CHAPTER 3

THEORETICALPERSPECTIVE
OF INDIAN HOTEL INDUSTRY
PROFILE
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CHAPTER 3

THEORETICAL PERSPECTIVE OF INDIAN

HOTEL INDUSTRY PROFILE

3.1 HISTORY & EVOLUTION OF THE HOTEL

The Hotel Industry that exists today can be traced back to 3000 B.C., where

the earliest inns were homes with rooms provided for the travelers. Conditions

improved in1700s England when the Renaissance sparked the desire to travel. The

United States saw its Hotel Industry created a century later. By this time they had

revolutionized many firsts in the industry including private rooms with locks and

doors, free soap, trained staff, and a pitcher of water in each room. Indoor plumbing

and the creation of the lobby followed shortly thereafter. The business of providing

strangers with hospitable means has come a long way. What once was service to

fellow man is now the foundation for numerous economies throughout the world.

The modern era of the Hotel Industry saw its beginnings in 1794 at New York

where the first ever Hotel was built. Profit potential was recognized with the inception

of the Industrial Revolution. Stock companies invested in the hotels seeking profit

from property value appreciation and room occupancy revenue. The surrounding

communities were promised an increase in sales by means of higher volume of people

passing through. The Industry creates a multitude of opportunities which now saturate

the Industry in the form of spin-offs of these top four hotel companies creating the

most common chains we know of today. History has proven that the success of this

industry has largely to do with two factors, Location and Innovative Integration, the
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combination of these two has created a margin between the larger chains and those

who operate on a smaller scale. Soap and locks on doors were the innovation for their

day. The Strategic placement and the Product differentiation once again guide the

success of this industry.

The word , “Hotel” is derived from the French word ‘Hotel’. which referred to

a French version of a townhouse or any other building seeing frequent visitors, rather

than a place offering accommodation. Hotel is an establishment that provides paid

lodging on a short-term basis. The provision of basic accommodation, in times past,

consisting only of a room with a bed, a cupboard, a small table and a washstand has

largely been replaced by rooms with modern facilities, including en-suite bathrooms

and air conditioning or climate control. The additional common features found in the

hotel rooms are a telephone, a wall clock, a television, and Internet connectivity;

snack foods and drinks may be supplied in a mini-bar, and facilities for making hot

drinks. Larger hotels may provide a number of additional guest facilities such as a

restaurant, a swimming pool or childcare, and have conference and social function

services.

Some hotels offer meals as part of a room and board arrangement. Hotel

Industry in India has witnessed tremendous boom in recent years. Hotel Industry is

inextricably linked to the Tourism Industry and the growth in the Indian Tourism

Industry has fuelled the growth of Indian Hotel industry. The thriving economy and

increased the business opportunities in India have served as a boon for the Indian

Hotel Industry. The arrival of low cost airlines and the associated price wars have

given domestic tourists a host of options. The 'Incredible India' destination campaign
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and the recently launched 'Atithi Devo Bhavah' (ADB) campaign have also helped in

the growth of Domestic and International Tourism and consequently the Hotel

Industry. According to a report, the Hotel Industry in India currently has a supply of

110,000rooms and there is a shortage of 150,000 rooms fuelling hotel room rates

across India. According to estimate, demand is going to exceed supply by at least

100%over the next 2 years.

The future scenario of Indian Hotel Industry looks extremely rosy. It is

expected that the budget and the mid-market hotel segment will witness a huge

growth and expansion while the luxury segment will continue to perform extremely

well over the next few years. According to the British laws, a hotel is a place where a

“bonafied” traveller can receive food and shelter provides he is in a position for it and

is in a fit condition to receive.

Hotels have a very long history, but not as we know today, way back in the 6th

century BC when the first inn in and around the city of London began to develop.

The first inns catered to travellers and provided them with a mere roof to stay under.

This condition of the inns prevailed for a long time, until the Industrial Revolution in

England, which brought about new ideas and progress in the business of inn- keeping.

The invention of the Steam Engine made travelling even more prominent,

which had to more and more people travelling not only for business but also for

leisure reasons. This leads to the actual development of the Hotel Industry as we

know of it today.
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A Hotel today not only caters to the basic needs of the guest like food and

shelter but also provides much more than that, like personalized services and so on

A Hotel today is “Home away from home”.

3.2 OVER VIEW

The global Hotel Industry appears to be now on a path of slow recovery,

having coming out of two exceptionally bad years (2009-2010). While the main

recovery leaders are the emerging countries in the Asia-Pacific region, the developed

luxury hotel markets of the USA and Europe have also reported signs of demand

recovery during the past 12 months.

In India, the demand - or occupancy - led recovery that started with the return

of domestic travellers late in calendar 2010, received a boost with Foreign Tourist

Arrivals (FTAs) picking up in the subsequent months. The latter half of 2010-11 saw

the industry push for higher tariffs, although pricing recovery for the whole of 2010-

11 stood at a tepid 5-8%. From our analysis of demand, supply and industry profits,

and considering the fact that the previous recovery cycles lasted six to eight years,

ICRA believes that the current recovery is still in a nascent stage and yet to make the

transition from an occupancy-led up-cycle to a more convincing ARR-led recovery.

The market requires further improvement in occupancy and confidence to be able to

gain real pricing power. Overall, ICRA expects the Indian Hotel Industry to post a

modest recovery in performance during the next three quarters, aided by high single-

digit ARR growth.

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One of the key risks to recovery comes from demand dampeners, namely,

expectations of relatively mute corporate performance in fiscal 2011-12 (which could

slow down corporate spending), increase in interest rates, rise in fuel and food prices

(which would impact disposable incomes), and subdued macroeconomic signals from

the developed markets. For recovery to be sustained, it must be supported by gains in

the underlying economy. Additionally on the supply front, heavy supplies in markets

like the National Capital Region (NCR), Hyderabad, Pune, Bangalore and Chennai

are expected to suppress pricing power.

3.3 GROWTH OF THE INDUSTRY

3.3.1 Rate of Growth

According to a report, Hotel Industry in India currently has a supply of 10,000

rooms and there is a shortage of 150,000 rooms fuelling hotel room rates across India.

According to estimates demand is going to exceed supply by at least 100% over the

next 2 years. Five-star hotels in metro cities allot same room, more than once a day to

different guests, receiving almost 24-hour rates from both guests against 6-8 hours

usage. With demand-supply disparity, hotel rates in India are likely to rise by 25%

annually and occupancy by 80%, over the next two years. This will affect the

competitiveness of India as a cost-effective tourist destination.

To overcome this shortage the Indian hotel industry is adding about 60,000

quality rooms, currently in different stages of planning and development, which

should be ready by 2012. The Hotel Industry in India is also set to get a fillip with

Delhi hosting 2010 Commonwealth Games.

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The future scenario of the Indian Hotel Industry looks extremely rosy. It is

expected that the budget and mid-market hotel segment will witness huge growth and

expansion while he luxury segment will continue to perform extremely well over the

next few years.

The hotel industry in India is going through an interesting phase. One of the

major reasons for the increase in demand for hotel rooms in the country is the boom

in the overall economy and high growth in sectors like Information Technology,

Telecom, Retail and Real estate.

Rising stock market and new business opportunities have also been attracting

hordes of foreign investors and international corporate travelers to look for business

opportunities in the country. The arrival of low cost airlines and the associated price

wars have given domestic tourists a host of options. The opening up of the Aviation

Industry in India has led the way for exciting opportunities for the Hotel Industry as it

relies on airlines to transport 80% of international arrivals.

Moreover, the government’s decision to substantially upgrade 28Regional

Airports in smaller towns and privatization and expansion of Delhi and Mumbai

airport will improve the business prospects of the Hotel Industry in India. Substantial

investment in tourism infrastructure is essential for Indian Hotel Industry to achieve

its potential. The upgrading of National Highway connecting various parts of India

has opened new avenues for the development of Budget hotels here.
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The Government of India’s Incredible India Destination Campaign and the

Atithi Devo Bhavah campaign have also helped the growth of domestic and

International Tourism and consequently the Hotel industry.

In order to increase the stock of hotel rooms, the Federation of Hotel and

Restaurant Associations of India suggested to the government that the floor area

ration of the existing hotels should be increased. This was a couple of years before

and will help create additional rooms in the existing properties and ease the burden of

shortage of hotel rooms in the country. The proposal is yet to be implemented.

3.3.2 Pattern of Growth (Seasonal & cyclic)

The Pattern of growth in the hotel industry is both seasonal and cyclic as Hotel

Industry is inter -related and based on the Tourism Industry. As the Industry is related

and run on the demand based on the location in some regions like historical places

and business centers (e.g., Delhi, Hyderabad, Tirupathi, etc.,) the demand for the

hotels are cyclical and for few places the demand is seasonal. Seasonal demand

depends on the weather location (e.g., beaches in India are mostly visited in summer

because of weather and vacations)

3.4 GROWTH DETERMINANTS

3.4.1 Location

Location is a critical consideration because if affects the hotel’s ability to draw

the customers. It is important that hotel location be visible, accessible, convenient and

attractive to market. The surrounding land uses are important for all types of lodging

operations. Aesthetics of the area, noise, safety and other factors should be

considered.
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3.4.2 Commercial Locations

By location along major highways or in business or industrial districts, hotels

and motels benefit from high visibility and proximity to generators of room night

demand. Local colleges, hospitals, attractions, services and entertainment are

examples of “room night” demand generators.

3.4.3 Resort Locations

Hotels and motels in resort areas generate most of their business form leisure

travelers who see the lodging facility and surrounding area as their “destination.”

Access and visibility, while important, are secondary to the quality of the facility,

services, amenities, and nearby attractions.

3.4.4 Local Market Area

A lodging facility must be located in a market area that attracts overnight

visitors.

3.4.5 Business Climate

Hotels and motels which primarily serve business travellers usually rely on the

strength of the local business community.

3.4.6 Tourism Activity

Hotels and motels in resort areas typically rely on the local attractions to

bring in the customers. Attractions can include both natural and man-made places of

interest.
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3.4.7 Business Travellers:

Business travellers represent a large portion of lodging demand in many

market areas. They include people travelling on business representing commercial,

industrial and governmental organizations. Peak business demand is usually

experienced from Monday through Thursday nights.

3.4.8 Leisure Travellers:

Leisure travellers may visit an area for a vacation, to attend sporting or social

events, to shop, or to visit friends and relatives. They might be staying over simply

because they are travelling to other destinations. Leisure travellers may be

individuals, couples, families, or small groups. Travellers visiting hospitals and

universities are typically included in this market segment. Leisure room demand is

often seasonal. In larger, more urban market areas, leisure room demand may be

limited to weekends, summer months and holiday periods.

3.4.9 Other Travellers:

Various lodging customers cannot be classified under the categories of

business, leisure, or group. These travellers may include construction workers,

truckers, utility crews and others.

3.5 CHARACTERISTICS OF HOSPITALITY INDUSTRY

Perishability: If the full capacity of the services is not utilized the services becomes

perishable.

Variability: The Quality of Service varies to a great extent.

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Inseparability: Service is inseparable from the provider.

Intangibility: Hospitality is intangible but Hotel Industry is tangible as one can

touch, taste and feel the product.

3.6 CLASSIFICATIONS OF HOTELS

India’s Hotel Industry comprises the following four main categories:

3.6.1 Star hotels

This category is based on the standards of location, facilities, infrastructure

and amenities provided. Star rating is given by HRACC (The Hotel & Restaurant

Approval & Classification Committee of Ministry of Tourism, India). They form 30%

of the industry size. The star ratings are Five Star Deluxe, Five Star, Four Star, Three

Star, Two Star and One Star. The first 2 types are usually located in business areas of

Metro cities and cater to foreign tourists, business travellers, top government officials

and political brass, offering luxury at a high price. The next two types are in tier II

cities and tourist destinations preferred by midlevel executives and leisure tourists.

The last two types are found in smaller cities and around tourist spots, preferred by

domestic tourists. Reputed Indian veterans include ITC, Indian Hotels Company (Taj

group), East India Hotels (Oberoi group), Hotel Leela Venture and ITDC hotels.

Foreign hospitality players include Marriott, Radisson, Sheraton, Meriden, Hyatt,

Four Seasons Regent, Carlton group, Jumeirah and Mandarin Oriental and Dubai’s

Istithmar luxury hotels.

3.6.2 Heritage Hotels

This category is on the basis of the nature. They operate from forts, palaces,

castles, jungles and river lodges and heritage buildings. These are ideally suited for
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vacations, relatively affordable and fun places. The classification includes Heritage

Classic, constructed between 1920 and 1935, Heritage Grand, existing before 1920,

and Heritage, set up around 1935 to 1950. Most Indian hotel groups mentioned above

operate Heritage hotels at historical sites across India. The other types in this category

include Beach resorts and wildlife resorts.

3.6.3 Budget Hotels

They are usually preferred by the domestic travellers seeking economical

accommodation. These are reasonably priced, offer limited luxury, seasonal discounts

and decent services. Some new global entrants include UK’s Dawnay Day and

Whitbread Premier Travel Inn, Shangri-la, Aman resorts, Golden Tulip budget hotels,

Fairfield inns, Country inns and suites, Courtyard by Marriott, Hometel, Ibis and

Kamfotel among others. Budget hotels are preferred by business travellers

contributing to greater ARR (average room rate) than leisure travellers. Increased

demand and healthy Occupancy have fuelled the growth of budget hotels in a short

time

3.6.4 Unclassified Hotels

They are motels spread across the country. They form 19% of the industry

size. Low price is their only USP (unique selling proposition). Some other such

categories include: Airport Hotels, Ecotels, Service Apartments, Timeshare, Modular

Hotels, Forest Apartments, Agriculture destination resorts, condotels, Holiday homes

and Spas (residential, urban, ayurvedic, Medi, chocloate etc)

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Diagram 3.1 Classification of Hotel

Source: Journal of Hospitality and Leisure Marketing (2003)

3.7 RECENT TRENDS IN INDIAN TOURISM AND HOSPITALITY

INDUSTRY

The Asian games in 1982 provided an opportunity to travel agents and tour

operators to market India abroad and they grabbed it well. Encouraged by some

incentives announced by government, Five Star hotels began growing all over the

India. All these helped a lot in the healthy growth of tourism in our country. In fact,

tourism business and hotel business go side by side and both are complementary to

each other. In India, both approved and unapproved hotels are found but approved

hotels have an edge over unapproved hotels in several respects. Hotels are granted

approval from the Department of Tourism, Government of India at project stage and

then are classified in one of the star categories.

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It is voluntary for a hotel to get approved status from the government, but only

approved hotels can avail the various income tax incentives, import licences and other

approvals.

There were 1300 approved and 477 unapproved hotels offering 98515 rooms

in 2004 as against 1285 approved and 452 unapproved hotels offering 95722 rooms in

2003. The Indian hotel business is focused largely on foreign tourists with almost 70

percent business coming from this segment. The key operating characteristics of the

hotel business are the occupancy rate and the average room rate. The room rates

depend on the class, location and the image of the hotel. The occupancy rate is

dependent primarily on the seasonal arrivals as well as the location of the hotel.

Occupancy level of 70 to 80 per cent is considered good by industry standards. The

Average occupancy in India was 59.7 per cent in 2004 as against 54.8 per cent in

2003 and average room rate was Rs.2689 in 2004 as against Rs.2004 in 2003

(FH&RA). The position has been improving continuously.

Diagram 3.2 International Tourist arrivals in India

(Source : WTTC, Planning Commission Business Press, TSMG Analysis)

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The hotel industry and the 5-star hotels in particular are concentrated in the

four Metros, especially in Mumbai and Delhi. As many as 75 per cent of the 5 Star

Deluxe rooms, 47 per cent of the 5 Star ordinary rooms and approximately 35 per

cent of all the registered rooms are in the four Metros. Due to the phenomenal

increase in tourism activities, the hotel business has grown beyond expectations. This

is particularly true about international tourism and star hotel business.

At present, about 789 million tourists are crossing international border every

year and they are spending nearly 685 billion US Dollars. This figure was just 100

million in 1964. The figure swelled to 1 billion by 2010 and will be1.5 billion by

2020 as per projection by World Tourism Organization. International tourists here in

India were 3.5 million in 2004 as against 2.78 million tourists in 2003. The Foreign

exchange earnings from these tourists were about 23000 crores of rupees in 2004 as

against Rs.16429 crores in 2003. During the year 2005, about 4 million foreign

tourists came here and India earned 5 billion US Dollars from them. In the first 6

months of the year 2006, about 2.16 million foreign tourists visited India and foreign

exchange earnings from these were 13441 crores of rupees.

It is expected that this growth will continue during the next couple of years if

no adverse incident happens in India or the South East Region. According to an

estimate of CII, the number of foreign tourists visiting India is likely to increase to 50

million by 2020. As per estimates of Ministry of Tourism, 1,50,000 hotel rooms of

different categories are required to be added to the existing available rooms in the

next couple of years to accommodate all the foreign tourists and this will involve an

investment of Rs. 35,000 crores.

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Obviously, there is a good scope for hotel business all over the world

including India and these estimates will boost hotel business in India.

The key factors spawning India’s hospitality industry growth are a booming

economy and steady political scene, soaring service industry, FDI inflow,

infrastructure growth and a boost for the tourism sector due to government funding.

An estimated 4.4 million tourists are expected to visit India with an annual average

growth rate of 12% in the next few years. The domestic tourist market is also

flourishing. The commonwealth games in 2010 have also added to the demand for

quality accommodation.

The hospitality and leisure industry comprises of mostly chains/multiple

business units, widely scattered across the globe. With the advent of the Internet and

the latest technologies, the industry is facing a constantly changing business

environment requiring immediate and proactive adaptability in operations, customer

relationship management and back office processes. Products and service offerings

differentiation has been diminishing leading to consumers demanding fast and highly

personalized services.

3.8 SIGNIFICANCE OF HOSPITALITY INDUSTRY

Tourism and Hospitality Industry may help the underdeveloped/developing

countries more in resolving their various problems as this industry today has emerged

as one of the fastest growing industries in terms of capital invested, foreign exchange

earnings and providing jobs. In India, it is considered as highly labour intensive

service industry, where the employment-investment ratio is higher than any other
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industry. One of India's biggest problems is to find ways to employ its ever-growing

population. Travel and tourism directly create employment opportunities in hotels,

restaurants, airlines, travel agencies, passenger ships, and as a result of the spread

effect creates jobs in industries like construction, telecommunication, manufacturing

and the retail trader.

According to Ministry of Tourism, an investment of Rupees one million in the

hotel and restaurant sector may create 89 jobs as against 44 jobs in agriculture sector

and 12.5 jobs in the manufacturing sector. Investment required to create one job in

manufacturing sector is around Rupees.79, 000 whereas in Hospitality Industry it is

only Rupees11,200. At present about 20 million persons are directly or indirectly

employed in tourism related industry and this figure is likely to increase to 40 million

by 2020. It amply proves the job potential of Hospitality Industry in India.

3.9 TRENDS IN REVENUES AND PROFITS FOR THE INDIAN HOTEL

INDUSTRY

Diagram 3.3 Trends in Revenues and Profits for the Indian Hotel Industry

(Source: ICRA’s estimates, Capitaline Database. Sample of selected hotels )

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The Hotels Industry is characterized by seasonality, with the second half of a

financial year being the peak season. The Industry’s quarterly performance in 2010-

11 when compared with that in 2009-10 shows steady improvement—an indication

that the industry is in the early stages of recovery. The overall revenues and the

revenues per available room in Q3 and Q4, 2010-11, are however still lower than the

respective figures reported by the same quarters in 2007-08, which remains one of the

best periods for the Indian Hotels Industry in recent times. Although ARRs posted

some improvement, cost pressures (employee, fuel and F&B expenses) muted margin

recovery during H2, 2010-11.

3.10 CHENNAI HOTEL MARKET PERFORMANCE

The hotel inventory in the city in the financial year 2008 was approximately

3,800 keys (including branded and unbranded stock), which increased to

approximately 4,200 keys in the financial year 2009, showing an increase of 11% and

a further 400 rooms in the financial year 2010, registering a growth of 21% over 2008

levels.

To meet the surging demand in the Hospitality Sector, the hotel room

inventory in Chennai is graduating from a nascent stage with considerable hotel

development activity planned and ongoing.

Approximately 5,000 to 6,000 new rooms are anticipated to enter the Chennai

Hotel Market over the next five years. While not all these rooms are under active

development, it is likely that a considerable proportion of the supply will translate

into quality accommodation product.

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Operators likely to enter the market include Hilton, Marriott, Accor, ITC (with

a new property with a considerable room inventory), InterContinental, Sarovar, Leela

and Krism.

The city is a key business hub for south India and demand here has historically

been driven by the Banking, Financial Services and Insurance (BFSI), IT/ ITeS, the

automobile manufacturing industry and leisure.

Nearly 75% to 80% of the city’s demand base is of corporate/ business origin,

with the remaining being Meetings, Incentives, Conventions and Exhibitions (MICE),

Leisure as well as Airline driven.

The Chennai Hotel Market, similar to other markets in India, experienced a

considerable growth in ARR and occupancy levels over the three years upto 2008.

While the economic slump resulted in demand depletion across all market segments

and hotel categories, the overall performance of the city for the fiscal year 2010 is not

likely to be detrimental to hotel performance.

The competitive market occupancy rate (for organised and unorganised hotel

rooms) declined from 69% in the Financial Year 2008 to 65% in 2009 and marginally

increased to 66% in the year 2010.

While the occupancy rate experienced a minimal growth between 2009 and

2010, the ARR has experienced improvements, highlighting the occupancy and

pricing strategies undertaken by hotels to maintain profitability. The ARR grew from

approximately INR 4,300 in 2008 to approximately INR 4,800 in 2008 and a further

growth to approximately INR5,200 in 2010.

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3.11 OUTLOOK

Despite the economic slump, the Chennai hotel market appears to be showing

signs of positive growth in relation to hotel performance and hotel development

activity. A number of developers are currently exploring new hotel development

options in the city.

Chennai’s strong demand base is driven by the BFSI, port, automobile

manufacturing and IT/ITeS sectors. A sizeable proportion of room night demand is

likely to be driven by non-local manpower involved in projects (architects, designers,

project management teams, quantity surveyors, etc) who essentially stay over

relatively longer periods of time.

The outlook for the city’s hotel market is neutral -- while demand is likely to

experience growth following the economic slump, although at a lower pace, supply

growth is likely to outpace demand in the short term. Some correction in the ARR is

anticipated, particularly from 2012 to 2015 when majority of the rooms are likely to

enter the market.

The long-term outlook for the city is positive with the anticipated quality

supply likely to enhance Chennai’s profile on the national and international market.

The business and industrialization boom in Chennai is growing bigger year

after year. Catering to the business needs there is an equivalent boom in the

hospitality industry. Business customers account for around 75% of the business of

the branded hotels in Chennai.

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Owing to this promising market many big players in the hospitality both

Indian and foreign have made huge bets on Chennai. The number of five star hotels in

Chennai is set to double in a year with hotels from Hilton, Hyatt, Leela and ITC are

about to get operational by the year end.

Currently Chennai has 29 branded hotels with more than 4500 rooms. 17 new

hotels with almost 3500 rooms are under construction and will be operational in the

next 2-3 years. This continual increase in supply has impacted the occupancy rate of

the hotels. The occupancy has come down to 64% from 68% a year earlier. Similarly

the revenue from each room has also come down. The average room rent has come

down from Rs.7000/- to Rs.6100/-

Chennai is the capital city of the Indian state Tamil Nadu, in the south of

India. It is the fifth most populous city in India and one of the fastest growing cities in

the world. According to the Confederation of Indian Industry, the city is estimated to

grow to a $100–billion economy, almost 2.5 times its present size, by the year 2025.

Diagram 3.4 Hotel Performance in Chennai city

Source: Colliers International Research2012

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Nearly 75% of the city’s demand base is of business origin, with the

remaining being MICE and leisure. Relative to other cities in India, Chennai has

performed well, achieving occupancy rates of 66% in 2009, 62% in 2010 compared to

66% in 2011, representing an increase of 3% despite a 12% growth in additional

available rooms during the same period. The decline in 2010 was due largely to the

global economic crisis, but the market fully recovered in 2011 despite the addition of

the new supply to the market. The average room rate for the Chennai hotels market

was $162 in 2009, $140 in 2010 and $129 in 2011 Chennai’s hotels have witnessed

an increasing business demand, which is expected to grow mainly driven by corporate

travel budgets leading to higher business travellers. In addition, the already well-

established tourist industry continues to be promoted and facilities improved to

increase tourist visitor numbers.

The city has recently started segregating into distinctive micro areas, with the

regions of Sri perumbudur (Chennai’s industrial hub) and OMR (Chennai’s IT

corridor) attracting significant investments into hotels, primarily in the budget and

mid-market segments.

Given the number of existing and new companies setting up their offices in

the city and its micro areas, there is a significant extended-stay demand, which will

result in a strong growth of extended stay products. New upscale and luxury hotels

with extensive meeting facilities are expected to boost the MICE demand. Expansion

of the existing airport indicates the growing need to boost the capacity to cope with

the increased air demand in the area. With strong growth in visitor numbers and as

economic climate improves the long-term outlook for the Chennai hotel market will

remain strong and positive.

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Chennai has witnessed an evolution of sort. From a traditional and rather close

set-up the change over the years has been quite vivid and contemporary. Investments

in sectors, automobiles, Information Technology, etc, has brought in a new dimension

to the city and has also changed its demographic set-up to some extent. Further, the

expatriates brought in their preferences and globalisation did make an impact on the

cities.

3.11 MAJOR DEPARTMENTS WITHIN A BIG HOTEL

The departments are classified on account of its function as Core or Support.

These include:

Rooms Division or Accommodations

Food & Beverage Operations

Marketing and Sales

Front Office/ Bell Desk

Human Resources and Training

Production or Kitchen

Finance and Purchases

Security and Safety

Engineering and Maintenance

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3.11.1 Food and Beverages

F & B deals mainly with food and beverage service allied activities. Different

divisions are there in F & B like Restaurants, Speciality Restaurants, Coffee Shop (24

hrs.), Bar, Banquets, Room Service etc. Apart from that they have Utility services

(Cleaning).

3.11.2 Front Office Department:-

The Front Office is the command post for processing Reservations,

Registering guests, Settling guest accounts (cashiering), and Checking out guests.

The Front Desk agents also handle the distribution of guestroom keys and mail,

messages or other information for guests. The most visible part of the Front Office

area is of course the Front Desk. The Front Desk can be a counter or, in some luxury

hotels, an actual desk where a guest can sit down and register

3.11.3 Housekeeping Department:-

The Housekeeping Department is another important department in Hospitality

world. Housekeeping is responsible for cleaning the hotel’s guestrooms and public

areas. This department has the largest staff, consisting of an assistant housekeeper,

room inspectors, room attendants, a house person crew, linen room attendants and

personnel in charge of employee’s uniforms. They may also have their own laundry

and valet service. Hotels with laundry and valet equipment may use it only for hotel

linens and uniforms and send guest clothing to an outside service where it can be

handled with specialized equipment.

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3.11.4 Food Production Department

Food production deals with the preparations of food items. It is basically

engaged in preparing those dish, which are ordered by the guest and afterwards is

catered by the F&B Department. Cuisines like Indian, Continental, Thai, Italian,

Konkani (Coastal Sea Food), South Indian, Chinese, Mexican, etc., have different

Chefs appointed for the speciality cuisine.

3.11.5 Marketing & Sales Department:-

Sales and marketing have become one of the most vital functions of the Hotel

business and an integral part of modern Hotel Management. It includes packaging for

selling, sales promotion, advertising and public relations. The Marketing Division is

charged with the responsibility of keeping the rooms in the hotel occupied at the right

price and with the right mix of guests.

3.11.6 Engineering and Maintenance Department:-

The energy crisis throughout the world has given a great importance to the

engineering department of a hotel. This department provides on the day-today basis

the utility services, electricity, hot water, steams, air-conditioning and other services

and is responsible for repair and maintenance of the equipment, furniture and fixtures

in the hotel. The engineering department has an important role in satisfying the guest-

demand and helping to maintain the profit level of the hotel. The cleaning, up-keep,

repair, replacement, installation and maintenance of property and its furnishing,

machinery and equipment are the joint responsibilities of Engineering/Maintenance

and the Housekeeping Department.

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3.11.7 Finance, Accounting and Control Department:-

A hotel’s Accounting Department is responsible for keeping track of the many

business transactions that occur in the hotel. The Accounting Department does more

than simply keep the Books-Financial Management is perhaps a more appropriate

description of what the Accounting Department does. Whereas the control department

is concerned with cost control guidelines by way of reducing in investment, reduction

in operating cost, control of food service costs, control of beverage costs, labour cost

control etc.,

3.11.8 Safety and Security Department:-

The security of guests, employees, personal property and the hotel itself is an

overriding concern for today’s hoteliers. In the past, most security precautions

concentrated on the prevention of theft from guests and the hotel. However, today

such violent crimes as murder and rape have become a problem for some hotels.

Unfortunately, crime rates in most major’s cities are rising. Hence today Security

department also concentrates on these additional criminal activities too.

3.11.9 Administration Department:-

Top organizational members usually supervise the Administration Department

in a hotel. This Department is responsible for all the work connected with

Administration, Personnel, Manpower, Employee’s Welfare, Medical, Health and

Security.
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3.11.10 Human Resource Development:-

This department started getting importance only few decades before in Hotel

Industry and within a short span of time it has become a very important part of the

organization. It plays the role of a facilitator between the bargainable cadre and non-

bargainable cadre. This department is the topic of discussion. The practice, which this

department and their staff perform, is going to be learned in the light of the present

Study.

The Researcher can conclude from the review of Hospitality Industry, its

growth and characteristics that this industry is very peculiar and driven mainly by the

people who are serving for the Industry. This service is the only experience that a

customer carries with himself. Hospitality is an intangible experience. The success of

this Industry depends on capable and trained employees. Hence training in Hospitality

Industry is an important aspect of its success and growth. Training in Hospitality

Industry is also a crucial function of its managers.

3.12 LIST OF PLAYERS IN THE INDUSTRY

Taj Group

Inter Continental

Le Meridien Group of Hotels

Oberoi Group of Hotels

The Park Group of Hotels

Welcome Heritage Group of Hotels

ITC Welcome group of Hotel

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3.12.1 Brief profile of Players in the Industry

The best Hotel Chains of India Mentioned below are the significant hotel

chains of India,

Taj Group of hotels in India:

The most popular name that is almost synonymous with hospitality in India is

that of the Taj Group. Offering the best hotels across various genres like Business

Hotels, Heritage Resorts, Luxury Hotels and even Sea Resorts, the Taj Group is

definitely the best in the field.

The Oberoi Group of Hotels in India:

One of the most prominent names among the hotel chains of India is the

Oberoi Group. It also owns several properties in exotic places like Australia and

Mauritius. With its world class facilities and efficient staff to manage and play the

perfect Indian hosts, the Oberoi hotels is no doubt a great feather on the grand cap of

tourism in India.

Le Meridien Group of Hotels:

The Le Meridien Group of Hotels has played an instrumental role in playing

the perfect host to the millions of tourists and guests coming here. It is a luxury brand

of great fame and reflects the inherent Le Meridien touch of elegance and class

through all its properties in India. It is no wonder, one of the exclusive hotel chains of

India.
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Best Western Group:

A world famous name when it comes to hospitality and service, the Best

Western Group owns several properties across India. Each of the hotels has been

equipped with numerous features to enable a cozy stay to the guest.

3.13. Categorization of Players in the Hotel Industry

3.13.1 Based on location

City center: Generally located in the heart of city within a short distance from

business center, shopping arcade. Rates are normally high due to their location

advantages. They have high traffic on weekdays and the occupancy is generally high.

Motels: They are located primarily on Highways, they provide lodging to highway

travellers and also provide ample parking space. The length of stay is usually

overnight.

Suburban Hotels: They are located in suburban areas and generally have high traffic

during weekend. It is ideal for budget travellers. In this type of hotel, rates are

moderately low. Airport Hotels: These hotels are set up near the airport. They have

transit guests who stay over between flights.

Resort hotels: They are also termed as health resorts or beach /Hill resorts and so on

depending on their position and location. They cater to a person who wants to relax,

and enjoy themselves at hill station. Most resorts work to full capacity during peak

season. Sales and revenue fluctuate from season to season.

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Floating hotels: As the name implies these hotels are established on luxury liners or

ships. It is located on rivers, seas or big lakes. In cruise ships, rooms are generally

small and all furniture is fixed down. It has long stay guests.

Boatels: A house boat hotel is referred as boatels. The Shikaras of Kashmir and

Kettuvallam of kerala are houseboats in India which offer luxurious accommodation

to travellers.

Rotels : These novel variants are hotels on wheels. Our very own "palace on wheels

“and "Deccan Odyssey" are trains providing a luxurious hotel atmosphere. Their

interior is done like in a hotel room. They are normally used by a small group of

travellers.

3.13.2 Based on Size of Property

The main yardstick for the categorization of hotel is by size or the number of

rooms available in the hotel.

Small hotel: Hotels with 100 rooms and less may be termed as Small hotels.

Medium sized hotel: Hotels which have 100-300 rooms are known as Medium sized

hotel.

Large hotels: Hotels which have more than 300 rooms are termed as Large hotels.

Mega hotels: Hotels with more than 1000 rooms.

Chain hotels: These are the groups that have hotels in many of locations in India,

international venues as well.

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3.13.3 Based on the Level of Service

Hotels may be classified into Economy, and Luxury hotels on the basis of the

level of Service they offer:

Economy/ Budget hotels: These hotels meet the basic need of the guest by providing

comfortable and clean room for a comfortable stay.

Mid -market hotels: It is suite hotel that offers small living room with appropriate

furniture and small bed room with king -sized bed.

Luxury hotels: These offer world class service providing restaurant and lounges,

concierge service, meeting rooms and dining facilities. Bath linen is provided to the

guest and is replaced regularly. These guest rooms contain furnishing, art work etc.,

prime market for these hotels are celebrities, business executives and high-ranking

political figures. Example: Hyatt Regency, New Delhi

3.13.4 Based on the Length of Stay

Hotel can be classified into Transient, Residential and Semi- residential hotels

depending on the stay of a guest.

Transient Hotel: These are the hotels where a guest stays for a day or even less. They

are usually Five Star Hotels. The occupancy rate is usually very high. These hotels are

situated near the airport.

Residential hotels: These are the hotels where aguest can stay for a minimum period

of one month and upto a year. The rent can be paid on monthly or quarterly basis.

They provide sitting room, a bed room and a kitchenette.

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Semi- residential hotels: These hotels incorporate features of both Transient and

Residential hotel.

3.13.5 Based on Theme

Depending on theme, Hotel may be classified into Heritage hotels, Ecotels,

Boutique hotels and Spas.

Heritage hotel: In this hotel a guest is graciously welcomed, offered room that have

their own history, serve traditional cuisine and are entertained by folk artistes. These

hotels put on their best efforts to give the glimpse of their region. Example: Jai

Mahal Palace in Jaipur.

Ecotels: These are environment- friendly hotels and they use eco- friendly items in

the room. Example: Orchid Mumbai is Asia’s first and most popular Five Star

Ecotels.

Boutique hotels: This hotel provides exceptional accommodation and furniture in a

themed and stylish manner and caters to corporate travelers. In India The Park

Bangalore is a boutique hotel.

Spa: It is a resort which provides therapeutic bath and massage alongwith other

features of luxury hotels.In India Ananda spa in the foot hill of the Himalayas as the

most popular spa.

3.13.6 Based on Target Market

Commercial hotels: They are situated in the heart of the city in busy commercial

areas so as to get good and rich business. They cater mostly to businessmen.
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Conventional hotels: These hotels have large conventional complex and cater to

people attending a convention, conference

Resort hotels: These leisure hotels are mainly for vacationers who want to relax and

enjoy with their family. The occupancy varies as per season. The atmosphere is more

relaxed. These are spread out in vast areas so many resorts have solar powered carts

for the transport of guest.

Suite hotels: These hotels offer rooms that may include compact kitchenette. They

cater to people who are relocating like lawyers, executives who are away from home

for a long business stay.

Casino hotels: Hotels with predominantly gambling facilities comes under this

category, they have guest room and food and operation too. These hotels tend to cater

leisure and vacation travellers. Gambling activities at some casino hotels operate all

24 hours a day and all 365 days.

3.14 PRODUCT LINES AND CONSUMER BEHAVIOUR

3.14.1 Products

Rooms:

The rooms in hotels are based on the Category of the hotel. The facilities in

the rooms are based on the type of hotel and prices of the rooms are based on the type

and facilities provided in the room.

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Conference Rooms:

The conference rooms are provided by hotels for the meetings and other

requirements as per the request by the customers. The price depends on the facilities,

space and time utilized.

Banquets & Halls:

Banquet halls are provided by hotels for parties and functions. These halls

provide extra revenue for the hotels.

Restaurants & Bar:

Along with the rooms the hotels provide restaurants and bars which are

charged separately. This adds revenue as well as a facility for the customers who are

staying in hotels.

3.14.2 Product Description

There are several types of rooms provided by the hotels based on their

category. Few types of rooms are explained below

Standard: This category usually means the most basic room type offered by the hotel.

It has basic, standard amenities and furnishings. Standard rooms in hotels with higher

categories often have no view or have a poor view over the dumpster or parking lot.

Moderate: Usually a slight bit better than the standard, but still not deluxe. It may

refer to the room view as well as the size and the type of furnishings offered.
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Superior: This category is always subject to interpretation. It is supposed to mean

superior to a standard room in both size and furnishings, but it often refers to just the

view. Some hotels have only Superior rooms; the categories then are defined by the

view and location of the room.

Deluxe: These rooms are supposed to be Deluxe in every way: View, location,

furnishings and size.

Junior Suite: A "junior" suite is typically a larger room with a separate seating area.

Sometimes it has got a small divider between the part of the room that the bed is in

and the seating area, but it is not two separate rooms.

Suite: A Suite is usually two or more rooms clearly defined; a bedroom and a living

or sitting room, with a door that closes between them. Many hotels use the word

"suite" to define any room with a sofa in it so be sure to check thoroughly if what the

customers really want are the two or more separate rooms.

Studio : This is usually configured like a Junior Suite, but has the added advantage of

a "kitchenette," or cooking facilities.

3.14.3 Complimentary Products

Swimming pool, Fitness Centre

Meeting Rooms, Business Centre

Complimentary High Speed Internet, Free Local Calls

Superstar Hot Continental Breakfast, Complimentary Morning Newspaper

Guest Laundry, Dry Cleaning

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Coffee/Tea Maker, Mini Fridge, Microwave

Complimentary Valet Parking

Wake Up Service

Bike rental at the Reception Desk

Fitness Centre

Tennis Court

Beauty parlor Lucie: Lifting Cure, Regeneration Cure, Manicure, Pedicure

Hair Dresser

Private Car Park on the Hotel Premises

Travel Agent

Airport Pick -up and drop

Guide Facilities

Banquet Halls

Meeting Rooms

Swimming Pools

3.14.4 Substitutes:

Friend’s or relative’s houses,

Youth Hostels,

Paying Guests

Dormitories Resorts

Motels

Lounges in Airports, Railway Stations, and Bus Shelters.

Private Guest Houses and R&B Guest Houses

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3.15 TRAINING DESIGN OF HOTEL EMPLOYEE

Training Design is an art as well as a science. As a science, it takes into

account the purpose the organization wants the training to achieve, appropriate

principles from learning theory, and pragmatic considerations, such as cost and

organizational sponsorship. As an art the instructional designer provides creative

solutions for learning needs.

3.16 ADDIE MODEL

The ADDIE model refers to Analyze, Design, Develop, Implement and

Evaluate. Furthermore, it provides a step-by-step process that helps the instructional

designers plan and create training programs with a framework in order to make sure

that their instructional products are effective and that their processes are as efficient

as they can possibly be.

Diagram 3.5 ADDIE Model (Training design of Hotel Employee)

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Analyze

Who is the audience and what are their characteristics?

Did we identify the new behavioural outcome?

What types of learning constraints exist?

What are the delivery options?

What are the online pedagogical considerations?

What is the timeline for project completion?

Design

Documentation of the project's instructional, visual and technical design

strategy

Apply instructional strategies according to the intended behavioural outcomes

by domain (cognitive, affective, psychomotor).

Create storyboards

Design the user interface and user the experience

Prototype creation

Apply visual design (graphic design)

Development

List activities that will help the students learn the task.

Select the delivery method such as tapes, handouts, etc.

Review the existing material so that one need not reinvent the wheel.
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Develop the instructional courseware.

Synthesize the courseware into a viable training program.

Validate the instruction to ensure it accomplishes all goals and objectives.

Implement

During the implementation phase, a procedure for training the facilitators and

the learners is developed.

The facilitators’ training should cover the course curriculum, learning

outcomes, method of delivery, and testing procedures.

Preparation of the learners includes training them on new tools (Software or

Hardware),student registration.

This is also the phase where the project manager ensures that the books, hands

on equipment, tools, CD-ROMs and software are in place, and that the

learning application or website is functional.

Evaluation

Review and evaluate each phase (analyze, design, develop, implement) to

ensure it is accomplishing what it is supposed to.

Perform external evaluations, e.g. observe that the learner on the job can

actually perform the tasks that were trained.

Revise training system to make it better.

The design of the training program can be undertaken only when a clear

training objective has been produced. The training objective clears what goal has to
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be achieved by the end of training program i.e. what the trainees are expected to be

able to do at the end of their training. Training objectives assist trainers to design the

training program

3.17 SWOT ANALYSIS

STRENGTHS

A very wide variety of hotels is present in the country.

There are international players in the market such as Taj and Oberoi

&International Chains

The manpower cost in the Indian hotel industry is one of the lowest in the

world.

India offers a readymade tourist destination with the resources

Natural and cultural diversity

Demand-supply gap

Government support

WEAKNESSES

The cost of land in India is high at 50% of total project cost as against15%

abroad.

The Hotel Industry in India is heavily staffed.

High Tax structure in the industry makes the industry worse off than its

international.
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Only 97,000 hotel rooms are available in India today.

Only limited value -added services

Slow implementation

OPPORTUNITIES

Demand between the national and the inbound tourists can be easily managed

due to difference in the period of holidays.

In the long-term the hotel industry in India has latent potential for growth.

Unique experience in heritage hotels.

Rising income.

THREATS

Guest houses replace the hotels.

Political turbulence in the area reduces tourist traffic and thus the business of

the hotels

Changing trends in the west demand similar changes in India

The economic conditions of a country have a direct impact on the earnings in

hotel industry.

Lack of training man power in the hotel industry.

Fluctuations in international tourist arrivals.

Increasing competition.