OBJECTIES OF PROJECT:-

• To analyses the role and need of Hospitality & Catering as it is an upcoming era
of Hospitality.
• To know how Hospitality can be beneficial in growth of Indian economy.
• To know about the emergence of Hospitality industry in International market.
• To understand the nature of services rendered and various facilities provided by
Hospitality Industry.
• To know about the recent trends & services of main Hospitality players in India.
• To understand the future prospects and challenges faced by Hospitality Industry
activity.

1
 Introduction

In the long-term the hotel industry in India has largest potential for growth. This is
because India is an ideal destination for tourists as it’s is the only country with the most
diverse topography. At present India attracts approximately 2.5mn tourists every year
which is just 0.4% of the world tourist arrivals. Countries such as Thailand and Malaysia,
attract thrice as many tourists

2
HISTORY OF
HOTEL INDUSTRY IN INDIA

The Indian sub-continent is vast and with a population of almost 800 million is obviously
not homogenous. Apart form Hindi there are several languages as well as hundreds of
different dialects-at the people of India belong to a variety of faiths.

The country is divided into several states and each state has its own culture with
traditions that go back thousands of years.
Tradition in food too differs from state to state, just as the European food of Italy is
totally different to that neighboring France or Germany.

Indian cooking has more combinations of flavors and seasonings- that any other nation in
the world.
Indians have much to be proud of in their style of cooking and the fantastic range of
fabulous foodstuffs from around the country.

Hotels and the catering industry started late in the 19th century, with the development if
the major cities, easier sea travel and the coming of the railways.

In ancient times travelers were a rarity, but could always rely on a meal whilst passing
through. As the centuries progressed, travelers, mostly pilgrims, would be cared for the
temple.
During the latter part of the 18th centuries, and the formation by the British of the East
India company. It was apparent that catering requisites on a more formal basis were
required, and with the advent of the railways in the mid 19th century. Small hotels and
clubs were becoming part of everybody life for those who could afford to eat out.

For the ordinary man in the street, curbside catering was a way of life and for many
hundreds of years.

3
Prior to the formation of hotels and hotel companies, the ‘club’ provided any lodging
amenities that were required. These clubs were restricted unfortunately, to Europeans or
upper class Indians. However it did give many Indians the opportunity to work in a
Hotel-type environment and become skilled in the kitchens and restaurants .These skills
were often passed down from father to son.

The princely palaces of the many Royal Indian maharajahs and families were also run on
hotel lines of the present day, at least as far as food and drink was concerned. Kitchens
with Indian & European chefs were considered normal and the banquets of yesteryear far
outshone any thing that is provided today even in the best of the five star hotels.

India & Indians have a long cultured heritage of catering and hospitality.

The diversity of the Regional dishes and the talent to produce then has long been inherent
and it is because of this fruitful history that India, with its numerous Hotels & restaurants
ranks among the worlds leading Hospitality and tourist venues.

Railway catering :- In the mid 19th century Railway network began in India railway
catering facility. Railway companies even want to the extant of setting up hotels attached
to the stations so that passengers who were changing from one region to another could
spend the night before or after in relative comfort. The luxury of sleeping cars &
restaurant cars were a much later development. Now day’s Indian railway catering
services are also on contract basis with different Indian Hotels.

4
Airline catering:-Unlike any other transport system –rail or ocean liner-air transport has
to carry pre-prepared food on board, as there are no facilities available on any airline for
cooking or presentation.
Most Airlines design and plan flight catering establishments/kitchens to meet their own
requirements. Air India floated a subsidiary company known as HCL (Hotel Corporation
of India) with a view to operate a flight kitchens known as “chefair” and also
accommodate travelers in five star category hotels at a major airports (The central group
of hotels)

5
CURRENT SCENARIO

• Economic liberalization has given a new impetus to the hospitality industry.

• It costs an average of US$50-80 million to set up five-star hotels with 300
rentable rooms in India. The gestation period is usually between three and four
years. Movements in real estate prices have to be watched, though they have
stabilized in the past three years or so.
• Non-five-star hotels are obviously cheaper and have had smaller gestation
periods, but international chains are expected to go into the five-star category.
• The Indian hospitality industry is growing at a rate of 15 percent annually. The
current gap between supply (61,000 rooms) and demand (90,000 rooms) is
expected to widen further as the economy opens and grows.
• The government forecasts an additional requirement of 200,000 rooms by the turn
of the century.
• A rapidly growing middle class, the advent of corporate incentive travel and the
multinational companies into India has boosted prospects for tourism. India's easy
visa rules, public freedoms and its many attractions as an ancient civilization
makes tourism development easier than in many other countries.
• Many foreign companies have already tied up with prominent Indian companies
for setting up new hotels, motels and holiday resorts. The entry of McDonald’s,
Pepsico’s Kentucky Fried Chicken, Domino’s and Pizza Hut has given an
international glitz to the hospitality sector.
• Several international chains including Sheraton, Holiday Inn, Intercontinental,
Hyatt, Radisson, Best Western, Days Inn, Hilton, Quality Inn, Ramada Inn,
Meridian, Kempenski, Four Seasons Regent, Accor, and Marriott International are
entering or expanding their hotel network in India.

6
 FUTURE TENSE

Trends That Will Shape The Future Of Hospitality Sector Are:

Low cost carriers: Travelers in general are more price sensitive to airfare than they are
to hotel room rates. Often a low airfare will stimulate demand for travel even if hotel
prices are increasing. LCCs are a good option for business travelers, as they have
advantages like low cost, more options and connectivity.

2. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from
the business travel segment. The average room rate (ARR) realized from business
travelers is normally higher than from leisure travelers. Heightened demand and the
healthy occupancy rates have resulted in an increase in the number of budget hotels.
Some of the new players entering into this category of hotels include Hometel, Kamfotel,
Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn.

3. Service apartments: The concept of service apartments, though a recent phenomenon

in India, is an established global concept. Villas in Spain, flats in the UK and apartment
complexes in the US have all created a viable market for those who want more than just a
room in a hotel. Service apartments are the latest trend in accommodation, offering the
comfort and convenience of a home without the hassles of having to maintain or look
after it. Ideally suited for medium-to-long staying guests, service apartments are a natural
choice for corporate

4. Technology: Travel and technology have become inseparable. Technology is making

its own advances with high-tech video conferencing facilities, web cameras and virtual
reality mode of conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity,
easy access to information, etc. are just a few areas where technology has completely
changed the way we travel.

7
5. Loyalty travel: Today, airline-credit card company tie-ups have brought a whole range
of benefits to the travelers. These include insurance cover, upgrades, free tickets, access
to executive lounges, and a host of other goodies.

8
Scope in hotel industry/future

SCOPE (A Global View)

The hospitality industry is probably the world’s fastest-growing, job-creating profession,

employing one in ten people worldwide. In the UK alone, the industry employs over 1.8
million people. It is estimated that the industry will require 30,000-35,000 trained people
at management and supervisory level year on year until 2010, if it is to fulfil its potential.
There are currently too few students taking college and university courses in hospitality
to sustain this requirement. You can imagine, therefore, that there is enormous scope for
those who want to pursue a career in the industry, plus a huge range of employment
opportunities across the varied subsectors. You might want to manage a hotel, run a
restaurant or become the next Jamie Oliver, or maybe your interests lie in accountancy or
information technology. You may want to start your own business or be part of an
international one. Whatever your talents, the hospitality industry offers variety and
opportunity.

SCOPE IN RURAL AREAS

.
• The New Tourism Policy released in May 2002 has outlined the following policy
initiatives for the tourism sector:
• The new policy is built around the 7-S Mantra of Swaagat (welcome), Soochanaa
(information), Suvidhaa (facilitation), Surakshaa (security), Sahyog (cooperation),
Sanrachnaa (infrastructure) and Safaai (cleanliness).
• The new policy envisages making tourism a catalyst in employment generation, wealth
creation, development of remote and rural areas, environment preservation and social
integration. The policy also aims to spruce up economic growth and promote India’s
strengths as a tourism destination that is both safe and at the same time exciting.

9
• The policy proposes the inclusion of tourism in the concurrent list of the Constitution so
as to enable both the central and state governments to participate in the development of
the sector.
• No approval is required for foreign equity of up to 51 per cent in tourism projects.
Enhanced equity is considered on a case-to-case basis. NRI investment is allowed up to
100%.
• Approvals for Technology agreements in the hotel industry are available on an
automatic basis, subject to the fulfilment of certain specified parameters.
• Concession rates on customs duty of 25% for goods that are required for initial setting
up, or for substantial expansion of hotels.
• 50% of profits derived by hotels, travel agents and tour operators in foreign exchange
are exempt from income tax. The remaining profits are also exempt if reinvested in a
tourism related project.
• Approved hotels are entitled to import essential goods relating to the hotel and tourism
industry up to the value of 25% of the foreign exchange earned by them in the preceding
licensing year. This limit for approved travel agents/tour operators is 10%.

• Hotels located in locations other than the four major metro cities are entitled to 30%
deduction from profit, for a ten-year period.
• The expenditure tax has been waived in respect of hotels located in the hills, rural areas,
and places of pilgrimage or specified place of tourist importance.

10
BENEFITS TO CUSTOMERS

Since the economy opened up in 1991, several foreign chains have entered the Indian
market, including Hyatt, Four Seasons, Hilton, Regent, Radisson and Holiday Inn. The
result is that the quality of service has improved. The overseas players have brought in
efficient systems and service standards from Europe and the US. Competition has forced
Indian hotel groups to improve their standards. The customer has benefited in many
ways. The influx of foreign players has led to major price wars in the industry. In an
attempt to woo customers, Indian hotels have reduced their tariffs significantly.
According to one hotelier, "India has become a normal market -– like others in the West
or in Southeast Asia – with demand and supply determining the price".

11
 RELETED ISSUES

*Role of Highway Restaurants & Resorts*

Today the number of Highways being build has increased the tourism in the country.
With this ,Growth many restaurants ,bars ,resorts & fast food outlets have emerged to
cater to the needs of all types of vehicles running on the highway.

these Travelers include motorists, coaches, Holiday makers, corporate houses arranging
conferences ,Seminars & training sessions for their executives at hill stations etc.

The difference in Running of city restaurants & highway restaurants that people who
came to city restaurants are more or less of some or nearby locality whereas in highway
restaurants people who came from different part of the country.

Highway catering suffers staff problems as most of the sites are away from areas of
habitation.

Significant management problems such as no fixed working hours, block of inventory &
high overheads are other.

For a highway restaurants tasty & hygiene food, alert security arrangements, good
infrastructure are necessary. It would gives repetitive client advantage.

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 *HOTEL EQUIPMENT INDUSTRY*

The performance of Hotel equipment industry has been fairly well despite the odds.
Though the industry has not grown in past few years but the business has been stable.
One reason for slow growth is that the Indian Hotels are not getting good business. This
has resulted in low equipment purchases. The solution for all these ails is that the
government should focus more attention on tourism development in the country.

Once the industry boom all the other sector connected to the industry will automatically
grow. However ,slow down in the hotel industry has meant that we are servicing more of
fast food outlets, restaurants outdoor caters, etc.

Major problem being faced by the equipment industry is that customers delay in
payments .High custom duty is another area of problem.

AAHAR is the on of the major exhibitions in the food & equipment segment. It has
became ideal ground for buyer-seller interaction and leads to business development with
a lot of new client coming in to hotel Industry. Indian trade promotion
organization(ITDO) give more weightage to promotion and marketing the equipment.

Target market for hotel equipment products is very broad. Hotel, restaurants, fast food
joints, Industrial, Hospital canteens, coffee shop, entertainment centers, Ice cream
parlors etc. Hotels are the biggest users of these range of equipment.

13
 //RECENT
DEVELOPMENT//

14
 *USE OF INFORMATION TECHNOLOGY IN HOTEL
INDUSTRY*

Today Information Technology is the lifeline of hotel Industry. It has penetrated almost
all departments of a hotel and helped the industry in a big way. To be a global player one
cannot ignore place on the IT front. What is happening at the movement is that it is also
helping Hoteliers strengthen their relationship with their relationship with their respective
guests, the most important assets for any Hotel.

*How IT effects hotel?

Property management system (PMS) are helping to create a database of guests needs and
preference and serving them to the best of their liking without actually interfering with
their activity.
Its help hotels to reach their customers in better way but also ensure loyalty from their
prized guests. The beginning of the IT interface starts right from the check in point.

Central reservation system (CRS) is mostly used for reservation purpose in many hotels.
with that hotels can know about the availability of room India-wide of their chain of
hotels within a key stroke.

Most of the 5 star or 4 star hotels are using IT now a days .They have totally
computerized accounting department. That is interface with other departments of the
hotels. Their supply chain management is also completely IT enabled.

At the hotel level, reservations are number one, without IT one cannot even think of such
high service delivery. Accounts, HRD, and receivables are some of the areas where IT
plays a major role.
The web based reservation is fast emerging as a future medium of advance reservation for
heritage & independent hotels, witnessing a 600 per cent increase during 1999-2000*

15
According to survey, jointly conducted by the Federation of Hotel & restaurant
Association of India (FHRAI)

“Hotel web sites at 5.5 % had the highest growth rate over the previous year especially
in the heritage sector where it accounted for 12.4 per cent of all advance reservations”

The report shows the growing importance of IT in the Hotel Industry. The survey
indicates that while almost all hotel use some accounting software packages, the
penetration of Local area Network (LAN) within hotels is about 40 per cent. About 30
per cent of 1,131 hotels surveyed found using Management Information System (MIS)

Web sites are extensively used by the star category hotels as effective marketing media.
About 89.9 % of hotel still relay on print media.

At the same time 84.4 % five star deluxe &91.3 % five star hotels are found using their
web sites as an effective marketing media .

16
MARKETING MIX
IN THE HOTEL
INDUSTRY

17
A modern hotel is a major establishment, manned by trained personnel from hotel schools
an institution of commercial hospitality and a building or an institution where the guest
expect refined behavior, excellent services and personal attention

In order to market a hotel product the combination of different sub mixes is very
important. The combination of core and peripheral services, the creative promotional
decision, the pricing strategy that will enable the hotel to maintain the commercial
viability, The place and the people are the important decision making areas in the
formation of sound mix for hotel industry.

THE PRODUCT:

The core service / product of the hotel industry which satisfies the basic needs of the
customer is the rooms. The role of the industry is to provide basic accommodation
facilities. Apart from this there are other tangible elements that are added like room
service, laundry etc the other services that can be added are childcare, barber ,
babysitting, boutiques, currency exchange , in room telephone service , express check in
, express check out, florist, front desk – 24etc.

PRICING DECISION

There can be competition based pricing or demand based pricing. Off season discounts
can be clubbed with higher rtes during season also. Differential pricing can also be
adopted based on the type of client the hotel caters to.

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PROMOTION MIX:-

Promotion schemes should carried on regularly promoting the hotel, the advertising
should be done through attractive pictures through travel agents, through hoardings,
pamphlets etc. advertisements can also be given on travel guides which are published by
the govt agencies.

PLACE:-

The place in case of hotel industry must provide easy accessibility in terms of proximity
to railway stations, airports etc. it must be a safe and convenient location. The closer the
places to such important places, the greater are the chances of business.

- 19 -

19
 W
W
WS
W
W
W
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STRENGTHS

1. Natural and Cultural Diversity:

India has a rich cultural heritage. The "unity in diversity" tag attracts most tourists. The
coastlines, sunny beaches, backwaters of Kerala, snow capped Himalayas and the
quiescent lakes are incredible.

2. Demand-supply gap: Indian hotel industry is facing a mismatch between the demand
and supply of rooms leading to higher room rates and occupancy levels. With the
privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five
star hotels. This has led to the rapid expansion of the sector.

3. Government support: The government has realized the importance of tourism and has
proposed a budget of Rs. 540 crore for the development of the industry. The priority is
being given to the development of the infrastructure and of new tourist destinations and
circuits. The Department of Tourism (DOT) has already started the "Incredible India"
campaign for the promotion of tourism in India.

4. Increase in the market share: India's share in international tourism and hospitality
market is expected to increase over the long-term. New budget and star hotels are being
established. Moreover, foreign hospitality players are heading towards Indian markets.

WEAKNESSES

1.Poor support infrastructure: Though the government is taking necessary steps, many
more things need to be done to improve the infrastructure. In 2003, the total expenditure
made in this regard was US $150 billion in China compared to US$ 21 billion in India.

21
2. Slow implementation: The lack of adequate recognition for the tourism industry has
been hampering its growth prospects. Whatever steps are being taken by the government
are implemented at a slower pace.

3. Susceptible to political events:

The internal security scenario and social unrest also hamper the foreign tourist arrival
rates.

OPPORTUNITIES

1.Rising income: Owing to the rise in income levels, Indians have more spare money to
spend, which is expected to enhance leisure tourism.

2. Open sky benefits: With the open sky policy, the travel and tourism industry has seen
an increase in business. Increased airline activity has stimulated demand and has helped
improve the infrastructure. It has benefited both international and domestic travels.

THREATS

1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists

can be risky, as there are wide fluctuations in international tourism. Domestic tourism
needs to be given equal importance and measures should be taken to promote it.

2. Increasing competition: Several international majors like the Four Seasons, Shangri-La
and Aman Resorts are entering the Indian markets. Two other groups - the Carlson Group
and the Marriott chain - are also looking forward to join this race. This will increase the
competition for the existing Indian hotel majors

22
 GOVERNMENT POLICY

Hotels form an important and vital segment of the tourism infrastructure in the
country. The economic impact of hotel industry particularly in export earning,
employment generation and income distribution is widely appreciated in tourism
literature. The tourists spend approximately 40% of their funds on room and board
considering the importance of this sector in promoting tourism in India, the central
government has been continuously emphasizing development of hotels in its tourism
policy.

In June 1982, the Planning Commission recognised tourism as an industry. In the

Seventh and Eight Plans tourism planning got due importance. A National Committee on
Tourism was set up by the Planning Commission in July 1986 to evolve a plan for the
coming years. In the field of accommodation the recommendations of NCT, 1988 were:

• Encouragement through suitable incentives to supplementary accommodation like

private guesthouses, tourist bungalows, forest lodgings etc.

• Construction of Yatri Niwas to be left to the private sector.

• Youth hostels to be provided in as many places as possible.

• The accommodation sector should be provided with monetary incentives to ease

the borrowing and repayment of loans; fiscal incentives to improve the
profitability and operational input incentives for greater efficiency in operation
and management.

23
• NAP 1992 with an objective to increase export earning from Rs. 2400 crore to Rs.
10,000 crores by increasing the Indian share of world tourism from 0.4% to 15
within the next five years, suggested a new action plan, where a lot of emphasis
has been laid on promotion of hotel industry. Accordingly, the government of
India announced an incentive package that consists of:

• Fiscal incentive under section 80 HHD of the Income Tax Act where by 50% of
the income earned on account of foreign exchange earnings of a hotel are
exempted from Income Tax and the rest 50% also be exempted if reinvested in
tourism industry.

• Concession that hotels set up in rural areas, hill stations, pilgrim centres and
specified destinations will be exempted from expenditures and 50% of income tax
for ten years.

• Interest subsidy on loans for construction of hotels (1% for loans up to Rs. 75
lakhs for 4-5 star hotels and 3% for all other approved hotels and subsequently
this incentive was discontinued for metropolitan cities and enhanced to 5% for
hotels in specified destination.)

• Incentives to heritage hotels (capital subsidy to the extent Rs. 5 lakhs or 25% of
the cost, ten years holiday for expenditure tax and 50% from income tax.)

24
 KEY DRIVERS
OF
HOTEL INDUSTRY

Average room rate (ARR) and occupancy are the two most critical factors that determine
the profitability,
Since most of the marginal revenue gets added to the bottom-line. ARR in turn depends
upon location, brand image, star rating, quality of facilities and services offered and the
seasonal factor.

Hotel industry is a play on the economy. Buoyancy of tourist as well as business traffic
increases with stable socio-economic conditions. In the past, the hotel occupancy rates
slumped during the December 92 Ayodhya episodes and also during the September-
October 94 plague scare. During they the nuclear tests conducted had a negative impact
on tourist traffic & also due to earthquake .

Quarterly Tourist Arrivals

Season Tourists %
Apr-June 18
July-Sept 23
Oct-Dec 33
Jan-March 26

Leisure tourist arrivals are seasonal in nature. Because of the climatic conditions, there is
a preference for the winter months. Hence occupancy rates are higher during October-
March than April-September. To encourage tourist arrivals in the off-season period many
hotels offer hefty discounts on room tariff. Incentives given are therefore inversely
related to the level of occupancy rates.

25
Hefty discounts are also offered to repeat customers such as corporate, airline
crewmembers and tour groups. Discounts can vary between 10-15% for corporate, to as
much as 45-50% for airline crew members. Hence a higher percentage of such guests
lowers the ARR of a hotel.

Business travelers are not seasonal as tourist travelers but they are more prone to
postponing their visits in the event of any disturbance within the country. Therefore, the
business traffic correlates to the economic climate within the country.

The hotel industry is a net foreign exchange earner. In-fact it is the second largest foreign
exchange earner after textiles and garments. Depreciation of the rupee therefore leads to
windfall gains.

Infrastructure facilities in the country have a great bearing on foreign tourist arrivals.
Improved travel facilities with an increase in flight seat capacity, expansion in rail and
road networks will commensurately increase the industry prospects.

26
 COST STRUCTURE AND
BARRIERS TO ENTRY
OF
HATEL INDUSTRY IN INDIA

Operating leverage (proportion of fixed costs/total cost) is approximately 70% for the
hotel industry. Consequently while break-even levels are high, income above that level
flows straight through to the bottom-line.
The high cost for constructing a hotel stems from the fact that land cost comprises 45-
50% of the total project cost, about 25-30% goes into construction and the remainder into
furniture and fittings. The floor space index (FSI) provided to hotels is the same as
residential properties, which is also one of the prime reasons for the high cost of land.
The cost for a 300-room hotel in Delhi works out to Rs20mn/room.
Administrative and other overhead cost comprise approximately 30% of the total
operating cost and is the single largest cost component. Food and beverage (15%),
Employee (19%) Repairs and maintenance (16%), Power and fuel (12%) and selling
expenses (8%) are the other components of operating cost.

Cost Structure
Component % of total cost
Administrative overheads 30
Employee 19
Repairs and maintenance 16
Food and beverage 15
Power 12
Selling expenses 8
• Source:www.indiainfoline.com/hotels/cost

The hotel industry in India is heavily staffed. This can be gauged from the facts that
while Indian hotel companies have a staff to room ratio of 3:1, this ratio is 1:1 for
international hotel companies.

27
Land is the single largest cost item in the construction of a hotel in India. Moreover it is
very difficult to find vacant land in cities such as Mumbai and Delhi. Companies
operating in these two cities are therefore relatively protected.

Construction costs are also very steep. It is estimated that construction cost of land is
approximately Rs5mn per room for a 5-star hotel and Rs3mn per room for a 4-star hotel.
Gestation period for hotel can range between 48-50 mths for a 250 room 5-star hotel.

Existing players in the industry have a major advantage in being ahead of others in
acquiring low cost leases from governmental bodies. Most of these leases are of a long
term nature valid for 99 years. Hotel majors IHCL and EIH have long-term leases on
their prime properties. AHL owns the land on which the Hyatt has been constructed.

Moreover, the existing players have a definite edge as they enjoy a strong brand equity.
Chain hotels such as Taj and the Oberoi are better equipped to cater to the tourists
travelling in the tourist circuit.

RESEARCH PART

28
 DEMAND-SUPPLY
IN
HOTEL INDUSTRY

DEMAND

International business travelers will drive demand for premium hotels. These hotels
mainly draw their clientele from foreign visitors and domestic business travelers. The fact
that these hotels earn almost 70% of their revenue in foreign exchange bears out this
dependence. Therefore future growth in premium segment will depend on high spending
foreign tourists.

While foreign business tourist arrivals are dependent on the investment climate in the
country, arrivals of foreign leisure tourists are dependent upon stable socio-political
conditions in the country. More often than not the investment climate and socio-political
conditions are correlated. This is because, stable political condition results in increase in
business confidence and this translates into increased investments.

When the economic conditions are favorable, hotels enjoy high occupancy rates. This
gives them the flexibility of increasing their room rates. During the boom phase most
hotel companies operated at very high occupancy rates, which gave them the leeway of
increasing their room rates.

Amongst the foreign tourists, leisure travelers comprise 76% of the total tourists inflow
where as business travelers comprise 21%. Leisure tourist arrivals are seasonal in nature
as India's subtropical climate leads to preference for the winter months. Occupancy levels
are low between April-September as is reflected in quarterly tourist arrivals.

29
At present India attracts more than 2mn tourists a year. Following economic
liberalization, the flow of foreign business travelers increased phenomenally in the early
90's. In FY96 tourist arrivals increased by 21% yoy. Thereafter due to weak socio-
economic conditions growth in tourist arrivals petered off. Following political turmoil
and the nuclear test, tourist arrivals declined by 5% in FY99.

Demand for hotels in cities like Mumbai and Delhi are the highest. In fact at present, out
of the total of 19,000 5-star and 5-star deluxe rooms in the country, 50% are accounted
for by these two cites. These cities along with Bangalore and Chennai serve as gateway to
important tourist destinations.

Certain tourist destinations have also seen high concentration of tourist room demand.
Destinations such as Agra-Jaipur, Mysore, Bhubaneshwar-Puri-Konark, Jaisalmer-
Jodhpur-Bikaner and Mahabalipuram-Pondicherry have been popularized by the tourist
operators.

Trend In Tourist Arrivals

Year Arrivals Growth (yoy)
93-94 1.88
94-95 1.82 -3.19
95-96 2.19 20.33
96-97 2.33 6.39
97-98 2.37 1.72
98-99 2.25 -5.06
* Source:www.indiainfoline.com/hotels/tour/

SUPPLY

30
The Department of tourism has pegged the total room availability at 60,000 rooms. There
are 42,858 rooms under construction. It is estimated that to attract 5mn tourists the total
room availability would have to be approximately 120,000 rooms.

Between August 91 and August 1998, 259 foreign collaborations were approved by the
Union government out of which 167 proposals were for equity investments to the tune of
Rs2.8bn. Presently, there are 127 proposals to set up various grades of hotels at a total
investment of Rs10.4bn

Investments in the hotel sector has shown a sharp decline of 18% in FY99 as compared to
FY98, as many of the projects planned were subsequently called of due to the weak
economic conditions and high cost involved in setting up hotels. Also most players also
did not have the required free cash to continue with their investments.

Presently, the total 5 & 4-star room capacity in the four metro cities is close to
13,000rooms. Mumbai and Delhi account for the bulk of the total room availability. The
Taj and the Oberoi group have significant presence in all the metro cities.

5 & 4 Star Room Availability In Metro Cities

City 5 star 4 star
Mumbai 3,500 1,000
Delhi 5,500 1,000
Calcutta 1,000 250
Chennai 250 600
Bangalore 800 150

Tourists frequently visit destinations like Agra, Jaipur and Goa. The total room
availability in these cities is to the tune of around 4000 rooms.

5&4 Star Room Availability In Important Tourist Destinations

City 5 star 4 & 3 star

31
Agra 750 400
Jaipur 800 200
Goa 1,000 700

There are approximately 5,200 (5 & 4-star) rooms that are presently under construction in
the five metro cities. These will be commissioned by FY02. In the last 2-3 years Mumbai
has seen massive investments (currently under implementation) in hotel projects. Room
availability in Mumbai is slated to increase by another 3,100 rooms

In Mumbai, the Sahar region has seen massive investments from major hotel companies
which include Hilton, ITC, Hyatt regency and the Taj group. Lokhandwala in
collaboration with Regent group is setting up a hotel in Bandra and Marriot in
collaboration with Raheja group is setting up a hotel at Powai. The Oberoi group (EIH) is
constructing a 500 room hotel at the Bandra-kurla co-
mplex

BIBLIOGRAPHY:

• www.google.com
• www.oberio.com
• www.Taj.com

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• www.hotel
• www.Haytt.com

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