CH INSTITUTE OF MANAGEMENAT AND COMMUNICATION PRESENTATION ON HOSPITALIYE AND TOURISM

PRESENTED BY :
Umesh patel Lahar pandey Kiran surage raghvendre shukla Jp rathore Swati dwivedi Sandeep pushpad Shakti pratap

What is Hospitality?
The reception and entertainment of guests, visitors, or strangers with liberality and good will.

Industry profile

It is one of the largest industries in both the global and national contexts. It involves cooperative organizations. relationships with multiple

INDIA being a cheap destination for leisure tourism ,unlimited tourism and untapped business prospects, we can expect green pastures of growth in the year ahead

Current scenario

India has potential to become the number one tourist destination in the world, with demand growing 10.1% per annum. The hospitality industry is poised to grow at a faster rate and reach Rs.1500 billion. The contribution in India to Gross Domestic Product is estimated to rise from 8.6% (USD 117.9 billion) in 2010 to 9.0% (USD 330.1 billion) by 2020.

Three Main Objectives of the Hospitality Manager

Make the guest feel welcomed
Make sure things (products & services) work for the guest

Make sure the operation continues to provide service and make a profit

Govt. major policy initiatives include(Tourism policy)

Liberalization in aviation sector. Pricing policy for aviation fuel which influences international air fare. Rationalization in tax rates in the hospitality sector. Tourist friendly visa regime. Immigration services. Procedural charges in making available land for construction of hotels. Allowing setting up a guest house

Govt. open skies policy

Permission for domestic airlines to commence international flights. Star-up of various low cost carriers. 100% FDI is permissible in this sector

Why People Choose to Study Hospitality Management?

Experience
Interest

Ambition

Trends Affecting the Future of the Hospitality Industry

Increasing competition Emphasis on service Customers growing value consciousness

Changes in marketing and management made possible by technology

Hotel industry is expected to grow from USD 16.7 bn to USD 30.7 bn at 26% CAGR between 2008-13
Indian Hospitality market size (USD bn)

Total Hospitality

38.8

26.5

22.5

21.5

Total Number of Hotels in India, 2010

Business and investments: Current situation of Indias hotels

Hotel Imperial New Delhi: 99.57 % occupancy.

Hotel Trident Hilton, Gurgaon (suburban Delhi): 98.3 % occupancy.

Increase in average room rent for the entire hotel industry over the last year: 35 %. Unmet demand for hotel rooms: 150 000 rooms. Additional demand this year: 15 000 rooms.

Currently Marriott has over 1,000 rooms spread across four properties in Mumbai and Goa.

Strong economic recovery coupled with governments numerous policies and incentives will drive the growth in hospitality sector
GROWTH DRIVERS OF HOSPITALITY INDUSTRY IN INDIA Regulatory Drivers
Incentives by Central and the State governments
Elimination of Customs Duty on

External Drivers
Strong economic growth

Internal drivers
Hosting major sporting events

import of raw equipment, liquor etc

materials,

Fringe Benefit Tax exempted on

GDP growth of 9% p.a. in 2010. Forecasted to grow at a rate of 8.7% p.a. till 2016 thereby enabling hospitality sector growth
Increasing FDI inflow

International sporting events like Formula One race in the National Capital Region (NCR) in 2011 are set to boost hospitality
Demand-supply imbalance

crche, employee sports, guest house facilities

Five year income tax holiday

granted to 2-4star hotels established in specified districts having UNESCO-declared 'World Heritage Sites
Exemption of Luxury Tax and

FDI inflow increased due to allowance of 100% FDI and better infrastructure availability
Increasing tourist arrivals

Ministry of Tourism estimates a shortage of 0.15 mn hotel rooms in 2011, of which twothirds are in the budget category
Rising income and spending

Sales Tax for 5-7 Years for new projects

Governments open sky policy has

Hospitality sector handled 5.58 mn international tourists arrivals(8.1% Y-o-Y growth) and 740.21 mn domestic tourists in 2010 (10.7% Y-o-Y growth)
India tourism campaigns

Indian Hospitality sector

Rising disposable incomes, cheaper airfares, changing consumer lifestyle and ease of financial transactions leading

boosted number of passengers in India

Introduction of Medical or M-

VISA to boost medical tourism

The Incredible India and Atithi Devo Bhavah campaigns have improved foreign tourist outlook for India

Hospitality industry is one of the most liberalized sectors in India with 100% FDI allowance through automatic route and single window clearance facilities
Foreign direct investment (FDI)
FDI has been permitted up to 100% under the

Approval of a hotel project

As of Dec

automatic route Total FDI inflow in hospitality sector between 2000 -10 amounted to USD 2.17 bn For foreign technology agreements, automatic approval is granted if: Up to 3% of the capital cost of the project is proposed to be paid for technical consultancy services Up to 3% of the net turnover is payable for franchising and marketing/publicity fees Up to 10% of gross operating profit is payable for management fees, including incentives fees

Regulatory and FDI policies in Indian hospitality sector

2010, government has given nod to single window clearance for hospitality industry The Ministry of Tourism approves hotels at project stage based on documentation. Project approval is given to a 1, 2, 3, 4, 5 Star Hotels and Heritage Basic Category The Hotels have to apply for classification under 5 Star Deluxe/ Heritage Classic/ Heritage Grand category if they fulfill the prescribed norms within 3 months of commencing operation Project approval will be valid for 5 years

A tax rebate equal to 100% of the profit and gain for the first 5 consecutive years to an hotel in specified areas, if such hotel / convention

centre is constructed and has started operations before 31st July, 2010
A tax rebate equal to 100% of the profit and gain for the first 5 consecutive years to an hotel located in the specified district having a World

Heritage Site and has started functioning before 31st March, 2013

Tax Holiday available for hotels

The unorganized and largely fragmented hotel sector in India is undergoing a rapid change with entry of foreign players
Key hospitality players in India

NATIONAL PLAYERS

INTERNATIONAL PLAYERS

Hence, hotel room supply is expected to grow at 15% CAGR surpassing demand which is estimated to grow at 10.3% CAGR during 2010-13

Indian Hospitality Market : No. of Keys * (2010-13)

CONT
Room demand distribution in top 10 cities (2013E)

CONT
Upcoming room supply (2010-2013)

Increasing demand in Tier 2 and Tier 3 cities along with rising land costs will contribute towards shaping Future hospitality trends the future of hospitality
Upcoming Areas Hospitality supply in Tier II and Tier III locations will increase based on the untapped potential of the domestic commercial and leisure demand The Indian hotel market will remain an expensive market to enter with the exponential growth in capital land values across the country Green Hotels will increase operational efficiencies and bottom lines, inspite of its marginally higher construction costs Hospitality Real Estate

Green Hotels

Loca -vore: Local cuisines concept that believes in maximizing benefits to cultural heritage will be adopted in F&B

Local cuisines in F&B

Resource Optimization

Relocation of non-revenue generating departments from hotel premises to off hotel premises will maximize space efficiencies

Growing Importance of healthy and organic food will result in its introduction in the menus of all day dining and multi cuisine restaurants Personnel Retention Manpower retention programs will result in marked increase in salaries across the sector

Healthy & Organic Foods

Source: HVS Report Hotels in India- Trends and Opportunities 2010, Oct. 2010

19

Indias hotel industry

India's htel industries Is experiencing an unprecedented boom, driven by increasing numbers of business and tourist arrivals. But how long can the good times last?

Structure of the industry

premium & luxury segment

FIVESTAR DELUX

Premium & luxury segment

FIVE STAR

Mid Market Segment

FOUR STAR

Mid Market Segment

THREE STAR

Budget Segment
TWO STAR

Budget Segment
ONE STAR

Palaces & Forts

HERITAGE HOTELS

Consumer segments
The business traveler. International and national sports& game players The leisure traveler.

Airline cabin crew.

Users of Hotel Services

Business and investments: Current situation of Indias hotels

Some figures
Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident Hilton, Gurgaon (suburban Delhi): 98.3 % occupancy. Increase in average room rent for the entire hotel industry over the last years 35 %. Unmet demand for hotel rooms: 150 000 rooms. Additional demand this years 15 000 rooms.

The boom has attracted several global players, ranging from Starwood and Mariott to Four Seasons and ShangriLa.
Currently Marriott has over 1,000 rooms spread across four properties in Mumbai and Goa.

The engine of growth

Tourism boom
The tourism traffic has been growing between 20-28 % every wear for the last four years and this rate of growth Is expected to continue for the next few years. The constant boom and the resultant demandsupply mismatch has led to sharp increases in the average room rates and thus pushing up revenues of industry players expected to perform very well in futureand the industry offers an interesting investment opportunity for long- term investors.

Most of the five-star hotels are seeing more than 80 % occupancy and some of the lesserknown five-star hotels are overbooked.

Incredible India
The Ministry of Tourism is pushing the great Indian story effectively with its subtle and charming Incredible India campaign We have spent $5 million on this campaign since December 2002 and plan to keep it going, Amitabh Kant, the joint secretary at Indias Ministry of Tourism. According to estimates, another 150,000 rooms will have to be added across the country in the next five to Severn years to be able to meet the increased demand.

At 6,762 rupees, Bangalore had the highest ARR across all categories in the 30 cities. New Delhi was the second highest, registering an ARR of 5,498 rupees. All India ARR increased 26.9 % over the previous year. Star category occupancies ranged from 46.3 % to 72.1 %.

The future growth

Hospitality experts believe that the Indian hotel industry will witness higher than usual growth in the coming peak season. The lean season has been exceptionally good for us. Our room occupancy rate has been around 89 per cent and we are looking at over 95 per cent occupancy for the period September to December, says Kapil Chopra, general manager, Trident Hilton, Gurgaon. The non-luxury segment in particular has been perking up with more and more investors spotting the demand supply imbalance, surge in domestic travel and growth in spending among middle-class Indians.

Major players in India

HOTEL CHAINS Indian hotels company Ltd EIH Ltd ITC Hotels Ltd ITDC Ltd INTERNATIONAL HOTEL CHAINS Marriotte Starwood Berggruen hotels Emaar MGF Localized hotel companies SMALL CHAIN Hotel leela Venture Asian hotels Bharat hotels

PUBLIC SECTOR CHAINS

ITDC HAI

The Competition
The world's leading hotel brands - joining the battle The country has been flooded by some of the world's leading hotel brands. Unitech, which is setting up two hotels in Delhi, has already formed a joint venture with Marriott International to run its three new hotels in India, which are expected to Start operations by 2008. All other majors including Marriott, Hyatt, Hilton, Accor, Four Seasons etc are briskly rein forcing their presence in India.

Indian hotel companies look overseas

The movement is not one-way Cash rich Indian hotel companies have been acquiring properties overseas. The Tata group's Indian Hotels Comptant is in the process of acquiring Boston based luxury hotel the Ritz-Carlton for around $170 million dollars With growing competition, hotels are under tremendous pressure to generate new lines of revenue with creative approaches. Hotels are trying every possible way to generate cash from alternative sources to achieve economies of scale. Reducing transaction costs, increasing productivity and promoting traditional Indian values

Looking for new niche

Many business hotels in India are integrating full-fledged spas on their premises, originally a main stay of resort properties. Another interesting trend in India is that of mixed-use developments. However, in order to attract more visitors, India still needs to dramatically increase the number of rooms available.

The challenges to face

The lack of adequate infrastructure development. There is still need to improve air connectivity. As competition increases, there is a definite pressure on ARR and operating margins. Some players are already preparing for the difficult times when the ARRs are expected to fall by 30-40 percent in the next 3-4 years.

SWOT Analysis
STRENGTHS
Faster GDP growth Industrialization. Natural heritage India as a global player

WEAKNESS
Lake of connectivity. Lake of publicity. Hectic rules Influence of politicians Marketing gap.

Cont.
OPPORTUNITIES
Health tourism. Strong in cultural and nature aspects. Commercialization of sports and games. FDI policy. Mismatch of supply and demand. THREATS Poor domest tourism infra structure Political conditions Terrorism Increase in pollution Entry of new competitors

Hospitality Pyramid is Inverted

Economical

Luxury

Importance
Impetus to other industries Third largest net earner of foreign exchange. Contributes to the national integration, preserves natural and cultural environments Create substantial job opportunities

Its rapidly growing Western-style fast food joints offer unlimited opportunities for foreign food and beverage exporters,

Tourism related industries

Travel agencies, Tour operating agencies Units providing facilities for cultural, adventure and wild life experience to tourists, Surface, air and water transport facilities to tourists, Leisure, entertainment amusement, sport and health units for tourists Convention/seminar units and organizations.

Thomas Cook, Cox & Kings India Limited, Star Luxury Cruises, Queen Mary II Cruise Liners etc

Forms of tourism
Cultural tourism & Round Trips Commonwealth Games 2010 Monsoon magic Rural & village tourism Medical tourism Luxury tourism Adventure tourism

Role of tourism industry in India GDP

According to the global authority for hotel real estate, Lodging Econometrics, there were 73,793 hotel rooms in the pipeline of which 11,207 were due to open in 2009 and 22,522 in 2010 International tourists over 5 million visitors, while domestic market is more than 500 million. foreign tourists in India has increased by 12.4 percent in one year 2009 to 2010 In 2006, Indian tourist industry witnessed a growth of 14.3 percent, which reached around 3.89 million in 2007 The foreign tourists arrival led to a robust growth in the foreign exchange earnings that increased from USD 5.03 billion during January-October 2006 to USD 6.32 billion during January-October 2007, which is apparently a 25.6 percent rise.

The impact of India's economic growth on tourism

Industrialization, Education, Higher number of qualified professionals, Opening up of foreign markets, Liberal trade policies and better advertising, Strategic marketing, Strategic planning of excursion packages, Eco-tourism, Sports events that bring the spot-light on India, Greater patronage by greater number of MNC's heading to our shores, Diversifications of the Indian open industries norm,

IMPACT OF RECESSION
In 2009, the country is seen rising 6.5 percent, compared to the world output, which is seen falling 0.4 percent.
The tourism sector is expected to perform very well in future and the industry offers an interesting investment opportunity for long-term investors. The Indian tourism sector is seen generating $42.8 billion by 2017, a 42 percent surge from 2007, according to an industry research note by auditing and consulting firm Deloitte Despite the numerous problems, tourism industry was the second-largest foreign exchange earner for India.

CHALLENGES
successfully preserving these in their original form and making them accessible to domestic and international travellers. various categories of tourism products, such as
o o o o o o o o o Adventure tourism medical tourism Eco-tourism Rural tourism Cruise tourism Meetings Incentives Conferences And exhibitions (MICE) tourism etc.

THE SCENE TILL NOW

Some major international events like 9/11, US-led war against terror and SARS hit the tourism industry over the past few years. Cutting down of routes by domestic airlines and increase in airfares last year also led to a fall in the movement of people in the country. The Mumbai terror attacks, targeting two premium hotels, also tarnished the country's reputation, drastically reducing hotel occupancy levels, and affecting year-end travel. Expenses per night of stay for a tourist in India during the SE Asian currency crisis was $100 whereas it was around $35-40 in the SE Asian countries. This hurt Indian tourism. High luxury and entertainment taxes and high landing charges applicable in Indian airports.

Thank you .

Any question???????

It is one of the largest industries in both the global and national contexts. It involves cooperative relationships with multiple organizations. INDIA being a cheap destination for leisure tourism ,unlimited tourism and untapped business prospects, we can expect green pastures of growth in the year ahead

The world travel and tourism council(WTTC) has predicted that India has potential to become the number one tourist destination in the world, with demand growing 10.1% per annum. The hospitality industry is poised to grow at a faster rate and reach Rs.1500 billion. The contribution of the entire travel and tourism sector including hospitality industry in India to Gross Domestic Product is estimated to rise from 8.6% (USD 117.9 billion) in 2010 to 9.0% (USD 330.1 billion) by 2020.

Many higher end hotels in India are realized that their key USP in international competition is not their high-tech facilities, but rather their outstanding staff-to-guest ratios and the longstanding tradition of Indian hospitality as immortalized by "Atithi Devo Bhava". Hospitality is about serving the guests and to provide them with a "feel-good-effect". Personalized comprehensive service, such as suites having their own personal butler, gives guests that extra feel of being valued by their hosts.

Three Main Objectives of the Hospitality Manager

As a successful manager in the hospitality industry, you must exhibit many skills and command much specialized knowledge all directed toward achieving the managerial objectives listed below:

Make the guest feel welcomed Make sure things (products & services) work for the guest Make sure the operation continues to provide service and make a profit Lets explore each objective individually...

Brief Summary of Managements Role in the Hospitality Industry There were three main objectives of a hospitality manager:
Make the Guests Feel Welcome Make Sure Things Work for the Guests Make sure the operation continues to provide service and make a profit.
Simply stated, these objectives suggest that managers must be able to relate successfully to employees and guests, direct the work of their operation, and achieve operating goals within a budget - that is, to run a productive operation within certain constraints. (Chapter 1Page 6)

PRODUCT: High class accommodation, food and beverage and it is a luxury product PRICES: Prices are very high and varies as per the season PROMOTION: Very effective promotion to the targeted customers through national and international magazines.

PLACE: located in all metros and follows its own regional tradition and treats their guests accordingly PROCESS: Regular maintenance of the room, keeping the surroundings clean and hygienic

PHYSICAL EVIDENCE: Deep sleep is more than just the right bed. It is about an environment that soothes all the five senses. Experience our rooms and know how it feels to sleep like a baby again. PEOPLE: Highly professional workers ,internationally qualified chefs.

HOSPITALITY & TOURISM INDUSTRY development goes hand by hand. Tourism policy. Governments open skies policy. Foreign Trade policy. FDI in HOTEL & TOURISM INDUSTRY. Other government initiatives.

Liberalization in aviation sector. Pricing policy for aviation fuel which influences international air fare. Rationalization in tax rates in the hospitality sector. Tourist friendly visa regime. Immigration services. Procedural charges in making available land for construction of hotels. Allowing setting up a guest house.

Permission for domestic airlines to commence international flights. Star-up of various low cost carriers.

FDI

100% FDI is permissible in this sector

Why People Choose to Study Hospitality Management

They have experience in the industry and want to continue growing and changing with the industry. They are interested in the hospitality industry.
They have ambition and know that they can grow as a professional in the industry.

Trends Affecting the Future of the Hospitality Industry

Increasing competition Emphasis on service Customers growing value consciousness Changes in marketing and management made possible by technology

Hotel industry is expected to grow from USD 16.7 bn to USD 30.7 bn at 26% CAGR between 2008-13
Indian Hospitality market size (USD bn)
Restaurant sector Hotel sector Total Hospitality 26% CAGR 12% CAGR 38.8 21.5 6.8 14.7 2009 26.5 9.5 30.7 17 2010 2013
The Indian hospitality industry is one of the fastest

growing sectors of the Indian economy; except for a short phase the during recession and the terrorist attacks in 2008 and 2009 respectively
As of May 2011 contribution of the hospitality industry

22.5 5.8 16.7 2008

8.1

which comprises of hotels, restaurants and allied

services to Indian GDP was 2.2%
In 2010, 30% and 16% of the Indian hotel and restaurant

sectors were in the organized sector

Hospitality

Total Number of Hotels in India, 2010 Hotel Categories 5 Star deluxe/5 Star 4 Star 3 Star 2 Star 1 Star Heritage Uncategorized Total No. of Hotels 165 770 505 495 260 70 7078 8707 No. of Rooms 43965 13420 30100 22950 10900 4200 132885

industry is one of top employment

generating industries which according to executive search and HR consulting firm Ma Foi Randstad generated 160,300 jobs in 2010 and is expected to generate 218,200 jobs in 2011
According to hospitality consulting firm HVS, there is a

shortage of quality branded hotel rooms in the major Indian cities as compared to other international cities and the shortage will be more pronounced as Indian 60

economy strives toward double-digit growth Source: Technopak Report Dissecting the Indian Hospitality Industry 2009, Ma Foi Randstad press release dated 31 March 2011, India Biz News Article dated June 13,2011, Livemint article dated May 2010

Business and investments: Current situation of Indias hotels

Some figures :
Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident Hilton,Gurgaon (suburban Delhi): 98.3 % occupancy. Indian hotels are witnessing mindblowing occupancy rates. Increase in average room rent for the entire hotel industry over the last year: 35 %. Unmet demand for hotel rooms: 150 000 rooms. Additional demand this year: 15 000 rooms.

The boom has attracted several global players, ranging from Starwood and Mariott to Four Seasons and ShangriLa. The largest hotel company in the world,French chain Accor, has entered India and is now devising aggressive plans for expansion in the market. Several others are racing to increase their presence in India, including the Marriott group.
Currently Marriott has over 1,000 rooms spread across four properties in Mumbai and Goa.

Strong economic recovery coupled with governments numerous policies and incentives will drive the growth in hospitality sector
GROWTH DRIVERS OF HOSPITALITY INDUSTRY IN INDIA

Regulatory Drivers
Incentives by Central and the State governments
Elimination of Customs Duty on

External Drivers
Strong economic growth

Internal drivers
Hosting major sporting events

import of raw materials, equipment, liquor etc

Fringe Benefit Tax exempted on

GDP growth of 9% p.a. in 2010. Forecasted to grow at a rate of 8.7% p.a. till 2016 thereby enabling hospitality sector growth
Increasing FDI inflow

International sporting events like Formula One race in the National Capital Region (NCR) in 2011 are set to boost hospitality
Demand-supply imbalance

crche, employee house facilities

sports,

guest

Five year income tax holiday granted

FDI inflow increased due to allowance of 100% FDI and better infrastructure availability
Increasing tourist arrivals

to 2-4star hotels established in specified districts having UNESCOdeclared 'World Heritage Sites
Exemption of Luxury Tax and Sales

Ministry of Tourism estimates a shortage of 0.15 mn hotel rooms in 2011, of which two-thirds are in the budget category
Rising income and spending

Tax for 5-7 Years for new projects

Governments open sky policy has

Hospitality sector handled 5.58 mn international tourists arrivals(8.1% Y-o-Y growth) and 740.21 mn domestic tourists in 2010 (10.7% Yo-Y growth)
India tourism campaigns

Rising disposable incomes, cheaper airfares, changing consumer lifestyle and ease of financial transactions leading

Indian Hospitality sector

boosted number of passengers in India

Introduction of Medical or M-VISA to

boost medical tourism

The Incredible India and Atithi Devo Bhavah campaigns have improved foreign tourist outlook for India

62
Source: Technopak Report Dissecting the Indian Hospitality Industry 2009, TCFI Report Hospitality in India, Oct. 2010

Hospitality industry is one of the most liberalized sectors in India with 100% FDI allowance through automatic route and single window clearance facilities
Foreign direct investment (FDI)
FDI has been permitted up to 100% under the

Approval of a hotel project

As of Dec 2010, government has given nod to single

automatic route Total FDI inflow in hospitality sector between 2000 -10 amounted to USD 2.17 bn For foreign technology agreements, automatic approval is granted if: Up to 3% of the capital cost of the project is proposed to be paid for technical consultancy services Up to 3% of the net turnover is payable for franchising and marketing/publicity fees Up to 10% of gross operating profit is payable for management fees, including incentives fees

Regulatory and FDI policies in Indian hospitality sector

window clearance for hospitality industry The Ministry of Tourism approves hotels at project stage based on documentation. Project approval is given to a 1, 2, 3, 4, 5 Star Hotels and Heritage Basic Category The Hotels have to apply for classification under 5 Star Deluxe/ Heritage Classic/ Heritage Grand category if they fulfill the prescribed norms within 3 months of commencing operation Project approval will be valid for 5 years

A tax rebate equal to 100% of the profit and gain for the first 5 consecutive years to an hotel in specified areas, if such hotel / convention

centre is constructed and has started operations before 31st July, 2010 A tax rebate equal to 100% of the profit and gain for the first 5 consecutive years to an hotel located in the specified district having a World Heritage Site and has started functioning before 31st March, 2013 Finance Bill 2009, which has proposed to abolish Fringe Benefit Tax with effect from 1st April 2009 has become major advantage to the Hospitality industry

Tax Holiday available for hotels

Source: India Law Offices article in 2009

63

The unorganized and largely fragmented hotel sector in India is undergoing a rapid change with entry of foreign players
Key hospitality players in India
Players InterContinental Segment Presence

Brands InterContinental Crowne Plaza Holiday Inn Holiday Inn Express Hotel Indigo Staybridge Suites Candlewood Suites Radisson Hotels and Resorts Park Plaza Country Inns & Suites Park Inn

Future Expansion Plans

INTERNATIONAL PLAYERS

Luxury, midsegment and business

Plans to operate 45 new hotels by

2015

Carlson

Luxury, business, economy and cruises Luxury, midsegment and budget

Plans to increase its presence in India

to 78 hotels by 2012, from 28 in 2009

Plans to construct 50 budget hotels

Indian Hotels

Taj, Gateway Vivanta Ginger

under the Ginger brand over the next four years

To invest USD 2,000 mn over next

NATIONAL PLAYERS

ITC Welcome group

Luxury, budget and heritage

EIH

ITC Hotel Luxury Collection Welcome Hotel Sheraton Fortune Welcome Heritage

few years
Plans to develop 750 additional hotel

Business , leisure and cruises Luxury and heritage

Oberoi Trident

rooms under the Trident brand over the next 2.5 years
Expected to add 349 more rooms in

The Leela

Leela penta Leela palace

2012

64
Source: TCFI Report Hospitality in India, Oct. 2010

Hence, hotel room supply is expected to grow at 15% CAGR surpassing demand which is estimated to grow at 10.3% CAGR during 2010-13
Indian Hospitality Market : No. of Keys * (2010-13)
Demand 53,412 32,660 Supply 66,487 35,503 75,967 81,296

Room demand distribution in top 10 cities (2013E)

11% 3% 9% 24%
Mumbai NCR Pune Ahmedabad Goa Chennai

38,789

43,828

4% 8%

2010

2011 F

Jaipur

2012 F

2013 F

7% 3% 6%

24%

Bengaluru Kolkata Hyderabad

(*) Note: Number of keys :The number of guest rooms in a hotel

Upcoming room supply (2010-2013)

Economy Midscale Upscale Total Rooms 8,092
The Indian government through Budget 2011-12 has proposed

13,075 1,087 2,363 9,480 684 3,231 9,625 5,714 2010 2011F 5,565 2012F

several measures that will increase investment into hospitality sector and accelerate the process of development
The huge influx of incremental rooms will result in the occupancy

543 1,835

5,330
743 1,280 3,307 2013F

levels of hotels for most of the cities falling considerably except Mumbai and Goa during 2010-13
Despite a similar quantum of room demand in Mumbai and the

NCR in 2013, the size of Mumbai market, at USD 930 mn, will be substantially greater than the NCR market size of USD 620 mn

Source: Knight Frank Report Indian Hotel Market Dec 2010

65

Increasing demand in Tier 2 and Tier 3 cities along with rising land costs will contribute towards shaping the future of hospitality
Future hospitality trends
Hospitality supply in Tier II and Tier III locations will increase based on the untapped potential of the domestic commercial and leisure demand The Indian hotel market will remain an expensive market to enter with the exponential growth in capital land values across the country Green Hotels will increase operational efficiencies and bottom lines, inspite of its marginally higher construction costs Hospitality Real Estate

Upcoming Areas

Green Hotels

Loca -vore: Local cuisines concept that believes in maximizing benefits to cultural heritage will be adopted in F&B

Local cuisines in F&B

Resource Optimization

Relocation of non-revenue generating departments from hotel premises to off hotel premises will maximize space efficiencies

Growing Importance of healthy and organic food will result in its introduction in the menus of all day dining and multi cuisine restaurants Personnel Retention Manpower retention programs will result increase in salaries across the sector in marked

Healthy & Organic Foods

Source: HVS Report Hotels in India- Trends and Opportunities 2010, Oct. 2010

66

INDIAS HOTEL INDUSTRY

India's htel industries Is experiencing an unprecedented boom, driven by increasing numbers of business and tourist arrivals. But how long can the good times last?

premium & luxury segment

FIVESTAR DELUX

Premium & luxury segment

FIVE STAR

Mid Market Segment

FOUR STAR

Mid Market Segment

THREE STAR

Budget Segment
TWO STAR

Budget Segment
ONE STAR

Palaces & Forts

HERITAGE HOTELS

The business traveler. International and national sports& game players The leisure traveler. Airline cabin crew.

Business and investments: Current situation of Indias hotels

Some figures :
Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident Hilton,Gurgaon (suburban Delhi): 98.3 % occupancy. Indian hotels are witnessing mindblowing occupancy rates. Increase in average room rent for the entire hotel industry over the last year: 35 %. Unmet demand for hotel rooms: 150 000 rooms. Additional demand this year: 15 000 rooms.

The boom has attracted several global players, ranging from Starwood and Mariott to Four Seasons and ShangriLa. The largest hotel company in the world,French chain Accor, has entered India and is now devising aggressive plans for expansion in the market. Several others are racing to increase their presence in India, including the Marriott group.
Currently Marriott has over 1,000 rooms spread across four properties in Mumbai and Goa.

A booming market
The established hotel chains A number of global players are already well established in India. These include Hilton, Shangri-La, Radisson, Mariott, Meridien, Sheraton, Hyatt, Holiday Inn, InterContinental and Crowne Plaza.

Investments Now besides hotel companies, even the investment firms and private equity companies are beginning to get excited about India. Berggruen Holdings India, a subsidiary of New York-based investment company Berggruen Holdings,has announced that it is seed-funding a nonluxury hotel chain in India. Private equity firm Warburg Pincus has picked up around 27 % stake in Delhi-based mid-price hotel chain,Lemon Tree, for $ 60.2 million.

The engine of growth

Tourist boom

The tourism traffic has been growing between 20-28 % every wear for the last four years and this rate of growth Is expected to continue for the next few years.

The constant boom and the resultant demandsupply mismatch has led to sharp increases in the average room rates and thus pushing up revenues of industry players (hotels, tour operators, airlines, shipping lines, etc)
The tourism sector is expected to perform very well in futureand the industry offers an interesting investment opportunity for longterm investors. Most of the five-star hotels are seeing more than 80 % occupancy and some of the lesserknown five-star hotels are overbooked.

Incredible India
The Ministry of Tourism is pushing the great Indian story effectively with its subtle and charming Incredible India campaign We have spent $5 million on this campaign since December 2002 and plan to keep it going, Amitabh Kant, the joint secretary at Indias Ministry of Tourism. According to estimates, another 150,000 rooms will have to be added across the country in the next five to seven years to be able to meet the increased demand. At 6,762 rupees, Bangalore had the highest ARR across all categories in the 30 cities. New Delhi was the second highest, registering an ARR of 5,498 rupees. All India ARR increased 26.9 % over the previous year. Star category occupancies ranged from 46.3 % to 72.1 %.

The future growth

Hospitality experts believe that the Indian hotel industry will witness higher than usual growth in the coming peak season. The good times for the Indian hospitality industry are here to stay, with top-end hotels experiencing high room occupancy rates even in the lean season. The lean season has been exceptionally good for us. Our room occupancy rate has been around 89 per cent and we are looking at over 95 per cent occupancy for the period September to December, says Kapil Chopra, general manager, Trident Hilton, Gurgaon. There was an increase of 15 % in the number of international tourist arrivals in India and 14 % in the foreign exchange earnings in the first quarter of 2006 as compared to the same period last year. The non-luxury segment in particular has been perking up with more and more investors spotting the demand supply imbalance, surge in domestic travel and growth in spending among middle-class Indians.

HOTEL CHAINS

SMALL CHAINS

INDIAN HOTELS COMPANY LTD EIH LIMITED ITC HOTELS LTD ITDC LTD

HOTEL LEELA VENTURE ASIAN HOTELS BHARAT HOTELS

PUBLIC SECTOR CHAINS

ITDC HAI INTERNATIONAL HOTEL CHAINS MARRIOTTE STARWOOD BERGGRUEN HOTELS EMAAR MGF

LOCALIZED HOTEL COMPANIES

The Competition
The world's leading hotel brands - joining the battle
The country has been flooded by some of the world's leading hotel brands. New brands such as Amanda, Satinwoods, Banana Tree, Hampton Inns, Scandium By Hilt and Mandarin Oriental are planning to enter the Indian hospitality industry in joint ventures with domestic hotel majors. Unitech, which is setting up two hotels in Delhi,has already formed a joint venture with Marriott International to run its three new hotels in India, which are expected to start operations by 2008. The three new hotels will be located in Kolkata, Gurgaon and Noida. We are investing around 700 crore rupees to set up these hotels, says Unitech managing director Sanjay Chandra. All other majors including Marriott, Hyatt, Hilton, Accor, Four Seasons etc are briskly reinforcing their presence in India.

Indian hotel companies look overseas

The movement is not one-way. Cash-rich Indian hotel companies have been acquiring properties overseas. The Tata group's Indian Hotels Company is in the process of acquiring Boston-based luxury hotel the Ritz-Carlton for around $170 million dollars (around 765 crore rupees). Due diligence is likely to be completed soon. The hotel will be acquired through the companys New York-based subsidiary, says RK Krishna Kumar, vice chairman of Indian Hotels. Indian Hotels is looking to strengthen its presence in the United States with this acquisition. It has also set up properties in the Middle East, the United Kingdom and Africa. Its fierce rival, Oberoi group, has also been active overseas with properties in Saudi Arabia, Mauritius, Egypt, Australia and Indonesia, and elsewhere. With growing competition, hotels are under tremendous pressure to generate new lines of revenue with creative approaches. With newer players poised to enter the market one of the key factors that will drive future demand is alternate revenue streams. Hotels are trying every possible way to generate cash from alternative sources to achieve economies of scale. Reducing transaction costs, increasing productivity and promoting traditional Indian values

Looking for new niche

Many business hotels in India are integrating full-fledged spas on their premises, originally a main stay of resort properties. Another interesting trend in India is that of mixed-use developments. While the concept has proved to be successful abroad, it is still at the embryonic stage in India. In this type of development, the real estate would typically include an apartment block or a commercial block (retail or office) along with a hotel. However, in order to attract more visitors, India still needs to dramatically increase the number of rooms available.

The challenges to face

The lack of adequate infrastructure development. The airports at the primary gateway cities of Delhi and Mumbai have been privatised, and work has commenced on modernisation. New privately owned international airports are expected to be commissioned at Hyderabad (2008) and Bangalore (2009), which will give a large boost to the economic growth of these areas.
There is still need to improve air connectivity; rail and road connections as well as general infrastructure like power and water. The result of the industry's success. As competition increases, there is a definite pressure on ARR and operating margins. The industry market will definitely shift from being demand-driven to supply-driven and that the hotel companies will need to revisit their strategies and, of course, their prices. Some players are already preparing for the difficult times when the ARRs are expected to fall by 30-40 percent in the next 3-4 years and then the distinguishing factor for the hotels will be the offer in its entirety rather than just the price or the facilities that the hotels offer.

STRENGTHS Faster GDP growth Industrialization. Natural heritage India as a global player

WEAKNESS lake of connectivity. Lake of publicity. Hectic rules Influence of politicians Marketing gap.

OPPORTUNITIES Health tourism. Strong in cultural and nature aspects. Commercialization of sports and games. FDI policy. Mismatch of supply and demand.

THREATS Poor domestic tourism infra structure Political conditions Terrorism Increase in pollution Entry of new competitors

Hospitality
Tourism Infrastructure

Industrialization
Education

Thankyou .

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