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Hotel Distribution


The hospitality industry consists of broad category of fields within the service industry that includes lodging, restaurants, event planning, parks,  lineand additional fields within the tourism industry.

Hospitality is about serving the guests to provide them with "feel-good-effect". "Athithi devo bhavha" (Guest is God) has been one of central tenets of Indian culture since times immemorial. In India, the guest is treated with utmost warmth and respect and is provided the best services. 

Today hospitality sector is one of the fastest growing sectors in India. It is expected to grow at the rate of 8% between 2007 and 2016. Many international hotels including Sheraton, Hyatt, Radisson, Meridien, Four Seasons Regent, and Marriott International are already established in the Indian markets and are still expanding.

Hotels (as well as other forms of accommodations) are generally segmented by the services and amenities offered. These two factors, along with location, also have a bearing on the price range.

  • Budget hotels offer clean albeit simple rooms that provide the basics of places to sleep and shower. Usually budget hotels are designed for travelers looking to maximize their funds and minimize expenses.
  • Business hotels offer a high standard by providing rooms equipped with what business travelers would consider necessities. Usually found in business-class hotel rooms are high speed Internet connections, alarm clocks, comfortable beds, irons and ironing boards, coffee makers, complimentary newspaper delivery and hairdryers.
  • The facility of a business hotel would also offer an in-house restaurant, bar, exercise room and shuttle service to nearby airports. Limit concierge assistance is often included as well as room service, laundry and dry cleaning and wake-up calls.
  • Luxury hotels are known for their lavish decor and extraordinary service. With superior amenities, accommodations at luxury hotels are designed to thoroughly pamper and impress guests. According to a Business Week Online article, those in the luxury market are getting harder to please stating that luxury goods and service providers can't afford to blunder with the level of service and customer experience they provide. For this reason, many luxury hotels go far beyond the norm by providing a lifestyle experience equal to or better than what guests have become accustomed to at home.
  • Luxury hotels frequently offer full-service day spas, five-star restaurants staffed by world-class chefs, ballrooms, lavish pools, golf packages and guest services that are unsurpassed by any other class of hotel. In addition, luxury rooms generally include those amenities found in business class hotels plus in-room safes, goose down comforters and pillows, marble showers and tubs, larger rooms, separate sitting or living area and fog-free bathroom mirrors.

  Some of the main features of the Indian hotel industry include the following:

  The industry is more dependent on metropolitan cities as they account for 75% to 80% of the revenues, with Delhi and Mumbai being on top. 

  The average room rate (ARR) and occupancy rate (OC) are the two most critical factors that determine profitability. ARR depends on location, brand image, star rating, quality of facilities and services offered. The occupancy rate depends on other seasonal factors. 

  India is an ideal destination for tourists. Approximately 4.4 million tourists visit India every year. Thus the growth prospects are very high. 

  In the hotel sector, a number of multinationals have strengthened their presence. Players like Four Seasons are also likely to enter the Indian market in the near future. Moreover, Indian hotel chains are also expanding internationally. A combination of all these factors could result in a strong emergence of budget hotels, which could potentially lower the cost of travel and related costs. 

'Hotel Industry in India' is eroding its competitiveness as a cost effective destination. However, the rating on the 'Indian Hotels' is bullish. 'India Hotel Industry' is adding about 60,000 quality rooms, currently in different stages of planning and development and should be ready by 2012. MNC Hotel Industry giants are flocking India and forging Joint Ventures to earn their share of pie in the race. Government has approved 300 hotel projects, nearly half of which are in the luxury range. Sources said, the manpower requirements of the hotel industry will increase from 10 million in 2008 to 45 million by 2012.

With the USD 23 billion software services sector pushing the Indian economy skywards, more and more IT professionals are flocking to Indian metro cities. 'Hotel Industry in India' is set to grow at 15% a year. Already, more than 50 international budget hotel chains are moving into India to stake their turf. Therefore, with opportunities galore the future 'Scenario of Indian Hotel Industry' looks rosy.

While the potential of hotel industry is great, there are several constraints for the industry to grow. High cost of land in the country often discourages an investor to put in money in construction of new hotels. Construction of hotels is highly capital intensive and it is estimated that to construct a single five-star room it costs around Rs 1.25 crore. As a result there is no incentive to construct new hotel properties and there is a mismatch between demand and supply leading to higher occupancy rates and increasing prices. In fact, average rate of hotel rooms in five-stars has gone up from Rs 4,000 five years ago to Rs 16,000 now. Though this rate can be affordable for business travellers, it is very difficult for leisure travellers to pay such exorbitant rates.

Across the country there is no rationalisation of taxes as states charge different rates. Secondly, multiplicity of taxes like value added tax and service tax further compound the problem. Tax holidays are available only to hotels at heritage sites and so this measure is restrictive for the growth of the hotel industry.

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