel & light increased by 11.28 per cent in Q4 FY09 as compared to the Q3 FY 09. Among the hotels, Jindal Hotels Limited incurred maximum expenditure on the cost of power, fuel & light by 147.81 per cent, along with TAJGVK Hotels & Resorts Limited (20.34 per cent), Asian Hotels Limited (17.79 per cent) and Despite the decline in income top line and bottom line, the cost of hotel industry went up by 20 per cent during Q4 FY 09 as compared to the Q3 FY 09.

The maximum rise was incurred by Asian Hotels Limited (11.57 per cent) followed by Jaypee Hotels Limited (10.85 per cent) and TAJGVK Hotels & Resorts Limited (8.30 per cent). The rapid pace of expansion in hospitality sector of India raised the interest cost borne by the Indian hotel industry. The borrowing cost of the hotels went up by 51.65 per cent in fourth quarter of FY 09, while the total income decreased by 4.47 per cent during the period. The ten hotels analyzed by the AFP registered rise in interest cost, the maximum increase was incurred by TAJGVK Hotels & Resorts Limited (193.51 per cent) followed by Howard Hotels Limited (164.94 per cent) and Oriental Hotels Limited (89.10 per cent) among others. The employee cost of hotels also registered a rise in the total expenditure during the period. The employee cost of hotels rose by average 7.47 per cent in Q4 FY 09 as compared to the Q3 FY 09. The hotels that witness maximum rise in employee cost include Asian Hotels Limited (24.91 per cent), TAJGVK Hotels & Resorts Limited (24 per cent), Howard Hotels Limited (21.65 per cent), Ishwar Bhuvan Hotels Limited (15.45 per cent) and Oriental Hotels Limited (13.27 per cent) among others in Q4 FY 09 as against Q3 FY 09.

Growth
According to a report, Hotel Industry in India currently has supply of 10,000 rooms and there is a shortage of 150,000 rooms fuelling hotel room rates across India. According to estimates
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demand is going to exceed supply by at least 100% over the next 2 years. Five-star hotels in metro cities allot same room, more than once a day to different guests, receiving almost 24hour rates from both guests against 6-8 hours usage. With demand-supply disparity, hotel rates in India are likely to rise by 25% annually and occupancy by 80%, over the next two years. This will affect the competitiveness of India as a cost-effective tourist destination. To overcome, this shortage Indian hotel industry is adding about 60,000 quality rooms, currently in different stages of planning and development, which should be ready by 2012. Hotel Industry in India is also got a fillip with Delhi hosted 2010 Commonwealth Games. The future scenario of Indian hotel industry looks extremely rosy. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years. The hotel industry in India is going through an interesting phase. One of the major reasons for the increase in demand for hotel rooms in the country is the boom in the overall economy and high growth in sectors like information technology, telecom, retail and real estate. Rising stock market and new business opportunities are also attracting hordes of foreign investors and international corporate travelers to look for business opportunities in the country. The arrival of low cost airlines and the associated price wars have given domestic tourists a host of options. The opening up of the aviation industry in India has led the way for exciting opportunities for the hotel industry as it relies on airlines to transport 80% of international arrivals. Moreover, the governments decision to substantially upgrade 28 regional airports in smaller towns and privatization and expansion of Delhi and Mumbai airport will improve the business prospects of hotel industry in India. Substantial investment in tourism infrastructure is essential for Indian hotel industry to achieve its potential. The upgrading of national highway connecting various parts of India has opened new avenues for the development of budget hotels here. The Government of Indias Incredible India destination campaign and the Atithi Devo Bhavah campaign have also helped the growth of domestic and international tourism and consequently the hotel industry. In order to increase the stock of hotel rooms, the Federation of Hotel and Restaurant Associations of India suggested to the government that the floor area ration of the existing hotels should be increased. This was a couple of years before and will help create
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additional rooms in the existing properties and ease the burden of shortage of hotel rooms in the country. The proposal is yet to be implemented.

Pattern of Growth (Seasonal & cyclic) Pattern of growth in hotel industry is both seasonal and cyclical as hotel industry is interrelated and based on the tourism industry. As the industry is related and run on the demand based on the location in some regions like historical places and business centers (ex: Delhi, Hyderabad, Tirupathi, etc) the demand for the hotels are cyclical and for few places the demand is seasonal. Seasonal demand is depend on the climate and location (ex: beaches in India are mostly visited in summer because of climate and vacations)

Growth Determinants
Location: Location is a critical consideration because if affects hotels ability to draw customers. It is important that hotel location be visible, accessible, convenient and attractive to market. Surrounding land uses are important for all types of lodging operations. Aesthetics of the area, noise, safety and other factors should be considered.

Commercial Locations: By location along major highways or in business or industrial districts, hotels and motels benefit from high visibility and proximity to generators of room night demand. Local colleges, hospitals, attractions, services and entertainment are examples of room night demand generators.

Resort Locations: Hotels and motels in resort areas generate most of their business form leisure travelers who see the lodging facility and surrounds area as their destination. Access and visibility, while important, are secondary to the quality of the facility, services, amenities, and nearby attractions.

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Local Market Area: A lodging facility must be located in a market area that attracts overnight visitors.

Business Climate: Hotels and motels that primarily serve business travelers usually rely on the strength of the local business community.

Tourism Activity: Hotels and motels in resort areas typically rely on local attractions to bring in customers. Attractions can include both natural and man-made places of interest.

Business Travelers: Business travelers represent a large portion of lodging demand in many market areas. They include people traveling on business representing commercial, industrial and governmental organizations. Peak business demand is usually experienced Monday through Thursday nights.

Leisure Travelers: Leisure travelers may visit an area for a vacation, to attend sporting or social events, to shop, or to visit friends and relatives. They might be staying over simply because they are traveling to other destinations. Leisure travelers may be individuals, couples, families, or small groups. Travelers visiting hospitals and universities are typically included in this market segment. Leisure room demand is often seasonal. In larger, more urban market areas, leisure room demand may be limited to weekends, summer months and holiday periods.

Other Travelers: Various lodging customers cannot be classified under the categories of business, leisure, or group. These travelers may include construction workers, truckers, utility crews and others.

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EFFECTS OF RECESSION
The Indian Hotel Market Outlook Report, India Digest 2008 (brought out by Jones Lang LaSalle Hotels) states in an assuring manner that the impact is expected to be short term. The Indian economy has withstood such upheavals in the past so there is nothing to panic about. Organizations that want to effectively take note of the recessionary trends and protect their business will have to take on some hard decisions like 'back to basic' kind of planning, and ensure that input costs are maintained at levels that would continue to give them the profit margins without sacrificing the quality of delivery or the products. The hospitality industry should work on training, preventive maintenance, multiskilling, employee exposure, cross training and such measures that are non-financial and would enhance guest satisfaction. Staff retrenchment, cost cutting, travel and advertisement cuts may show savings in the short run but would certainly damage the long term growth of the hospitality industry. The next 18 to 24 months are testing times for the industry, but hoteliers with a proven track record will take things in their stride and come out of the recession with learning and experience. Another opportunity before the hoteliers is to look at options of joint promotions. Many hoteliers are already operating in collaboration with airlines, travel agents, etc for packages, not only for tourists but also groups, MICE as well as wedding promotions. Hotels have also associated with car rentals, travel portals and airline networks. This is expected to help ease the recessionary cascading effect. Hoteliers can join hands with the respective state tourism boards and other private operators to take full advantage of the hitherto unexploited domestic tourism potential. With the baton of the Commonwealth Games 2010 being passed on to India, and hotels increasing rooms, things will definitely start looking up in a few months.
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Increased interest in the Indian markets, improved international access coupled with the modernising of major airports will definitely boost hotel industry in India.

Facts and Figures of Indian Hospitality industry:

Tourism is presently the most important civil industry in the world. The hospitality industry is second only to the global oil industry in terms of turnover, and is, by far, the largest employer around the world. Ten percent of the world's work force is in the tourism industry, and 10 percent of the world's GNP comes from tourism.

Impact of Tourism on the Indian economy: Traffic increase: +45.5%, Value increase: +62.2% (in US$ million), Additional earnings from Tourism: +Rs.8274 crore. Foreign exchange earnings from tourist spending were pegged at around Rs.5, 358 crore in the first two months of 06, registering a growth of 14.7% over the same period in 05. Foreign tourist flow has grown at around 13%, with 4.4 million visitors in 2006. Last financial year saw 4.01 million tourists arriving in the country, up by 11% over last year and is expected to maintain the same levels this year too. In calendar 05, the country received 3.9m foreign tourists, a jump of 14% over 04. In 05, the country earned $6.9bn from inbound foreign tourists, which is more than twice the $3.1bn earned in 02.

The tourism ministry has set a target of 10 million tourists by 2010. The World Tourism Organisation has predicted that India will receive 25 million tourists by 2015. The World Travel and Trade Council, figures indicate that the Indian tourism demand is expected to grow at 8.8% from 2007-2016. According to the World Travel and Tourism Council, revenue from foreigners travelling to India is expected to grow to US424 billion by 2015. Indians travelling in India as well as abroad are expected to spend US$63 billion by 2015.

The who's who of the world of international fund companies - Blackstone, Morgan Stanley, Walton Street Capital, Starwood Capital, Merrill Lynch, West bridge Capital, Lehman Brother are looking to invest in the hospitality sector.

Around 500 million domestic tourists are projected to travel across India by 2010 compared to around 325 million in 2006 and growing at over 10% annually.

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India's hospitality sector is expected to see an estimated investment of US$11.41 billion in the next two years, and around 40 international hotel brands making their presence in the country by 2011, according to a report by Ma Foi Management Consultants. Moreover, the sector is expected to provide over 400,000 jobs.

In India, the industry supports 48 million jobs, directly or indirectly or 8.27 per cent of total employment and accounts for 5.83 percent of the GDP, according to Department of Tourism estimates.

According to an HVS International report average employee to room ratio is 1:8 in Indian hotels across all markets and drops to 1:5 for three star categories of hotels. The report also states that the hotel sector would need a fresh workforce of at least 94,000 by 2010-11.

In the FHRAIs memorandum presented to the government recently, it is said that at least 1, 50,000 additional rooms are required to meet the target of 5 million foreign tourist arrivals. This entails an investment to the tune of over Rs.15, 000 crore. Currently there are 1, 05,000 hotel rooms in the three to five-star category in India. The annual growth rate of hotel rooms in India is 6%. Nearly 11 per cent of the hotel demand in the country is from long stay guests.

To set up a 5-star deluxe hotel with 250-300 rooms will cost approximately Rs.300 crore, excluding the land cost. As per estimates by hospitality consultancy HVS International, around 150 hotel projects are in the works across the country, which are likely to add around 53,000 rooms over the next five years.

There are about 1,285 approved budget hotels across the country with about 51,000 rooms apart from guesthouses, dharamshalas and devasthans in the unapproved sector. The footprints of the IT and ITES in Tier 2 cities like Indore, Jaipur, Agra, et al, have played a role in driving the demand for budget hotels in these cities.

The tourism ministry has proposed a cash subsidy of Rs.2 lakh per room for one-star category and Rs.3 lakh per room for two and three star category hotels to facilitate their growth. According to Federation of Hotel and Restaurant Association of India (FHRAI), the country is short of 65,000 budget category rooms.

There is a shortage of around 30,000 rooms in Delhi and the NCR for the 2010 Commonwealth Games. In the NCR 27 new hotels and service apartments are slated to come up over the next four years, with nearly twenty hotels in Gurgaon alone, adding about 5,000 rooms.

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Average Room Rate (ARR) of hotels in India is increasing at the rate of over 20%almost equal to that of hotels in developed countries such as Europe and the US. The growth in ARRs is a direct fallout of the shortage of five-star accommodation in India and high demand generated by the booming economy. This shortage has stimulated investments in the hotel industry.

Most of the five-sar hotels are witnessing an average room occupancy rate of over 80%. For every room constructed, 3-5 jobs are created. The World Travel and Tourism Council has estimated that by 2010, tourism can support 25 million jobs ( 1 in every 15 ) in India through 8% annual growth.

For every rupee that goes into building a hotel, three more are spent on furnishing it. More than 27000 items go into a hotel including building material, chandeliers, glassware, furnishings, energy saving devices etc., and at present 90% of hotel accessories are indigenously produced in India. So the domestic accessories sector stands a good chance in the near future.

The average duration of stay of a foreign tourist in India is one of the highest in the world. On an average, it exceeds 27 days in the case of non-package tourist & is 14 days in the case of package tourist.

Wedding tourism is growing almost 100% on a year-on-year basis. Generally, the ratio of foreigners to Indians in an NRI wedding is 7:3. On an average, an NRI wedding organised in India costs Rs.50 lakh. On an average, 50-150 rooms are booked in a star category hotel.

Cruise shipping is growing globally at the rate of 12-15% annually. In India the cruise market is in excess of 1,25,000 guests annually and will grow at over 10% annually. As per Mumbai Port Trust, 31 international cruise calls are expected in India during 20062007 against 21 during 2005-2006. For 2007-2008 up to 54 cruise companies have sought permissions to berth their ocean liners in India ports.

22 Institutes of Hotel Management being operated as Centres of Excellence for providing hospitality manpower. The government plans to set up four Indian Institutes of Hotel Management in Uttaranchal, Jharkhand, Chhattisgarh and Haryana. To provide training in the area of tourism, the tourism ministry will also start 400 training programmes. Estimates indicate a need for about 15,000 more trained persons in the star category hotels, which includes about 2,700 managers, 2,500 supervisors and about

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1,000 staff. Hotel companies have hiked salary levels on an average by 15-20% in the last one year (2005-2006).

Online travel industry is growing at a CAGR of 125%. Generating revenues of around $300-500 million, the size of this industry is around 2% of the entire travel industry, which is estimated to be $42 billion. Growing at the current rate the online travel industry in India is expected to become a $2 billion industry by 2008.

International Recognition: India's booming tourism sector has not only witnessed international investments but also achieved international accolades with its increasing appeal as the leading global tourist destination. The government has been instrumental in making tourism a priority sector. Its efforts have borne fruits with a series of international recognition and awards.

India has been elected to head the UN World Tourism Organisation (UNWTO), the highest policy making world tourism body represented by 150 countries. The world's leading travel and tourism journal, Conde Nast Traveller, has ranked India as the 'numero uno' travel destination in the world. India was adjudged Asia's leading destination at the regional World Travel Awards (WTA). India's Taj Mahal continues to figure in the Seven Wonders of the World. Bangalore-based Leela Palace Kempinski was voted the favourite business hotel in the world in a Readers' Choice Awards by Conde Nast Traveller in 2007. India bagged the World's leading Destination Marketing Award for the Incredible India campaign.

Government Initiatives: To unlock the huge potential in this sector, the government has taken various initiatives for the development of this sector.

Launch of Incredible India campaign to promote tourism both in domestic and international markets. Guidelines issued for classification of Apartment Hotels / Timeshare Resorts / Guest Houses and Bed & Breakfast establishments. Railways have planned to set up 100 budget hotels at various stations along with private hospitality players. Recognition of spare rooms available with various house owners by classifying these facilities as "Incredible India Bed and Breakfast Establishments"', under 'Gold' or 'Silver' category.

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Other Initiatives by the Ministry of Tourism:- Paradigm shift towards Rural Tourism/Agri Tourism, Eco-Tourism; Medical Tourism launched as a new product. According to a report by FICCI and Ernst & Young, medical tourism industry, currently pegged at $450m, has the potential to grow into a $2.2bn (Rs.10,000 crore) industry by 2012. An estimated 1.75 lakh medical tourists visited India in 2005 for cardiac care, cosmetic surgery, joint replacements and dentistry, about 30% more than 2004. Inbound medical tourism is expected to contribute about 15% of corporate hospitals total earnings by 2009.

Another initiative in the pipeline is industry body CIIs partnership with 29 hospitals across 16 states to work out a price band for speciality services in cardiology, orthopaedics, oncology and minimally invasive surgery. The healthcare industry is working closely with the tourism ministry, which will incorporate these packages under its Incredible India campaign tp promote medical tourism in overseas markets. Currently 5 hospitals in the country have got National Accreditation Board for Hospitals and Healthcare Providers (NABH) accreditation. 15 more hospitals are expected to be accredited in one year. 32 hospitals have applied for the accreditation with the NABH and many are expected to follow. International Society for Quality in Healthcare (ISQua) - an international body that certifies quality of healthcare delivery, recognises the NABH accreditation is of the highest global standards. A new category of visa, "Medical Visa" ('M'-Visa), has been introduced which can be given to foreign tourists coming into India for medical tourism.

Eco-tourism - The government is considering various fiscal and policy measures to promote ecological and adventure tourism in the country including formulating uniform ecological guidelines to conserve nature and waiver of service tax charged on adventure tours.

Ministry of Tourism has tied up with United Nations Development Programme (UNDP) to promote rural tourism. 15 key tourist destinations/circuits being developed to world class standards and identified 50 villages for exposition of handicrafts and handloom.

The United Nations Educational Social and Cultural Organization have declared 16 centrally protected monuments: Ajanta, Ellora, Elephanta Caves, Agra Fort, Taj Mahal, Fatehpur Sikri, and the Sun Temple at Konark, the Churches and Convents of Goa, Khajuraho, the Buddhist monuments of Sanchi, Humayun's Tomb, Qutab Minar, Hampi

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monuments, Pattadakal monuments, Brihadisvara temple and the Mahabalipuram monuments as world heritage sites.

924 Infrastructure projects worth Rs.1440.86 crore sanctioned during the 10th Plan. The government has already okayed plans to substantially upgrade 28 regional airports in smaller towns. The upgradation of national highways connecting various parts of India has opened up the way for the development of budget hotels in India.

Focus on Buddist Circuit through infrastructure upgradtion of Buddist Circuits and "Walk with the Buddha" Campaign. The Tourism Ministry has identified 62 centres of Buddhist interest for development.

Tourism revival in J&K through a special tourism package. Focus on North East as India's tourism gateway to the East. Tourism ministry has proposed to declare a conditional 10-year tax holiday for all tourism projects in the country. Companies would enjoy full tax exemption up to 50% of the profits, but to enjoy tax benefits for balance amount they would be required to reinvest that part of the profits in tourism projects.

The government has allowed 100 per cent FDI in the hospitality sector. And with the relaxation of FDI restrictions on the real estate sector the hospitality industry has registered an increase in investments.

Social awareness among Service Providers and capacity building of Taxi Drivers and Guides through "Atithi Devo Bhavah" Campaign.

Key Findings & Highlights

The share of Travel & Tourism industry to the global GDP is 6.23% with value of US$ 3,493.19 billion and industry demand contributed to 13.21% of global GDP in 2009. The contribution of Hospitality Industry towards the generation of employment in India is 8.78%. Annually 5 million foreign tourists visit India and 562 million domestic visitors recorded. Commonwealth also gave huge boost to the whole industry.

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According to the report by World Travel and Tourism Council, India currently ranks 18th in business travel and will be among the top 5 nations by the end of 2010. ASSOCHAM has projected that Medical Tourism is likely to become the leading foreign exchange earner for India India is now emerging as one of the hot destinations for medical tourism after Singapore, Thailand, Hong Kong, Malaysia, Philippines, Columbia

Reasons to Buy

Spot Investment opportunities Reveals demand trends and assess the average occupancy rates of branded hotels Get a thorough understanding about the industry & the most popular destination for the international tourists Know the corrective measures for sustainable growth in the industry

CONCLUSION

The hotel industry in India having a tremendous opportunity in the future because of increasing trends in the tourism industry and government promoting the Incredible India campaign and other tourism promotion measures, the hotel industry in India is mix of many brand internationally established hotels having the scope to attract shares in the brand hotels which will help to expand the industry and the innovations in the industry is helping the hotels to retain the customers with them. Though the industry is having opportunities in future it is suffering with the cost of land which is costing 50% of the total cost and the taxes are main drawbacks for the industry. Industry is opening gates for the foreign investment which is a good sign for the industry and industry is working toward the fulfilment of the demand and supply gap.
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This hotel industry analysis report helps to know the full information of Indian hotel industry. The government support towards the hotel industry and its development is appreciable. It creates interest of the competitors to grow drastically. The hotel industry comprises a major part of the tourism industry. The hotel industry contributes employment and economical growth of the country. The report shows that the present and future skyrocket scenario of the industry. Various classes and categories of hotels and their services of the industry are very effective. The market share and expansion of industry in Indian economy is rosy day by day. At present the government is very liberal in regulating and licensing to the hotels because to increase foreign tourist average daily rate.

References

http://www.hotelmarketing.com http://www.conventions.net/hotel_industry_products_services.asp http://www.hotelresource.com http://books.google.co.in/books? id=fm1g5CL1_FkC&pg=PA93&lpg=PA93&dq=threat+of+new+entrants+in+hospit ality+industry&source=bl&ots=d7mC_

www.business.mapsofindia.com www.rdhawan.com/emba/Class08/Hospitality

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