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Indian Hotel industry:

The Indian hotel industry has emerged as one of the keyindustries driving growth of the services sector in India. It has

evolved into an industry that is sensitive to the needs and

desires of people. The fortunes of the hotel industry have

always been linked to the prospects of the tourism industry

and tourism is the foremost demand driver of the industry.The Indian hotel industry has recorded healthy growth fuelled

by robust inflow of foreign tourists as well as increased tourist

movement within the country and it has become one of the

leading players in the global industry. Foreign tourist arrivals

(FTAs) into the country increased steadily from 2002 to 2008.

FTAs dipped in 2009, due to the global economic slowdown;

however, the impact on the Indian industry was much lower

than that on the global counterparts.

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According to the World Travel and Tourism Council (WTTC),

India ranks 18th in business travel and will be among the top 5

in this decade. Hotels in India have a supply of 110,000 rooms.With a shortage of 150,000 rooms, likely to result in demand-

supply disparity, room rates will see a rise to 25 per cent

annually over the next two years. The industry seems to be

fast getting rid of competition when it comes to being a cost-effective destination. The industry is adding about 60,000

quality rooms, currently in different stages of planning and

development and should be ready by 2012.

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Characteristics of Indian hotel Industry:

Major characteristics of the Indian hotel industry are:

High seasonality:

The Indian hotel industry normally experiences high demand

during OctoberApril, followed which the monsoon months

entail low demand. Usually the December and March quarters

bring in 60% of the years turnover for Indias hoteliers.

However, this trend is seeing a change over the recent few

years. Hotels have introduced various offerings to improve

performance (occupancy) during the lean months. Theseinclude targeting the conferencing segment and offering

lucrative packages during the lean period.

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Labor intensive:

Quality of manpower is important in the hotel industry. Theindustry provides employment to skilled, semi-skilled, and

unskilled labor directly and indirectly. In India, the average

employee-to-room ratio at 1.6 (2008-09), is much higher than

that for hotels across the world. The ratio stands at 1.7 for

five-star hotels and at 1.9 and 1.6 for the four-star and three-star categories respectively. Hotel owners in India tend to

over-spec their hotels, leading to higher manpower

requirement. With the entry of branded international hotels

in the Indian industry across different categories, Indian hotel

companies need to become more manpower efficient and

reconsider their staffing requirements.

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Fragmented:

The Indian hotel industry is highly fragmented with a large

number of small and unorganized players accounting for a

lions share. The major players in the organized segment

include The Taj, Oberoi, ITC Hotels, and East India Hotels.

Demand of Indian hotel Industry:

YEAR Demand of Rooms Increase in demand (%)

2010-11 22,822 9.74%

2009-10 20,797 8.71%

2008-09 19,130 9.20%

2007-08 17,518 13.22%

2006-07 15,472 -

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Here, the chart shows the Demand of the hotel rooms from the year 2006-

07 to 2010-11. It tends to increase year by year shows good position of the

Indian hotel industry. Demand is increased by 13.22% during the financial

year 2007-08 as compare to the year 2006-07(base year).it is increased by9.20%,8.71%.& 9.74% for the next three years respectively. The

percentage of increase in demand for the year 2009-10 was less as

compare to other years because of the terrorist attack on two big hotel Taj

and Oberoi and also world economic depression.

15472

1751819130

20797

22822

0

5000

10000

15000

20000

25000

2006-07 2007-08 2008-09 2009-10 2010-11

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Causes for increase in Demand of Indian hotelIndustry:

The fortunes of the hotel industry are closely linked to the

tourism industry and hence tourism is one of the mostimportant Demand drivers. In addition, all factors that aidgrowth in the tourism industry also apply to the hotelindustry. The Indian hotel industry demanded highly in recentyears owing to a number of factors:

Increased tourist movement:

Increased FTAs (Foreign Trade Adjustments) and touristmovement within the country has increased demand of the

hotel industry. Healthy corporate profits and higherdisposable incomes with easier access to finance have driventhe rise in leisure and business tourism, thus having a positiveimpact on the hotel industry.

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Development of other markets:

A major trend in recent times is the development of the hotelindustry in cities other than major metros. As real estateprices have been soaring, setting up and maintainingbusinesses and hotels in major metros is becoming moreexpensive, leading to search for other cities entailing lesser

costs. Consequently, hotel markets have emerged in citiessuch as Hyderabad, Pune, and Jaipur. This has led to increasein Demand for hotel development activity and expansion ofhotel brands within the country.

The industry has also seen development of micro markets,

especially in primary cities. As cities grow larger and moreoffice spaces come up across the city, travelers prefer to stayat hotels closer to the place of work/visit to save on time. Thishas led to the same hotel company setting up hotels acrossdifferent location within a city.

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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.Year Supply of Rooms Increase in Supply (%)

2010-11 27,703 7.49%

2009-10 25,773 4.68%

2008-09 24,620 1.54%

2007-08 24,246 5.37%

2006-07 23,010 -

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Here, we can clearly see the supply force of Indian HotelIndustry from the year 2006-07 to 2010-11. It tends toincrease year by year, shows good position of the Indian hotel

industry. Supply is increased by 5.37% during the financialyear 2007-08 as compare to the year 2006-07(base year). It isincreased by 1.54%, 4.68% & 7.49% for the next three yearsrespectively.

23,01024,246 24,620

25,77327,703

0

5,000

10,000

15,000

20,000

25,000

30,000

2006-07 2007-08 2008-09 2009-10 2010-11

Supply of Rooms

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The percentage of increase in supply for the year 2008-09 was

less as compare to other years because of the terrorist attack

on two big hotel Taj and Oberoi reduce the foreign visitors

and also world economic bad situation. But overall in the

other years it is increased because of the increase in the

number of visitor in the country; measures taken bygovernment to improve hotel industry as well as liberal policy

toward FDI.

Despite a dip in the year 2009, the hotel industry is addingabout 60,000 quality rooms, currently in different stages of

planning and development and should be ready by 2012.

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Distribution of Supply among 10 major cities:

Name of city Proportion (%) Name of city Proportion (%)

Goa 7% Kolkata 8%

Pune 15% Chennai 9%

Jaipur 3% Bangalore 12%

Cochin 4% NCR 13%

Hyderabad 15% Mumbai 14%

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The chart shows the distribution of supply among 10

major cities of the India. Different cities have different

proportion in the supply of hotel services such as the highest

portion is of the Hyderabad and Pune.

chennai

9%

Bengaluru

12%

NCR

13%

Mumbai

14%

Goa

7%Pune

15%Jaipur

3%

Cochi

4%

Hydrabad

15%

Kolkata

8%

Distribution of supply

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Causes for increase in Supply of Indian hotel Industry:

Various policy measures undertaken by the Ministry ofTourism and tax incentives have also aided supply of the hotelindustry; some of them include:

Allowance of 100% FDI in the hotel industry (includingconstruction of hotels, resorts, and recreational facilities)through the automatic route

Introduction of Medical Visa for tourists coming into thecountry for medical treatment

Issuance of visa-on-arrival for tourists from select countries,which include Japan, New Zealand, and Finland

Promotion of rural tourism by the Ministry of Tourism incollaboration with the United Nations DevelopmentProgramme

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Elimination of customs duty for import of raw materials,

equipment, liquor etc

Capital subsidy programme for budget hotels

Exemption of Fringe Benefit Tax on crches, employee sports,

and guest house facilities

Five-year income tax holidays for 2-4 star hotels established inspecified districts having UNESCO-declared 'World Heritage

Sites'.

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Demand and Supply Comparison of Indian hotel industry:

There is a mismatch between demand and supply

leading to higher occupancies and average room rates. The

demand and supply gap differs from city to city. There is not a

vast difference between demand and supply of the rooms in

Indian hotel industry. Here, demand and supply of major ten

cities is given:

Year Demand of Rooms Supply of Rooms Shortage/ Surplus

2010-11 22,822 27,703 4,881

2009-10 20,797 25,773 4,976

2008-09 19,130 24,620 5,490

2007-08 17,518 24,246 6,728

2006-07 15,472 23,010 7,538

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The Demand -Supply chart shows the gap betweendemand and supply disparity of the Indian hotel industry. Itshows the simultaneous increase in both over the five years.The Demand and supply gap is tends to decrease year by yearand the margin of gap is also declining.

0

5,000

10,000

15,000

20,000

25,000

30,000

2006-07 2007-08 2008-09 2009-10 2010-11

23,01024,246 24,620

25,77327,703

1547217518

1913020797 22822

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The demand-supply gap is 7538 rooms during the year 2006-

07 but as year passed it is 6728 rooms, 5490 rooms, 4976rooms, and 4881 rooms respectively for the next four years.

The demand-supply gap is declined by 10.74% in the year

2007-08 as compare to the year 2006-07. It is declined by18.40%, 9.36%, 1.94% for the year 2008-09, 2009-10, 2010-11

respectively.

The decrease in the demand-supply gap is good for the Indian

hotel industry because as the gap decrease there will increase

in the demand of the hotel rooms.

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Conclusion:

From the above discussion we are come to the conclusion

that the Indian hotel industry has performed well during last

five years. It is growing year by year instead of many hurdles

in the way.

The industry has supplied as per demand but is still facing

shortage of 150000 rooms, likely to result in demand-supply

disparity; supply is not as much as compare to the demand in

the industry.

The government should increase its budget towards the hotelindustry as it is observing high rates of growth and can lead to

Indias development as well.

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Thank You

ForYour

Co-ordination

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Sallu = 1-7

Jithin = 8-10

Sandip = 11-15

Dhaval = 16-18

Arjan = 18-20

Conclusion can be present by anyone who wants

to intiatess.