Indian Hotel Industry

Presented by

Ayyappan.R(07MBA020)

J.Karunanithi(07MBA053)

Mahendran.S(07MBA059)

Nithya.S(07MBA069)

• 'Hotels in India' have supply of 110,000 rooms of

which 5 Star category accounts for approx. 30%. • India’s luxury rooms availability lower than even

smaller East Asian countries

HongKong Bangkok Singapore Malaysia India0

10000

20000

30000

40000

50000

60000

70000

80000

33536

5890932348

76373

21000

Source: Compendium of Tourism statistics, WTO

• 5 million tourists visited India last year• India needs an additional 50,000 rooms in the

next 2 or 3 years to service projected tourist arrivals

• Manpower requirements of the hotel industry will increase from 7 million in 2002 to 15 million by 2010

Main Characteristics Location No:of rooms Affiliation/Ownership Market Segment Mix Service Positioning Occupancy rate Rooms sold Average room rate Conference facilities/F & B outlets Physical facilities & services

Users of Hotel Services

Domestic ForeignPilgrims Political Representatives

Students Trade Representatives

Officials Cultural Representatives

Film Stars Educationists

Intellects Sportsmen

Business Executives Business Executives

Tourists Tourists

Economic impact of the Travel & Tourism Sector

% Share of World Travel & Tourism

Demand

Travel & Tourism Economy as %

of Total GDP

Travel & TourismEconomy Jobs as

% of TotalEmployment

WORLD 10.1 9.9 8.4South Asia 6.5 6.1 5.9India 6.5 6.1 6.4

Market Segmentation in Indian Hotel Industry

0

5

10

15

20

25

30

35

40

1.1

39.5

8.1

1.9

19

94.8

1.65.8 6.3

3

Key Operating Characteristics

Average Occupancy(%)

City 2003-04 2004-05 2005-06

All India 59.7 63.6 64.1

Mumbai 66.3 74.9 75.8

Delhi 69.1 76.6 74.8

Chennai 61.6 73.3 78.0

Nagpur 51.3 46.1 71.0

Visakha-patnam

70.1 80.6 77.2

Average Rate(Rs)

2003-04 2004-05 2005-06

2,689 3,413 3,227

3,063 4,307 4,615

4,247 5,498 6,699

2,061 2,384 3,080

985 931 1307

1,293 1,531 1,686

Fluctuations in Demand: From Excess Demand to Excess Capacity

Four conditions potentially faced by fixed-capacity services:

Excess demandToo much demand relative to capacity at a given time

Demand exceeds optimum capacityUpper limit to a firm’s ability to meet demand at a given time

Optimum capacityPoint beyond which service quality declines as more customers are serviced

Excess capacity Too much capacity relative to demand at a given time

Variations in Demand Relative to Capacity

VOLUME DEMANDED

TIME CYCLE 1 TIME CYCLE 2

Maximum Available Capacity

Optimum Capacity (Demand and Supply Well Balanced)

Low Utilization (May Send Bad Signals)

Demand exceeds capacity (business is lost)

Demand exceeds optimum capacity (quality declines)

Excess capacity (wasted resources)

CAPACITY UTILIZED

Capacity Constrained: Defining Productive Capacity in Services

Physical facilities to contain customers

Physical facilities to store or process goods

Physical equipment to process people, possessions, or information

Labor used for physical or mental work

Public/private infrastructure

Alternative Capacity Management Strategies

Level capacity (fixed level at all times)Stretch and shrink

Offer inferior extra capacity at peaks Vary seated space per customer Extend/cut hours of service

Chase demand (adjust capacity to match demand)Schedule downtime during periods of low demandUse part-time employeesRent/share extra facilities and equipmentsCross-train employees

Flexible capacity (vary mix by segment)

Demand Levels Can Be Managed: Alternative Demand Management

Strategies Take no action

Let customers sort it out Reduce demand

Higher prices Communication promoting alternative times

Increase demand Lower prices Communication, including promotional incentives Vary product features to increase desirability More convenient delivery times and places

Alternative Demand Management Strategies

• Use price and other costs to manage demand

• Change product elements• Modify place and time of delivery

– No change – Vary times when service is available– Offer service to customers at a new

location• Promotion and education

Challenges faced..• Slow in implementation:  Lack of adequate recognition for the

industry despite being one the biggest generator of employment has been hampering growth prospects. Infrastructure development, though happening, continues to languish. Amidst improving fundamentals, India could lose out to other countries if the pace is not accelerated.

• Regional hubs developing:  Though India has the potential in the tourism sector, competition is more global. The rapid growth of China, select South East Asian countries, the pace of development in the Middle East could affect India, in terms of its ability to attract tourist into the country.

• Susceptible to geo-political events:  Since tourism is a global phenomenon, any adverse developments on the geo-political front are likely to impact global tourist flows. India is no exception to the same, as was evident during events like Parliament attack, sequential blasts etc.

Scope of the industry..

• As a tourist destination:  Though India accounts for a fraction of global tourist flows currently, the country is expected to increase its market share over the long-term. The recognition of tourism as an industry in the recent past has paved way for opening up to competition.

• Infrastructure development:  The road development project along with other aspects like airport modernization and port development is likely to result in increased economic activity.

• Increased competition:  In the hotel sector, a number of multinationals have entered/strengthened their presence in the country. Besides, Indian hotel chains are expanding in international market. A combination of all these factors could result in a strong emergence of the budget hotels.

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