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The Hospitality Services Industry Of India Tourism Essay

The Indian hospitality sector is certainly the most apt replication of the belief Atithi devo bhava- touch of tenderness, a helping hand and a welcoming visage. According to the Tourism Satellite Accounting (TSA) research, released by World Travel and Tourism Council (WTTC) and its strategic partner Oxford Economics in March 2010.

Hospitality is the world’s largest service industry, employing millions of people working in hotels, restaurants, cruise lines, resorts, private clubs, casinos, and bed-and-breakfasts throughout the world.

As per the Travel and Tourism Competitiveness Report 2009 by the World Economic Forum, India is ranked 11th in the Asia Pacific region and 62nd overall, moving up three places on the list of the world’s attractive destinations. It is ranked the 14th best tourist destination for its natural resources and 24th for its cultural resources, with many World Heritage sites, both natural and cultural, rich fauna, and strong creative industries in the country.

India also bagged 37th rank for its air transport network. The India travel and tourism industry ranked 5th in the long-term (10-year) growth and is expected to be the second largest employer in the world by 2019.

The hospitality industry is a 3.5 trillion dollar service sector within the global economy. It is an umbrella term for a broad variety of service industries including, but not limited to, hotels, food service, casinos, and tourism. The hospitality industry is very diverse and global. The industry is cyclical; dictated by the fluctuations that occur with an economy every year.

Trends in Hospitality Sectors

Trends that will shape the future of hospitality sector are:

2.1. Low cost carriers:

Travelers in general are more price sensitive to airfare than they are to hotel room rates. Often a low airfare will stimulate demand for travel even if hotel prices are increasing. LCCs are a good option for business travelers, as they have advantages like low costs, more options and connectivity.

2.2. Budget hotels:

More than 50 per cent of occupancy of a majority of hotels comes from the business travel segment. The average room rate (ARR) realized from business travelers is normally higher than from leisure travelers. Heightened demand and the healthy occupancy rates have resulted in an increase in the number of budget hotels. Some of the new players entering into this category of hotels include Hometel, Kamfotel, Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn.

2.3. Service apartments:

The concept of service apartments, though a recent phenomenon in India, is an established global concept. Villas in Spain, flats in the UK and apartment complexes in the US have all created a viable market for those who want more than just a room in a hotel. Service apartments are the latest trend in accommodation, offering the comfort and convenience of a home without the hassles of having to maintain or look after it. Ideally suited for medium-to-long staying guests, service apartments are a natural choice for corporate employees or expatriates relocating to a particular city, non-resident Indians visiting the country for long spells and foreigners visiting the city for long durations.

2.4. Technology:

Travel and technology have become inseparable. Technology is making its own advances with high-tech video conferencing facilities, web cameras and virtual reality mode of conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity, easy access to information, etc. are just a few areas where technology has completely changed the the way we travel.

2.5. Loyalty travel:

Today, airline-credit card company tie-ups have brought a whole range of benefits to the travelers. These include insurance cover, upgrades, free tickets, access to executive lounges, and a host of other goodies.

Hospitality Industry in India

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.

Contribution to the economy

Combining unparalleled growth prospects and unlimited business potential, the industry is certainly on the foyer towards being a key player in the nation’s changing face. Furthermore, banking on the government’s initiative of upgrading and expanding the country’s infrastructure like airports, national highways etc, the tourism and hospitality industry is bound to get a bounce in its growth.

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The hotel and tourism industry’s contribution to the Indian economy by way of foreign direct investments (FDI) inflows were pegged at US$ 2.17 billion from April 2000 to September 2010, according to the Department of Industrial Policy and Promotion (DIPP).

India’s hotel pipeline is the second largest in the Asia-Pacific region according to Jan Smits, Regional Managing Director, InterContinental Hotels Group (IHG) Asia Australasia. He added that the Indian hospitality industry is projected to grow at a rate of 8.8 per cent during 2007-16, placing India as the second-fastest growing tourism market in the world. Initiatives like massive investment in hotel infrastructure and open-sky policies made by the government are all aimed at propelling growth in the hospitality sector.

Foreign Tourist Arrivals

Ministry of Tourism compiles monthly estimates of Foreign Tourist Arrivals (FTAs) in India and Foreign Exchange Earnings (FEE) from tourism on the basis of data received from major airports. Following are the important highlights, as regards these two important indicators of tourism sector for October 2010.

FTAs in India during October 2010 were 487,000 as compared to FTAs of 446,000 during the month of October 2009 and 450,000 in October 2008.

FTAs during the period January-October 2010 were 4.32 million with a growth rate of 9.9 per cent.

FEE from tourism during the month of October 2010 were US$ 1.18 billion as compared to US$ 1.09 billion in October 2009.

Changes in Demographics

Population is changing and people are living longer

The need to provide family-oriented services will soon peak

Number of older club members will increase

Number of younger workers will decline

A shortage of 10 Million workers is expected.

Government Initiatives/policy

According to the Consolidated FDI Policy, released by DIPP, Ministry of Commerce and Industry, Government of India, the government has allowed 100 per cent foreign investment under the automatic route in the hotel and tourism related industry. The terms hotel includes restaurants, beach resorts and other tourism complexes providing accommodation and /or catering and food facilities to tourists. The term tourism related industry includes:

Travel agencies, tour operating agencies and tourist transport operating agencies

Units providing facilities for cultural, adventure and wildlife experience to tourists

Surface, air and water transport facilities for tourists

Convention/seminar units and organisations

The Government of India has announced a scheme of granting Tourist Visa on Arrival (T-VoA) for the citizens of Finland, Japan, Luxembourg, New Zealand and Singapore. The scheme is valid for citizens of the above mentioned countries planning to visit India on single entry strictly for the purpose of tourism and for a short period of upto a maximum of 30 days. During the period January – October 2010, a total number of 5016 VoAs were issued under this Scheme.

The tourism master plan, the first for Karnataka, envisages initiatives to attract private investment ranging from US$ 2.2 billion to US$ 4.4 billion in the next three to five years. The plan is prepared based on the Vision 2020 document prepared and adopted by the Karnataka State Planning Board. The state government aims to generate 200,000 jobs in the tourism sector in the next five years. The master plan is aimed at making Karnataka the number one destination for tourism in the country by 2020, according to Mr G Janardhan Reddy, Minister for Tourism and Infrastructure Development


Natural and cultural diversity : India has a rich cultural heritage. The “unity in diversity” tag attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala, snow capped Himalayas and the quiescent lakes are incredibl

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

Government support: The government has realized the importance of tourism and has proposed a budget of Rs. 540 crore for the development of the industry. The priority is being given to the development of the infrastructure and of new tourist destinations and circuits. The Department of Tourism (DOT) has already started the “Incredible India” campaign for the promotion of tourism in India.

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Increase in the market share: India’s share in international tourism and hospitality market is expected to increase over the long-term. New budget and star hotels are being established. Moreover, foreign hospitality players are heading towards Indian markets.


1. Poor support infrastructure: Though the government is taking necessary steps, many more things need to be done to improve the infrastructure. In 2003, the total expenditure made in this regard was US $150 billion in China compared to US$ 21 billion in India.

2. Slow implementation: The lack of adequate recognition for the tourism industry has been hampering its growth prospects. Whatever steps are being taken by the government are implemented at a slower pace.

3. Susceptible to political events: The internal security scenario and social unrest also hamper the foreign tourist arrival rates.


Rising income: Owing to the rise in income levels, Indians have more spare money to spend, which is expected to enhance leisure tourism.

Open sky benefits: With the open sky policy, the travel and tourism industry has seen an increase in business. Increased airline activity has stimulated demand and has helped improve the infrastructure. It has benefited both international and domestic travels.


Fluctuations in international tourist arrivals: The total dependency on foreign tourists can be risky, as there are wide fluctuations in international tourism. Domestic tourism needs to be given equal importance and measures should be taken to promote it.

Increasing competition: Several international majors like the Four Seasons, Shangri-La and Aman Resorts are entering the Indian markets. Two other groups – the Carlson Group and the Marriott chain – are also looking forward to join this race. This will increase the competition for the existing Indian hotel majors

3.9. Major players in Hospitality Industry in India.

1. The Indian Hotels Company

2. ITC/ Sheraton Corporation

3. The Leela Group

4. The Bharat Hotels Group

5. The EIH Ltd (The Oberoi Group)

6. India Tourism Development Corporation (ITDC) / The Ashok Group

7. The Hotel Corporation of India (HCI)

8. Jaypee Hotels Ltd.

India’s Role in Hospitality

The current count of hotel rooms is 130,000, and the country is expected to require an additional 50,000 rooms over the next two to three years, according to World Travel and Tourism Committee (WTCC) estimates

US-based hotel chain, Marriott International, plans to expand its network in India to 100 hotels over the next five-years, stated Arnie Sorenson, Chief Operating Officer, Marriott International. At present, the group operates 11 properties across the country.

The Road Ahead

The contribution of travel and tourism to Gross Domestic Product (GDP) is expected to increase from 8.6 per cent (US$ 117.9 billion) in 2010 to 9.0 per cent (US$ 330.1 billion) by 2020.

Export earnings from international visitors and tourism goods are expected to increase from US$ 11.1 billion in 2010 to US$ 33.6 billion in 2020.

Travel and tourism investment is estimated at US$ 34.7 billion or 7.2 per cent of total investment in 2010. By 2020, this should reach US$ 109.3 billion or 7.7 per cent of total investment.

Roots Corporation, a subsidiary of Indian Hotels Company (IHC), plans to open 60 to 70 budget hotels, known as Ginger Hotel, in 23 locations across the country.

ITC, the Kolkata-based cigarette major, also projected its plan to open 25 new hotels under the Fortune brand over the course of next 12-18 months (or by 2011).

International Hospitality Business

Hospitality is very important component of Service industry in any country’s national economy. When a domestic hospitality company decides to expands its operation into a foreign country, its overseas development recognizes as international business and its business revenue generated from overseas operations are described as service export.

Advantages of International hospitality services:

Management Companies

Investment Companies

Fast Chaining: Hotel management companies can develop much faster using this method with very limited risk.

Reduced risk in running hotel business

Financing the property: management companies need a little or no initial investment

Generally minimum profit is guaranteed and the capital investment will be paid back

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The reduced risk: the risk for management companies running the deriving from excess building cost, market recessions or changing markets are all significantly reduced.

With the recognition of the prestigious hotel brand name the value of the property may increase

High return on investment (ROI): due to the low amount of investment required from hotel management companies, very high financial and economic earnings can be achieved

Disadvantages of International hospitality services:

Management Companies

Investment Companies

Obtain only part of the profit

Last control of daily operations of property

Loss of properties potential appreciation in the past 5 years, in many parts of America and Britain, property prices are more than doubled.

The management company may not have necessary year of experience, knowledge or resources in managing overseas business

The owners may interfere despite the contract in some of the management issues limiting the management companies’ operational potentials

Management companies may lose the contract in certain stage

Case Study – TAJ HOTEL

The Indian Hotels Company (IHC) is the parent company of Taj Hotels Resorts and Palaces. It was founded by Jamsetji N. Tata on December16, 1903. Currently the Taj Hotels Resorts and Palaces comprises 57 hotels at 40 locations across India .

Physical Evidence

Lobby- It being the first & the last part of the hotel that the guestsees,thus it should be well designed, also to ensure that the customer returns again the room should be comfortable and should have made his stay hassle free process

Major service encounter that extremely delighted or disappointed are:

1. Check – in.

2. Bell person carrying luggage to the room.

3. Food.

4. Wake up call

5. Check out.


Promotional schemes are carried on regularly the hotel has many loyalty programe, clubes, membership, previlage etc some of them are

The Taj Inner Circle.

The Taj Junior League.

The Taj Club.

Taj also offer Taj surprises including weekend savers,value vouchers,book early get more.


Business news paper(E.T, Financial Express, Bombay Times)

T.V channels like STAR NEWS,CNN and CNBC.


Global Awards:


Dun & Bradstreet – American Express Corporate Awards 2007 -India’s Top 500 Companies 2007 – in the “Hotels” category – The Indian Hotels Company Ltd.


Taj Hotels Resorts and Palaces is proud to receive the award for

‘The Best Business Hotel Chain in India’ by the readers in UK at

the 2008 Business Traveller Awards.

Some Mile stone of Taj GROUP

1903 – The Company opens its first hotel, the “Taj Mahal Palace” in Mumbai, India. The Company opens its first five star deluxe beach resort, the “Fort Aguada Beach Resort” in Goa.

1974 – The Company begins business in metropolitan hotels by opening the five star deluxe hotel, the “Taj Coramandel” in Chennai

1980 – The Company opens its first hotel outside India, the “Taj Sheba Hotel” in Sana’a, Yemen.

2006- The Company acquires the “W” hotel in Sydney, Australia which is later renamed as the “Blue Sydney”.

The Company commences operation of its first wildlife lodge at Mahua Kothi, Bandhavgarh.

2007 – The Company acquires the “Ritz-Carlton” in Boston, USA which is later renamed as the “Taj Boston.” The Company commences operation of its second wildlife lodge at Baghvan, Pench.


The hotel has many competitors like

The Oberai towers

The Marine Plaza

The Orchid.

Le Meridian

Mergers and acquisitions

Starwood Group (W Hotel)



The Pierre US

July 2005

Regent Hotel (renamed Taj Lands End)



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