Introduction

The Hotel Industry comprises a major part of the Tourism industry. Historically viewed an industry providing a luxury service valuable to the economy only as a foreign exchange earner, the industry today contributes directly to employment (directly employing around 0.15 million people), and indirectly facilitates tourism and commerce. Prior to the 1980s, the Indian hotel industry was a slow-growing industry, consisting primarily of relatively static, single-hotel companies. However, the Asiad, held in New Delhi in 1982, and the subsequent partial liberalization of the Indian economy generated tourism interest in India, with significant benefits accruing to the hotel and tourism sector, in terms of improved demand patterns. Growth in demand for hotels was particularly high during the early 1990s following the initiatives taken to liberalize the Indian economy in FY1991, as per the recommendations of the International Monetary Fund (IMF). The euphoria of the early 1990s prompted major chains, new entrants and international chains to chalk out ambitious capacity additions, especially in the metropolitan cities. However, most of these efforts were directed towards the business travelers and foreign clientele. In recent years, the hotels sector has grown at a faster rate than GDP. As a result, the share of hotels & restaurants in GDP at current prices has increased from 1.2per cent in FY2000 to 1.5per cent in FY2005. In constant (1999-2000) prices, the GDP from hotels and restaurants has increased from Rs. 222.65 billion in FY2000 to Rs. 335.49 billion in FY2005. As a result, the share of hotels and restaurants in total GDP at constant prices has increased from 1.24per cent in FY2000 to 1.40per cent in FY2005.

Structure of the Industry

Hotels in India are broadly classified into 7 categories (five star deluxe, five-star, four star, three star, two star, and one-star and heritage hotels) by the Ministry of Tourism, Government of India, based on the general features and facilities offered. The ratings are reviewed every five years.
Star Category Definition Characteristics of ultimate luxury and sophistication. First class accommodations. Highly personalized service. Impeccable standard of excellence. Upscale in all aspects. Above average level of service. Enhanced level of quality throughout. In house dining available with many other services.

Multifaceted and comprehensive. Usually associated with business travelers. Upgraded physical attributes, service, and comfort. Aimed toward traveler looking for more than just the basics. Usually small to medium sized hotel chains. Limited food service. Essential accommodations. Usually food within walking distance. Appeal to budget minded travelers while keeping in mind cleanliness

Structure of Hotels:
Premium and Luxury Segment This segment comprises the high-end 5-star deluxe and 5-star hotels, which mainly cater to the business and up market foreign leisure travelers and offer a high quality and range of services. The segment accounted for 29per cent of the total hotel rooms in the country in December 2005. Mid-Market Segment This segment comprises 3 and 4 star hotels, which cater to the average foreign and domestic leisure traveller. This segment also caters to the middle level business travellers since it offers most of the essential services of luxury hotels without the high costs since the tax component of this segment is lower compared with the premium segment. Budget Segment These comprise 1 and 2 star hotels referred to as Budget Hotels. These categories do not offer as many facilities as the other segments but provide inexpensive accommodation to the highly price-conscious segment of the domestic and foreign leisure travellers. Heritage Hotels In the past four decades, certain architecturally distinctive properties such as palaces and forts, built prior to 1950, have been converted into hotels. The Ministry of Tourism has classified these hotels as heritage hotels. Others At any point in time, applications for classification are usually pending with the Ministry of

Tourism because of which such properties remain unclassified. The number of hotel rooms pending classification has declined from historical 15-20per cent to 5per cent of the total rooms available in the recent past.

Consumer Segments:
The market for the hotel industry can be divided into the following key consumer segments based on purpose of visit: The Business Traveler The Business Traveler is a businessman or a corporate executive travelling for business purposes. This segment includes corporates, both domestic and foreign, who open offices in the hotel premises during start-ups, corporate executives who make extended stay either for long duration projects or while waiting for permanent accommodation (primarily expatriates) and convention arrivals. While the senior executives usually stay in 5 star hotels, the middle level executives, who are much larger in number, stay in the budget hotels. Corporate Catalyst India A report on Indian Tourism and Hotel Industry This segment offers better realizations, as they demand relatively smaller discounts on room rents (about 10per cent-15per cent), use more of facilities such as PCs, fax multi-media, conference halls. Also, the Food & Beverage (F&B) revenues are better as they usually eat in the hotel itself due to their busy schedules. The Leisure Traveler The Leisure Traveler could either be a foreigner or a domestic traveler whose primary purpose of visit is holiday and site seeing. Among non-business foreign tourists the primary motivation for visiting India is largely cultural attraction followed by conferences and conventions, tourist attractions like beaches, wild life, hill resorts etc. Usually, leisure travelers are part of a package run by a tour operator. The margins offered by leisure travelers tend to be lower because of two reasons. Firstly, they seek higher discounts and also provide less F&B revenues as they usually eat out. The business offered by this segment is highly seasonal and tends to peak in the September to March period. Airline Cabin Crew Airline Cabin Crew forms another important segment because of the repetitive and guaranteed nature of the business that they provide. Usually, these are a part of an annual contract whereby, in return for a fixed rate, a certain number of rooms are provided on

demand for cabin crews. With discount rates in the range of 40per cent and 50per cent, this represents a low-yield segment for hotels in general. Corporate Catalyst India A report on Indian Tourism and Hotel Industry

Major players in the Indian Hotel Industry:

1. 2. 3. 4. 5. 6. 7. 8. The Indian Hotels Company ITC/ Sheraton Corporation The Leela Group The Bharat Hotels Group The EIH Ltd (The Oberoi Group) India Tourism Development Corporation (ITDC) / The Ashok Group The Hotel Corporation of India (HCI) Jaypee Hotels Ltd.