PRESENTATION ON ANALYSIS ON INDIAN HOTEL INDUSTRY DEMAND AND SUPPLY OF LAST FIVE YEARS

Submitted By:Parmar Arjan (69) Dhaval Patel (77) Jithin Ponathil (87) Saiyed Salahuddin (92) Sandip Dankhara (115) Submitted To:Mrs. Ranjan Sabhaya

Indian Hotel industry:

The Indian hotel industry has emerged as one of the key industries driving growth of the services sector in India. It has evolved into an industry that is sensitive to the needs and desires of people. The fortunes of the hotel industry have always been linked to the prospects of the tourism industry and tourism is the foremost demand driver of the industry. The Indian hotel industry has recorded healthy growth fuelled by robust inflow of foreign tourists as well as increased tourist movement within the country and it has become one of the leading players in the global industry. Foreign tourist arrivals (FTAs) into the country increased steadily from 2002 to 2008. FTAs dipped in 2009, due to the global economic slowdown; however, the impact on the Indian industry was much lower than that on the global counterparts.

 According to the World Travel and Tourism Council (WTTC), India ranks 18th in business travel and will be among the top 5 in this decade. Hotels in India have a supply of 110,000 rooms. With a shortage of 150,000 rooms, likely to result in demandsupply disparity, room rates will see a rise to 25 per cent annually over the next two years. The industry seems to be fast getting rid of competition when it comes to being a costeffective destination. The industry is adding about 60,000 quality rooms, currently in different stages of planning and development and should be ready by 2012.

Characteristics of Indian hotel Industry:

Major characteristics of the Indian hotel industry are: High seasonality: The Indian hotel industry normally experiences high demand during October April, followed which the monsoon months entail low demand. Usually the December and March quarters bring in 60% of the year s turnover for India s hoteliers. However, this trend is seeing a change over the recent few years. Hotels have introduced various offerings to improve performance (occupancy) during the lean months. These include targeting the conferencing segment and offering lucrative packages during the lean period.

Labor intensive:
Quality of manpower is important in the hotel industry. The industry provides employment to skilled, semi-skilled, and unskilled labor directly and indirectly. In India, the average employee-to-room ratio at 1.6 (2008-09), is much higher than that for hotels across the world. The ratio stands at 1.7 for five-star hotels and at 1.9 and 1.6 for the four-star and threestar categories respectively. Hotel owners in India tend to over-spec their hotels, leading to higher manpower requirement. With the entry of branded international hotels in the Indian industry across different categories, Indian hotel companies need to become more manpower efficient and reconsider their staffing requirements.

Fragmented:
The Indian hotel industry is highly fragmented with a large number of small and unorganized players accounting for a lion s share. The major players in the organized segment include The Taj, Oberoi, ITC Hotels, and East India Hotels.

Demand of Indian hotel Industry:

YEAR 2010-11 2009-10 2008-09 2007-08 2006-07 Demand of Rooms 22,822 20,797 19,130 17,518 15,472 Increase in demand (%) 9.74% 8.71% 9.20% 13.22% -

25000 20797 20000 15472 15000 10000 5000 0 2006-07 2007-08 2008-09 2009-10 19130 17518

22822

2010-11

Here, the chart shows the Demand of the hotel rooms from the year 200607 to 2010-11. It tends to increase year by year shows good position of the Indian hotel industry. Demand is increased by 13.22% during the financial year 2007-08 as compare to the year 2006-07(base year).it is increased by 9.20%,8.71%.& 9.74% for the next three years respectively. The percentage of increase in demand for the year 2009-10 was less as compare to other years because of the terrorist attack on two big hotel Taj and Oberoi and also world economic depression.

Causes for increase in Demand of Indian hotel Industry:

The fortunes of the hotel industry are closely linked to the tourism industry and hence tourism is one of the most important Demand drivers. In addition, all factors that aid growth in the tourism industry also apply to the hotel industry. The Indian hotel industry demanded highly in recent years owing to a number of factors: Increased tourist movement: Increased FTAs (Foreign Trade Adjustments) and tourist movement within the country has increased demand of the hotel industry. Healthy corporate profits and higher disposable incomes with easier access to finance have driven the rise in leisure and business tourism, thus having a positive impact on the hotel industry.

Economic growth: India is one of the fastest growing economies in the world. It recorded healthy growth in the past few years, at more than 9% each during financial year 2006-08. Despite the global economic slowdown, the Indian economy clocked growth of 6.7% and 7.4% in financial year 2009 and 2010 respectively. Attractiveness of India has encouraged foreign players to set up their operational facilities in the country. Domestic industries have also made heavy investments to expand their facilities through Greenfield and Brownfield projects. Changing consumer dynamics and ease of finance: The country has experienced a change in consumption patterns. The middle class population with higher disposable incomes has caused the shift in spending pattern, with discretionary purchases forming a substantial part of total consumer spending. Emergence of credit culture and easier availability of personal loans have also driven growth in the travel and tourism and hotel industries in the country.

Development of other markets:

A major trend in recent times is the development of the hotel industry in cities other than major metros. As real estate prices have been soaring, setting up and maintaining businesses and hotels in major metros is becoming more expensive, leading to search for other cities entailing lesser costs. Consequently, hotel markets have emerged in cities such as Hyderabad, Pune, and Jaipur. This has led to increase in Demand for hotel development activity and expansion of hotel brands within the country. The industry has also seen development of micro markets, especially in primary cities. As cities grow larger and more office spaces come up across the city, travelers prefer to stay at hotels closer to the place of work/visit to save on time. This has led to the same hotel company setting up hotels across different location within a city.

Demand-supply gap: Indian hotel industry is facing a mismatch between the demand and supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to the rapid expansion of the sector.
Year 2010-11 2009-10 2008-09 2007-08 2006-07 Supply of Rooms 27,703 25,773 24,620 24,246 23,010 Increase in Supply (%) 7.49% 4.68% 1.54% 5.37% -

Supply of Rooms
30,000 25,000 20,000 15,000 10,000 5,000 0 2006-07 2007-08 2008-09 2009-10 2010-11 23,010 24,246 24,620 25,773 27,703

Here, we can clearly see the supply force of Indian Hotel Industry from the year 2006-07 to 2010-11. It tends to increase year by year, shows good position of the Indian hotel industry. Supply is increased by 5.37% during the financial year 2007-08 as compare to the year 2006-07(base year). It is increased by 1.54%, 4.68% & 7.49% for the next three years respectively.

 The percentage of increase in supply for the year 2008-09 was less as compare to other years because of the terrorist attack on two big hotel Taj and Oberoi reduce the foreign visitors and also world economic bad situation. But overall in the other years it is increased because of the increase in the number of visitor in the country; measures taken by government to improve hotel industry as well as liberal policy toward FDI. Despite a dip in the year 2009, the hotel industry is adding about 60,000 quality rooms, currently in different stages of planning and development and should be ready by 2012.

Distribution of Supply among 10 major cities:

Name of city Goa Pune Jaipur Cochin Hyderabad Proportion (%) 7% 15% 3% 4% 15% Name of city Kolkata Chennai Bangalore NCR Mumbai Proportion (%) 8% 9% 12% 13% 14%

Distribution of supply
Goa 7% Pune 15% Jaipur 3% Cochi 4% Hydrabad 15%

Mumbai 14% NCR 13% Bengaluru 12%

chennai 9%

Kolkata 8%

The chart shows the distribution of supply among 10 major cities of the India. Different cities have different proportion in the supply of hotel services such as the highest portion is of the Hyderabad and Pune.

Causes for increase in Supply of Indian hotel Industry:

Various policy measures undertaken by the Ministry of Tourism and tax incentives have also aided supply of the hotel industry; some of them include: Allowance of 100% FDI in the hotel industry (including construction of hotels, resorts, and recreational facilities) through the automatic route Introduction of Medical Visa for tourists coming into the country for medical treatment Issuance of visa-on-arrival for tourists from select countries, which include Japan, New Zealand, and Finland Promotion of rural tourism by the Ministry of Tourism in collaboration with the United Nations Development Programme

 Elimination of customs duty for import of raw materials, equipment, liquor etc Capital subsidy programme for budget hotels Exemption of Fringe Benefit Tax on crches, employee sports, and guest house facilities Five-year income tax holidays for 2-4 star hotels established in specified districts having UNESCO-declared 'World Heritage Sites'.

Demand and Supply Comparison of Indian hotel industry: There is a mismatch between demand and supply leading to higher occupancies and average room rates. The demand and supply gap differs from city to city. There is not a vast difference between demand and supply of the rooms in Indian hotel industry. Here, demand and supply of major ten cities is given:
Year 2010-11 2009-10 2008-09 2007-08 2006-07 Demand of Rooms Supply of Rooms 22,822 20,797 19,130 17,518 15,472 27,703 25,773 24,620 24,246 23,010 Shortage/ Surplus 4,881 4,976 5,490 6,728 7,538

30,000 25,000 20,000 15,000 10,000 5,000 0 2006-07 2007-08 23,010 15472 24,246 17518

24,620 19130

25,773 20797

27,703 22822

2008-09

2009-10

2010-11

The Demand -Supply chart shows the gap between demand and supply disparity of the Indian hotel industry. It shows the simultaneous increase in both over the five years. The Demand and supply gap is tends to decrease year by year and the margin of gap is also declining.

 The demand-supply gap is 7538 rooms during the year 200607 but as year passed it is 6728 rooms, 5490 rooms, 4976 rooms, and 4881 rooms respectively for the next four years. The demand-supply gap is declined by 10.74% in the year 2007-08 as compare to the year 2006-07. It is declined by 18.40%, 9.36%, 1.94% for the year 2008-09, 2009-10, 2010-11 respectively. The decrease in the demand-supply gap is good for the Indian hotel industry because as the gap decrease there will increase in the demand of the hotel rooms.

Conclusion:
From the above discussion we are come to the conclusion that the Indian hotel industry has performed well during last five years. It is growing year by year instead of many hurdles in the way. The industry has supplied as per demand but is still facing shortage of 150000 rooms, likely to result in demand-supply disparity; supply is not as much as compare to the demand in the industry. The government should increase its budget towards the hotel industry as it is observing high rates of growth and can lead to India s development as well.

Thank You For Your Co-ordination

Sallu = 1-7 Jithin = 8-10 Sandip = 11-15 Dhaval = 16-18 Arjan = 18-20 Conclusion can be present by anyone who wants to intiatess .