prospects of the indian hotel industry 4.2 the concept...

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CHAPTER IV

PROSPECTS OF THE INDIAN HOTEL INDUSTRY

4.1 An Introduction of the Hotel Industry

4.2 The Concept of a Hotel

4.3 The Development of the Hotel Industry in India

4.4 The Major players in the Hotel Industry

4.5 Classification of Hotels

4.6 General classification of the Hotel Industry

4.6.1 On The Basis of Standards

4.6.2 On the Basis of Nature

4.7 Different Departments in Hotels

4.7.1 Core Functioning Departments

4.7.2 Support Department (Cost Centres)

4.8 Services in the Hotel Industry

4.9 Structure of the Hotel Industry in India

4.10 Prospects of the Hotel Industry in India

4.11 Tourism in Karnataka State

4.11.1 Mysore

4.11.2 Bangalore

4.12 Recent Trends in the Tourist Industry of Karnataka

4.12.1 Tourist inflow

4.12.2 Seasonality

4.12.3 Distribution

4.12.4 Tourist accommodation

4.12.5 List of hotels in Karnataka

4.13 Challenges faced by the Hotel Industry

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Chapter IV

Prospects of the Indian Hotel Industry

4.1 An Introduction of the Hotel Industry

The tourism industry is one of the world's fastest growing industries, with

estimated growth in global travel expanding from 450 million travellers in 1992 to

730 million in 2010 (world tourism organisation). The hospitality sector represents an

important part of the tourism industry and comprises hotels, restaurant, pubs and

clubs, guesthouses and self-catering operations. The largest component within the

Indian hospitality sector is hotels. One of the fastest growing sectors of the economy

is the hotel industry.

The hotel industry alone is a multi-billion dollar and a growing enterprise. It is

exciting, never boring and offers unlimited opportunities. The hotel industry is diverse

enough for people to work in different areas of interest and still be employed within

the hotel industry. This trend is obvious not just in India, but also worldwide. Modern

hotels provide refined services to their guests. The customers or guests are always

right. This principle necessitates application of management principles. The hotel

industry professionals have realized the instrumentality of management principles in

the hotel industry.

4.2 The Concept of a Hotel

The common law says that a hotel is a place where all conduct themselves

properly and who are able and ready to pay for their entertainment, accommodation

and other services including boarding, like a temporary home. It is a home away from

home where all the modern amenities and facilities are available on a payment basis.

It is also considered to be a place where tourists stop, cease to be travellers and

become customers. The definition presented by hotel operators to authorities of the

National Recovery Administration in Washington is found to be a more

comprehensive definition, presented by Stuart McNamara. The definition states that, “

Primarily and fundamentally, a hotel is an establishment which supplies boarding and

lodging not engaged in inter – state commerce or in any intra – state commerce,

competitive with or affecting inter – state commerce (or so related that the regulation

of one involves the control of other).”

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The hotel may furnish quarters and facilities for assemblage of people for

social business or entertainment purposes and may engage in retaining portion of its

premises for shops and businesses whose continuity (i.e., proximity) is deemed

appropriate to a hotel. The assemblage of people for social business and entertainment

purposes makes it essential that hotels are also furnished with a big conference hall

where the maximum possible accommodation is available.

We also call it the function room. Initially the term motel was meant for local

motorists and foreign tourists travelling by road. They serve the needs and

requirements of these travellers and meeting their demand for transit and

accommodation. Some of the important services offered by the motels are parking,

garage facilities, accommodation, and restaurant facilities.

4.3 Development of the Hotel Industry in India

The twentieth century may be called as the beginning of star hotels in India. In

this century, big and modern hotels came into existence on account of the advent of

big businessmen and new entrepreneurs. Affluent tourists also contributed a lot to the

development of star culture. The major star hotels in India are in the private sector.

The high profile hotels include The Indian Hotels Company Ltd., East India Hotels

Ltd., ITC Hotels Ltd., Bharat Hotels Ltd., Asian Hotels Ltd., Hotel Leela venture Ltd.

and Jay Pee Hotels Ltd. etc. The only public sector enterprise is India Tourism

Development Corporation Ltd. which runs the country’s largest accommodation

chain, and the Ashoka Group of Hotels. The hotel industry in India is making a

remarkable progress in the private sector. The hotels have shown distinct

improvement in operating techniques, catering and service.

Prior to the 1980’s the Indian hotel industry was a nascent and slow growing

industry primarily consisting of relatively static, single hotel companies. However, the

Asian games in 1982 and the subsequent partial liberalization of the Indian economy

generated tourism interest in India with significant benefits accruing to the hotel and

tourism sector in terms of improved demand patterns, The fortunes of the hotel

industry are tied to the fortunes of tourism and the general business climate in the

country which is why the economic liberalization initiatives implemented since 1991,

led to a soaring demand and supply gap in the hotel industry.

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This enabled Indian hotel companies to increase their Average Room

Realizations (ARR) by almost 50% between April 1994 and April 1997 and still enjoy

extremely high occupancies of above 80% for most of this period. During this time

the ARR’s of Indian 5 Star hotels were comparable to those prevailing in Singapore

and Hong Kong and were among the highest in the region.

The hotel industry in India has witnessed tremendous boom in recent years.

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 the

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.

Over recent years the government has taken several steps to boost travel and

tourism which have benefited the hotel industry in India. These include the

abolishment of inland air travel tax of 15%; reduction in excise duty on aviation

turbine fuel to 8%; and removal of a number of restrictions on outbound chartered

flights, including those relating to frequency and size of aircraft. The Government's

recent decision to treat convention centres as part of core infrastructure, allowing the

government to provide critical funding for the large capital investment that may be

required has also fuelled the demand for hotel rooms.

The opening up of the aviation industry in India has exciting opportunities for

the hotel industry as it relies on airlines to transport 80% of international arrivals. The

government's 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 the hotel industry in India. Substantial investments in tourism

infrastructure are essential for the Indian hotel industry to achieve its potential. The

upgrading of national highways connecting various parts of India has opened new

avenues for the development of budget hotels in India. Taking advantage of this

opportunity Tata group and another hotel chain called 'Homotel' have entered this

business segment.

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According to a report on a website, the hotel industry in India currently has an

accommodation of 110,000 rooms and there is a shortage of 150,000 rooms fuelling

hotel room rates across India. According to estimates demand has exceeded supply by

100% (in 2012). Five-star hotels in metro cities allot the same room, more than once a

day to different guests, receiving almost 24-hour 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 the Indian hotel industry is adding about 60,000

quality rooms, currently in different stages of planning and development, which

should be ready by 2013. Government has approved 300 hotel projects, nearly half of

which are in the luxury range. The future scenario of the 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 hospitality industry is a 3.5 trillion dollar service sector within the global

economy. It is expected to grow at the rate of 8% between 2008 and 2016. Many

international hotel brands including Sheraton, Hyatt, Radisson, Meridien, Four

Seasons Regent, and Marriott International are already established in the Indian

markets and are still expanding. Increase in average room rent for the entire hotel

industry over the previous year was 35 %.

4.4 Major Players in the Hotel Industry

(i) The Indian Hotels Company

The Indian Hotels Company and its subsidiaries are collectively known as Taj

Hotels, Resorts and Palaces, recognized as one of Asia's largest and the finest hotel

company. Incorporated by the founder of the Tata Group, Jamsedji N Tata, the

company opened its first property, The Taj Mahal Palace Hotel, Bombay, in 1903.

The Taj, a symbol of Indian hospitality, completed its centenary year in 2003. Taj

Hotels Resorts and Palaces comprises 59 hotels at 40 locations across India with an

additional 17 international hotels in the Maldives, Mauritius, Malaysia, United

Kingdom, United States of America, Bhutan, Sri Lanka, Africa, the Middle East and

Australia.

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The company has had a long-standing commitment to the continued

development of the Indian tourism and hospitality industry. From the 1970s through

the 1990s, the Taj played an important role in launching several of India's key tourist

destinations. Working in tandem with the Indian government, the Taj developed

resorts and retreats while the government developed roads and railways to India's

hidden treasures.

(ii) ITC/ Sheraton Corporation

ITC's Hotel division was launched on October 18, 1975, with the opening of

its first hotel - Chola Sheraton in Chennai. ITC –Welcome group Hotels, Palaces and

Resorts, is today one of India's 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 chain’s 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 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 franchise for almost 25 years now, there are currently 10

Welcome group Sheraton hotels, and more in the pipeline.

(iii) The Leela Group

Founded in 1957 by Capt. C.P. Krishnan Nair, the Leela Group is engaged in

the business of ready-made garments and luxury hotels and resorts. The Leela

Kempinski, Mumbai and The Leela, Goa and the newly opened Leela Palace

Kempinski New Delhi are some of the best hotels in India, and have also won

considerable international acclaim.

(iv) The Bharat Hotels Group

The Bharat Hotels group is a major player in India’s tourism and hotel sector.

It operates its hotels under ‘THE GRAND’ banner and its present portfolio of hotels

incorporates FOURTEEN luxury hotels in the five-star deluxe segment. These include

InterContinental ‘The Grand’ hotels in New Delhi, Mumbai, Goa & Srinagar and The

Grand Ashok, Bangalore, The Grand Laxmi Vilas Palace, Udaipur and The Grand

Temple View, Khajuraho.

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(v) The EIH Ltd (The Oberoi Group)

Asian elegance is the key to running hotels, if you ask EIH (better 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 has hotels in Australia, Egypt, Indonesia, Mauritius, and Saudi Arabia too.

Most of the company's luxury properties bear the Oberoi banner.

(vi) 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 developing

tourism infrastructure and promoting India as a tourist destination. The ITDC Ashok

Group of hotel chains manages some of the best five star and luxury tour hotels in the

Indian hospitality industry. The hotels run by the ITDC Ashok Group of hotel chains

may be divided into different categories: these are elite hotels, comfort hotels and

classic hotels. The ITDC Ashok Group of hotel chains manages 33 hotels 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 courteous and efficient.

(vii) Jaypee Hotels Ltd

Jaypee Hotels Limited primarily engages in the ownership and operation of

hotels in India. The company owns three Five Star Deluxe Hotels, namely Jaypee

Palace Hotel at Agra, and Jaypee Vasant Continental and Jaypee Siddharth Hotel at

New Delhi. It also manages the operation of the hotels Jaypee Residency Manor at

Mussoorie and Jaypee Green Resorts. In addition, Jaypee Hotels is involved in

construction operations. The company is headquartered in New Delhi, India. Jaypee

Hotels Limited is a subsidiary of Jaiprakash Associates Limited.

4.5 Classification of Hotels

India’s hotel industry comprises the following four main categories.

(Chakravarti, B.K.):

(i) Commercial Hotels cater mainly to business clients and usually offer room

service, coffee shop, dining room, cocktail lounge, laundry and valet service as

well as access to computers and tax services.

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(ii) Airport Hotels are located near airports and are conveniently located to provide

any level of service from just a clean room to room service and they may provide

bus or limousine service to the air port.

(iii) Conference Centres are designated to specifically provide meeting space for

groups; they provide all service and equipment necessary to handle a convention.

(iv) Economy hotels provide a limited service and are known for clean rooms at

prices meeting just the basic needs of travelers.

(v) Suite or All-Suite Hotels are hotels which offer spacious layout and design.

Business people like the setting which provides space to work and entertain,

separate from the bedroom.

(vi) Residential Hotels are very popular and a typical residential hotel offers long

term accommodations.

(vii) Casino Hotels are often quite luxurious. Their main purpose is in support of the

gambling operation. Casino hotels often offer top name entertainment and an

excellent restaurant.

(viii) Resort Hotels are the planned destination of guests, usually vacationers. This is

because resorts are located at the ocean or in the mountains away from inner

cities. Resort hotels may offer any form of entertainment to keep their guests

happy and busy.

4.6 General Classification of the Hotel Industry:

4.6.1 On The Basis Of Standards

Like most of the countries in world, India also has hotels divided in to

different categories depending on their location, facilities, infrastructure and amenities

provided. All the star hotels in India are government approved with continuous

control on the quality of services offered.

(i) Five Star Hotels: The most luxurious and conveniently located hotels in India

are grouped under Five Star Deluxe Hotel categories. Five Star Deluxe in India

are globally competitive in the quality of service provided, facilities offered and

accommodation option. These are top of the line hotels located mostly in big

cities. These hotels provide all the modern facilities for accommodation and

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recreation matching international standards in hospitality. In such type of hotels,

the HR department is established separately.

(ii) Four Star Hotels: A rung below five star hotels are Four Star Hotels, providing

all modern amenities to travellers with a limited budget. The quality of service is

almost as high as the five star and above categories. These kinds of hotels are for

travellers with a limited budget or at places which might not get the tourist traffic

associated with larger cities. In such types of hotel the concept of HR is more or

less followed.

(iii) Three Star Hotels: These are mainly economy class hotels located both in

bigger and smaller cities and catering to the needs of budget travellers. Though

they have fewer amenities and lesser facilities, these hotels are value for money

and give good accommodation and related services on the reduced price. Services

are stripped down versions of higher categories of hotels yet sufficient to fulfil

customer basic needs. In such type of hotels the concept of HR may or may not

be present.

(iv) Two Star Hotels: These hotels are mostly available in small cities and in

particular areas of larger cities. Catering to the backpacker tourist traffic, these

hotels provide all the basic facilities needed for general accommodation and

offers the lowest prices. In this type of hotel concept HR is absent.

(v) One Star Hotels: The hotels with the most basic facilities, small number of

rooms, locations in far-flung areas, are grouped under One Star Hotel category.

These hotels are best when the customer is looking for the cheapest available

accommodation option.

4.6.2 On The Basis Of Nature

(i) Heritage Hotels, in India are the best if one is looking for sheer elegance, luxury

and loyal treatment. They are not just another accommodation option but tourist

attractions in themselves. Exquisitely designed and decorated, meticulously

preserved, high standards of service and ethnic cultural motifs helps the tourists

get the complete experience of India. A new classification of heritage hotels has

been introduced to cover functioning hotels in palaces. Such traditional structures

reflect the ambience and lifestyle of a bygone era and are immensely popular

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among the tourists. The scheme aims at bringing such properties to like so as not

to be lost due to erosion or unuse.

(ii) Beach Resorts Hotels, are also available Peninsular India by the Arabian Sea,

the Bay of Bengal, the Indian Ocean and the two emerald archipelagos of

Lakshadweep and Andaman and Nicobar having a long coast line of around 7500

km, offering an amazing array of beaches, some popular, some not so well

known. Thus the location of a resort is the basic point of attraction for tourists.

(iii) Wild Resorts Hotels, are located in the wilderness a wildlife tour is incomplete

if one does not actually live in a forest for a few days. It means living in a rest

house or a tent in the midst of dense wilderness and waking up to the twittering

of birds.

(iv) Government Approved Hotels, are hotels, which might not have applied for star

categorization or small enough to find them in the list. Many of the wildlife

resorts, lodges and hostels are government approved providing a minimum level

of accommodation facilities at far off places.

(v) Residential Hotels, work as apartment house. Often they are referred to as

apartment hotels. The hotels charge rent on monthly, half – yearly, or yearly

basis. They are generally located in big cities and towns where no meals are

served to the customers.

(vi) Commercial Hotels, are meant for people who visit a place of trade and

commerce or business purposes and therefore these hotels are found located at

the commercial or industrial centres. They focus their attention on individual

travellers and are generally run by owners.

(vii) Budget hotels, are usually preferred by domestic travellers seeking economical

accommodation. These are reasonably priced, offer limited luxury, seasonal

discounts and decent services. Budget hotels are preferred by business travellers

contributing to greater ARR (Average Room Rate) than leisure travellers.

Increased demand and healthy occupancy has fuelled the growth of budget hotels

in a short time. Some other such categories are Chart 4.1:

Source: Classification of Hotel (Hotel School of Hague Classification)

4.7 Different Departments in Hotels

The departments are classified on account of it functions. They are as follows:

4.7.1 Core Functioning Department

(i) Food and Beverage (F&B) Department,

beverage service allied activities. Diffe

Restaurants, Specialty Restaurants, Coffee Shop (24 hrs.), Bar, Banquets,

Room service etc. Apart from that they have Utility services (Cleaning).

(ii) The Front Office Department,

reservations, registering guests, settling guest accounts (cashiering), and

checking out guests. Front desk agents also handle the distribution of

guestroom keys and mail, messages or other information for guests. The most

visible part of the front office

can be a counter or, in some luxury hotels, an actual desk where a guest can sit

down and register.

(iii) The Housekeeping Department,

hospitality world. Housekeeping i

guestrooms and public areas. This department has the largest staff, consisting

of an assistant housekeeper, room inspectors, room attendants, a house person,

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rent Departments in Hotels


4.7.1 Core Functioning Department

Food and Beverage (F&B) Department, F & B deals mainly with food and

beverage service allied activities. Different divisions are there in F & B like



Front Office Department, is the command post for processing




visible part of the front office area is of course the front desk. The front desk


down and register.

Housekeeping Department, is another important department in the

hospitality world. Housekeeping is responsible for cleaning the hotel, the





F & B deals mainly with food and

rent divisions are there in F & B like



is the command post for processing




area is of course the front desk. The front desk


is another important department in the

s responsible for cleaning the hotel, the



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crew, linen room attendants and personnel in charge of employee uniforms.

They may also have their own laundry and valet service. Hotels with laundry

and valet equipment may use it only for hotel linen and uniforms and send

guest clothing to an outside service where it can be handled with specialized

equipment.

(iv) The Food Production Department, deals with the preparation of food items.

It is basically engaged in preparing such those dishes, which are ordered by

the guest. It is catered by the F&B department. Cuisine A variety: like Indian,

Continental, Thai, Italian, Konkani (Coastal Sea Food), South Indian, Chinese,

Mexican, etc are offered. Different chefs are appointed for such specialty

cuisines.

4.7.2 Support Department (Cost Centres)

(i) Marketing & Selling Department: Sales and marketing has become one of

the most vital functions of the hotel business and an integral part of modern

hotel management. It includes packaging for selling, sales promotion,

advertising and public relations. The marketing division is charged with the

responsibility of keeping the rooms in the hotel occupied at the right price and

with the right mix of guests.

(ii) Engineering and Maintenance Department: The energy crisis being faced

throughout the world has given much importance to the engineering

department of any hotel. This department provides a day-to-day basis utility

services, electricity, hot water, steam, air-conditioning and other services and

is responsible for repair and maintenance of the equipment, furniture and

fixtures in the hotel. The engineering department plays an important role in

satisfying the demand of guests and help to maintain the profit level of the

hotel. Cleaning, up-keep, repair, replacement, installation and maintenance of

property and its furnishing, machinery and equipment are the joint

responsibilities of Engineering /Maintenance and the Housekeeping

Department.

(iii) Department of Finance, Accounting and Control: A hotel’s accounting

department is responsible for keeping track of the many business transactions

that are routine in the hotel. The accounting department does more than simply

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keep the books-financial management is perhaps a more appropriate

description of what the accounting department does. The control department is

concerned with cost control guidelines by way of reducing investment,

reduction in operating cost, control of food service costs, control of beverage

costs, labour cost control, etc.

(iv) Safety and Security Department: The security of guests, employees,

personal property and the hotel itself is an overriding concern for today’s

hoteliers. In the past, most security precautions concentrated on the prevention

of theft from guests and the hotel. However, today such violent crimes as

murder and rape have become a problem for some hotels. Unfortunately,

crime rates in most major’s cities are rising. Hence today the security

department has to be ever vigilant in curbing such additional criminal

activities.

(v) Administrative Department: Top organizational members usually supervise

the Administratiev Department in a hotel. This department is responsible for

all the work connected with administration, personnel, manpower, employee’s

welfare, medical, health and security.

(vi) Human Resource Development: This is a new area in the hotel industry and

within a short span of time it has become a very important part of the

organization. It plays the role of facilitator between the bargain able cadre and

the able non-bargain cadre. This department is also the focus of the discussion.

The practice, which this department and their staff perform, will be elaborated

in the light of the following project.

4.8 Services in the Hotel Industry

The first step in hotel service is to make it the core of the mission statement of

the company. A mission statement typically describes what kind of business the

company is in, what its mission, or purpose is, and what it believes in. For instance,

the Holiday Inn chain of hotels offers convenience at moderate price. Such hotels are

conveniently located near airports or city centres and either has a restaurant or is near

eating places. The rooms are clean and comfortable. Implicit in its mission are various

service objectives, the organization must be sure to know and understand its

customers.

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Once the mission statement and service objectives are clear, a service strategy

must be developed to clarify and implement them. A key part of the plan should be to

establish service performance standards. Performance standards translate work

requirements into levels of acceptable or unacceptable performance, and they need to

be built into the job descriptions and evaluation forms. For example:

� Customers are greeted within one minute of sitting down.

� Customer complaints regarding catering service are resolved immediately, and

the dining room manager is notified.

� The server looks directly at the customers when speaking to them.

� The server checks back with each party at least once during the meal.

� Meals are accurately served.

4.9 Structure of the Hotel Industry in India

Hospitality and hotel management are two most important segments

interdependent and interlinked to each other. Without hospitality it would very

difficult for the hotel business to survive. It is therefore, very essential that both these

industries should be managed professionally and in a particular manner. Hotel

management has in fact become a science itself and several new strategies and

innovations are being introduced in the hotel industry to make it at par with

international standards.

The hotel industry has traditionally hired people from many different cultural

and ethnic backgrounds. Within hotel and restaurant companies with international

operations, managers have to deal with cultural diversity of the work force as well as

the guests. It is obvious that effective managing of this diversity is a requirement at all

levels of a hospitality organisation, and that the companies in the forefront of

managing diversity will have a competitive edge.

As of December 2010, there are a number of category of hotels. Table: 4.1 show the

structure of the hotel industry.

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Table 4.1

Number and Category of hotels

Star Category No. of Hotels No. of Rooms

5-Star Deluxe 82 18764

5-Star 92 11332

4-Star 132 9401

3-Star 704 31039

2-Star 587 19031

1-Star 212 695

Heritage 83 2216

To be classified 50 5127

Total 1942 97605

Sources: Ministry of Tourism, Government of India.2010

4.10 Prospects of the Hotel Industry in India

The prospects of an industry depend upon the economic, social, political,

scientific and technological changes that are taking place in the universe. The hotel

industry is very sensitive and change in any sphere of the universe or in any branch of

human activity immediately reflects upon this industry.

Techniques, ideas, modes and methods of operation undergo continual

alteration in the hotel business. The emerging worldwide scenario is very conducts for

the growth of tourism and the hotel industry. This is due to worldwide education and

industrial development leading to greater enlightenment, increased earnings of

individuals, economic growth of tourist producing nations, medical science’s progress

leading to longer life, improved infrastructure of communications and improved

transport means etc.

Similarly, increase in holidays, vacations with pay, implementing policy of the

government for other employers, increase in pay, extra ordinary revolution in the

means of transportation including aero planes and steady reduction in airlines fares

have given a boost to the domestic tourism and hotel business in India.

In recent times any discussion on the hotel industry only veers around the

falling occupancy rates and average room rates and the trying times that the Indian

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hotel industry is going through. It is expected that in the metro cities, in three to four

years time, the hotel industry will face major problems on the supply side.

Major hotel chains have unveiled plans to expand into three or four star

segments in smaller towns. As the growth in metro cities approaches stagnation, hotel

chains are looking at the smaller town segments for future growth.

India’s booming hotel industry has transformed into a veritable basket of the

choicest of rooms, food and beverage, health and business facilities, travel packages

and everything that you can think of. New global entrants are vying with existing

local players to provide world-class services at prices suited to every pocket.

4.11 Tourism in the Karnataka State

The state of Karnataka was established in the year 1956, under the States

Reorganization Act. The state was originally called the State of Mysore and later

renamed Karnataka in 1973. Karnataka is the eighth largest state in the Indian union

and hosts 5% of the national population. The State of Karnataka is one of the top ten

domestic tourism destinations in India and was ranked 4th in 2011. The State has

various tourism assets such as beaches, hill stations, heritage monuments, national

parks, wild life sanctuaries etc. Given the variety of the tourism assets, the state is

promoted under the tagline “One state, many worlds”. The Karnataka State Tourism

Development Corporation (KSTDC) established in 1971 was entrusted with the task

of undertaking and developing tourism-related commercial activities.

The Corporation is presently engaged in a variety of activities such as tourism

strategy & development of an overall tourism sector policy, Marketing and promotion

of tourism and participation in tourism related events, identification and development

of tourism destinations, market research and statistics for tourism.

One of the recent tourist attractions introduced by the Corporation in

collaboration with the Indian Railways is a special tourist train on the lines of the

Palace on Wheels in Rajasthan, offering two itineraries namely: Pride of the South

and Southern Splendour. However, the Corporation has suffered losses due to a

number of organizational constraints. In order to minimize these losses and also to

provide better services to the tourists, the Government has undertaken privatization of

some of the commercial property units of the Corporation.

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In spite of possessing a variety of tourist attractions, the State has not been

able to accelerate the pace of tourism in comparison to other states. The relative

inability of the Karnataka State to harness and develop its full tourist potential may be

attributed to a combination of factors such as lack of effective policies, inadequate

infrastructure, ineffective marketing, Lack of quality accommodation facilities and

lack of decent facilities for the tourists.

The main rationale for formulating a comprehensive tourism policy is rooted,

on one hand, in the convergence of socio-economic spread benefits, environment

friendliness and employment potential of the tourism industry and on the other, in the

growing demand for tourism products in the State, brought about by a rapid industrial

growth in the State during the recent years that has led to tremendous increase in the

number of business travellers.

4.11.1 Mysore

Mysore is a popular tourist destination, receiving over two million visitors

annually. The Karnataka government is taking initiatives to promote heritage tourism

in Mysore and the city aims to target five million visitors annually by 2020. Other

factors that make Mysore a key tourist destination are a good geographical location in

close proximity to Bangalore, and excellent climatic conditions. Well-planned

investments in the city's infrastructure and industries are expected to further catalyze

Mysore's position from a purely tourism driven city to a commercial one.

Currently, the hotel market consists largely of small, unbranded hotels in the

budget and mid market segments. Moving forward, the addition of branded, medium

sized mid market hotels is expected. Though the Mysore market is weak at present, it

is expected to grow in the near future. Several factors will help facilitate the growth in

the market such as the Bangalore-Mysore Infrastructure Corridor, planned

commercial developments, growth in tourism and improved operations of the airport.

4.11.2 Bangalore

Bangalore witnessed a sharp increase in average rates of approximately -31%

in 2009-10 over the previous year, following the drop in occupancies in 2008-09 and

2009-10. The major portion of demand for Bangalore is in the commercial segment;

therefore, it suffered both from the decrease in travel expenses by corporations and

building of guest-houses by large companies to house their employees for an extended

period of time.

141

Bangalore is currently divided into three micro-markets: the Central Business

District (CBD), the Whitefield area and the Electronic City area. While the CBD

comprises mostly first class/luxury hotels that cater to mid management or higher

corporate clients, Electronic City and Whitefield largely consists of mid-market to

budget hotels with the exception of a few first class hotels. The city is expected to

further segregate into two more micro-markets: the Northern and Western markets.

Going forward, we anticipate a strong pickup in demand due to existing companies

becoming more active and due to a number of companies moving into Bangalore.

However, there is an ample amount of new supply entering the market in the next

three to four years and this is bound to put downward pressure on most hotels'

performances.

Table 4.2 Snapshot of Karnataka

Category Value Capital Bangalore

Area in square kilo meter 191,791

Number of revenue divisions

� Number of revenue divisions -4 � Number of districts- 30 � Number of taluks- 176 � Number of towns- 270

Major cities

Bangalore, Mysore, Mangalore, Hubli-Dharwad, Gulbarga

Population in million

� 52.7 (2001 census) � 61.1 (2011 census preliminary

estimate) Percentage of urban population of total (%) 38.6 (2011 census preliminary estimate) Literacy Rate (%) 67 (2011 census) Industrial growth rate 8% Airports Bangalore, Mangalore Gross domestic Product Rs. 2.71,956 crore (2010-11 estimates) Net per capita income (current prices) Rs.60,000

Contribution to economy by sector

� primary sector- 16% � secondary sector- 29% � tertiary sector- 55%

Major economic sectors

� IT/ITES � Tourism � Biotechnology � Telecom � Electronics � Engineering � Textiles � Automotive � Agro and food processing

*Source: Economic Survey- 2010-11, directorate of economics & statistics, Karnataka,

4.12 Recent Trends in Tourist Industry of Karnataka

4.12.1 Tourist inflow

Karnataka attracted around 84.68 million tourists with around 84.10 million

domestic tourists and 0.57 million international tourists in 2011. The tourism figures

for the last 5 years along with the associated growth rates are provided in the

Table 4.3.

Domestic and international visitors to KarnatakaCategory 2005

Domestic

24,698,243

Growth rate -

CAGR 0.9% over the period 2005

International 545,225

Growth rate


Total 25,243,468

Growth rate


Source: Department of Tourism. Karnataka

The year 2011 has seen a major turnaround in tourism figures and growth rates for

Karnataka. It is seen that domestic tourists increased by around 120% and

international tourists by around 77%. This is much higher than the equivalent figures

for any of the other major Indian states.

Comparison of growth rates for international tourists

13%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

2006

142

4.12 Recent Trends in Tourist Industry of Karnataka




Table 4.3 Domestic and international visitors to Karnataka

2006

2007

2008

2009

24,698,24 36,195,907

37,825,953

37,010,928

32,729,679

47% 4.5% 2% 12%

0.9% over the period 2005-10

505,524

534,563

520,041

229,847

-7%

6%

-3%

-56%


25,243,4 36,701,431

38,360,516

37,530,969

32,959,526

45% 5%

-2%

-12%


Source: Department of Tourism. Karnataka




of the other major Indian states.

Chart 4.2 Comparison of growth rates for international tourists- India and Karnataka

14%4%

-2%

12% 9%6%

-3%

-55%

41%

77%

2007 2008 2009 2010 2011




Domestic and international visitors to Karnataka 2010

2011

32,729,6 38,202,077

84,107,390

11% 120%

229,847 324,573

574,005

56% 41%

77%

32,959,5 38,526,650

84,681,395

12% 7%

120%




India and Karnataka

77%

2011

India

Karnataka

Comparison of growth rates for domestic tourism

The above statistics indicate that domestic tourism is the primary driver for

overall tourism growth in Karnataka. The issue of stagnation and decline of

international tourist numbers over the period 2005

2011, where for the first time international visitor numbers were higher than in 2005.

Chart 4.4 shows the overall contribution of Karnataka to the India tourism

figures. Due to the high growth seen in 2011, the contribution of Karnataka to

domestic and international tour

overall period considered).

Contribution of Karnataka to India tourist numbers

18%

47%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

2006

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2004 2005

143

Chart 4.3 Comparison of growth rates for domestic tourism- India and Karnataka



international tourist numbers over the period 2005-10 seems to have been reversed in

he first time international visitor numbers were higher than in 2005.



domestic and international tourist is almost double the figures for 2009 (lowest in the

overall period considered).

Chart 4.4 Contribution of Karnataka to India tourist numbers - international and domestic

14%7%

19%11%

15%

5%

-2%

-12%

17%

2007 2008 2009 2010

2005 2006 2007 2008 2009 2010 2011

Domestic International

India and Karnataka



seems to have been reversed in

he first time international visitor numbers were higher than in 2005.



ist is almost double the figures for 2009 (lowest in the

international and domestic

15%

120%

2011

India

Karnataka

2011 2012

The key challenge for Karnataka tourism would be to maintain the growth

trajectory that started in 2010. The dominance of domestic tourism is illustrated by the

contribution of overall tourists to Karnataka shown in Chart 4.5. The contribution of

domestic tourism in 2010 is around 99% comparable to the all India figures.

Domestic

4.12.2 Seasonality

The maximum inflow of tourists for both the domestic and international

categories is seen in the months of December to February. The seasonal trends are

more pronounced for

arrivals concentrated in the period of October to March as shown in Chart 8 (based on

2010-11 tourism figures). In the case of domestic tourists, the seasonal skew is less

pronounced with around 63% of tourist arrivals happening in the period from October

to March (based on 2010

Chart 4.6: Seasonality of tourists in the State

144


ry that started in 2010. The dominance of domestic tourism is illustrated by the



Chart 4.5: mestic tourist percentage for India and Karnataka



more pronounced for international visitors with around 74% of international tourist


11 tourism figures). In the case of domestic tourists, the seasonal skew is less

nd 63% of tourist arrivals happening in the period from October

to March (based on 2010-11 tourism figures), as shown in the Chart 4.6.

Chart 4.6: Seasonality of tourists in the State


ry that started in 2010. The dominance of domestic tourism is illustrated by the



tourist percentage for India and Karnataka



international visitors with around 74% of international tourist


11 tourism figures). In the case of domestic tourists, the seasonal skew is less

nd 63% of tourist arrivals happening in the period from October

11 tourism figures), as shown in the Chart 4.6.

145

4.12.3 Distribution

The southern districts of Karnataka - Bangalore (Rural & Urban), Mysore,

Ramnagara, Mandya, Kodagu -account for more than 60% of total international

tourism inflows as shown in Chart 4.7. Mysore accounts for the largest inflow of

tourists for both the domestic and international categories.

Chart 4.7

Percentage of international tourists- Major tourism destinations in Karnataka

Chart 4.8

Percentage of domestic tourists- Major tourism destinations in Karnataka

146

4.12.4 Tourist accommodation

It is estimated that there are around 3000 hotels and restaurants in Karnataka.

This is based on the official version of the Department of Tourism (DoT). The

number of approved hotels in Karnataka at the end of 2009 was 53. Apart from the

major hubs such as Bangalore and Mysore, there is a requirement for increasing

tourism accommodation facilities at major tourism destinations across Karnataka.

The DoT has been making efforts to promote the development of home stays

at tourism destinations such as hill stations to meet the requirement for

accommodation. In addition the KSTDC has also been developing and operating

accommodation facilities at different tourism destinations. The DoT has also

identified the need to develop wayside amenities across the state. For this purpose the

DoT proposes to develop wayside amenities in destinations between Sringeri &

Chickmagalur and Bellary & Hiriyur.

4.12.5 List of hotels in Karnataka

The total number of hotels listed in the Karnataka Hotel and Travel

Association (KHTA) are 223; out which 163 are three star and 60 are four star hotels.

147

Table 4.4

List of Selected Hotels in Karnataka

Three- star Hotels Four-star Hotels

Bangalore 1. Abhimaani Vasathi, 2. Ascot 3. The Basil Ikon, 4. The Chalet 5. Classic Inn, 6. Aditya Inn 7.12th Avenue, 8. 24 Tech Hotel 9. 37th Crescent, 10. 9 Marks Inn Indiranagar, 11. Airavatam Boutique Hotel, 12. Ample Inn, 13. Ankit Vista Green Village, 14. Apollo Sindoori Hotels, 15. Arafa Inn, 16.Arama, 17.Ashraya International Hotel, 18. Astra, 19. Ballal Residency, 20. Barons Inn, 21. Basera Inn, 22. The Basil Ikon, 23. The Belair, 24. The Bell Hotel, 25. Best Western Plus Confident Propus, 26. The Bouvice Villa 27. Brigade Homestead, 27. Brunton Aster, 28. Brunton Heights, 29. Casa Apartments, 30. Casa Cottage, 31. Chairman's Club Resort, 32. The Chalet, 33. Chalet Citadel, 34. Chalet Riviera, 35. The Chevron Hotel, 36. The Chevron Orchards, 37. Citrine Hotel, 38. City Centre Residency 39. Classic Inn, 40. Radha Hometel 41. Komfort Terraces Business Boutique 42. Grand Bee Hotel, 43. Grand Continent Hotel, 44. Escape Hotel, 45. Justa The Residence, 46. Casa Piccola Cottage, 47. Citrus Bangalore, 48. Hotel La Classic, 49. Clarks Exotica, 50. Casa de Bengaluru, 51. Hotel Ramanashree, 52. The President Hotel, 53. HM hotel, 54. Curzon Court, 55. Pai Viceroy Jayanagar, 56. Nandhana Grand 57. Grand Bee Hotel, 58. Ibis Bengaluru 59. Formule1 Bengaluru, 60. Canary Sapphire - CRN, 61. Keys Hotel Whitefield, 62. Shilton Royale, 63. Hotel Bangalore Gate, 64. Rosline The Boutique, 65. Mango Hotels, 66. Keys Hotel, 67. Citrine Hotel, 68. Premier Inn, 69. Crest Executive 70. Radha Hometel, 71. Komfort Terraces, 72. Fortune Park JP Celestial,

1.The Atria, 2.Adarsh Hamilton 3.Blupetal, 4.Confident Amoon 5.Rama, 6. The Capitol, 7. Adarsh Hamilton, 8. Aloft By Starwood 9. Angana Courtyard, 10. Aurick Hotel 11. The Chancery, 12. Citadines Richmond Bangalore, 13. Citrus Bengaluru, 14. Crest Executive 15. Dew Drops, 16. The Elanza Hotel 17. Escape Hotel, 18. Fairfield By Marriott Bengaluru, 19. Fortune Park JP Celestial, 20. Halcyon Condominiums 21. Fortune Select Trinity, 22. Golden Tulip Hotel Bangalore 23.Electronics City 24. Goldfinch Hotel, 25. Le Meridien Bangalore, 26. La Classic 27.Hotel Ramanashree Richmond Circle 28. Ibis Bengaluru, 30. Jayamahal Palace 31. Keys Hotel Whitefield, 32. Oxford Inn 33. Lemon Tree Premier, 34. MGM Mark Whitefield, 35. Olde Bangalore Resort 36. Premier Inn Bangalore, 37. The Pride Hotel, 38. Purple Lotus, 39. Quality Inn Shravanthi, 40. Radha Regent 41. Ramada Encore,42. Regaalis 43. Royal Orchid Central, 44. Sai Vishram 45. The Solitaire Hotel, 46. Spree Bangalore, 47. The Taj Gateway Hotel 48. The Pride Hotel

148

73. Pai Comforts JP Nagar , 74. Royal Tranquility, 75. The Chancery, 76. SilicRest Hotel 77. Hotel Regaalis, 78. Ramanashree 79. The Monarch Luxur, 80. The Royale Senate, 81. Pai Viceroy, 82. The Olive 83. Abhimaani Vasathi, 84. MGM Mark Whitefield Hotel, 85. Museum Inn 86. Shilton Residence, 87.Airavatam Boutique Hotel, 88. Mango Hotel 89. Ramee Guestline B'lore Hotel, 90. Grand Continent Hotel, 91. Shilton Hotel 92. Citadel Hotel, 93. Magaji Orchid 94. Lake View Residences, 95. Hotel City Centre, 96. The Chevron Hotel 97. Classic Inn, 98. The Monarch Hotel 99. Ashraya International Hotel, 100. Ramanashree California, 101. Comfort Inn Vijay, 02. Sri Krishna's, 103. Temple Tree 104. Mapple Express Bangalore, 105. The Belair, 106. Hotel T.A.P. Gold Crest, 107. The Rayal Comforts, 108. HHI Select Bengaluru, 109. Chalet Citadel 110. Quality Inn Shravanthi, 111. Hotel Bangalore International, 112. Mayflower The Business Hotel, 113. Shelton Grand 114. Nandhini Hotel, 116. Chetan International Hotel, 117. Gardeenia Comfortes118. Red Mount Hotel, 119. Nandhini Hotel 120. Maya International, 121. Hotel City Centaur, 122. Hotel Shanthi Residency Marathalli, 123. Grand Pavilion 124. JP Cordial, 125. Howard Johnson 126. Siesta Whitefield, 127. Parijatha Gateway Hotel, 128. Safina Hotels Ltd 129. Dr. Rajkumar International 130. Hotel AJ International 131. Hotel Mark's Grandeur 132. Unwind Island, 133. Golden Landmark Hotel, 134. Sunray Hotel 135. Hotel Empire International 136. Hotel Rama

149

Three-Star Hotels Four-Star Hotels

Mysore

1. Parklane Hotel, 2. Kings Kastle

3. Hotel MB International, 4. Royal Orchid Metropole Hotel, 5. Parklane Hotel, 6. Ginger Mysore, 7. Kings Kastle, 8. Hotel Paradise, 9. Lalitha Mahal Palace Hotel, 10. Hotel Sujatha Residency, 11. Hotel Roopa, 12. Bombay Tiffanys Hotel, 13. Hotel Abhishek, 14. Hotel Royale Heritage, 15. King's Kourt Hotel, 16. The President Hotel, 17. Hotel Palace Plaza

18.KVC International, 19. Nalapad Residency, 20. Siddharta, 21.Crystal Paark in

1.Hotel Regalis, 2.Pai Vista, 3.Lalith Mahal Palace, 4. Royal Orchid Brindavan Gardens, 5. Country Inn

6. Golden Landmark Resort, 7. Fortune JP Palace, 8. The Windflower, 9. Hotel Sandesh The Prince

Mangalore

1. Poonja International, 2. Prestige

3. Veena International, 4. Mati Mahal

5. The Saffran Boutique, 6. Ginger Hotel

7. The Gateway Hotel, 8. Goldfinch Mangalore, 9. Nalapad Residency Mangalore

1.Cold Finch The Boutique, 2.Deepa Comforts, 3. The Ocean Pearl

Three-Star Hotels Four-Star Hotels

Hotel Malligi (Hospet), Hyatt Place Hampi (Bellary) , Club Mahindra Coorg (Madikeri), The Ocean Pearl (Mangalore), The Gateway Hotel (Hubli-

Dharwad), Wildernest (Chorla)

, Gateway Hotel (Chikamagalur) ,

Ambatty Greens Resort (Virajpet), Vijayshree Heritage Village (Hospet,), Hotel Candy Southern Star (Hassan), Clarks Inn Airport (Hubli-

Dharwad), Krishna Palace (Hospet), Paradise Isle Beach Resort (Udupi) , Hotel Hill View (Madikeri), Hotel Ramdev International (Belgaum), Hotel Rakshit International (Belgaum), Hotel Sankam Residency (Belgaum), Sterling Holidays Emerald Bay (Karwar), Sun International Hotel (Gulbarga)

SwaSwara (Gokarna), Vivanta by Taj Madikeri (Madikeri), Orange County, Coorg (Siddapura), The Serai (Chikamagalur), The Windflower (Suntikoppa), Royal Orchid Central (Hospet), Royal Orchid Central, (Shimoga), Amanvana Luxury Boutique (Kushalnagar), .Eefa Hotel (Belgaum)

150

4.13 Challenges faced by the hotel industry Despite the growth, the hotel industry is facing numerous new challenges due

to external and internal factors in its business environment which affect its

organizational performance measurement .The external factors include stiff

competition from peers in the hotel industry (For instance, inflation and increase in

fixed expenses). These external factors have severely affected the Indian tourism

industry particularly the hotel industry.

Besides external factors, hotels have to deal with internal challenges which are

related to the hotel. Management internal factors may contribute to their poor

performance in Hotels. The statistics published by the HVS (Hospitality Valuation

Services, New Delhi) showed that despite the average rates witnessed an increase of

approximately 8% in the year 2009-10, while the average rate of growth of

occupancy across India declined by approximately -3%, with some cities witnessing

declines of up to -15%, coupled with a decline in net income percentages of

approximately 11% in 2009-10 over 2008-09. The PAR (Amount Per Available

Room), increase in property operations and maintenance costs, along with the POR

(Amount per Occupied Room) increase in food and beverage expenses are responsible

for the reduction in lines.

Overall in the past few years, 2005-2010 the hotel industry has witnessed

numerous ups and downs. It also shows that industry performance improved in 2005-

06 and reached its peak in 2007-08, while the occupancies continued to decline in the

year 2009-10 over 2008-9. However, the average rates saw a marginal increase, while

revenues and Net Incomes decreased over the past five years. In 2009-10, while the

revenues declined by 5% over the past year, the net income for hotels declined by -

15%. Chart 4.9 illustrates the trends in revenue earned and the net income generated.

Chart 4.9

Source: HVS (Hospitality Valuation Services, New Delhi) 2009-10

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