ANALYSIS OF OPERATING ENVIRONMENT

AND

COMPETITION

Submitted By:

Ashish Jain (71059)

Submitted to: Prof. Freda J Swaminathan Gaurav Singh (71064)

Nishith Kejriwal (71078)

Saurabh Jain (71089)

Sumit Mathur (71096)

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 Introduction of the Industry

A hotel is an establishment that provides paid lodging usually on a short-term basis. Hotels
often provide a number of additional guest services such as a restaurant, a swimming pool or
childcare. Some hotels have conference services and meeting rooms and encourage groups to
hold conventions and meetings at their location. We are concentrating on the leader Indian
Hotel industry ie. The Taj Group.

The Taj Group

For more than 100 years, The Taj Group has acquainted guests with the living heritage of
India - and a legendary experience in hospitality. It began on December 16, 1903, when
Jamshetji Nusserwanji Tata opened Taj’s first hotel, the Taj Mahal Palace & Tower in
Mumbai. This grand hotel epitomized a philosophy that still holds true today: provide
impeccable service and unparalleled facilities so every stay is a memorable one.

A part of the Tata Group of companies www.tata.com, India's premier business house, Taj
Hotels Resorts and Palaces comprises 57 hotels in 40 locations across India with an
additional 18 international hotels in the Maldives, Mauritius, Malaysia, Australia, UK, USA,
Bhutan, Sri Lanka, Africa, and the Middle East. Over the years, Taj has won international
acclaim for its quality hotels and its excellence in dining, business facilities, interiors, and
world-class, personalized service.In India, Taj is recognized as the premier hospitality
provider, spanning the length and breadth of the country, and gracing important industrial
towns and cities, beautiful beaches, historical and pilgrim centres, and wildlife destinations.

An innovator in dining, Taj was the first to introduce Sichuan, Thai, Italian, Mexican, and
Californian cuisine into the country. In 1972, it was the first to open a 24-hour coffee shop in
India at Taj Mahal Palace & Tower, Mumbai. Today, each restaurant is reflective of that
tradition, setting benchmarks for an outstanding culinary experience.

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 Analysis of Operating Environment

In order to analyze the operating environment, successful companies recognize and respond
profitably to unmet needs and trends. We are analysing the operating environment and
competition for the service “HOTEL”.

a) Elements of macro-environment from a marketer’s perspective (of a leader “Tha Taj

Group”)

Suppliers

Macr Market Intermediaries

Public oEnv
iron
ment

Competitors Customers

A marketer must pay attention to the interaction of these environmental forces. Target
consumers of “Taj Hotel” are Business Class, Foreign tourists and High segment families.

Demographic Environment: Population, population-age mix and literacy levels of

population come under this category. India is a young nation with its median
population being 25 years. The majority of the young IT professionals spend their
leisure time by visiting exclusive hotels and resorts. This generates considerable
amount of revenue for the hotels, The Taj being one of them.

Socio-cultural Environment: India is a complex nation of cultures and sub-cultures.

The Taj group gives a regional touch in the area of its operation by providing regional
theme including the hotel environment, costumes of waiters, food etc. Because of the
cultural diversity and regional differences The Taj Group continuously conducts
research on consumer behavior.

Economic Environment: India’s economy has been showing vibrancy and growth
from 1991 ever since the government initiated programs to ease government controls
on industry and commerce. Globalisation, like most important matters, began during

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 this period. Luxury hotels in India constitute over 70 per cent of the company’s
profits and attract international guests, the focus is increasingly on revving up the
product and the service.

Political and legal Environment: This environment deals with the increase in business
legislation and the growth of special interest group. Taj pays high tax to the
government. As per the rule a certain percentage of total hotel premises is devoted to
greenery. Protection of consumer’s interest is the first priority of the hotel.

Natural Environment: The deterioration of the natural environment is a major global

concern. Taj spa at Fort Aguara beach resort and Taj holiday village offers guests a
space to de-stress and relax. All treatments have been designed to guide guests in
their internal and external journey towards a balance of the physical and meta-
physical being. Taj hotel and resort palaces has entered into a joint venture with
Conservation Corporation Africa (CC Africa) and Cigen Corporation, part of the
Chaudhary Group, to provide wildlife enthusiast, circuit tourists and high-end
domestic travelers with fascinating ‘Wildlife Experiences’ within India, with an
ecologically sustainable model.

Technology Environment: The hotel guest of the future will be far savvier and
discerning. With the world at his feet and a world of information at his fingertips - he
will choose to stay at a hotel chain that remembers his preferences and delivers an
inimitable experience every time, anywhere in the world. This means that the
challenge for hotels to sustain connections with guests will only increase. The Taj
group is trying to address this through their guest tracking system, which helps them
to follow their guests' needs over a lifetime.They believe that personalisation and
customisation of each guest's needs, their likes and dislikes, is something that Taj has
to constantly focus on.

Government policies: The Taj is of the view that the Government's imposition of
different taxes and irrational treatment of low star hotels are of great concern. They
feel that the Government should come out with a strong suggestion and open agenda
that should be something that the hotelier can rely upon. The high rocketing price of

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 taxations has unnecessarily caused/created great worry to the tourists and travelers,
which made them ultimately opt for other destinations. The government should try to
nationalize and make its taxation norms more convenient. The Taj believes that the
present auctioning of hotel sites at an unreasonable price by the Delhi Development
Authority (DDA) has also created a lot of hurdles, in which there is no justification of
higher prices.

b) Opportunities for Taj Group:

• Market Demand:

The year 2006-2007 saw a continuation of growth momentum experienced by the hotel
industry in 2005-2006. Most cities saw occupancy levels improve over the previous year and,
consecutively for two years, both occupancy and average room rates have improved.
According to HISCA, the growth rates for the important 19 hotel markets have been above
10% and are tipped to touch 14% this fiscal year.

The stimulus for the ever increasing demand for the more number of hotel rooms is the
growth in the economy and the spurt in the tourism. More and more tourists are coming to
India and this has resulted in huge business for the hotels. The Taj Group of Hotels is also
cashing on this trend and is opening its hotels and resorts in different cities of the country and
also outside the country.

• Consumer:

The hotel industry has a very wide spectrum of consumers which has led to an exponential
growth in the hotel industry. The clientele base of the Taj hotels can be broadly divided into
the following categories:

o Foreign tourists

o Corporate World

o Upper Middle Class Families

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These consumer segments constitute the core business of the Taj Group of hotels. India has
emerged as the new hottest tourist destination and with more and more tourists coming to the
country; this has resulted in tremendous growth for the Taj group of Hotels. Also with the
high economic development of the country, people are willing to spend more money. The I.T
boom has resulted in the economic surge of the middle class, as a result more and more
people are spending on leisure activities. This has also generated huge revenues for the Taj
Group of Hotels. Also the corporate world is regularly organizing international conferences
which are organised in hotels like the Taj. This also adds the growth of the Taj hotel chain.

• Industry:

The growth of the Taj group of Hotels can be further catapulted through mergers and
acquisitions. Being the industry leader Taj can acquire other hotels which can increase its
market share in the industry. Also Taj is expanding its market by opening its hotel outside the
country. It has already established its chain in America and Britain and is venturing into other
countries as well.

• Supplier Related Factors:

The Taj group of Hotels has also made extensive changes to improve its supply chain. The
various commodities which are required by the hotel are as following:

o Apparels and clothing

o Furniture and other accessories

o Automobiles

o Raw food materials

The Taj group of hotels have outsourced these activities to other firms under strict contracts
of superior services to the customer. All these items are crucial for the growth of the hotel
industry. The Taj group has to fulfil its superior quality standards and therefore take care of
all these basic needs of the hotel.

c) Elements of the microenvironment:

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 Employee

Elements
of Micro
Consumer Environm Competitors
ent

Distributers Suppliers

d) Inferences of the environment:

• Competitors: Welcom Heritage Group, ITC Welcom Group, Oberoi Hotels &
Resorts, Sarovar Park Plaza Group, Trident Group, Mansingh Group, Jaypee Group,
HRH Group of Hotels are the main Indian players that compete Taj Group. Due to
rise in tourism, emergence of new tourist destinations, and technological upgradations
with the emergence of new breed of tech-savvy travelers make it imperative for many
global ventures to come to Indian Market like Dubai Ventures, Blackstone,
Berggruen Hotels, Emaar MGF-Whitbread JV etc. Marriott and Hilton are
aggressively looking for a share of the action in India.

• Suppliers: MRM Export provides a wide range of Bed Sheets, Curtains, Cushion &
Cushion Covers. Prakash & Company deals in quality food products such as sweet
corn kernal, baby corn, coconut milk & cream, instant cup noodles, Thai sauce,
canned fruit & juices, curry paste, etc. Business Pages India Provides all India guide
services by directory of exporters, importers and service providers. Calif Engineering
Pvt. Ltd.

• Customers: Business Class Corporates, Foreign Tourists, Upper Middle class

Families, etc. are the main consumers of taj Groups.

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 • Distributors: Pegasus Solutions, Inc. has a service agreement with Taj Hotels
Resorts and Palaces. Dallas-based Pegasus Solutions is a global leader in providing
technology and services to hotels and travel distributors. Tulleeho is India's only
marketing consultancy and services firm for the alcoholic beverages industry and has
a service contract with the Taj group of Hotels. They also have partnerships with
NGOs like Katha Khazaana and Akshay Pratishthan which is meant to improve the
baking and catering skills of women.

• Employee: The Taj Group had always believed that their employees were their
greatest assets and the very reason for the survival of their business. In 2000, to show
its commitment to and belief in employees, the Taj Group developed the 'Taj People
Philosophy' (TPP), which covered all the people practices of the group. TPP
considered every aspect of employees' organizational career planning, right from their
induction into the company till their superannuation.

Potter’s Five Forces model for ‘Taj Group’

Potential Entrants:

Blackstone,Berggruen Hotels,Dubai Ventures, Leela

Ventures, etc.

Suppliers: Industry Competitors: Buyers:

Prakash & Company, Allwar Enterpises, Rashy Oberoi Group, ITC Group, Marriot & Hilton, Hyatt Business Class Corporates, Foreign Tourists,
Buying Services, Domotex International, etc. Group,Heritage Group,Le Meridian, etc. Upper Middle class Families, etc.

Substitute

Cruise Tourism, Tour Organizers, Royal & luxury Trains,

etc.

e) Prediction on the future trends:

The hotel industry very much depends on the country’s hospitality sector i.e. travel and
tourism industry. Hospitality Sector is expected to grow at the rate of 8% between 2007 and
2016. Many international hotels including Sheraton, Hyatt, Radisson, Meridien, Four

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Seasons Regent, and Marriott International are already established in the Indian markets and
are still expanding. The Readers Travels Awards 2006' has placed India at number four
among the world’s must see countries, up from number nine in 2003.

With 4.4 millions tourists' arrival in the country last year, the industry has been seeing
unprecedented growth with an average of 15 per cent every year. This figure is expected to
grow further in the coming years. The Capital has also witnessed 32.1 per cent growth in
tourists' arrival in the last year. The cities of Mumbai, Chennai and Kolkata have shown a
growth of 25.0%, 10.0% and 2.9% respectively.

However it’s also predicted that the forthcoming Commonwealth Games in 2010 will create
a demand of 25000-30000 rooms in NCR against the present capacity of only 15000 rooms.

Between now and the Games, new developments in the National Capital Region (NCR -
including Delhi and its suburban conurbations of Gurgaon and Noida) are set to include a
320-room Novotel, a 200-room Taj Hotel, three Starwood (the 300-room Westin New Delhi,
the 97-room Westin Sohna-Gurgaon and the 220-room Sheraton New Delhi) and a 319-room
Leela-Kempinski joint venture. The public sector is also playing a role with the state
governments of Delhi, Haryana and Uttar Pradesh having ear-marked 75 potential NCR sites
for hotel development.

Thus India’s economy needs to continue its boom and the government continue to invest in
the country’s infrastructure. With a booming IT sector, India is ideally placed to thrive in the
21st century. However justification of such high average room rates can be found only in
world-class facilities and back-up services for the business traveller. If the logistics of travel
itself are troublesome, business people may be dissuaded from travelling to India. As India’s
cities attract increasing numbers of visitors, the surrounding services need to be improved.

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f) Changes in Marketing Environment and Impact on the industry: With the increasing
competition and globalization, it is likely that the market environment will be undergoing a
drastic change in the near future.

Likely changes:

1. Multi-cuisine restaurants in single hotels

2. Wireless Internet connectivity
3. Real time downloading of international newspapers in its original format
4. Conference rooms equipped with electronic safes, mini-bars, direct dial telephones
and additional outlets for fax/modem.
5. Golf-course inside the hotels
6. All modern amenities like fax, photocopier, multimedia workstation with internet and
secretarial services
7. Shopping malls
8. Intensive brand creation campaigns to increase market share
9. Spa with elements of yoga, meditation and ayurveda to relax and rejuvenate guests

Impact:

1. Increasing competition between hotels of the same cateogary

2. Low star hotels won’t be able to withstand the increasing competition

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 3. Foreign hotels coming in to India: Big international names with more financial
clout and global reach like the Four Seasons, Marriott and Hilton are aggressively
looking for a share of the action in India.
4. Attrition: The growing travel and tourism industry, foreign hotels coming in to India
and the demand from IT companies will put a tremendous pressure on staff retention.

Competitive Behavior: Competitor Map for ‘Taj Group’

Cruise Tourism

Le Meridian

Business
Royal &
Tour Organizers Luxury
Trains eg.
Marriot & Luxury Price ITC Group
Palace on
Hilton
Wheels
Taj Group
Culture
Touris
m

Oberoi Group
Heritage
Group

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 Conclusion

The Taj Group of Hotels is the leader in the hospitality industry with a market share of 40%
and has been providing excellent services to its consumers. Along with this it has also
fulfilled its social responsibilities which are its core values. This mix of capital and social
culture has catapulted the Taj Group of Hotels to become the leader in the industry. The Taj
group will continue to work on its global expansion strategy, which may see it acquiring
properties in the gateway cities of Europe, North America, and China.

Executive Summery

Observation, Inferences and Conceptualisation

India's hospitality sector has grown in an unprecedented manner during the last few years if
not decades, and has become one of the fastest and leading global players. This has been the
result of a strong performance of the corporate sector in the country and largely a sense of
sanguinity with regard to economy.

India is today one of the world's fastest growing hotel markets. It has taken us approximately
11 years to reach or exceed the previous occupancy highs seen in the mid nineties. There is a
bright future for the hotel industry in India because of the following factors:

• Improving infrastructure and Growing IT sector

• Booming Economy

• Visa on arrival for the foreign traveler

• Modernization of airports and construction of international airports in major towns

• Encouragement of public private partnership

• Encouraging associations of trade by involving private sector in decision making

The inference is growth of hotel industry is directly dependent on the economic growth of the
country. So, India’s booming economy is continuously contributing to the Hotel Industry.

References: http://www.tata.com/indian_hotels/

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 http://www.india-chainhotels.com/

http://www.travelmasti.com/tajhotels/taj_index.htm

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