Market shares

The Taj Hotel's market

positioning and competitive
Market Efficiency
Marketing position refers to
the location of a brand
which is relative to its
competitors in the
customer's mind. A hotel's
positioning is based on the
special features or attributes
like food and beverage
service and particular
comforts like airport
convenience. They have
positioned themselves as a
high end luxury segment. It
has made its consumers to
feel the taste of the royalty
in the modern world. This
made the group different
from their world wide
competitors Hilton, Oberoi
and Marriott groups. They
have scattered worldwide in
the countries like Australia,
Bhutan, Malaysia, Maldives,
South Africa, England, Sri
Lanka and US.
Strategy
A hotel's business strategy
has two basic differentiation,
they are market emphasis or
a cost emphasis. In this
situation hotel follows the
hybrid strategy which blends
the strategy of market
emphasis and cost
emphasis. A critical issue
facing the market emphasis
is to differentiate themselves
from the competitor. The
business class segment is
comparatively generate
profit high than the other
segment in the hotel
business. This specific is
highly price sensitive when
compared to the luxury and
leisure segment. By utilising
the strategy of exploring the
business class they have
placed their Taj Presidency
hotels in both the metro
cities and also in small
towns.
The Taj marked out the three
separate entities like Taj
group, business, leisure and
luxury. The concept of these
sub brands have come into
existence in early 1990's
where the management
operation was completely
different. The territory is
scattered geographically
according to the three
divisions.
Segmentation
Taj group has classified their
service into three different
categories and they are
Business, Leisure and luxury.
They have categorised their
business and created their
sub-brands in the early and
in themed of nineties, the
period was 1990 - 2000. Taj
group have showcased them
as a luxury hotel among their
competitors. They are the
pioneer of this business and
continuously achieving the
standard and increased their
benchmark. They are
targeting their own audience
who has been their
customer for a long time.
The Oberoi Hotel's market
positioning and competitive
Market Efficiency
Marketing Strategy
• Their marketing strategy's
objective is to communicate
the unique set of services
that they offer to discerning
hotel guests.
• They attempt to direct the
focus of their guests to the
issues of quality and value
for the money a supposed to
simply the bottom line costs
associated with their stay.
• Their marketing strategy
will allow us to communicate
about brand values, develop
close working relationships
with their customers and
suppliers and to identify the
needs of their guests in an
effective manner.
• Continued differentiation
and growth are two goals
they have set for them.
Growth will take place by
targeting new areas of
business within both local
and national communities.
 
Value Proposition
 
• Oberoi Hotels offers the
best, most personalized
service for the corporate
traveller.
 
• They include business
essentials in every room,
such as a nice desk, internet
connection,wireless access,
and provide easy to access
meeting rooms with all
audio-visual and technology
needs as they will as
catering for longer meetings.
 
Positioning
• The Oberoi Hotels is
positioned as a five star
plus, business traveler's
hotel, strategically located
and offering a high level of
personal service.
 
• Their focus is on offering
their guests added value and
differentiating ourselves in
their levels of personal
service. They provide a
quality hotel experience
where guests are valued,
respected and their
business is truly appreciated
 
WHAT ARE THE KEYS TO
PROFITABILITY IN THE
INDUSTRY?
 
What are the main
competitive forces and
factors within those forces
which determine potential
profitability in the industry?
The Hotel Industry in most
metropolitan cities in the
world is characterized by
high capital costs and a high
proportion of fixed costs to
total costs. The high capital
costs require that from the
outset the project must be
managed to achieve the
most cost-effective use of
resources applied to
construction, furnishing and
equipment, pre-operational
expenses and finance.
Hotels also been built to an
optimum size, approximately
500 rooms, in order to
benefit from the economies
of scale. Hotels must also
aim to fill their rooms as
profitably as possible, both
through room occupancy
levels and the relative tariffs
applied.
 
WHAT IS A HOTELʼS
COMPETITIVE ADVANTAGE
AND COMPETITIVE
POSITION?
 
Competition in the Hotel
Industry anywhere in the
world is intense within
strategic groups subject to
the level of industry growth.
Industry growth in major
cities, capitals or financial
centers is high at present
partly due to the travelers
from tourist groups,
business and independent
leisure travelers, resulting in
low levels of jockeying.
Competitive position
involves Cost and
Differentiation. There are no
switching costs, which could
increase potential jockeying.
Product differentiation can
be high ranging from budget
hotels to deluxe hotels.
Hotel operators wish to
exploit to establish customer
loyalty, image
and differentiation. Fixed
costs are high in the industry
and consequently high room
occupancy rates are critical.
Competition would,
therefore, be very fierce in a
situation of oversupply of
hotel rooms. Capacity is
augmented in large
increments in recent years
due to some major
international events such as
Olympia Games, Expo or
World Cup.
 
Competitorsʼ reaction is
expected to be fragmented,
haphazard and insignificant,
especially as the common
market is forecast to be one
of the more buoyant
segments among total
arrivals in the coming future.
The key issue remains that
whether there are any
further sites in the
immediate vicinity of any big
cities which may be
purchased by other business
groups commanding similar
capital resources to any
hotel operator which will
pose significant potential
future competition.
 
WHAT ARE OTHER MAJOR
INCOME STREAMS FOR
HOTEL OPERATORS (key
success factors)?
 
Income from any hotel
project can be safeguarded
by six major income streams
apart from room sales:
 
(1)Food and Beverage is one
of the important income
sources. A large restaurant
serving Western or local
food or a coffee shop
serving buffet must be
planned for any hotel
project. These will attract
considerate non-hotel
resident business including
banquet facilities. By world
standards F&B income is a
very large component of the
total hotel income in the
Hotel Industry as a whole.
(2) Exhibitions and
Conventions can provide
steady rental and service
income for any hotel.
 
(3) Entertainment such as
Cinemas, Concerts and
Business Function Room
Facilities are likely to receive
heavy patronage.
(4) Commercial and
Shopping Complex must be
planned. The shopping
space with retail shops
selling luxury merchandises,
watches and jewelry can
provide recurrent rental
income.
(5) Neon-Signage can be
planned which will further
diversity income.
 
(6) Car-parking Service can
be another major income
source.
 
 
 
 
 
 
 
 
WHAT IS THE HOTELʼS
BUSINESS STRATEGY?
 
Porter (1980) indicated that
intensity of rivalry is
dependent on number and
size of direct competitors,
rate of growth of the
industry, product
differentiation and switching
costs, fixed and running
costs, capacity
augmentation, exit barriers
and diversity. If jockeying for
position in a higher strategic
group became more intense
in a position of oversupply,
hotels might be diverted to
another segment of the
market, forcing hotels to cut
margins unless it has
established sufficient
differentiation to maintain its
own position within its
strategic group.
 
The Hotel Industry in any
major cities in the world
contains very high exit
barriers. Once in, it is very
difficult to get out. There is
considerable diversity in the
strategy and aims of
companies owning hotels.
For example, an airline
entering the hotel industry
may see its hotel operations
as ancillary to its core
business of selling air travel.
Similarly, a property
developer engaged primarily
in property development and
investment, may have a
different objective and
strategy from a company
whose core business is hotel
ownership/management.
 
The corporate structure of
the company holding the
hotel can be designed from
the tax planning angle with a
view to being able to sell this
development at much
reduced rates of stamp duty
and legal expenses. The
company can keep the
options open either to sell
before completion or to keep
the hotel project as a long
term investment.
 
Professional trade bodies
ABOUT FHRAI ( Federation
of hotel and Restaurant
Association of India):
FHRAI is the voice of the
Hospitality Industry and
provides an interface
between the Hospitality
Industry, Political
Leadership, Academics,
International Associations
and other Stake Holders.
FHRAI is committed to the
progress of the Industry
through the various
activities like education and
training, research and
publication, Annual
Convention to promote
interaction with Government
officials, political leaders and
stake holders of the
Industry.
FHRAI is managed by the
Executive Committee
headed by the elected
President having a tenure of
one year. The Executive
Committee comprises of
members from the four
Regional Associations. The
day-to-day business is
conducted by the
Secretariat headed by the
Secretary General.
Benefits:
Discount Cards
Our hotel and restaurant
members receive two
membership discount cards
entitling them to 30%
discount on rooms and F&B
in all member
establishments.
Magazine
Our monthly FHRAI
Magazine is a highly
acclaimed premium
publication for the
hospitality industry. It
provides vital updates on
legal matters and
government policies,
besides featuring insightful
articles on contemporary
trends in the Indian and
global hospitality sector.
Legal Relief
We continuously monitor
various legal and regulatory
developments and obtain
timely and effective
redressal for our members.
Representation & Lobbying
As the authentic voice of the
hospitality industry in India,
FHRAI actively engages with
the Central and State
governments on a multitude
of issues and robustly
represents the views and
collective concerns of our
members.
Website
The FHRAI website
www.fhrai.com, is a
comprehensive portal which
gives our members access
to details of the member
establishments, latest
industry news, event
updates, electronic copies
of the current and back-
issues of the FHRAI
Magazine and other
indispensable resources.
Laws governing Hotel
Industry
The laws that govern the
Hotel Industry can be
classified into the following
broad categories.
Establishment and
Commissioning of Hotels
The first head of laws that
govern the hotel industry
include the laws regarding
commissioning and
construction of hotels,
restaurants, guest houses
and other establishments of
such kind. These laws also
include laws such as Foreign
Exchange Management Act,
Industrial Licensing Policies,
and land laws, etc. Hotel
insurance policies,
especially the customized
ones can fulfil the growing
needs of the hotel industry.
It can cover all its
establishments ranging from
spa to guest houses and
apartments, bed and
breakfasts, etc. Other
insurance policies such as
the standard insurance
policy would cover risks and
damages arising from
accidents, fire, natural
calamity, etc.
 
The operation, management,
and maintenance of Hotel
Industry
The second head of laws
that govern the working of
hotel industry is related to
matters such as
management, maintenance
and the operational activities
of hotels. Such laws include
insurance laws, laws
regarding safety and
security of workers, food
and hygiene standards,
obtaining licenses, Food and
Drug Administration Act,
Shops and Establishment
Act, etc. For example, Acts
such as the Food
Adulteration Act would
prohibit the sale of
substandard food items
thereby protecting the
customers from the potential
harm caused by poisonous
food and protecting their
interest by eliminating the
fraudulent practices. The
Food Safety and Standards
Act would set up criteria for
manufacture, storage,
distribution and sale and
trade of food substances so
that they remain fit for
human consumption for a
considerable period. The
Legal Metrology Act would
regulate the use of
standards of weights and
measures. The Copyright
Act would protect the rights
relating to expression in the
form of literature, drama,
music, art or architectural
works. In fact, hotels are
required to take such
copyright licenses before
they organize any event
such as plays or musical
shows, etc.
Taxation, Employment, and
Contracts in Hotel Industry
The third set of laws that
govern the working of a
hotel are related to the
contracts that it enters into
with other enterprises or
employment contracts, for
example, the Apprentice Act,
Employees State Insurance
Act, etc. These laws also
include the manner in which
such entities are taxed.
Taxes may include income
tax, service tax, expenditure
tax, excise duty, luxury tax,
entertainment tax, value
added tax, etc. Legislations
such as the Shops and
Establishment Act or the
Employees State Insurance
Act would aim at regulating
the relationship between
employers and employees in
the hotel. The former would
lay certain statutory
obligations on the employers
in matters related to wages,
work hours, holidays, paid
leaves, provision for
payment for overtime work,
etc. The latter is a social
security scheme that would
mandate the employers to
protect the interest of the
workers in times of
contingencies such as
sickness, maternity leaves,
physical impairment or
injuries occurring from the
workplace, subsequent
medical care. The Provident
Fund Act mandates the
creation of provident fund
schemes for the employees.
The Apprentices Act shall
govern the working of
apprentices in the Hotel
Industry.
Other laws governing Hotel
Industry
Other laws that may govern
the working of hotels may
include local law norms or
other local land norms or
guidelines issued by the
tourism industry such as
approval of hotels at project
stage and classification &
reclassification of hotels,
guidelines for classification
of heritage hotels, Time
Share Resorts (TSR), Stand
Alone Restaurants,
guidelines for apartment
hotels, guidelines for
approval of guest houses,
Hospitality Development and
Promotion Board,
implementing a transparent
system for the effective
monitoring of hotel projects,
ensuring timely accrual of
approvals / clearances /
NOCs by the multiple
agencies and facilitating the
implementation of hotel
projects, expeditious
clearances, etc. will enable
completion of hotel projects
in time leading to
enhancement of room
availability for the tourists.
Hotel & Restaurant Approval
& Classification Committee
The Hotel and Restaurant
Approval & Classification
Committee inspects and
assesses the hotels based
on the kind of facilities that
they provide. The two
categories of hotels that
they inspect are first, hotel
projects that are approved at
the implementation stage
and secondly, the
operational hotels which are
classified into various
categories. About the
former, the Ministry of
Tourism after certain
documentation provides
project approvals that shall
remain valid for five years.
Once the hotel reaches its
operative stage, the
approval ceases to exist
within three months. The
respective hotel must apply
for the classification during
these three months. Once
the classification is
obtained, it becomes valid
for 5 years.
FINANCIAL RATIOS
Current Ratio:
 
The current ratio is a
liquidity ratio that measures
whether or not a firm has
enough resources to meet
its short-term obligations. It
compares a firm's current
assets to its current
liabilities, and is expressed
as follows:
 
Current Ratio= Current
Asset/Current Liabilities
 
The Current Ratio of Taj
Hotel is 0.75 while the
Current Ratio of Oberoi
Hotel is 6.81. This means
that Oberoi Hotel has
enough short term
resources to meet its short
term obligations.
 
Earnings per Share (EPS):
 
Earnings per share (EPS) are
the portion of a company's
profit allocated to each
outstanding share of
common stock. Earnings per
share serve as an indicator
of a company's profitability.
EPS is calculated as:
EPS = (Net Income -
Dividends on Preferred
Stock) / Average
Outstanding Shares
The EPS of Taj Hotel is 42.18
and the EPS of Oberoi Hotel
is 26.23, which means that
Oberoi Hotel is more
profitable than Taj Hotel.
This reveals that Oberoi
Hotel is the most efficient
company in terms of
generating Earnings Per
Share.
Operating Profit Margin:
The operating profit margin
ratio indicates how much
profit a company makes
after paying for variable
costs of production such as
wages, raw materials, etc. It
is also expressed as a
percentage of sales and
then shows the efficiency of
a company controlling the
costs and expenses
associated with business
operations. Furthermore, it
is the return achieved from
standard operations and
does not include unique or
one time transactions.
Operating profit margin =
Operating income ÷ Total
revenue
The Operating Profit Margin
of Taj Hotel is 21.89% and
that of Oberoi Hotel is
51.86%. Oberoi Hotel is
highly successful in
controlling the expenses by
registering the OPM of
51.86%. Hence, Oberoi Hotel
is the most efficient in
controlling expenses when
compared to the other
company.
Debt Equity Ratio:
Debt/Equity (D/E) Ratio,
calculated by dividing a
companyʼs total liabilities by
its stockholders' equity, is a
debt ratio used to measure a
company's financial
leverage. The D/E ratio
indicates how much debt a
company is using to finance
its assets relative to the
value of shareholdersʼ
equity. The formula for
calculating D/E ratios is:
Debt/Equity Ratio = Total
Liabilities / Shareholders'
Equity
The Debt Equity Ratio of Taj
Hotel is 0.63 while that of
Oberoi Hotel is 0.02 which
indicates that Taj Hotel has
more debt comparatively
Oberoi Hotel.
Return On Net Worth:
Return on Net Worth is a
ratio developed from the
perspective of the investor
and not the company. By
looking at this, the investor
sees if entire net profit was
passed on to him, how much
return he would be getting.
It explains the efficiency of
the shareholdersʼ capital to
generate profit.
RONW = Net Income /
Shareholdersʼ Equity
The RONW for Taj Hotel is
2.86% and that of Oberoi
Hotel is 7.80%. Oberoi Hotel
has a reasonable yield
compared to Taj Hotel.
Fixed Assets Turnover Ratio:
The fixed-asset turnover
ratio is, in general, used by
analysts to measure
operating performance. It is
a ratio of net sales to fixed
assets. This ratio specifically
measures how able a
company is to generate net
sales from fixed-asset
investments, namely
property, plant and
equipment (PP&E), net of
depreciation. In a general
sense, a higher fixed-asset
turnover ratio indicates that
a company has more
effectively utilized
investment in fixed assets to
generate revenue.
The fixed-asset turnover
ratio is calculated as:
Fixed Assets Turnover Ratio
of Taj Hotel is 0.56 and that
of Oberoi Hotel is 3.39.
Hence, Oberoi Hotel is the
most efficient company in
managing their investments
in fixed assets.