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 19 th 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.

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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.

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• 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.

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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".

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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.

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//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.

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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*

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 .

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MARKETING MIX

IN THE HOTEL

INDUSTRY

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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

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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.

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.

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- 20 -

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W

WW

WW

W W

S

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.

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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.

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

22

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

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.

23

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.

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

25

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.

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.

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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

27

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.

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.

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RESEARCH PART

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

29

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.

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

30

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

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

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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

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

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BIBLIOGRAPHY:

www.google.com

www.oberio.com

www.Taj.com

www.hotel

www.Haytt.com

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