Hospitality

Industry Overview Indian Hospitality industry is one of the fastest growing industries of the Indian economy contributing significantly to the countrys gross domestic product (GDP), and foreign exchange earnings (FEE). It is also linked with other industries such as transportation, food & beverages, handicrafts and infrastructure which further aids in the growth and the development of the country. Thus, the industry has been a cause as well as beneficiary of the overall economic development of India, due to its foreword as well as backward linkages. It has evolved into an industry that is sensitive to the needs and desires of people. Fortune of the hospitality industry has always been linked to the prospects of the tourism industry and tourism is the foremost demand driver of the hospitality sector. Tourism industry is one of the largest industries in the world today with more and more people travelling for leisure or business, thanks to higher disposable income and falling travelling costs. The Indian hospitality industry has recorded healthy growth fuelled by robust inflow of foreign tourists as well as increased tourist movement within the country and it has become one of the leading players in the global industry. In the past few years, India has witnessed spurring growth in both international and domestic tourists. The country greets around 5.5 mn international visitors every year and nearly 740 mn domestic tourists. Tourism in India has picked up over the last decade, which has prompted the government to accord priority to the development of tourism sector by announcing various fiscal and monetary incentives. The Indian Tourism Industry has acted as a tool to stimulate other sectors and in turn help in overall development of the Indian economy. The growth of the tourism sector has helped the government increase its revenues, which is invested for general economic improvement. During 2010, the FEE from tourism was estimated at US$ 14.19 bn as compared to FEE of US$ 11.39 bn during 2009. The tourism industry is also known to create ample of jobs both within the skilled and the unskilled category. In 2011, the global travel and tourism industry employed close to 258 million people and generated USD 5,991.9 billion or 9.1% of the worlds GDP. Industry characteristics The major characteristics of the Indian hospitality industry are: High seasonality The Indian hotel industry normally follows high demand during October to April and is followed by low demand during the monsoon months. Usually the December and March quarters bring in major chunk of the revenue of the years turnover for Indias hoteliers. However, this trend is witnessing a change over the recent few years. Hotels have introduced various offerings to improve performance (occupancy) during the lean months. These include targeting the conferencing segment, and offering lucrative packages during this period, among others. Labor intensive The success of any industry to a big extent depends on the quality of manpower, and hospitality industry is not an exception. The hospitality & tourism industry is manpower-intensive and provides employment to skilled, semi-skilled, and unskilled labor directly or indirectly. According to the World Travel and Tourism Council (WTTC) estimates, Indias total contribution of Travel & Tourism to employment (including wider effects from investment, the supply chain and induced income impacts) was around 37.6 mn jobs in 2011 (7.5% of total employment). By 2021, Travel & Tourism is forecast to support 47.4 mn jobs (8.1% of total employment), an increase of 2.3% pa over the period.

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 Fragmented The Indian hotel industry is highly fragmented with a large number of small and unorganized players and they account for a lions share in the Indian hotel industry. The major players in the organized segment include The Taj, Oberoi, ITC Hotels, East India Hotels, amongst others. Almost 70% of the total industrys turnover comes from the unorganized sector, while the balance comes from the organized sector. Development of other markets A major trend that has been witnessed in recent times is the development of the hotel industry in cities other than the major metros. As real estate prices soared cost of setting up and maintaining businesses and hotels in the major metros become more expensive, this lead to the search for other cities, where costs were lesser. This led to the emergence of hotel markets in cities such as Hyderabad, Pune, Jaipur, amongst others. This has consequently leaded to increase in hotel development activity and expansion of hotel brands within the country. The industry has also witnessed the development of micro markets, especially in the primary cities. As cities grow larger and office spaces are spread across the city, people, travelers prefer to stay at hotels closer to the place of work/visit and thus save on travelling time. This has lead to the same hotel company setting up hotels across different location within a city. Growth Drivers The fortunes of the hospitality industry are closely linked with the tourism industry and hence tourism is one of the most important growth drivers for the hospitality industry. In addition, all the factors that aid growth in the tourism industry are also the major growth drivers for the hospitality industry. The Indian hospitality industry has recorded healthy growth in recent years. A number of factors have had a hand in aiding this growth. These have been discussed below. Increased tourist movement Increased foreign tourist arrivals and increased tourist movement within the country has also aided the growth in the hospitality industry. Healthy corporate profits and higher disposable incomes with easier access to finance have aided the rise in leisure and business tourism, thus affecting the hospitality industry favorably. Economic growth India is one of the fastest growing economies of the world. The Indian economy has recorded healthy growth in the last few years. Despite the global economic slowdown the economy clocked growth of 6.7 % and 7.4 % in FY09 and FY10 respectively. Attractiveness of the Indian economy has encouraged foreign players to set up their operational facility in India. Changing consumer dynamics and ease of finance The country has witnessed a change in consumption patterns. The middle class population with higher disposable incomes has caused the shift in spending pattern, with discretionary purchases forming a substantial part of total consumer spending. Increased affordability and affinity for leisure travel are driving tourism in India and in turn aiding growth of the hospitality industry in India. Emergence of credit culture, easier availability of personal loans has also aided the growth in the travel and tourism industry and thus the hospitality industry in the country. Marketing strategies Marketing strategies in the hospitality industry has witnessed a sea change over the last decade. A decade back, the brand name of the hotel was the major consumer-puller. However, with the arrival of the well educated, travelled and experienced traveler, hotel companies have had to change/realign their marketing strategies. Todays hotel companies marketing mantras are differentiation, consistency, customer satisfaction, delivery of brand promises and customer retention.

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Development and use of technology has also changed the way, hotel companies operate and has created the need for online marketing. Travelers are increasingly doing some basic research on the tourist site with the aid of internet. . Blogs, networking sites, travel sites are therefore being used by the travelers for making their choices and the information provided by these media tends to influence the travelers opinions and choices. Travel portals such as www.makemytrip.com, www.yatra.com, www.hotels.com have emerged in recent times and travelers are increasingly using these portals to make their hotel reservations. These have emerged as the new channels of distribution. Performance Indicators According to world Travel & Tourism Council (wTTCC) estimates: Indias total contribution of Travel &Tourism to GDP, including its wider economic impacts, is forecast to rise by 8.8% pa from Rs 3,680.4bn (4.5% of GDP) in 2011 to Rs 8,523.1bn (4.9%) by 2021. Indias total contribution of Travel & Tourism to employment, including jobs indirectly supported by the industry, is forecast to rise by 2.3% pa from 37,655,000 jobs (7.5% of total employment) in 2011 to 47,480,000 jobs (8.1%) by 2021. Travel & Tourism visitor exports are expected to generate Rs 678.6bn (3.8% of total exports) in 2011, growing by 11.4% pa (in nominal terms) to Rs1,344.7bn (2.1%) in 2021. Conclusion The prospects for the hotel industry in India are bright. With the revival in the global economy, international tourist inflow into the country is expected to rise. Additionally, the hosting of international sports events and trade fairs and exhibitions in the country is expected to aid both inflow of international tourists and domestic tourist movement. While the potential is huge, there remain concerns for the growth of the hospitality industry. These include high real estate prices in the country, security threat, shortage of manpower, high tax structure and non-uniformity in taxes.

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