HOTELS & RESTAURANTS EMPLOYEES COOPERATIVE

HOTEL PROJECT

1. INTRODUCTION:

The new millennium has seen the country open up its economy to
foreign investors leading to a large number of private players investing in
the country. With its buoyant economy, India is emerging from behind the
traditional stereotype of being a land of cows, magicians and poor, illiterate
people.

In a country as diverse and complex as India, it is not surprising to find that

people here reflect the rich glories of the past, the culture, traditions and
values relative to geographic locations and the numerous distinctive
manners, habits and food that will always remain truly Indian, according to
five thousand years of recorded history.

From the eternal snows of the Himalayas to the peninsula of the far South,
from the deserts of the West to the humid deltas of the East, from the dry
heat and cold of the Central Plateau to the cool forest foothills, Indian
lifestyles reflect the geography. The food, clothing and habits of Indian
differ in accordance to the place of origin.

The Colorful mosaic of Indian festivals and fairs - as diverse as the land, is
an eternal expression of the spirit of celebration. Observed with
enthusiasm and gaiety, festivals are like gems ornamenting the crown of
Indian Culture. They are round the year vibrant interludes in the mundane
routine of life.

Indian cuisine boasts of an immense variety not restricted to only curry.

In Indian cuisine, food is categorized into six tastes - sweet, sour, salty,
spicy, bitter and astringent. A well-balanced Indian meal contains all six
tastes. This principle explains the use of numerous spice combinations
and depth of flavor in Indian recipes.
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Tourism in India has seen development due to the combined effort of

the public and private sectors. The Department of Tourism, Government of
India with its Incredible India campaign has done a commendable job in
promoting the country. It has even been ranked number one destination in
the world according to the Annual Reader's Awards 2007 held by Conde
Nast Traveller, UK. Recent years have seen a large number of international
hospitality brands setting up hotels in the country. Connectivity has also
improved drastically with most international airlines flying to various Indian
cities.

With growing disposable incomes and consumer aspirations

coupled with the enormous tourism potential in India, demand for hotels,
holiday homes & resorts and thus leisure real estate is booming.
According to the World Travel and Tourism Council, India is expected to be
the third fastest growing country in the world over the next ten years, as far
as travel and tourism demand is concerned. That growth potential,
coupled with the 19.8 per cent increase in the number of Indians living in
India with financial assets of more than US$ one million (compared to the
6.5 per cent growth worldwide) are important factors in promoting the
growth of leisure real estate in India.

In fact, Indian tourism is expected to grow at the rate of 20 – 25 per

cent per annum till 2017, posing a huge opportunity for wealth creation in
our country. 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 arrival of low cost airlines and the associated
price wars have given domestic tourists a host of options.
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In recent years government has taken several initiatives to boost
travel and tourism which have benefited hotel industry in India. These
include the abolishment of the inland air travel tax of 15%, reduction in
excise duty on aviation turbine fuel to 8% and removal of a number of
restrictions on outbound chartered flights, including those relating to
frequency and size of aircraft. The government's recent decision to treat
convention centres as part of core infrastructure, allowing the government
to provide critical funding for the large capital investment that may be
required has also fuelled the demand for hotel rooms.

Hotel industry in India currently has supply of 110,000 rooms and

there is a shortage of 150,000 rooms which evidently fueled room rates
across the country. 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, Indian hotel industry is adding about

60,000 quality rooms currently in different stages of planning and
development which should be ready by 2012. Hotel industry in India is also
set to get a fillip with Delhi hosting 2010 Commonwealth Games.
Government has approved 300 hotel projects, nearly half of which are in
the luxury range. The future scenario of Indian Hotel Industry looks
extremely rosy.

It is expected that the budget and mid-market hotel segment will

witness huge growth and expansion while the luxury segment will continue
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to perform extremely well over the next few years. (Source : I Love India –
economy of India dated 21.07.07)

2. THE INDIAN ECONOMY – AN OVERVIEW

Rapid growth and strong macro-economic fundamentals have

characterized developments in the Indian economy in the past financial
year. GDP is estimated to have grown at a robust 9.4% during 2006-07 as
against 9.0% in 2005-06. The only time the economy has grown faster was
in 1988-89. This acceleration in growth rates was led by industrial and
services sector activities, which exhibited double-digit growth. Increase in
tourist arrivals and visits, augmentation of telecommunication services,
escalated development in Information Technology (IT) & IT enabled
Services (IteS) and improvement in the financial services sector has kept
the Services sector buoyant in recent years.

The Services sector showed a healthy growth of 11.2% in 2006-07 as

compared to 9.8% in 2005-06 benefiting from the availability of skilled
labour. Trade, Hotels, Transport and communication continued to develop
at an accelerated pace recording a growth of 13.0% during 2006-07 as
against 10.4% in 2005-06.

Trends & Development in Tourism:-

The tourism industry in India despite being an important component of the

economy, contributed only 5.9% of the GDP in 2006-2007. According to
estimates of the World Travel Trade Council, Indian tourism demand will
grow at 8.8% from 2004-13 which would place India as the third-most
rapidly growing tourism market in the world after Montenegro and China. It
would further result in a growth of 7.1% in total travel and tourism GDP.
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The budget has proposed an outlay of approximately Rs.570 crores for
development of tourism infrastructure in 2007-08, up from Rs.423 crores
proposed in the corresponding period of 2006-07.

As India gets younger and richer, there will be sustained demand for short
duration travel at major gateway destinations and these markets will grow
exponentially in the next three to five years. With sustained economic
performance, India's per capita income will also continue to witness
growth. Moreover, higher disposable income rather than lower savings has
influenced the present-day consumption boom in India. As income,
induced spending is likely to sustain itself for a longer period and higher
disposable incomes are also expected to enhance the concept of traveling
for leisure thus providing the necessary impetus to destination travel
within integrated travel circuits. In most markets, insufficient room
availability and high rates create conditions that are not conducive for
large incentive based group travel.

The economy's buoyancy, initiatives to improve infrastructure, the boom in

aviation and real estate, easing of restrictions on foreign investment and
perhaps most importantly efforts to communicate the Brand India message
– will continue to fuel demand for hotels across star categories in the
majority of leisure markets. India's hotel industry is increasingly being
viewed as investment-worthy both within the country and outside
Recent developments within the industry, backed with a positive outlook
for the economy, have resulted in accelerated growth in demand for hotel
accommodation over the last two years. The continued demand – supply
imbalance has led to exponential rate increases resulting in inflated room
rates across key markets in the country, some of which currently rank
among the most expenses hotel markets in the world. Over the long-term,
inflated room rates are expected to have a severe negative effect on the
potential demand, especially for leisure destinations.
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Overall, the industry saw a 12 month growth of 30% in average rate (in
2006-07) as opposed to a growth of 23.7% the previous year. Occupancy
growth which had been 2.6% previous year, showed a marginal growth of
0.7% (in 2006-07). Average rates in 2006-07 witnessed another increase
across all market segments. This is partially attributable to the strong
demand. All-India occupancy touched a record 72% mark for the first time.
While the year-on-year demand growth from certain segments continued,
the overall supply addition has been marginal. Due to the widening gap,
hotels over the last 3 – 4 years have realigned their yield management and
pricing to increase penetration from high paying customers.

The indications are that when year round occupancies start touching the 70
– 75% mark, there is substantial un-accommodated demand in the market.
During this high demand period, many cities were completely sold out on a
number of nights, resulting in hotels selling a significant proportion of its
inventory on rack rates.

Hotel Supply

There has also always been considerable debate about the number of
rooms India actually has. Our estimate is that there are possibly 110,000
rooms currently operating in India. It is also felt that there would probably
be another 25000 to 30000 guest houses or corporate guesthouses taking
the total supply of transient guest rooms to approximately 200,000 units /
rooms. However, shocking and a number that we are confident about is the
low number of branded or quality room supply in the country; it stands at
below 40000. This overall number for India is actually lower than that for
many international cities around the globe. Therefore, when we look at the
approximate 102,000 rooms being developed or say we use a probability
factor of 58% across the country, the numbers of room being developed in
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India still remain extremely low and offer huge potential to investors and
operators across all segments. In most cities, this high growth can easily
attributed to the existing low base of quality hotel supply.

Future Trends

Clearly, operators have focused intensely on increasing rates, even if it has

been at the cost of lower occupancies. While this has been a good strategy
in the short term, in the near future the operators need to find the right
balance between trying to push rates vis-à-vis losing room nights.
Typically, the average rate movement follows the occupancy movement.
This has been the case historically and is a global trend as well. So if
occupancy goes up the rates follow. Conversely, if occupancies decline
the operators will be hard pressed to reduce tariffs.

F & B space and meeting space is expected to become even more

important as we move ahead, particularly for full service hotels. New
restaurant concepts are being created and today modern hotels have been
able to convert the pre function spaces into revenue generating areas.
Most conferences need these areas to host sponsor booths and or serve
food.

Technology is also going to become an important player in streamlining

operations and reducing the dependence on man power. Globally, in room
technology is becoming more sophisticated with interactive computers, TV
and music stations. This is to the customer’s benefit as many of these
services are being provided free to retain the guest.
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Market analysis :-

 Seasonality Trend : The Indian hotel industry reflects a clear

seasonality trend. For Example, in India, the tourism and hospitality
industry shows signs of an up trend in the months of November to
February due to higher tourist flows. The months of June to
September on the other hand, are months of low occupancies and
revenue, with fewer business or leisure visitors.

 Strong dependence on the services economy – The hotel industry is

highly dependent on services economy in terms of performance. Thus
in the years of the services economy boom, the hotels business has
grown well and has been relatively unaffected by the under
performance of the manufacturing sectors of the economy. India has a
long term competitive advantage in the services sector which
contributed close to 10.6% of India’s GDP in 2005-06 and is expected
to increase further. This trend is the positive signal to benefit the
hotel industry in the coming years

 Brand Impact: The hotel industry is characterized by strong brand

focus resulting in choices being made by the customer based on
factors beyond price – especially in the luxury segment where the
brand is a hallmark of product and service quality. Our company has
registered a name to reckon with in terms of service and the facilities
that are offered for the price. This has earned customer loyalty, which
will reap benefits from the existing customers who have been using
our facilities repeatedly.

 Instant perishability of the product: The industry belongs to the

service sector and thus the product (service) is instantly consumed
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and cannot be replenished. Thus one, needs to maximize utilization of
available capacity and reduce marginal costs over marginal revenues

 The major cost drivers in the industry are ;

 Food and beverage costs

 Employee Costs
 Power and Fuel expenses
 Administrative and other overhead costs
 Advertising and publicity expenses

 The hotel industry has its own set of entry barriers, which are :

 High real estate costs and lack of availability of land in prime

locations
 High cost of construction
 High break even levels for new hotels, due to high investment
costs
 Time taken in acquiring loyalty of customers/brand building
costs
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HOTELS & RESTAURANTS EMPLOYEES COOPERATIVE

1. VISION

To emerge as a leader in providing one-stop, integrated and multi-

facility Business Hotels, Suites, Convention Centers, Banquet Hall,
Restaurant.

2. MISSION

To make a positive difference to customers, employees, shareholders and

community by working together constantly improving satisfaction,
opportunity and value. To strive and exceed their expectations through
passion in what we do pursuing honesty and integrity in our actions with
high commitments to excellence, quality, efficiency, trust and inclusion
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3. Company Profile:

1. Name of the Unit HOTELS & RESTAURANTS EMPLOYEES

COOPERATIVE
Bidhannagar, Durgapur – 713212
a Regd.
2. Address Office
Bidhannagar, Durgapur – 713212
b Site

3. Constitution Cooperative Society

7. Business Activities Hotel cum Bar & Restaurant

4. Project Details:

Project Title: Resort and Convention Centre & Tourism development.

Project Location : In Bidhannagar, Durgapur – 713212

Project Components :

 Pre-function area of 750 sq.m.

 Banquet Hall for 125 delegates
 Indoor Exhibition Spaces aggregating to 1500 sq.
ft.
 Food & Beverages & Other Ancillary Facilities
 Open Exhibition Ground of 10000 Sq ft (Approx)

Resort with the following requirements

 31 No of Room & Lobby classifying 25 Double
Room & 06 Single Room
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 75 seating all day Restaurant and a lounge bar
 And a Banquet Hall .

Support Facilities and on-site infrastructure like internal road

network, parking areas, security, air conditioning, water supply and
rain-water harvesting, sewage treatment, solid waste management,
landscaping and other services required for the complex.

5. Technical Aspects:

Location details: 24 Bidhannagar, Durgapur – 713212.

Demographic Details: The area falls near 87°5’ Longitude & 23°88N
Latitude. The Climate of the area is tropical in nature. Winter is pleasant
with coldest months being December and January. The average minimum
temperature at winter is 7°C. Summer is very hot. May being the hottest
month with temperature rising up to 45°C with hot wind blowing at noon.

Sometime nor’westor blows in the afternoon in the month of April & May.
The average rain fall per year is in the tune of 1430.8mm with June and July
being the wettest months with on average monthly rain fall of 270-
280mm/month. The area being situated in the eastern part of the district the
average rainfall is better than that in western part of the district.

THE FUTURE

With such a proactive approach, the future looks pretty bright. The
tremendous change in the hospitality sector seen so far has been not just
in quantity (occupancy) but also quality. The demand in the premium
segment has also increased steadily. The city has reinforced its position as
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the country's favored conference destination and industrial zone. Cost
advantage has invited a host of small/medium scale Industries BPO & IT
companies to flourish here. Employment and spending power have
increased tremendously. This has a bearing on F&B spends by locals. The
future is promising.

Considering the above factors, Government of West Bengal has made a

serious attempt to bring about a drastic change in its policies with a
special reference to the Tourism Sector. The reason could be that the
Travel and Tourism industry is well on its way to becoming one of the most
powerful growth engines in the coming millennium and will generate
millions of job.

Acknowledging the vast potential and spin-off tourism has on other

industries, the Government of West Bengal is focusing on tourism for
generating greater employment and achieving higher economic growth.

The State Government has the vision of making West Bengal the
destination state of India, given its attractive diversity, natural endowments
and friendly population. West Bengal has a rich tourist potential, which is
yet to be exploited

West Bengal has great potential for tourism with its temple towns, Holistic
Resorts, monuments and other tourist attractions.

To encourage private investment in tourism and related industry, various

incentives and concessions are being offered. In keeping with our objective
and spirit, taxation has been attempted to be rationalized on the logic of
intelligent taxation to enable private sector to expand tourism. While
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acknowledging the primacy of the private sector, the state retains with
itself the responsibility of provision of public goods and for addressing
issues related to safety, quality and regulation.

DURGAPUR & NEARBY TOWNS AND DEMAND FOR ACCOMODATION

Durgapur - The Steel City of West Bengal, India

Durgapur the fastest emerging city of West Bengal, India is growing to

become one of the mega city of eastern India. Durgapur popularly known
as the Steel city of eastern India is varying its image and emerging also in
the fields of medical and education to become one of the multipurpose city
of India. Durgapur has a huge base of industries with two key steel plants
Durgapur Steel Plant and Alloy Steel Plant with their glowing township. City
Centre is the nucleus of Durgapur city's administration. Entertainment
centers richly known wide range of shopping malls and magnificent parks
and picnic spots. Durgapur took pride in its cultural activities though being
a relatively coming up new city.

Andal upcoming Airport will also add advantage for the visitors

Durgapur provides a wide range of oppurtunities to its visitors from

outside location.

Nearby Towns

Durgapur is growing rapidly along with its nearby towns and adjoining
areas. City like Asansol is already a well known city and other towns are
also growing along with Durgapur. These areas adjoining Durgapur has its
own importance and we are providing some information about few of them.
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 Asansol
 Bishnupur
 Bankura Town
 Bolpur
 Burdwan
 Panagarh
 Raniganj
Asansol

Asansol is the second largest city in West Bengal located in the Burdwan
district. It is a industrial- Coal-mining centre. It is the central city for its coal
belt surrounding and is heavily industrialised, it also acts as a trading town
owing to its location as a transport centre.The major industries here are
IISCO(SAIL), Chittranjan Locomotive Works, Hindustan cables Limited,
Burn standard, Rekitt & Coleman, Burnpur Cement and a number of small
scale industries. The Eastern coalfields a subsidary of Coal India lies here.
Bishnupur

About 82 Km from Durgapur. A Sub-Divitional of Bankura Dist. It has a very

good road connection with Durgapur. Busses are plying at regular interval
from Durgapur Station. Bishnupur is famous for music known as Vishnupur
Gharana. It is also noted for metal crafts, Silk and Beluchuri sarees, conch
ornaments and Terracotta Sculpture.

Bolpur

Bolpur is a municipality in Birbhum District in the state of West Bengal,

India. It is 145 km north of Kolkata and is best known for the proximity to
Visva Bharati, the university set up by Rabindranath Tagore the Nobel
laureate poet. Given its proximity to Santiniketan and Sriniketan it is one of
the seats of Culture and education in West Bengal.
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Burdwan

Burdwan also Bardhaman or Barddhaman is a city of West Bengal state in

eastern India It is the headquarters of Bardhaman District.
The places to visit

The famous Shrine of Sarvamangala, said to contain the remnant of Sati's

body, the umbilicus, is situated here. Aside this, there are quite a number of
temples and Sivalingams.
The Curzon Gate built in honour of the visit of Lord Curzon.
The palaces and gardens of the maharaja Golapbag.
At Nawab Hat, some 2 mile distant, is a group of 108 Siva lingam temples
built in 1788.
One must also know about a small village of burdhaman called
"Panchkula" where Gajan-Festival is celebrated with huge passion during
the month of May-June.
Shrine and Pir Bahram and Sher Afghan.
Barddhaman also have a planetarium named after India's eminent scientist
Meghnad Saha. It is the second planetarium of the state after Kolkata's
"Birla planetarium".
Panagarh

The name PANAGARH is tagged with a town located in West Bengal, India.
It is situated in the Burdwan district. The importance of this place is right
from the presence of the Military Base Camp up to the Indian Air force
station. Two ways communication by Railways & National Highways (NH2)
retains PANAGARH always connected with other places.
Raniganj

Raniganj is a city and a municipality in Bardhaman district in the Indian

state of West Bengal.
Parks and Picnic Spots.

 Durgapur Barrage
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 Exalts Kumar Mangalam Park
 Science and Energy Park
 Troika Park
 Deul/ Gor Jungle/ Maa Shyama Rupa Mandir
 Rondia
 Laodoha Forest
 Nachan Dam
 Ghagar Budi
 Maithon
 Lamia Park
 Shatabdi Park

Rondia

Randiha is a homely tourist spot in the Durgapur subdivision of Burdwan

district, about 10km from Panagarh on NH2 and about 19km downstream
the Durgapur barrage. A quaint town on the banks of the Damodar, Randiha
offers a beautiful mix of greenery and water. You can spend the mornings
with endless cups of tea, listening to the chirping of birds. The quiet of the
place makes one aware of the sounds of nature.

MAJOR PLAYERS:

Some of the famous hotels in Durgapur include, Hotel Peerless Inn, Hotel
Pritika, Hotel Rose Valley, Hotel Luxor, Hotel City Residency, Pratik Motel.

RISK FACTORS:

Socio Political Risks :

The hotel industry faces risk from the volatile socio-political environment
in the country. While general perception, now about West Bengal has been
on positive note, the disturbances due to Naxal movements have
threatened the industrial growth in the State.

Industry / sector specific risks :

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Infrastructure – Presence of good infrastructure in terms of airport / air
services is critical to attract customers. With Government of West Bengal
poised to Roads, creation of specialized industrial zones like Software
Park, Hardware Park, Textile Park, Biotech Park, FAB City etc. the
hospitality industry in Andhra Pradesh and especially in Hyderabad is
bound to leap up.

Risk of wage inflation:

The hotel industry needs quality employees and with demand for the same
improving across the industry, the company feels that wage inflation is a
critical factor in determining the costs for the company. Thus, our
Company will continue to focus on improving manpower efficiencies and
creating a lean organization, while maximizing effectiveness in terms of
customer service and satisfaction, as an area of great importance for the
management of the company
a. Financial Details : The following financial details are
separately annexed in this report:

1 PROJECT COST

2 DEPRECIATION SCH(CO. ACT)

3 DEPRECIATION SCH(IT. ACT)

4 INCOME TAX COMPUTATION

5 REVENUE & ASSUMPTIONS

6 PROJECTED PROFIT & LOSS ACCOUNT

7 PROJECTED BALANCE SHEET

8 STATEMENT OF WORKING CAPITAL

9 PROJECTED CASH FLOW STATEMENT

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10 BREAK EVEN POINT

11 COMPUTATION OF IRR OF THE PROJECT

12 DEBT SERVICE COVERAGE RATIO

13 TERM LOAN SCHEDULE

ANALYSIS

STRENGTHS –

 Present West Bengal Govt. is pro-active in improvement of law &

order which will attract businesses, Tourists.

 Availability of land at very competitive prices and encouraging

incentives & benefits for development of industries.

 Plenty of underground water as river Damador is passing through

Durgapur

 Adequate communication facilities. Improvement of Roads and

infrastructure during the last few years.

 Unpolluted and serene atmosphere to be created in of Durgapur City.

 Large convention and banquet halls to accommodate sufficient

number of participants

WEAKNESSES

 The proposed hotel location is on the outskirts of the Durgapur City

has the locational disadvantage.

OPPORTUNITIES

The relatively newer concept of weekend travel is poised to gain further

momentum with a growing economy and higher disposable incomes
and leisure destinations in close proximity to metro cities will benefit
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from this trend. Moreover, the developments and expansions planned
in industries and BPO segments remain encouraging. The entry of new
companies, typically, generates significant room night demand during
the start up period as processes are set up and executives travel for
training. This category of hotel customer ensures a relatively strong
base of demand due to a comparatively higher average length of stay.

 Scope for enhancing the services and covering various gamut of

entertainment to the local populace

 Ever increasing demand from the rich and affluent for a pollution free
environment and holiday

 Growing awareness in HR activities to conduct residential

conferences, training and seminars.

 Accelerated awareness and consciousness towards health, fitness

and comforts in the minds of the Indian populace.

THREATS

There are virtually no threats to the proposed Hotel as there is no such

Hotel in Durgapur. Hotel management will be in constant improvement
keeping space with international standard in the form of additional
facilities. This will ensure that there will be no threat from any
competitors.
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6. Conclusion:

We have based our conclusion on the following

a. the company is promoted by an established personals who

has proven his capability by successfully running business in
Durgapur West Bengal

b. Existing players in the industry are flourishing and additional

capacities are being built up.

c. There is adequate Demand and supply gap.

d. Possibilities of new markets for the industry are in the

horizon.

e. Debt Equity, the DSCR and sensitivity analysis shows the

project to be healthy. The Pay Back period, Break even point
indicating satisfactory prospects.

f. Locational advantage and connectivity.

g. With the changing image of West Bengal, Investments have

started to flow in and resulting in flow of floating population.