Industry Analysis of Hotel Industry, India

clientele structure and processes INDUSTRY ANALYSIS FOR HOTEL INDUSTRY, INDIA Shruti Garg 2012H149223P De air divisionment of Management 16th November 2012 Submitted to Dr. Jyoti TABLE OF CONTENTS 1. Introduction 1. 1 Background of Hotel Industry 1. 2 Structure of Hotel Industry 1. 3 Mid Market Segment 1. 4 Budget Segment 1. 5 hereditary pattern Hotels 1. 6 Others 2. 5 Major Players in Market 3. Profiles of any(prenominal) Major Players 3. 1. Indian Hotels Company 3. 2. ITC/Sheraton legions 3. 3 The Leela Group 3. 4 The EIH Ltd. (The Oberoi Group) 3. The Ashok Group 4. Porters Five Forces Model 4. 1 Introduction 4. 2 Bargaining office of Suppliers 4. 3 Bargaining power of Customers 4. 4 Threats of New Entrants 4. 5 Threats of Substitutes 4. 6 Competition Rivalry between Existing Players 5. SWOT outline 5. 1 Strengths 5. 2 Weaknesses 5. 3 Opportunities 5. 4 Threats 6. References 3 3 3 4 5 5 5 5 6 6 6 6 7 7 8 8 9 9 9 10 10 11 11 11 11 12 12 Shruti Garg 2012H149223P 2 scalawag i nsane asylum BACKGROUND OF THE HOTEL INDUSTRY The Hotel Industry comprises a major(ip) break apart of the Tourism industriousness.Historically viewed as an industry providing a lavishness service valuable to the economy notwithstanding as a foreign exchange earner, the industry today contributes directly to employment (directly employing around 0. 15 million people), and indirectly facilitates tourism and commerce. Prior to the 1980s, the Indian hotel industry was a slow-growing industry, consisting primarily of relatively static, single-hotel companies. However, the Asiad, held in New Delhi in 1982, and the subsequent partial liberalization of theIndian economy generated tourism interest in India, with momentous benefits accruing to the hotel and tourism sector, in terms of improved demand patterns. Growth in demand for hotels was curiously high during the early 1990s following the initiatives taken to liberalize the Indian economy in FY1991, as per the recommendations of the supra guinea pig Monetary Fund (IMF). The euphoria of the early 1990s prompted major manacles, new entrants and multinational gyves to chalk out ambitious capa urban center additions, especially in the metropolitan cities.However, most of these efforts were directed towards the personal credit line travelers and foreign clientele. In repenny years, the hotels sector has grown at a faster rate than GDP. As a result, the share of hotels & restaurants in GDP at current prices has increase from 1. 2per cent in FY2000 to 1. 5per cent in FY2005. In constant (1999-2000) prices, the GDP from hotels and restaurants has increased from Rs. 222. 65 million in FY2000 to Rs. 335. 49 billion in FY2005. As a result, the share of hotels and restaurants in total GDP at constant prices has increased from 1. 4per cent in FY2000 to 1. 40per cent in FY2005. 5 STRUCTURE OF THE INDUSTRY Hotels are an all-important(prenominal) parcel of the tourism product. They contribute in the overall tourism exp erience through the standards of facilities and serve offered by them. With the labor of providing contemporary standards of facilities and services available in the hotels, the Ministry of Tourism has formulated a voluntary scheme for smorgasbord of operational hotels which will be applicable to the following categories ? Star Category Hotels 5 Star Deluxe, 5 Star, 4 Star, 3 Star, 2 Star & 1 Star ?Heritage Category Hotels Heritage Grand, Heritage Classic & Heritage Basic Shruti Garg 2012H149223P 3Page MID-MARKET SEGMENT This segment comprises 3 and 4 lead story hotels, which cater to the average foreign and domestic leisure travelers. This segment also caters to the middle level worry travelers since it offers most of the essential services of the luxury hotels without the high approach since the revenue enhancement component of this segment is cut back compared with the premium segment. BUDGET SEGMENT These comprise 1 and 2 star hotels referred to as Budget Hotels.These c ategories do not offer as many facilities as the early(a) segments but provide inexpensive alteration tithe passing price-conscious segment of the domestic and foreign leisure travelers. Shruti Garg 2012H149223P 4Page HERITAGE HOTELS In the past four decades, certain architecturally characteristic properties such as palaces and Forts, built prior to 1950, return been converted into hotels. The Ministry of Tourism has classified these hotels as heritage hotels. OTHERS At any point in time, applications for miscellany are usually pending with the Ministry of Tourism because of which such properties remain unclassified.The number of hotel rooms pending categorisation has declined from historical 15-20per cent to 5per cent of the total rooms available in the recent past. 5 major players in grocery store ? The Indian Hotels Company ? ITC/ Sheraton Corporation ? The Leela Group ? The EIH Ltd (The Oberoi Group) ? India Tourism Development Corporation (ITDC) / the Ashok Group Shruti Garg 2012H149223P 5Page PROFILES of some major players in the Hotel Industry THE INDIAN HOTELS COMPANY The Indian hotels companionship and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces, recognized as Asias largest and finest hotel company.Incorporated by the give of the Tata Group, Jemsetji N Tata, the company opened its first property, The Taj Mahal Palace Hotel, Bombay in 1903. The Taj, a symbol of Indian hospitality, entire its centenary year in 2003. Taj Hotels and Resorts and Palaces comprises of 59 hotels at 40 locations across India with an additional 17 international hotels in the Maldives, Mauritius, Malaysia, UK, USA, Bhutan, Sri Lanka, Africa, the middle east and Australia. The company has had a long standing commitment to the continuous outgrowth of the Indian tourism and hospitality industry.From the 1970s through 1990s, the Taj played an important role in accounting entry several of Indias key touring car destinations. Working in tand em with the Indian government, the Taj developed resorts and retreats maculation the government developed roads and rail airs to Indias hidden treasures. ITC/ SHERATON CORPORATION ITC Welcome assembly Hotels, Palaces and Resorts, is today one of Indias finest hotel chains, with its distinctive logo of hands folded in the traditional Namaste is widely recognized as the ultimate in Indian hospitality. Each of the chains hotels pays architectural tribute to ancient dynasties, which ruled India from time to time.The design concept and themes of these dynasties play an important part in their respective style and decor. With more than and more hotels being added at strategic destinations, the group has joined hands with the Sheraton Corporation to strengthen its international marketing base. A successful marketing prerogative for almost 25 years now, in that respect are currently 10 ITC Welcome group Sheraton hotels, and more in the pipeline. THE LEELA GROUP Founded in 1957 by Cap t. C. P. Krishnan Nair, the Rs. 4. 5 billion Leela Group is engaged in the employment of ready-made garments and luxury hotels and resorts.The Leela Kempinski, Mumbai and The Leela, Goa are two of the best hotels in India, and have also won considerable international acclaim. For this to have been achieved in 12 short years is Nothing short of Shruti Garg 2012H149223P 6Page remarkable. Recently in 2001 Capt. Nair fulfilled his longstanding dream of constructing a palace hotel in the garden city of Bangalore. The Leela Palace Kempinski, Bangalore is built in art deco style recreating the grandeur of The Mysore Maharajas Palace. It is set amidst 8 acres of ornament garden and waterfalls. It is a palace with the heart of a modern hotel.Its 254Kovalam is Keralas largest resort, built on a rock face cradled between two wide sweeping Beaches with stunning view of the famous Kovalam coastline. THE EIH LTD (THE OBEROI GROUP) Asian elegance is the key to running hotels, if you ask EIH (be tter known as The Oberoi Group). The company owns and operates about 20 luxury hotels, about 10 mid-range hotels, and two inland cruises The Oberoi Group operates primarily in India, but also in Australia, Egypt, Indonesia, Mauritius, and Saudi Arabia. Most of the companys luxury properties bear the Oberoi banner.The company in 2004 joined forces with Hilton International to rebrand most of its mid-range hotels as Trident Hiltons (the former Oberoi Towers is now known as the Hilton Towers Mumbai). The Oberoi Group also operates luxury cruises of the Nile River and Indias Kerala region. INDIA TOURISM DEVELOPMENT CORPORATION (ITDC) / THE ASHOK GROUP India Tourism Development Corporation (ITDC) was established in 1966 as an autonomous public sector corporation, entrusted with the task of helping develop tourism infrastructure and promoting India as a holidaymaker destination.The ITDC Ashok Group of hotel chains manages some of the best vanadium star and luxury tour hotels in the Indi an hospitality industry. The hotels run by the ITDC Ashok Group of hotel chains may be divided into incompatible categories these are elite hotels, comfort hotels and classic hotels. The ITDC Ashok Group of hotel chains manages 33hotels in 26 different tourist destinations all over India. The management of Ashoka Group believes in offering the best in the hospitality industry and the staff at each of the hotels run by the group is especially trained to be courtly and efficient.The Ashok Group of hotel chains boasts of running some of the best hotels in the Indian hotel industry. The hotels that are a part of the elite and classic socio-economic class of the ITDC Ashok Group are the Ashok Hotel in New Delhi, the Kovalam Ashok Beach Resortin Kovalam, Kerala, the Agra Ashok in Agra, Hotel Jaipur Ashok in New Delhi and the Qutab Hotel in New Delhi. Most of the hotels managed by the ITDC Ashok Group have had the privilege of playing host to several international and national dignitari es. Shruti Garg 2012H149223P 7Page PORTERS FIVE FORCES MODEL INTRODUCTIONPorters model is based on the insight that a corporate strategy should execute the opportunities and threats in the organization external environment. Especially, agonistical strategy should base on and understanding of industry structures and the way they change. Porter has identified five competitive forces that shape all(prenominal) industry and every market. These forces determine the forte of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization.Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to drive particular characteristics of their industry. Shruti Garg 2012H149223P 8Page 1. BARGAINING POWER OF SUPPLIERS The term su ppliers 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 analogous-TAJ, EIH, ITC & THE LEELA PALACE so they have a control over the industry. on that point are no substitutes for spas and five star hotels.The hotels customers are fragmented, so they have to reduce their dicker power to attract the customers. The Taj, ITC& Oberoi are having un bid rates and tariffs, because they are having their own brand image. The hotel chains are operating different services give care Spas, Boatels, Resorts, City Centers, Heritage HOTELS, etc. 2. BARGAINING POWER OF CUSTOMERS Similarly, the bargaining power of customers determines how much customers can call in pressure on margins and volumes. ? ? ? ? The hotel industry is one of the most invested in its fixed assets. So they are difficult 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 pricesensitive. Some unseasoned timings the hotels are offering discounts and incentives toreduce the bargaining power of buyers. 3. THREAT OF NEW ENTRANTS The competition in an industry will be the higher the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e. g. market shares, prices, customer loyalty) at any time.There is always a latent pressure for reaction and version for brisk players in this industry. Shruti Garg 2012H149223P 9Page ? ? ? The foreign hotel chains are tied up with Indian hotels to reduce the initial apostrophize and using the latters brand name. Brand loyalty of customers equal TAJ, ITC, and LEELA PALACE affects the new entrants. Access to raw materials and Distribution channels are controlled by Existing players like TAJ, ITC, a nd LEELA PALACE. The cost of land in India is high at 50% of total project cost as against 15% abroad. This acts as a major deterrent to the Indian hotel industry.In India the expenditure tax, luxury tax and sales tax inflate the hotel bill by over 30%. Effective tax in the South East Asian countries works out to only 4-5%. 4. THREAT OF SUBSTITUTES A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products. Brand loyalty of customers (TAJ, ITC, LEELA PALACE, etc,) is dominating the substitutes.The hotel relationship with customer and costs also the reasons to replacement to substitutes. The price variation of same class hotel services from various brands is one of the reasons to choose a substitute. The face up demand and supply of hotel rooms is one of the reasons to choose a substitute. More fixed cost and break costs affects the business. 5. COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. The top competitors in hotel industry are having the same services like five star, spas, boatels and motels, heritage hotels and palaces. The healthy competition among the all players is helping to increase the industry growth. Intense in metro cities, slowly picking up in secondary cities. Shruti Garg 2012H149223P 10 P a g e SWOT ANALYSIS STRENGTHS A very wide variety of hotels is present in the country. There are international players in the market such as Taj and Oberoi Chains A manpower cost in the Indian hotel industry is one of the lowest in the wor ld.India offers a readymade tourist destination with the resources intrinsic and cultural diversity Demand-supply gap Government support Increase in the market share WEAKNESSES The cost of land in India is high at 50% of total project cost as against 15% abroad. The hotel industry in India is heavily staffed. High tax structure in the industry makes the industry worse off than its international. Only 97,000 hotel rooms are available in India today. Only limited value added services Poor support infrastructure Slow implementation Susceptible to political events. OPPORTUNITIES Demand between the national and the inbound tourists can be easily managed due to difference in the period of holidays. In the long-run the hotel industry in India has latent potential for growth. Unique experience in heritage hotels. Rising income. point-blank sky benefits. THREATS Guest houses replace the hotels. Political turbulence in the area reduces tourist traffic and and so the busine ss of the hotels Changing trends in the west demand similar changes in India 2012H149223P 11 P a g e Shruti Garg The economic conditions of a country have a direct impact on the earnings in hotel industry.Lack of training man power in the hotel industry. Fluctuations in international tourist arrivals. Increasing competition REFERENCES ? ? Ministry of tourism website http//tourism. gov. in/TourismDivision/ Ministry of tourism Hotel classification guidelines http//www. hrawi. com/hotelrestaurant/Guidelines_for_classification_of_Hotels. pdf ? ? ? ? ? Hotel pictures http//www. hotel-pictures. net/ Taj http//www. tajhotels. com/ ITC Hotels http//www. itchotels. in/ The Leela http//www. theleela. com/ ITDC group http//www. theashokgroup. com/ Shruti Garg 2012H149223P 12 P a g e