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Summer internship project



A study At itc sonAr‟

Akshitara Singh
IBS Kolkata

Summer Internship program
Final report
“iMprovinG Acculturation, INDUCTION AND TRAINING
A STUDY AT itc sonAr”





By: Akshitara Singh

Under The Guidance Of:

Faculty Guide: Company Guide:

Prof. Subir Sen Mrs. Shweta Pillai

IBS Kolkata ITC Sonar


I would like to express my heartfelt thanks to my faculty guide, Dr. Subir Sen, for guiding me
through this project and for his insightful suggestions and advices. I would also like to express
my heartfelt gratitude to my company guide Mrs. Shweta Pillai for extending towards me, her
extensive knowledge and support, through the entire phase of my internship.

I would also like to thank Mr.Sujit Menon, for always providing me with all the insight into the
project. I extend my thanks to all who, directly as well as indirectly, helped me to achieve my
aims and objectives for this duration; Miss Suheli Das and all the hotel management staff and
trainees who extended their helping hands for completion of my project.

My thanks and gratitude also goes out to the unmentioned, but not unimportant people, who
helped me with their advice and support.

Thanking you,

Akshitara Singh


table of Contents

Serial no. Title Page no.

(i) Acknowledgement 3
(ii) Executive Summary 5
1 Introduction 6-8
1.1 Hospitality Industry 6-8
1.2 Top Players 8
2 Problems being faced by the Industry in terms of HR 9-10
3 Company Profile 11-17
3.1 ITC Ltd. 11-12
3.2 ITC Sonar 12-17
3.2.1 Facilities offered by Sonar 12-14
3.2.2 Features and Activities 14-17
3.2.3 Brief overview of Operational Departments 17-19
3.2.4 Front Office- Competency Mapping 19-21
4 The Project 22
4.1 Objectives 22
4.2 Limitations 22
5 The Cornerstones Of the Study 23
6 Methodology 24
7 Main Text 25-28
7.1 Stage 1- Recruitment Process 25-28
7.1.1 Factors Affecting Recruitment 26
7.1.2 Recruitment Process 26
7.1.3 Recruitment Process in Sonar 27
7.1.4 Temporary Recruitment and Selection 28
7.2 Stage 2 - Acculturation Process 29-34
7.2.1 Acculturation 29
7.2.2 Benchmarking with the Industry best: J.W Marriott 30-32

4 About J.W. Marriott 30 Acculturation in J.W. Marriott 30-32
(i) Throughout the Year Training 30
(ii) Acculturation Timeline in J.W. Marriott 32 Acculturation Process in ITC Sonar 33 Benchmarking Comparison 34
7.3 Stage 3 - Problem Identification (AS IS) 35-36
7.4 Stage 4 - Recommendations (TO BE) 37-38
8 Appendix 39-42
8.1 Questionnaire – Induction Feedback Form 33-41
8.2 Questionnaire Analysis 42
8.3 Economy and Indian Hospitality Industry
8.3.1 Article: Recession and Indian Hotel Industry
8.3.2 Article: Predictive power of Hotel Cycles
9 References 43

Executive summary

While product quality has been long acknowledged as a critical factor contributing to
competitive advantage, acceptance of the similar importance of service quality is more recent
(Bitner, Booms and Mohr 1994). This acceptance had manifold reverberations in the service
industry which, subsequently, was forced to acknowledge the importance of the human resource
providing the indispensable and vital service(s). It has been suggested service workers, because
of their decision to work in the service industry, will have a desire to provide good customer
service (Zeithaml and Bitner 2000) and this attitude is likely to carry over into their workplace
behaviors (Bitner, Booms and Mohr 1994). This attitude can be either further engrained or
reversed by the training he receives and the environment he works in.

During the acculturation process of a company, a worker is not only taught the dos and dont‟s of
his to-be trade, he is also given a peek into his future work environment which can create a
positive or negative impact on his work-related attitude. Thus, the process of acculturation is
given due importance by employers around the world.

This project enumerates the steps and importance of this process in ITC Sonar and provides
recommendations for its improvement which would help the hotel in improving its service and
therefore its value, in the eyes of both, the prospective customer(s) and the prospective (or
current) human resource(s) i.e. the employee(s).


1.1 The Hospitality Industry

India - a place where guests are considered and treated as a form of god, hospitality sector is one
of the greenest pastures of the Indian industry. Known for its quality and the standards of
customer service, India has become a leading destination for the tourists across the world.

The hospitality industry can be divided into two basic sectors: Hotel industry and Travel and
Tourism industry. While India has always been one of the „Hot Spots‟ of eager tourists, the
recent efforts on part of the Indian Tourism Ministry has helped our country become one of the
favorite destinations of adventure as-well-as serenity seekers across the world.

Encouraged by the booming economy and tourism, increased spending on leisure, the growing
demand and the shortages of room space, there has been an influx of globally renowned players
trying to capture a chunk of the ever growing Indian market. Few of them are Hilton Group,
Accor Hospitality, Marriott International, Inter Continental Hotels Group. On the other hand, the
Indian players are foraying into and have established themselves in foreign markets. The names
include the biggies like ITC hotels, Radisson Hotels, Indian Hotels Company Ltd., Oberoi
Hotels, and Asian Hotels etc. The Indian hospitality sector has recorded the compounded annual
growth rate of (CAGR) of 15 percent. The rate of growth has been more or less consistent over
the last few years.

The supply and Demand of hotels in India :

The current global turmoil of economy notwithstanding, the Indian hospitality industry is riding
on a high growth phase. This is because of more than decent growth in economy and the
proactive policies initiated by the Indian Government in Travel and tourism sector.

It is estimated that demand will exceed supply by at least 100% over the next 2 years. By 2010
the Tourism ministry is expecting the domestic tourists to cross the sixty seven crore mark,
Which, thanks to growing affluence of Indian middle class as well as good infrastructure in terms
of road and railways looks like a distinct possibility. The future forecasts highlight both positive
triggers as well as concerns for the industry. These are as following:

Acute Supply shortage

There is a complete mismatch of demand and supply situation due to the rapid pace of growth
experienced by the Indian Hospitality sector that has far exceeded the supplies. According to the
industry insiders, the current demand for hotel rooms is approximately 2.5 lac but there are only
1.1 lac rooms available leaving a huge shortfall. Right now hotels in all major cities spanning
India are experiencing high room rates and low availability of rooms. Star-rated hotels constitute
about 30 per cent of the hospitality industry. In 2008, India had about 204 five-star hotels, yet we
need 1,50,000 additional rooms at present to meet the demand.

Boost in Demand

Considering that three major sporting events are in the offing in the next few years, including the
Commonwealth games (2010), demand for the hotel rooms is expected to show a steady curve
upwards. This upward trend will be led by both foreign as well as domestic tourists, a segment
now said to have finally "arrived" in India due to their rising income and changing lifestyle.
Currently, domestic travel is growing at a rate of 15% to 20%. According to the World Travel
and Tourism Council, India ranks 18th in business travel and will be among the top 5 in this
decade. Five-star hotels in metro cities allot same room, more than once a day to different guests,
receiving almost 24-hour rates from both guests against 6-8 hours usage. With this kind of a
demand-supply disparity, room rates are most likely to rise 25% annually and occupancy is to
rise by 80%, over the next two decades. The Indian Hotel Industry is adding about 60,000 quality
rooms, currently in different stages of planning and development and should be ready by 2012.
The Hotel Industry giants are flocking India and forging Joint Ventures to earn their share in the
race. The Government forecasts an additional requirement of 200,000 rooms by the turn of the
century, and has approved 300 hotel projects, nearly half of which are in the luxury range.
According to sources said, the manpower requirements of the hotel industry will increase from 7
million in 2002 to 15 million by 2010.

Firming up of Average Room Rents

Average room rate or ARR is an important indicator of growth. This is because it is the room
rent that accounts for the major portion of revenue earned by the Hotel industry of India.
Average Room Rates (ARRSs) and occupancy rates have shown a consistent increase in the
major Indian cities. The reason attributed to this increasing Average Room Rates (ARRS) and
occupancy is the influx of foreign tourists. Even budget hotels are charging up to 250USD per
room. Even in the recent future, despite the global inflationary trends, Industry Pundits estimate
their arrival to be steady.


Coming to the flip side of the story, owing to acute shortage in supply of hotel rooms there are
many big projects in the pipeline. There is sudden fear that once these projects are executed there
may be a case of oversupply with considerable room additions. However, in the current
recessionary phase of the global market with liquidity crunch, high inflation etc, it would take a
substantial time before these projects are fructified. So, there is no immediate threat of

1.2 Top Players

The major players in the Indian hotel industry can be broadly classified into private players and
public players.

Public Sector Playe rs:

ITDC hotels
Hotel Corporation of India

Private Sector Players:

ITC Hotels
Indian Hotels Company Ltd.(The Taj Hotels Resorts & Palaces)
Oberoi Hotels(East India Hotels)
Hotel Leela Venture
Asian Hotels Ltd.
Radisson hotels & Resorts

2.Problems being faced by the Industry in
terms of Human Resources:
Shrinking Manpower
The hotel industry is rapidly losing good professionals to other service segments. With many
new opportunities opening up - for both graduates with a hospitality degree and hotel executives
with experience and talent - within the business process outsourcing (BPO), ICE and othe r
service segments in India, hotels are no longer the only career choice. We can go so far as to say
that the hospitality industry faces a serious threat from other sectors: those that offer better
comparative remuneration, a better work- life balance, a more challenging work environment, or
faster professional growth.

Shrinking manpower within the industry is, today, a grave problem. This paucity is being felt
across all levels of staff and management now, and across all departments. On a pessimistic note,
it can be said that 85 per cent of all management level personnel across hotel chains in India are
not happy, and are waiting for the right opportunity to move out.

Growing Disillusionment

The growing disillusionment within the sector is indeed worrisome. A love for the business of
hospitality, and the desire to excel as a hospitality professional - considered to be the driving
factors for a long-term career in the industry - are no longer motivation enough for a new
generation of professionals that seeks faster and better gratification. Quite clearly, industry
leaders, associations and HR practitioners need to put in time and effort, to provide a nd prepare
for long-term planning to resolve the issues. The issue of quality of working life would be the
single deciding factor for the new generation.

Changing Aspirations & Expectations

The aspirations and expectations of hotel professionals have also undergone a sea change. To
quote a senior hotel professional, “During our time, it would take as much as 13 years, through
various positions, to rise to the level of food and beverage manager. The new „Generation Y‟ is
not prepared to wait for more than six years. People now want a tangible idea as to how they will
progress in the organization.

The pressure of retaining people in today‟s competitive environment, and the adjustments that
this necessitates will, over a period, significantly change both the management structure and

working environment in hotels in India. Managers will need to pay more attention to employee
motivation and team-building efforts, and see that these 'ideas' are more regularly - and more
effectively - put into practice. Age old policies and super structures, will, we believe, have to
pave way to newer and faster career progression. HR concepts once alien to the Indian
hospitality, like HRIS, OD intervention and Career Pathing, must now be taken very seriously by
Indian hotel companies.

It is indeed disappointing that, to date, not one hotel company in India has been ranked in the top
three in any field of service orientation, or has been included in the list of best employers or best
companies to work for. The industry has, without doubt, been inward looking, and owners and
management have been slow to understand, recognize and adopt employee best practices.

Attracting Talent
The Indian hospitality the industry has failed to create enough excitement for talent from outside
the industry to enter and be a partner in its growth. The industry has to find new ways o f
attracting talent. At the same time, there is a need for senior management to be flexible in terms
of their hiring practices, and more accommodating with new recruits. Hoteliers need to let go of
apprehensions and doubts, as to whether 'outsiders' would perform well enough, and adopt a
longer-term, more visionary approach: invest in finding and attracting talent and devise ways to
retain good performers.

In other words, the industry needs to become more competitive. Lessons have to be learnt from
the telecom and the other newly emerging, fast- growing sectors where people were 'invited to
join the industry and given time and space to perform'.

The industry‟s compensation practices will go through a radical change. Some companies in
India have started the process of aligning their pay structure to those of newly emerging sectors,
but the differential is still too much, in the range of 30 - 40 per cent. Hotel owners and
management need immediately to plan develop and implement long-term strategies for bridging
or, at least, lessening the gap between what the industry offers - and what these professionals
would be paid outside. Industry leaders should be more open with their compensation policies
and practices. Annual benefits may need to be split into monthly or quarterly incentives, to
enable an ongoing process of employee motivation. Performance management linked incentives
must be very carefully monitored and should not be delayed. The practice of delaying
compensation should be rectified and given urgent and top priority.

3. Company Profile
3.1 ITC Ltd.:
ITC Ltd today stands as one of India‟s largest premiere private sectors in the world with its
presence felt in different businesses.

Cigarettes-ITC‟s name in terms of the Cigarette business envelopes a wide range of

popular brands such as Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut,
Scissors, Capstan, Berkeley, Bristol and Flake in terms of its portfolio

Paper Boards- ITC's Packaging & Printing Business is the country's largest convertor of
paperboard into packaging. It was set up in 1925 as a strategic backward integration for
ITC's Cigarettes business. It also offers a variety of value-added packaging solutions for
the food & beverage, personal products, cigarette, liquor, cellular phone and IT
packaging industries. ITC's Paperboards business has a manufacturing capacity of over
360,000 tonnes per year and is a market leader in India across all carton-consuming
segments. It‟s stationery brands "Paper Kraft" & "Classmate" are widely distributed
brands across India.

Greeting cards- ITC's Greeting & Gifting products include Expressions range of greeting
cards and gifting products.

Safety matches- ITC's brands of safety matches include Mangaldeep, VaxLit, Delite and
Aim. The Aim is to be the largest selling brand of Safety Matches in India. It also
exports premium brands to markets such as Europe, Africa and the USA. It has launched
Mangaldeep brand of Aggarbattis with a wide range of fragrances like Rose, Jasmine,
Bouquet, Sandalwood. Mangaldeep is also being exported to USA, UAE, Bahrain,
Nepal, Singapore, Malaysia, Oman and South Africa.

ITC entered the Lifestyle Retailing business with the Wills Sport range of international
quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive
stores later expanded its range to include Wills Classic formal wear (2002) and Wills
Club life evening wear (2003). In 2002, ITC entered into the popular segment with its
men's wear brand, John Players. In 2005, ITC introduced Essenza Di Wills, an exclusive
line of prestige fragrance products.

FMCG- ITC made its entry into the branded & packaged Foods business in August 2001
with the launch of the "Kitchens of India" brand. In 2002 it expanded into Confectionery,

Staples and Snack Foods segments. ITC's brand in Food category include: Kitchens of
India, Aashirvaad, Sunfeast, Mint-O, Candyman, and Bingo! ITC's International
Business Division (IBD) is the country's second largest exporter of agri-products. ITC
exports Feed Ingredients (Soyameal), Food grains (Rice, Wheat, Pulses), Coffee &
Spices, Edible Nuts, Marine Products, and Processed Fruits.

The E-Choupal model- ITC has been very effective in tackling the challenges posed by
the unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries. It has helped farmers
overcome the challenges associated with rural farming to a large extend.

ITC Hotels- In 1975 the Company launched its with the acquisition of a hotel in Chennai
which has been rechristened 'ITC-Welcomgroup Hotel Chola Sheraton'. Rooted in the
concept of creating value for the nation, ITC chose the hotel business for its potential to
earn high levels of foreign exchange, create tourism infrastructure and generate large
scale direct as well as indirect employment. Since then ITC's Hotels business ha s grown
to occupy a position of leadership, with over 90 owned and managed properties spread
across India, catering to the different needs and choices of travelers from across the
world. It stands today as the only Hotel Chain in the world which is known to have an
„Indian Soul‟.

3.2 ITC Sonar:

An integral part of the Luxury Collection (a hotel division) of ITC Welcomgroup, The Sonar
began operating on the 1st of January 2002. This luxurious hotel known as the „Businessman’s
Resort‟ is situated in North Kolkata. Holding true to the ITC slogan „Nobody gives you India
like we do‟ hotel was named „Sonar’ meaning „Gold’ in Bengali, the language of its place of

3.2.1 Facilities offered by Sonar:

The hotel has three categories of rooms which cater to the different needs and preferences of the
travelers. Each category has further sub divisions according to the structure of the room. The
rooms are categorized as following:

The Executive Club ‘For the discerning Business

There are 126 State-of-the-art rooms (16 smoking) each

measuring 380 sq. feet including 1 room for the
specially-able, 15 twin rooms and 12 interconnected
rooms offering luxury buffet breakfast and cocktails with
hors d‟ over‟s.

The Towers ‘Where Service is whatever you Want it to

The Towers offer 84 rooms (14 smoking) of 415 sq. feet
each. These include 1 room for the specially-able, 5 twin
rooms and 8 interconnected rooms. The Towers
incorporate a separate floor –The Eva floor for „The
Single Lady Traveler’ with services provided entirely by
female personnel. Entry is restricted for the male guests
as well as male personnel offering additional sense of
security and comfort for its lone lady guests.

The ITC One or I-One Premiere Suites ‘The power Of

Personal Space There are 21 rooms each measuring 580
sq. feet. There is one Grand Presidential suite, 2 Queen
Suites, 4 Junior/Princess Suites (2 smoking), 6
interconnected rooms and 2 smoking rooms. The
amenities offered include complimentary luxury
breakfast, fruit platters in the room, molten brown
bathroom amenities, personal DVD/CD player, fax
machine, stepper and personal library. There is
personalized valet service and in- room check- in.

The Presidential Suite or the Virginia Suite is the
largest room (smoking) in the hotel. It is non- saleable
and is kept ready at all times for the chairman of ITC
Ltd. „Mr. Y. C. Deveshwar‟

3.2.2 Features & Activities:


It celebrates the rich diversity of rich traditional
Indian cuisines and the 200 year old culinary
tradition of cooking food in sealed “deghs”. This
Indian fine dining restaurant with a show kitchen
serves a mix of Awadhi and Lucknawi cuisines. It
seats 74 persons and is open only for dinner (7:00
p.m. to 11:45 p.m.)


The most selling restaurant in the hotel, it serves the

acclaimed cuisine of the rugged North West Frontier.
It a restaurant set amidst a charming ambience where
you tie on checked aprons and are encouraged to eat
with your fingers. It seats 144 persons and serves
lunch (12:30 p.m. to 2:45 p.m.) and dinner (7:00 to
11:45 p.m.)

Pan Asian
It is a medley of oriental cuisines, inviting gourmets to a journey across the Pan-Asian belt.
At the Pan Asian, you can explore diverse culinary traditions from the hearty fare of
Mongolia to the fiery taste of Korea, China and Japan. It serves 140 persons providing lunch
(12:30 p.m. to 2:45 p.m.) and dinner (7:30 p.m. to 11:45 p.m.) throughout

Eden Pavilion

The Pavilion is a 24 hour multi-cuisine restaurant

offering a delectable variety of buffet fare
throughout the week for breakfast, lunch and dinner.
The buffet includes Indian, Continental, Dakshin
spread as well as the Lebanese spread (Maroush). It
seat 140 persons.

West View Bar and Grill

It is an exclusive bar (11:00 a.m. to 12:00 a.m.) with

interactive grill with the widest selection of imported
meats and Crepe-Suzettes cooked right on your table.
The novel outlet offering cigars from different parts
of the world seeks to be a culinary journey for the
discerning diner also offering the finest selection of
single malts, cognacs and new as well as old wines. It
serves 50 persons offering only dinner (7:00 p.m. to
12:00 a.m.).


It is an exclusive Irish pub and nightclub with an

expansive bar and a dance floor. It accommodates
118 persons. It is open on Wednesdays, Sundays
(7:00 p.m. to 12:00 a.m.), Friday (7:00 p.m. to 2:00
a.m.) and Saturdays (7:00 p.m. to 4:00 a.m.). it also
offers extensive snack and combo meals in

Conference Facilities and Business Centre

The hotel is acknowledged for its inimitable catering services, choice of cuisine and grand
orchestration is also a preferred venue for corporate events, especially as it was the first business
resort in the country. „Pala’ is Sonar‟s 7000 sq. feet, column- free ballroom comprising of 4
smartly equipped conference rooms and hi tech board rooms with videoconferencing,
administrative and secretarial facilities. It can accommodate up to 800 persons. Additionally

Sonar also boasts of „Sunderban – the Landscaped Garden‟ an outdoor venue of 35,000 sq. feet
of lawn area.

The Spa- ‘KayaKalp’

Covering over 15000 sq. feet, the Spa provides a

unique range of services, with a variety of Thai,
Swedish, Ayurvedic and Hydro- Therapeutic
massages. There are over 95 beauty & wellness
treatments to choose from, each dedicated to
personal needs and well-being. The Spa also has a
fully equipped Gymnasium, an uncompromised
rectangular pool, Yoga Centre and an attached
restaurant. It is like finding tranquility in the midst
of the bustling city.

3.2.3 Brief Overview Of the Operational Departments


Housekeeping plays a vital role in managing the hotel, any establishment being impossible to run
without it. „Housekeeping‟ is a department which is responsible for the maintenance, hygiene,
sanitation and general upkeep of the hotel premises. A good housekeeping sets the maintenance
standards of a hotel and keeps the guest satisfied. The housekeeping also consists of the laundry
which comes under the jurisdiction of a laundry manager who is solely in charge of maintaining
guest clothes, staff uniforms, room linen, food and beverage linen and providing them to the
various departments and maintaining stock. The horticulture department looks over the
landscaping of the entire property.

Food and Beverage Service:

This operational department refers to all the point of sales in the hotel. It includes the various
restaurants, outlets, In-room dining, banquets and Mithai shops. The basic purpose of this
department is to sell the food and beverages in the restaurants or shops creating customer delight
and in turn generating revenue. ITC Sonar has a variety of restaurants offering different cuisines
like Indian, continental, specialties of the North West frontier province. In room dining refers to
room service which is provided to the guests during their stay. The Food and beverage service
department attends to the customers during parties or official functions held in the banquets. The
Food and Beverage service is greatly dependant on the Food and Beverage production
department, however it is the service that can make or break the reputation of the restaurant as
well as the mood and mindset of the guest.

Food and Beverage Production:

The food and beverage production is commonly known as the Kitchen. It caters to all the
restaurants, banquets and shops within the hotel. This department is headed by the executive chef
who is appointed after considerable experience in the industry. It is divided into several sections
namely the cold food production, bakery, back kitchen, banquet kitchen, south Indian kitchen
and butchery. Every section of the kitchen is functional at all times catering to guests 24*7.

Front Office:

The front office is the heart of the hotel being the first contact point for any guest entering the
hotel. It is composed of the reception, concierge, reservations and the phone service system.

The „Reception‟ handles the registration requests, assignment of rooms, the mails/messages of
the guests and also processes the guest bills.

The „Concierge‟ provides custom services to the hotel guests like reservations for dining,
transportation and baggage handling while developing an extensive network of local, regional
and national contacts.

The „Reservation‟ receives and processes reservation requests, conveys information to the guests
like rate of the rooms, amenities, etc. They engage in up-selling, cross-selling and handle
cancellations, amendments and reconfirmations.

The „Phone Service System‟ is the nerve centre of communication. They monitor the guest
wake-up calls and coordinate emergency communication. It serves as a channel of two-way
communication i.e. from the hotel to the guest and the guest to the hotel. They shoulder a number
of roles and responsibilities like welcoming and registering the guest, carrying their luggage,
informing them about the special products within the hotel and furnishing them with information
about the city, the tourist destinations etc.

All the four departments are indispensable for the efficient functioning of the hotel. Food and
Beverage service and Front office generate 100 % of the revenue. However if the housekeeping
department was not efficient then no client would want to buy a room. Moreover, if the k itchen
would not be present the service department would not exist. Thus.each department works in
tandem with one another, with the common goal of creating customer delight and generating

3.2.4 Front Office- Competency Mapping

Front Office is the show window of the business organization. It is the hub, heart and
epicenter of the hotel activities. It continuously has to coordinate with the other departments
to provide efficient service to the guest. The main subdivisions of the front office are
Reception, Concierge, Reservations and phone service system. These sub departments
together monitor the guest cycle and coordinates all guest services such as information, mail,
message handling, guest accounting, bill settlement etc. The front office also has the
responsibility of ensuring safety and security of the guests.

The front office functions during various stages which are explained with the following

Baggage Handling

Bill settlement

Departure Pre
Check Out

Telephone calls Registration

Transportation Room Assignment


Maintaining guest accounts Arrival Issuing keys

Baggage handling

Guest Cycle

As seen in the above diagram, the front office has on-going responsibilities before the arrival of
the guest and even after the guest departs. During the pre arrival stage the reservations are made
by the reservations department of the front office. An effective registration and pre-reservation
process helps to speed up the arrival process. Once the reservation is confirmed, the registration
cards are printed and the rooms are blocked. On the arrival of the guest, his details are entered in
the guest records and the mode of payment is identified. The fro nt office clarifies all the queries
of the guest and makes the guest feel at ease with regard to his safety and security during his stay
at the hotel. Before the guest leaves the hotel the front office ensures the proper settlement of the
guest accounts and also takes the guest feedback and satisfaction tracking. In the post departure
phase the guest complaints are followed up by the employees at the front office. Thus, with the
help of the Guest cycle we can see that the front office is the nerve centre of all activities in a

hotel. Being the first and last contact point for a guest they carry the onerous responsibility of
leaving a good impression on the guest.

Duties and Responsibilities of the Reception

This section of the project attempts to study and map the competencies of two specific
subdivisions of the front office, namely the Reception and Concierge. The duties and
responsibilities of these two divisions are highlighted below.

The reception registers and assigns the rooms to the guests and tactfully handles all the
reservation requests after seeing the availability of rooms. They must have detailed information
of the arrivals, room requirements and expected departures of the day. Moreover, they must be
well equipped to provide information about the hotel and its surroundings. They handle the mail
messages of the guest, maintain the guest accounts and process the guest bills. They must have a
sound knowledge of different currencies and their exchange rates. The employees at the
reception must be confident while handling cash and credit cards. They help to coordinate with
other departments for maximum guest satisfaction and comfort and also handle guest complaints
and emergencies. They give all the departure rooms to the housekeeping properly and take all the
cleared rooms form the housekeeping .Thus, the reception performs the crucial task of being the
link between the hotel and the visitor.

Duties and Responsibilities of the Concierge

„Concierge‟ is a French word meaning „Doorkeeper‟ or „Porter‟. The concierge is the

„information counter‟ of the hotel and furnishes the guests with information as and when
required. It is required to be equipped with brochures; travel facilities information at all times
and make airline bookings, taxi booking and planning of itineraries for the guest. They take
charge of all packets and tickets for guest and ensure follow up. The concierge introduces and
sells all hotel services and facilities to the guests. They also review and follow up complaints of
guests and coordinate with the other subdivisions of the front office. The concierge maintains a
log book, a comparative hotel analysis, daily function sheet and airport pickups and drop records.
Thus, the concierge serves as a guest‟s liaison with hotel and non hotel services.

4. The Project:

This project entitled “Improving the Acculturation and the Training Process for the New
Joinees” is being implemented in ITC Sonar. It includes the following:

4.1 Objectives of the project :

Suggest new methods of imparting training to new joiners.
Introduce a follow- up procedure to ensure compliance with the training methodology
extending up to three months from the initiation of the training period.
Creation of a mentorship program to ensure thorough interaction between the new joiner
and the management.
Providing a basic checklist for the new joinees to help them observe the important facets
of each department.
Listing down the roles, duties and tasks of the employees in some of the core departments
in the hotel.

4.2 Limitations to the Study:

Prior non-conduction of such programs has caused employees to be hesitant and wary
about participation in this program and its consequences, thus, causing delays in data
Inchoate/dishonest/biased responses due to fear of reprisal from the management or due
to biased outlook towards the management.
The limitation of area of study, ITC Sonar, will cause the recommendations offered to be
relevant only to this hotel and will offer no insight about the problems being faced in
other hotels of ITC.

5. The cornerstones of the study


To improve the Provision of guidance

acculturation process and a proper process of
of the new Associates training to new joiners
till they are deemed
at the unit
self- competent


Lack of support or Introduce an effective

involvement from process and necessary
management/employe checks to ensure the
es /new joiners process is followed

6. The methodology

Analysis of secondary data collected by the company through company

administered questionnaires

Direct interaction with the employees about the acculturation process.

Direct interaction with the training manager in order to achieve the

development and implementation of an improved training and
acculturation process

Perform Bench marking with J.W.B. Marriot International to identify

scope for improvement the standards of ITC Sonar.


The project has been divided into four stages for the facilitation of implementation. The stages
with the major activities are being listed below:


Stage 1 Conducting the recruitment and

selection process.

Stage 2 Observing and gauging the process of


Stage 3 Problem identification in different

processes of the hotel.

Stage 4 Enumeration of the identified problems

and development of feasible solutions
to them

7.1 Stage 1: The Recruitment Process

Managing human resources in the hospitality industry presents special challenges, including
highly diverse employee backgrounds and roles, an ever-present focus on guest services, and
organizational structures that often diverge from generic corporate models. Hospitality human
resource (HR) management is a decision-making practice that affects the performance, quality,
and legal compliance of the business as a whole and therefore, requires attention for all its
components, especially the Recruitment component /phase.

Defined as “The process of seeking and attracting a pool of people from which qualified
candidates for job vacancies can be chosen.’’, it is basically the process of getting the right kind
of people to apply for the right kind of vacancies in an organization at the right time.

There are several factors affecting the recruitment process of organizations as illustrated as

7.1.1 Factors affecting recruitment

Social attitude &

Size of the Beliefs of people
organization (IT, BPO a few years ago)
Situation in labor market

Reputation of (Bangalore,
Demand for certain FACTORS
Organization Noida, Mumbai)
Skills/ professions (Google, TATA)

Channels &
Methods used for
How healthy is the Organization’s culture
Industry & Practices—Employer Branding
(Healthcare vs BFS) (Infosys, Marico)

Resources Allocated
To the recruitment process
(how soon the position Law of Land
Is to be filled…how important (work permits)
Is the position)

7.1.2 Recruitment Process

(Source: ICFAI
HR Planning

Identifying HR
Requirements surplus
Determine the criticality
Of Vacancy and How many
People are required
Organizational Policy

Choosing the
Right recruitment method Recruitment method
Not efficient

Analyze time & cost

Job Analysis
Recruitment process efficient
Implement the Recruitment program

Select & Hire

Evaluate the program

7.1.3 Recruitment process in Sonar

Influx of CVs/Resumes (year round) from

interested applicants

Campus CVs Screened by HR regional Head

Short-listing by respective HOD based on

requisite demand

1st round of interviews conducted by HR

regional head and Learning services manager
1st round of interview conducted by resp. HOD


clearance 2nd round of interviews conducted by GM, HR

regional head and Learning Services Manager
2nd round of interview conducted by GM,
Resident Manager (RM), HR regional head,
Learning Services Manager, resp. HOD


Acculturation process on joining

7.1.4 Temporary Recruitment and Selection
Recruitment and selection is done temporarily only for certain big events at the Sonar. Taking on
additional manpower temporarily facilitates effective functioning of the numerous banquets and
social events that take place in the hotel.

Temporary recruitment for farewell banquet

Date: 10th of April 2009

The event to be held was a Farewell Banquet for one of the pioneers of the hotel industry
Mr. S.S.H. Rehman. Hosted by the Chairman of ITC Ltd. Mr. Y.C Deveshwar, it was the
most important event on the ITC calendar for the year 2009-2010.

Though preparation for the event encompassed many activities, my work entailed entirely
of additional temporary recruitment. Students from six Hotel management schools were
invited for interviews including:
IIHM (International Institute of Hotel Management)
GNIHM (Guru Nanak Institute of Hotel Management)
AHA (Air Hostess academy)

Of the 95 respondents from the above schools, 70 were to be selected which were to
include 30 girls and 40 boys.

Selection parameters:
The interviewees were judged on the following parameters:
Communication Skills
Domain Knowledge (Food & Beverage Service)
Though selection protocol required presence of all three parameters, special emphasis
was laid on the communication skills and grooming standards of the interviewee.

7.2 Stage 2- The Acculturation Process

When a new employee joins the organization, the management focuses on making the employee
fully effective as soon as possible in order to optimally utilize his services. This process is often
myopically defined as Onboarding.

HR professionals universally define Onboarding simply as „moving a candidate for a role into
that role.‟ The candidate can be new to the organization, or may already be participating in the
organization as an employee, contractor, partner, or in any number of per ipheral capacities. The
role the candidate is moving into may be any working relationship with the organization, most
typically an employment role, but the role may also be an expansion of duty or responsibility,
either permanent or temporary. There are two basic approaches to Onboarding: Transactional
Onboarding, and Acculturation.

Transactional Onboarding

It focuses on automating the data transactions and processes related to moving the candidate into
their new role. It seeks to automate and perfect processes associated with Onboarding, processes,
that are defined through a combination of the organization's business policy, industry best and
accepted practices, and by regulatory bodies.

7.2.1 Acculturation
Known also as Socializing a candidate, or more big-brotherly as Indoctrinating a candidate, a
term more often heard in Europe, focuses on making the process of moving the candidate into
their new role as quick and as efficient as possible. Acculturation is about making sure the
employee understands their new role and organization and helping them achieve productivity
quickly. Acculturation is about making the candidate's transition as smooth and painless as
possible. Acculturation can be seen as the right-brain, artistic-thinking side of the Onboarding
persona to Transactional Onboarding's left-brain logical-thinking side of the Onboarding
persona. Return on investment for acculturation is realized through earlier and more rapid
productivity of the new employee and improved long term employee satisfaction and retention.
Acculturation‟s value is subjectively measurable and is valuable to employers with high costs
associated with recruiting and retaining employees, typically those in more professional roles in
the organization.

The Acculturation period is currently divided in Sonar in three phases

Classroom sessions in Learning Service

Orientation in other departments

Acculturation in their respective department

7.2.2 Benchmarking with the Industry Best: J.W. Marriott About J.W Marriott:
JW Marriott, one of the best hotel chains in India and across the world, is known to have a very
strong training and development side to it, one of the pivotal aspects for a service organization.
Marriott may not have as many hotels as compared to the other chains in India; however, it
makes its presence felt in the industry due to its exceptional service provided by a superbly
trained workforce which makes the experience of staying at Marriott unforgettable. The training
provided by Marriott is considered to be the industry best in India

The JW Marriott Hotel in Mumbai is situated at the Juhu Beach. It offers the following facilities:

Air Conditioned rooms – 274

Air conditioned deluxe rooms - 48

Air Conditioned Suites – 36.

Conference rooms - 9

Private spa/Jacuzzi (in selected rooms) Acculturation Process in Marriott:

(i) Throughout The Year Training:

15 Minute Training Calendar (prepared monthly)

Training Calendar Put Up on Department Board

Daily 15 Minute Training Conducted (Briefing)

Trainer Name Attendant Trainee Names Topic Covered

Training Audits
15 Minute Training Calendar
(ii) Acculturation Timeline in J.W. Marriott:



go on



Department-wise Online Courses

Level based Skills Initiation
Training Supervisors
Development Management
module training Development progress
(based on 9
Practical Test Online competencies;
Clearance Clearance competency
development program
Certification Certification based on specific
management level) Acculturation process in ITC Sonar (SIPOC)

SIPOC stands for Supplier-Input-Process-Output-Customer. SIPOC is a qualitative analytical
tool that is designed to focus a project team‟s attention on the key activities involved in a process
that flows between a company, its customers and suppliers. It is a high level process flowchart
that focuses the team‟s attention on the key processes that require improvement. The output from
a SIPOC diagram should be a list of key insights and implications. The implications should state
these in a way that leads on to an understanding of problems and opportunities. The SIPOC can
be used in combination with more detailed process maps to focus the team‟s attention on the

critical processes, flows and performance indicators. The real value of the SIPOC and process
maps is in extracting the insights and in understanding their implications.

Learn ing Serv ices Dept. Presentation/Handouts

HODs SABA e-modules

Line Managers Informat ion about other

Depts. & Property Tour.
List of skills & knowledge
On job training (Welcom
Basic Orientation (no
checklist provided)
New Joinee
C i
Customer Input


Output Process

O Trained Associates P Induction

Performance as per Standards
Consistency/ Motivated
Depart mental Orientation

Guest Satisfaction
Staff Retention Benchmarking Comparison:

J. W Marriott ITC Sonar

 90 day orientation program  4 Week training

 Daily training for existing staff  Periodic weekly training, not daily
and intensive training for new

 (competency of managers)  Not followed

Skills List

 Continuous performance  Supposed quarterly

evaluation (assessment of knowledge/skills assessment
technical skills)

 Spirits (Instant Gratification  Welcom Achievers program.

program) Points for performance Performance points redeemable
redeemable for gifts for ITC products

 40 hours of training per  Average training man hours of 5

assessment per year conducted hours per assessment per month

7.3 Stage 3-Problem Identification (AS-IS)
The Acculturation program is extremely crucial as these are the initial steps between an
employee and the managerial level to get to know each other. It is of significant importance
because it

Helps improve employee performance

Update employee skills
Retain and Motivate Employees
Create an Efficient and Effective Organization

In the Sonar, problems have been identified through the PIE Analysis which maybe illustrated as

P – Problem: Processes not adequately complied with.

I – Issue: No system is in place

E – Expectation: of the Stakeholder/ New Joinee.

To look at the problems objectively and sequentially under the PIE Analysis the following were

 P- Process not in place.

Some of the mandatory modules are not covered

The basic orientation program checklist is not followed

The mentors are not assigned

The induction timings are not adhered to by the presenters

Structured presentation formats are not followed

 I- No System is in place

No follow- up session by the learning services department

No formal guidelines for departments to handle new associates

Four weeks are not adequate for orientation

No structure to complete the Saba Modules

Lack of interactive sessions

 E- Expectation of the stakeholder/New Joinee

More interactive sessions

Feedback on performance and recognition

Warm Welcome by department members

Respect from others

Relevant training and direction from seniors

Performance as per standards

7.4 Stage 4- Recommendations (TO-BE):
The problems in Sonar, as we have seen, have been identified through the PIE Analysis.
However with the problems, feasibility in terms of solutions is a lso crucial. The feasible
solutions have been enumerated as following:

Update Induction presentations, hand-outs etc.

Assign mentor for each new joiner on the day of joining his/her department.

„What To Observe‟ (WTO) checklist for acculturation in other departments.

Acculturation checklists to be provided by Learning Services (Training Department) and

completed by the associate at the end of acculturation.

Acculturation period to be increased to three months for providing suitable opportunity

and time for the new joiner to learn the required skills and perform as per expectations.

Evaluation done at the end of the acculturation in other departments, checking if

information based on What To Observe checklist has been comprehended.

Follow- up classroom sessions by Learning Services within 3 months of joining to impart

more skills and take feedback on progress.

Include a session on open communication in the classroom phase to encourage feedback

and ideas.

List of skills and knowledge to be given department-wise to each new joiner with
scheduled time lines.

Classroom session to include inputs on audit, hotel score-cards etc.

SABA mandatory modules to be completed within 3 months followed by evaluation.

Guidelines to existing associates with respect to handling a new joiner.

Orientation manuals to be prepared in all the departments.

Sessions also to be conducted in Hindi/Bengali.

Use more methods for training delivery.

Induction schedules to be prepared and sent at- least 48 hours before prior to the date for
the sessions so that the sessions can be conducted with minimum waiting time without
the hold-up caused by non-availability of trainers.

Co-ordination with HR department for selection of joining date convenient for both the
new joiner and the hotel.

Convening of wrap-up session with GM/HOD.

The following PICK CHART highlights the feasibility of recommendations to be


Possible Implement
Add topics in the classroom session. Update material and session on communication.

Wrap-up session with GM/HOD. Assign department mentors.

Co-ordination of joining date with HR. WTO checklist for each department and its
subsequent evaluation.

Increase acculturation period to 3 months.

List of skills and required knowledge to be given

to new joiner.

Guidelines to associate for handling of new joiner.

Acculturation checklist given to each associate by

Learning services and its collection at end of three

Kill Challenge
Sessions in Hindi/Bengali.

Follow up sessions.

Variation in training Methodology.

------ SABA modules completion in 3 months with
compulsory subsequent evaluation.

Orientation modules for each department.

Erase Implementation/ Expected Benefits


8.1 Questionnaire

1. I joined ITC Sonar____________________(Please tick whichever applicable)

a) 1-3 months back

b) 4-6 months back
c) 7-9 months back

2. My departme nt is ________________________
3. Prior to joining Sonar, I was__________________ (Please tick whichever applicable)

a) Working in another hotel

b) Working in another organization (not a hotel)
c) Studying
4. Please give your rating for the following regarding your acculturation process at
ITC Sonar

S.No Strongly Agree Disagr Strongly No Total

Agree ee Disagree ans
5 4 2 1 3
1 Topics covered were relevant to my role 5 15 1 - 9 30
2 The presentations were interesting 8 12 1 - 9 30
3 The presenters were knowledgeable about 13 7 1 - 9 30
the topic
4 The amount of information was right for me 6 12 3 - 9 30
5 The length of the session right for me 6 8 5 1 9 30
6 This session helped me make new friends at 12 8 1 - 9 30
7 I have truly benefited by attending this 12 7 2 - 9 30
1 This helped me to understand the working of 2 13 1 2 12 30
other departments
2 The time spent in each department was - 7 8 2 13 30
3 The colleagues were keen to share their 3 11 2 1 13 30
knowledge about their department
4 This was helpful in my current role 6 8 2 1 13 30
1 My manager met me on my first day in the 23 7 30
2 I received a warm welcome in my department by my 21 9 30
co workers
3 I was provided an orientation to my work area 19 11 30
4 My job responsibilities were explained to me 23 7 30
5 I was given a checklist of the skills and knowledge that 11 19 30
I need to do my job well
6 I was assigned a mentor 18 12 30
7 I was given valuable and timely feedback on my 17 13 30
8 In case of questions/doubts I know who to approach 30 - 30
9 I received continuous training inputs from my 18 12 30


S.No Strongly Agree Disagree Strongly Total

Agree Disagree
5 4 2 1
1 I am proud to work here 14 6 3 1 30
2 I enjoy my work 12 13 2 - 30
3 I am treated with respect by my 6 19 2 1 30
co-workers and seniors
4 I am committed to create “a 18 11 - - 30
WOW at every moment of the
5 I know what is expected of me at 17 8 3 1 30
6 My contributions are valued by 6 14 4 1 30
my team members
7 I rarely think of working else 3 14 7 1 30

What additional inputs would you have liked during your induction session with respect
your work?

What additional inputs would you have liked in your departme nt to enhance your skills &

Any other comme nts about your first fe w months at ITC Sonar

8.2 Questionnaire Analysis

Induction Session in Training Room

Parameters Weighted Central Weighted
Average Average

Topics were relevant to my role 7.25

The presentations were interesting 7.50

The presenters were knowledgeable about their topic 7.92 7.31

The amount of information is right for me 7.00

The length of the session was right for me 6.00

The session helped me make new friends at work 7.83

I have truly benefited by attending this program 7.67

Acculturation in Other Departments

This helped me to understand the working of other departments 5.5 Central Weighted
The time spent in each department was appropriate 3.83

The colleagues were keen to share their knowledge about their 5.33
department 5.04

This was helpful in my current role 5.58


Starting with the parameter that deviated the most from the central weighted average ‟The length
of the session was right for me‟ The analysis suggests that most of the people do not agree with
it. During the induction people felt that the length of the induction period did not suit their
individual needs because of the fact that they needed to know more about the hotel and needed
the required time to fully comprehend all that was being told to them.

Coming to the second parameter „I have truly benefitted by attending this program‟ was second
in line to deviate from the central weighted average. The new joiners felt that they could have
been told things in a more structured manner.

The third parameter was about making new friends at work. It was seen that since the induction
period was not for an appropriate span of time, it created a form of hindrance for the new joiners
to make new friends.

The last parameter that I chose was about the knowledge of the presenters. The new joiners felt
that the presenters did not follow a structured format as a result for them to comprehend was an


„The time spent in each department was appropriate‟. This was not felt by the employees. They
felt that there was not enough time or matter that was covered for them to go through the
acculturation process in other departments.

About working in ITC Sonar

I am proud to work here 8.42 Central
I enjoy my work 9.67
I am treated with respect by my co-workers and seniors 9.17

I am committed to create a “a WOW at every moment of truth” 11.17 9.19

I know what is expected of me at work 10.33

My contributions are valued by my team members 8.25

I rarely think of working elsewhere 7.17


„I rarely think of working elsewhere‟ is a parameter which I chose as it deviated from the central
weighted average. The staff working here felt that they do think about working elsewhere as they
faced problems in the hotel in terms of acculturation and induction and subsequently their actual

„My contributions are valued by my team members‟ was a parameter of issue. Not being
recognized for their work leading to low levels of motivation, made the employees feel that their
contributions were not valued.

„I know what is expected of me at work‟. Owing to the absence of a mentor and continuous
guidelines as to how and what to do, led to confusion between the management and the workers
as to what to expect of each other.

„I am committed to create a WOW at every moment of truth‟. The employees seemed to be a
little confused with the platinum standard that the hotel followed. Probably because they could
not be reached out to in the way they could comprehended

8.3 Economy and Indian Hospitality Industry:

Article: Recession and Indian Hotel Industry

Given the current state of the economy, and the growing consensus that a recession is near,
if not here, what is the outlook for the hotel industry?
The slowdown of the economy didn‟t happen suddenly, it has been happening since last
year so the questions are:
- Were we following up closely on the happenings in our areas?
- What was our budget and our forecast for 2008?
- Did we have an action plan for the expected slowdown in the economy?
In Europe business went down by more than 40 %, especially during the summer.
In Saudi Arabia the demand has increased, although some of the big companies started to
reduce their manpower and expenses since the beginning of the year, but still some project
agreements are arising and will continue into the next year.
I do expect that within few months the demand will be back to 85% of normal, keeping in
mind the decrease of fuel prices and this potential influence on flight pricing.
In general, in most of the world there will be a slowdown and in the rest there will be more
pick up and demand, especially in the resort areas.
While all hotels are subject to the same broad economic influences, each market and
property is most directly affected by the supply and demand factors in their own back yards.
Markets facing significant supply increases will likely experience a greater degree of stress
than previously anticipated. Conversely, those with little to no supply increases underway
can expect to weather the storm with less difficulty.
For individual hotels, the slower periods of the economic cycle present opportunities as
well as threats. The reality is that demand doesn‟t just grow or decline, it also moves –
from market to market, and from hotel to hotel. Meetings once held in a more distant, more
expensive market may relocate to a more affordable local alternative. Business travelers
whose expense accounts once ran to a full-service hotel may seek out less expensive – and
often equally suitable – alternatives among the select - or limited - service lodging sector
and so on.
In these circumstances, one property’s decrease can be another’s opportunity for
With the revenue management tools available at the property level, property managers now
have a greater ability to effectively manage pricing so as to achieve an optimal balance
between occupancy and average rate.

So how can hotels revenue managers be ready for the expected stagnation in the economy?
Reconsider, Reevaluate and make action plans :
- During the daily activity, Monitor Changes to your Market Segment.
- Manipulate the Rate Structure – but don't lowe r it.
- Evaluate the hotel Channel Distribution
- Re-evaluate Your Competition set
- Create Dynamic Packages as much as you could for rooms and F&B.
- Monitor the Online Presence and strengthen
- Refer back to your marketing plan and see why people need to travel to your area
Using the principles of revenue management could carry you through the current stagnant
economy. Don't give in to the desperation of dropping your rates and crossing your fingers;
generating business is hard work. As the old saying goes, "you have to kiss a lot of frogs to
find a prince".
Ahme d Mahmoud
Director of Revenue management, Starwood
Saudi Arabia
Owner of

Article: Focus on hospitality: predictive powers of hotel cycles.

by Corgel, John (Jack) B.

Real Estate Issues • Winter, 2003 • Insider's Perspective

Whether we want to accept the fact or not the hotel business (both the sale of rooms and assets)
is a cyclical business. Cycles exist in the hotel business for some good and well documented
reasons. Most importantly, hotels are not the same as most other commodities like, say, tooth
paste. By this I mean that when the demand for rooms suddenly spikes, as it did during the recent
holiday season in New York City, the supply of rooms cannot correspondingly expand within a
short period to satisfy the new level of demand. Should the same circumstances occur in the
market for tooth paste, producers will turn up the machinery not operating at full capacity, add
another work shift, and turn out more tubes before you can say 'dental bills.' Thus, hotel supply
change lags demand in both the upward and do wnward directions meaning that RevPAR persists
at relatively high levels and growth rates following an upward movement in demand and
RevPAR persists at low levels and growth rates following a decline in demand.
The cycle's story just told appears quite tragic unless participants are somehow clever enough to
predict the turning points and avoid downturns and troughs. Despite the financial wreckage they
created in the past, hotel cycles now generate some underappreciated predictive powers. These
powers are fueled by the availability of Smith Travel Research and other data covering a
complete cycle (i.e., down from 1987 to 1992, up from 1992 to 2001, and down from 2001 until
quite recently). During the latest complete cycle, all the moving parts behaved much as economic

theory suggests. If the hotel market recently made an upward turn at the bottom of the cycle as
many feel, then we have in our possession the map of how a recovery will unfold. In this article,
I attempt to use the knowledge gained during the latest complete cycle to chart a near-term
course of events in the U.S. hotel market.


The existence of hotel market cycles is a well-recognized phenomenon. Smooth and regular
fluctuations around an equilibrium level may occur for two reasons. First, a strong correlation
exists between measures of national and local market economic activity (e.g., GDP, real personal
income, and employment) and hotel demand. Consequently, cyclical patterns in hotel
performance measures emanate from business cycle patterns through the demand side of the
market. Second, supply changes should logically follow shifts in demand, albeit with long
delivery lags. If the business cycle is smooth and construction predictably responds, then the
hotel market cycle will have a correspondingly smooth appearance over time.
Abnormally wide swings in hotel market performance observed during recent decades occurred
because of shocks to the economy and hotel markets. These events either impacted the supply of
hotel rooms, demand for hotel room nights, or both. Government intervention of the early 1980s,
for example, artificially inflated the supply of hotels. With occupancy already below normal
levels in the late 1980s, the recession and Gulf War in the early 1990s stymied the market
recovery. Similarly, the combined effects of the demand-based general economic recession
beginning in 2001, the terrorist attacks in September 2001 that created a stigma on domestic and
international travel caused demand for air travel to plummet, and the Iraqi war produced steep
declines in hotel occupancy and average daily rate (ADR) during 2001 and 2002.
The economics of hotel markets suggest that occupancy represents the current relationship
between demand and supply. Occupancy reaches levels above (below) normal when demand
exceeds (less than) supply. During periods of abnormally high (low) occupancy, ADR increases
(decreases) causing occupancy to fall (rise). The economics of hotel markets also suggest that
ADR represents the current relationship between demand and supply, and accordingly, ADR
reaches levels above (below) normal when demand exceeds (less than) supply. Once ADR
reaches a level in the market for which development becomes feasible. To complete the market
process, hotel construction eventually satisfies the excess demand that drove occupancy and
ADR above normal. As more rooms are added to the stock, occupancy and ADR fall back to
normal levels. At the peak of the cycle the market may become unstable with supply growth
continuing after demand is satisfied (i.e., overshooting). This problem of overbuilding is an
unfortunate byproduct of cyclical markets.
The hotel market process involves an observable lag between occupanc y change and ADR
adjustment. As markets move from the peak of the cycle to the trough, such as during the recent
cycle phase from 1998 to 2002, softness in demand forces hotel managers to reduce room rates

in an effort to maintain occupancy percent. These actions retard the decline in occupancy during
periods when demand drops. The opposite of this process occurs as markets move from the
trough of the cycle to the peak. An increase in the demand for hotel rooms causes immediate
improvements in occupancy. The upward trend in occupancy moderates as hotel managers begin
to raise room rates, which begins occurring as occupancy approaches the natural level of the
Hotel construction reacts to two market signals. The first signal, discussed above, comes from
the market for rooms in the form of occupancy and ADR growth reaching levels that make debt
and equity financing of hotel development feasible. The second comes from the asset market in
the form of pricing that makes it profitable to build and sell hotels. If these two signals conflict
then prediction becomes quite difficult.
Hotel cap rates appear to move in a counter-cyclical pattern, and thus valuations in the capital
market follow the same pattern as occupancy and ADR. The highest rate of slightly above 12%
occurred at the end of the early-1990s recession. The average rate reached 11.7% during the
recent recession, but fell sharply over the past two quarters. Hotel cap rates moved downward
and broke through the 10% barrier for several quarters in 1997 and 1998 when the economy and
market for hotel rooms was rapidly expanding. In theory, hotel cap rates should continue to
conform to the counter-cyclical pattern they followed during the past ten years because hotel
property values logically decline (rise) as incomes become more (less) risky.
Armed with recent evidence about the cyclical behavior of the hotel markets can we make any
predictions? It appears that the U.S. hotel market at the start of 2004 is in the early stage of an
upward movement toward a peak. This movement is conditioned by the general economic
recovery which governs its direction. Theory suggests that modest increase s in occupancy
starting in 2003 will continue until occupancy percents reach the long-run average (i.e.,
somewhere between 65 to 70% in most local markets). As the market approaches this point,
hotels will be able to begin increasing room rates.
From thereon up the slope, occupancy gains will slow and room rate increase s will begin to
dominate RevPAR growth. In some metropolitan markets, such as New York, occupancy is
already near the long-run average. Econometric forecasts from the Hospitality Research Group
and Torto Wheaton Research Hotel Outlook indicate that many major markets in the U.S. will
experience occupancy at long-run average levels by the end of 2004, meaning there will be room
rate growth in 2004 as well. During 2005, room rates will begin approaching development
feasibility levels.