- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Top Market Opportunities
- 5 Market Drivers
- 6 Market Restraints
- 7 Industry Challenges
- 8 Technology Trends
- 9 Pricing Trends
- 10 Regulatory Trends
- 11 Other Key Market Trends
- 12 Market Size and Forecast
- 13 Market Outlook
- 14 Technology Roadmap
- 15 Distribution Chain Analysis
- 16 Competitive Landscape
- 17 Competitive Factors
- 18 Key Market Players
- 19 Strategic Conclusion
- 20 Further Reading
Definition / Scope
Hotel industry, a sub-segment of tourism and hospitality is an integral part of the economy where it triggers employment generation, infrastructure development, and has a multiplier effect on the hospitality sector.
Accommodation could be hotels & motels, apartments, camps, guest houses, lodge, bed & breakfast establishments, houseboats, resorts, cabins & hostels. In addition, tourists also require catering facilities, which includes include hotels, local restaurants, roadside joints, cafeterias & retail outlets serving food & beverages.
Hotel industry can be classified in various ways, based on location, size of property etc. though it is so vast that all the hotels operating in the market do not fit into a defined category.
Classification of Hotels:
1. Based on Location
- City center: These are generally located in the premise of a city within a short distance from the business center, shopping arcade. Rates are normally high due to their location advantages. They have high traffic on weekdays and the occupancy is generally high.
- Motels: Its primary location is on highways, where they provide lodging to highway travelers for an overnight stay and also provide ample parking space.
- Suburban hotels: They are located in suburban areas targeted for budget travelers with a moderately low rate and have high traffic on weekend. Airport hotels: These hotels are set up near the airport. They have transit guest who stays over between flights.
- Resort hotels: They are also termed as health resort or beach hill resort and so depending on their position and location. They cater to a person who wants to relax, enjoy themselves at a hill station. Most resort work to full capacity during peak season.
- Boatels: A houseboat hotel is referred to as boatels. The SHIKARAS of Kashmir and KETTUVALLAM of Kerala are houseboats in India which offer luxurious accommodation to travelers.
2. Based on Size of Property
- Small hotel: It has 100 rooms and less.
- Medium sized hotel: In terms of a number of rooms, it has a capacity of 100-300 rooms.
- Large hotel: A hotel which has more than 300 rooms is termed as large hotels.
- Mega hotel: These are those hotels with more than 1000 rooms.
- Chain hotels: These are the groups that have hotels in many numbers of locations within a country or in an international place.
3. Based on the Level of Service
- Economy/ Budget hotels: These hotels meet the basic need of the guest by augmenting a comfortable and clean room for a cozy stay.
- Mid-market hotels: These are suite hotels that offer a small living room with appropriate furniture and a small bedroom with a king-sized bed.
- Luxury hotels: These offer world-class service into restaurant and lounges, concierge service, meeting rooms, dining facilities. Bath linen is provided to the guest and is replaced accordingly. These guest rooms contain furnishing, artwork etc. prime market for these hotels are celebrities, business executives and high ranking political figures.
4. Based on the Length of Stay
- Transient Hotel
- Residential hotels
- Semi residential hotels
5. Based on the Theme
- Heritage hotel: In this hotel, a guest is graciously welcomed, offered a room that has their own history, serve traditional cuisine and are entertained by the folk artist. These hotels put their best efforts to give the glimpse of their region.
- Ecotels: These are environment friendly adopting eco friendly items in the room.
- Boutique hotels: This hotel provides exceptional accommodation, furniture in a themed and stylish manner and caters to corporate travelers.
- Spas: These are resorts which provide therapeutic bath and massage along with other features of luxury hotels.
- As the new technology is developing, corporate travel departments and independent consumers are switching from travel agents to online travel agents to get the best discounts.
Indian cities have a comparatively low supply of hotel rooms per night than other international cities. For instance, Bangkok has 98 branded hotel rooms and Hong Kong has 91 rooms while India stands just at 72-75 rooms on average. Moreover, the occupancy rate remains below 70% but during seasonal demand, it reaches the peak.
In 2017/18, Occupancy rates for the hotel industry reached 66.6% for the first time since 2007, with a 64.8% occupancy rate achieved for the 2016/17 tourism season. That reflects a 3.5% increase in occupancy from the year before.
There is a slight increase in room night demand per day from its previous figure of 75,000. In 2017/18, the number has gone up by 5,000 to stay at 80,000 rooms demanded.
The revenue generated per room available to meet the demand has increased from USD 55 to USD 60 in 2017/18.
The Indian hospitality industry has experienced prominent growth in recent years due to various factors, including the rising purchasing power of domestic travelers, an increase in commercial development and foreign tourist arrivals, a growing airline industry and government-led initiatives aiming to stimulate the sector. There is a great deal of scope to expand tourism across India, and as the country improves air travel connections and relaxes visa restrictions, tourist arrivals should increase.
Domestic Consumer is the largest segment of the hotels & motels industry in India accounting for 52.9% of the industry’s total value. The domestic business segment accounts for a further 24.4% of the industry.
The luxury class constitutes 13% of all the rooms supplied in 2017. The mid-tier combined with upscale hotels comprised 74% of new supply in 2017.
|Base Year||2017||Researched through internet|
Top Market Opportunities
Hotel industry in India is a booming sector, especially with the increasing international tourist inflow into the country. Additionally, hosting of international sports events and trade fairs and exhibitions in the country are expected to contribute both inflows of international tourists and domestic tourist movement.
The proposed industrial parks, manufacturing facilities, and ports across the country provide a good opportunity for budget and mid-market hotels. Although around 89,500 additional rooms are expected to come up in India in the next five years, the supply of branded/quality rooms in India is much lower compared to other countries across the globe. Hence, there exists huge potential for investors and operators across all the segments of hotel industry in India.
Statue of Unity: Statue of Unity is the world's tallest monument opened in Gujarat state of India. It is the 182-meter tall statue aimed to attract a large number of tourists in the state. One the opening, more than 128,000 tourists visited the place.
Tier I cities preferred for expansions
Tier I cities, primarily Mumbai and Delhi, continue to be the most preferred locations for expansion. However, more and more hospitality players are now willing to invest in Tier II towns to capitalize on the growth of domestic travel. Although most players are not looking for international locations actively, some of the larger Indian chains are open to expanding internationally, provided there is an opportunity available.
- Theme Park Project located at Amarawati at a cost of USD 1.2 billion
- Entertainment Park Project located at Gorai at a cost of USD 624.2 million
- Samuka Tourism Park Project located at Puri at a cost of USD 468.2 million
- Dadashaheb Phalke Film City Project located at Mumbai at a cost of USD 405.7 million
Overall, there is a USD 6.2 billion opportunity in the tourism and hospitality sector under 256 projects that is welcomed to private players by Indian Government.
Spending on domestic hotel accommodation is increasing as household income is surging. As consumers shift towards higher income segments, annual average leisure hotel spends per household is expected to grow by 7% to USD 18 by 2020, compared to USD 13 in 2015. Business spending on hotels is also increasing with economic growth and rise in the working population.
The international travelers visiting India is expected to grow dramatically over the next 5 years, at over 7% to reach 11.3 million by 2020.
Relaxed policies on visa on arrival and increasing connectivity are growth drivers of tourist inflow. Hotel spending by foreign tourists is obviously expected to rise by 13% reaching USD 3.4 billion.
Moreover, GDP in India is steadily growing to reach a double-digit mark. The GDP growth rate is at 7.7% in 2018 and is expected to grow at a rate of 8.2% in 2022 as shown in the figure. Similarly, the middle-class population has doubled in the last 8 years since 2004. Middle-class population in India is likely to outnumber that of US and China by 2027. Higher income level is boosting leisure travel, wedding and social travel contributing to growth in hotel consumption by domestic travelers.
International chains are expanding faster than their Indian counterparts primarily because they only manage hotels. Indian groups such as Taj, Oberoi, ITC and The Leela have been focused on owning and operating their hotels. With the cost of land rising and debt levels growing, Indian companies have been forced to turn asset-light and realize the need to expand through management contracts.
The need for innovation, new technology, digital, and marketing campaign to boost traffic and exploit on growing guest numbers has led huge capital investment burden on budget hotels.
High labor cost is likely to continue and is a serious concern for hotels as the industry is already running in employee deficit and retaining the existing employees is very hard as the switching cost for employees is low.
- Shortage of skilled employees: One of the greatest challenges faced by the hospitality industry is the unavailability of a quality workforce in different skill levels. The hospitality industry has failed to retain good professionals.
- Hospitality management education should produce skilled resource by cross-training the staff and streamline the guest experience, reducing the cost of running a hotel and providing hotel staff with a higher amount of sought-after job skills.
- Retaining quality workforce: Retention of the workforce through training and development in the hotel industry is a problem and attrition levels are too high. One of the reasons for this is unattractive wage packages. Though there is a boom in the service sector, most of the hotel management graduates are joining other sectors like retail and aviation.
- Shortage of rooms supply: The hotel industry is facing a heavy shortage of rooms. It is estimated that the current requirement is 1,50,000 rooms. Though the new investment plans are there to expand the inventory, the shortage will still persist.
- Intense competition: The industry is witnessing heightened competition with the arrival of new international and hyper-local players, new products and new systems. The competition from neighboring countries and negative perceptions about Indian tourism product constrains the growth of tourism.
- Manual back-end: Though most reputed chains have IT-enabled systems for property management, reservations, etc., almost all the data which actually make the company work are filled in manual log books or are simply not tracked. And this lags such companies to innovate and leverage with big data.
Technologies such as artificial intelligence, machine learning, IoT and near-field communication mobile payment have been personalizing experiences that matter to travel consumers in areas that are often riddled with pain points, interruptions, and a difficult one-size-fits-all mentality.
The personalization we see coming to market involves brand interactions in the digital or physical realm that provide customers with levels of service that can be tailored to individual needs and preferences. For example, some hotels are piloting check-in recognition programs that identify the business class customer, enabling hotel staff to welcome them by name when they check in.
In the coming years, technology can enable large brands that serve millions of travelers each year to interact with their customers more like small businesses New advances in technology continue to alter the relationship between hotels and guests. User-friendly and powerful smartphones and tablets are changing travelers’ online preferences and habits, redefining how they research, plan and book a hotel. Empowered with more knowledge and social media, today’s hotel guest is pushing hotels for improved products and services in their travel experience.
From an ownership standpoint, advances in data analytics are transforming the hospitality industry with the potential to enhance a hotel’s financial performance and offer a detailed insight into customer preferences. As the use of mobile devices, social media and advanced analytics continue to proliferate, and as online distribution channels become more accessible, technology has created new opportunities for hotels to drive operating efficiencies and engage with guests, from booking to checkout.
For example, one international hotel brand has taken a more proactive approach by partnering with a leading engineering and technology university to redesign the future hotel experience and find innovative ways of making public areas more exciting, user-friendly and relevant to the technology needs of today’s traveler. For instance, a guest may call the front desk to request a forgotten toiletry; the hotel staff then inputs the guest’s room number into the robot’s tablet interface and places the toiletry on the robot, which delivers the item directly to the room.
Moreover, recent advances in wearable technology, such as smart watches and glasses, are expected to revolutionize the way customers access the web and contribute personal content. For example, hotel reviews that feature video instead of just text will place even more emphasis on hotel reputation and performance.
Through acquisitions of property management and digital marketing platforms, online travel agents (OTAs) are providing additional services to encourage hoteliers to distribute rooms on their sites.
On the other hand, hotel brands seek to drive bookings to their own proprietary websites by leveraging the power of loyalty programs and streamlining the booking experience.
Leading hotel companies are also leveraging advances in data analytics and artificial intelligence (AI) technologies to increase online reservations, improve the return on advertising spend (ROAS), better understand guest preferences and build stronger customer relationships.
- Mobile Applications: Mobile applications have emerged as one of the most critical points of interaction with consumers. Online Travel Agents (OTAs) are getting a majority of their traffic from mobile.
- Big Data: Big data analytics is the key to informed decision making. It can help personalize customer experience, employ dynamic pricing, optimize operations and channelize marketing efforts.
- AI: AI in the form of chatbots, virtual assistants and even robots is increasingly being employed across the travel sector. In addition, machine learning makes these tools smarter over time and helps improve customer experience.
- VR and AR: VR and AR could potentially change the way travelers go through the process of travel planning — enabling them to get closer to the reality of the experience they would have when they actually arrive at their destinations.
The pricing of a hotel is done on a system called “rate of the day” based on demand. As the rooms get taken the price goes up and on a busy day, a room like this one in Mumbai or Delhi will cost as much as you would have to pay for one in Paris or London. Adding more facilities to the five star rated hotels like Wi-Fi, spas, gyms, online booking etc. to maintain their guest loyalties which give the competitive advantage to its company.
Various Pricing Mechanisms:
- Rack Rates: Without any affiliations to warrant discounts, the Rack Rated customer pays the published rate, which was the highest rate.
- Consortia Rates: This is the same customer who booked through a travel agent using the GDS and received a 5%-10% discount off Rack Rates.
- Corporate Rates: Having met the hotel’s qualifying criteria, such as volume, businesses were guaranteed discounted rates.
- Group Rates: With a block of rooms, rates vary based on time of year and the nature of the group.
- Weekend Rates: Individual leisure travelers usually within a drive distance to the hotel get a coupon discount.
- Promotional rates: These rates are originally used sparingly and used as a means to stimulate business by using discounted rates to anyone, regardless of affiliation.
The average rate registered in 2016-17 was USD 63.50, which witnessed a 12.1% drop over the previous year (USD 72.22). Hotel occupancy, too, showed a modest decline of 0.5% over the previous fiscal.
- The majority of the legislation governing the hospitality and hotels industry can be divided into three main sectors.
- The first head is the legislation for the construction and commissioning of hotels, restaurants, guest house, and other establishments, and includes the Foreign Exchange Management Act, the industrial licensing policies, land laws and various development control orders issued by the central and state governments.
- The second head has legislation for the operation, maintenance, and management of establishments, food, and hygiene standards. It also includes insurance laws, fire safety, and weights and measures regulation. Further, various licenses, such as a liquor license, dance license, lodging house license, eating house license, police permissions, a license under the Shops and Establishment Act, or a license under the Food and Drug Administration Act, granted on an annual basis.
- The third head has rules regarding taxation, employment, and other contractual relationships. This includes laws on income tax, service tax, expenditure tax, excise duty, luxury tax, entertainment tax, as well as laws on employment matters like Apprentice Act, ESI Act, etc.
Licenses required by Hotels
- Police License / Registration.
- License under Shops & Establishments Act.
- License under Prevention of Food Adulteration Act.
- Registration under the Luxury Tax Act.
- Registration under the Sales Tax Act.
- Registration under the Contract Labour Act.
- Registration under the Pollution Control Act.
- Registration under the Apprentices Act.
- Registration under the Provident Fund Act.
- Registration under the ESI Act.
- Entertainment License on Festival Occasions.
- License for Chimney under the Smoke Nuisance Act.
- Registration under the Weights & Measures Act.
- Factory License for Laundry.
- Central Excise License for Bakery Products.
- Registration & Permits under the Motor Vehicle Act for Tourist Coaches / Taxies.
- Eating House License.
- Municipal Beer Bar License.
- License for storage of Diesel Oil.
- License for storage of Kerosene & Compressed Gas (LPG).
- Sign Board Directions, Neon Signs.
- License to deal in Foreign Exchange under FEMA.
- Cold Storage License, (if over 25 cubic ft.).
- License for Boiler & Generators and Mixers and Grinders.
- Bar License (Foreign Liquor).
- Mild Liquor License.
- Temporary License for Awnings & covering of Terrace during monsoon.
- Building Completion Certificate.
- Copy Right License for Playing of Music.
- Lodging House License
- Approval from the Department of Tourism, Government of India.
- Registration from GTDC for new projects under the Package Scheme of Incentives.
Major industry associations
- The Federation of Hotel & Restaurant Associations of India (FHRA);
- The Hotel & Restaurant Association of Eastern India (HRAEI);
- The Hotel & Restaurant Association of Northern India (HRANI);
- The Southern India Hotel & Restaurant Association (SIHRA);
- The Hotel & Restaurant Association (Western India) (HRAWI); and
- Hotels Association of India (HAI);
Measures undertaken by the government:
Various policy measures undertaken by the Ministry of Tourism and tax incentives have also aided growth of the hospitality 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 crèches, employee sports, and guest house facilities.
- Five-year income tax exemption for 2-4 star hotels established in specified districts having UNESCO-declared ‘World Heritage Sites’.
For hotel rooms that have an average room rate of USD 105, the applicable GST is 28%. If the average room rate is below USD 105, then the GST is 19%.
Other Key Market Trends
Healthy hospitality, in which companies are finding new ways of embracing health-consciousness travelers, is increasingly seen as a major opportunity for brand growth. Many large hotel chains are implementing a variety of strategies to expose their brands in the health and wellness space, including high-end spa experiences, alternative medicine services, and others that certain travelers are willing to pay a premium to access. That can help them compete against wellness resorts, some of which offer cutting-edge wellness experiences, as well as experts from across the medical field, for a premium fee.
The rapid growth of online travel agencies (OTAs) and private accommodations also likely continues to shape segments of the industry. OTAs continue to invest aggressively in their technology stacks, creating digital trip-planning experiences that are difficult to match. Among private accommodations, new, small players are setting up in niche markets like luxury rentals.
Market Size and Forecast
India currently has 125,000 branded hotel rooms, which will expand to 155,000 by 2020 and currently almost 50% of the rooms are under international brands.
The total contribution of the hotel industry, which is part of the hospitality segment in India, was more than $208 billion in 2017. That reflects 9.6% of GDP for the country.
The hotel sector, when combined with the hospitality sector, is responsible for 8% of the total employment opportunities available in India during any given year. In 2017, that means 41.6 million people were employed by the industry.
The hotel and tourism sector in India attracted $10.9 billion in foreign direct investment in 2017.
Indian hotel sector is expected to continue to grow from USD 7 billion of gross revenue in 2015 to USD 13 billion in 2020 at a CAGR of 11%. Out of USD 13 billion, USD 10 billion constitutes of hotel bookings and the remaining is constituted by booking of short-term rentals and other lodgings. Market players in this sector have the potential to innovate as travelers, both domestic and international become more open to alternate stay options. In terms of a number of rooms, it is estimated that there will be a supply of 149,276 rooms by 2021/22.
In 2020, the budget and luxury hotel segment is expected to grow at a CAGR of 14% and 12% respectively. Budget hotels dominated by OYO Rooms make 8% of the market while Luxury hotels like Taj Hotels make 23% of the pie.
Online hotel booking segment in India is expected to reach USD 4 billion by 2020 growing at a CAGR of 31% driven by an increase in online penetration. Currently, the online booking penetration remains at 17% and is estimated to hit 31% by 2020.
Digital footprint, a metric which measures consumers access to the internet, has more than doubled in the last 3 years with the advent of Jio, a VOIP network communication in India. This trend is expected to continue to reach 650 million internet users in 2020 that means around 75-80% of the Indian urban population will have access to the internet from the current 46% urban population.
Digital influence and conversion are expected to cross 40% in 2020 from the current 30%.
Distribution Chain Analysis
Hotel distribution chain is distinguished into two broad categories: Primary activities and Supporting activities. These activities function as operation, branding, and distribution of hotel service. First, brands are the most visible and recognizable parts of a hotel chain. Taj Hotel and Oyo room are such examples both distinguished as luxury and budget hotel respectively.
These activities involve branding and customers relationship on a daily basis. Secondly, daily operational activities of a hotel such as a day to day service of guest, inventory management, etc. Thirdly, the distribution activity involves delivery service to the actual and potential customers. Hotels approach customers mainly through two routes. One is through offline channels where service is delivered to an international guest through a global distributor and local travel agents communicate service to domestic guests. The hotels itself also make direct reservations.
On the other hand, technology has enabled the route to sell hotel service digitally. Online Travel Agencies (OTAs) such as Oyo room and MakeMyTrip book more than 60% of hotel rooms thorugh their application. Nowadays, hotels are upgrading their own sales channel towards online portals. Metadata and Keywords are essential to influence and convert a potential customer into actually buying the service. These tactics help generate more traffic to their portal when a customer makes a query on search engines.
Apart from the stakeholders illustrated in the figure, educational institutions to provide hospitality specific training and skill are another supporting body. Indian School of Hospitality (ISH) was established by a member of Starwood Hotels & Resorts in India to disrupt the hospitality education space. The Gurgaon-based ISH has plans to expand and gradually open more campuses in India and abroad.
The hospitality industry environment is changing at an incredible pace and if the talent is to be future-ready, curriculums need to have the newest trends and patterns incorporated into them.
The mission of ISH is to bring in a new-age educational philosophy and reimagining higher education for the upcoming generation of talent. The Indian School of Hospitality bases its unique approach to higher education on a balance of understanding the current needs of the global hospitality industry with those of today's millennial student. With a faculty comprising of hospitality industry experts and culinary veterans, the curriculum is tailor-made to prepare students to anticipate change and disruption within the global landscape - and become the disruptors of tomorrow.
The campus combines technology with high-end design, providing students of ISH an environment that helps to bring more joy into academic discovery while providing them with spaces to put their hands-on skills to the test, in a mirror-like working environment. The campus has an in-house fine dining restaurant, coffee shop, reception area and more to prepare students for the future.
ISH offers Bachelors in Hotel Management and Bachelors in Travel & Tourism programmes, with Intensive Culinary Arts Certificate. Presently, it also offers a Four Year Bachelors in Hotel Management (with a Certification in Hospitality Management), a Four Year Bachelors in Travel & Tourism (with a Certification in Culinary Arts) and a 9+3 month Intensive Culinary Arts Certificate.
The Indian hotel industry is highly fragmented, with a large number of small and unorganized players dominating the market. In recent years, there has been a shift towards the mid-market and budget segments in the industry, and the development of hotel aggregators in the budget space, who have consolidated the massive and unorganized hotel market.
Online platforms for budget accommodation such as Oravel Stays (OYO Rooms), WudStay, Zostel Hospitality (Zostel and Zo Rooms), FabHotels and Treebo have partnered with standalone hotels and guesthouses in order to provide them with marketing, distribution and quality assessments. These companies are raising venture funding and implementing ambitious plans for expansion. In just three years since its launch, OYO Rooms has nearly 125,000 rooms across 200 cities, making it one of India’s largest hotel chains.
In the hospitality space, the competition between hotel room aggregators and online travel agencies (OTAs) is intensifying. Hotel aggregators are fast eating into the market share of online travel agencies as better control over inventory helps them provide better customer experience.
The total online hotel room booking market has consistently grown in the past four quarters from $1.25 billion in the first quarter of 2017 to USD 1.78 billion in the fourth quarter. Both online travel agencies, including MakemyTrip.com, Cleartrip.com, and Booking.com, as well as budget hospitality company-turned-hotel aggregators like OYO and Treebo, have been growing quarter after quarter.
Oyo or Treebo are not just aggregators of the hotel inventory, their business models have evolved in recent times. They take control of part of the inventory or the full hotel and provide the branding. They invest money in upgrading the inventory to the specifications of the brand. These aggregators have been largely active in the budget category, where almost all the hotels are unorganized. Lack of standardized quality and facilities have been a major worry in the unorganized hospitality segment.
These hotel aggregators have brought in some standardization and this has increased demand for budget category hotels. Availability of standardized services at affordable pricing has led to the emergence of several new sets of customers. Medical tourism, people visiting relatives in other cities and traveling professionals are contributing to occupancies in the budget segment.
The major competition comes from the other companies in the same sector. So the rivals are to be found and make their primary and secondary strategies which makes the company competitive in the market. There are also pricing strategies which play fewer roles in the competitive market and should think of the non-pricing strategies which can be more competitive in the market.
Budget and midmarket hotels across the country are angry with Oyo because their business is suffering due to deep discounting, high commissions and arbitrary contract changes being sought by the platform.
Many big brands are discovering that strategic employee engagement programs are the foundation for redefining and transforming the customer experience, by driving brand loyalty and growing market share.
For example, engaged and motivated employees are at the heart of positive restaurant experiences—from how customers are greeted when they walk through the door, pick up a take-out order or get home delivery, to how quickly and well their food is prepared and served.
The strategy of offering competitive rates over online travel platforms, according to analysts and industry representatives, is being done to save on margins.
Hospitality majors are taking on online hotel aggregators and travel agents by offering cheaper rates, complimentary services, and loyalty points on direct bookings through their own websites over the past year or so.
Attractive pricing is a key competency accounting for 33% when it comes to choosing a hotel room in OTAs. Good reviews, Brand-image, and Cancellation policy sequentially follow the list where reviews matter about 17% to increase the footfall while the brand name and cancellation policy mater 10% and 8% respectively while making a decision.
Several hoteliers like The Indian Hotels, Hyatt, Starwood and Marriott International have redesigned their websites and offer the best available rates. Marriott, for instance, has seen an increasing inclination towards the use of direct methods by offering better rates and value-added services.
Meanwhile, companies are also adopting varied technologies to attract traffic. To gain incremental website traffic, by capturing search volume throughout the year, rather than just during a campaign period, they run `always-on' paid search (pay-per-click) campaigns on search engines
Key Market Players
OYO is India’s largest Hospitality Company in terms of the number of rooms operated and is shaping the evolution in the hotel industry in India with a unique business model to solve problems of small hotels with the help of cutting-edge technologies and innovation. Currently, it hits GBV run rate of USD 400 million with 15 million annual rooms booking.
Oyo’s Valuation is now more than that of India’s top 4 listed hotel companies combined.
Several innovative technologies and processes adopted by OYO:
- OYO Skill Institute– OYO has built in-house staff training capability with live on-the-job training and video clips benefiting 1000s of people.
- OYO Captain – Captain is deployed for localized and personal support guests.
- Consumers: Multichannel presence enabling real-time location-based search and booking through app, web, and a mix of offline and other connected tools.
- Partner hotels: Allowing a dynamic inventory/ hotel management and a seamless check-in check-out process on industry’s first mobile tablet-based hotel management system. While the majority of the industry still relies on calls and emails, at OYO, we see 100% of check-ins happening over the new age mobile savvy experience.
- Operations: Intelligent Captain App facilitating efficient and quicker tasks, stellar customer experience and a ticketing escalation tool to resolve issues faster along with several back-office tools speaking to each other to deliver a new-age quality experience along with old-school hospitality.
Other notable players in the market are
- Lemon Tree Hotel: Lemon Tree Hotels is the ninth largest hotel chain in India in terms of owned, leased and managed rooms, as of 2017. It operates in the mid-priced hotel sector, consisting of the upper-midscale, midscale and economy hotel segments. The company opened its first hotel with 49 rooms in May 2004. As on January 2018, it had 4,697 rooms in 45 hotels including managed hotels across 28 cities in India. The company went public in 2018.
- Treebo: Treebo Hotels works on a technology-enabled and franchise-based model. The founders do not own hotels but properties that are under its brand provide a certain value proposition to customers. Treebo’s Core Principle is a digital hotel, where the team works with the mind of an engineer and the heart of a hotelier. To keep a quality check on hotels, Treebo has employed ‘Floating General Managers’ – guardians of quality on the ground. Each floating manager comes with a wide array of experience from brands like Taj, Trident, Hyatt, Oberoi, etc., and is given charge of four to five properties at a time. Their role is to conduct staff training, interact with guests, as well as conduct quality audits every single day. By the end of 2018, the company expects to operate in more than 100 cities, 1500 properties, and 40,000 keys.
- Hyatt Hotels Corporation: Hyatt Hotels Corporation is an American multinational operator, owner, and franchisor of resorts, hotels, and vacation properties. It is headquartered in Hyatt Center, Chicago, Illinois. Its different brands are Park Hyatt, Andaz, Hyatt Centric, Ziva, Hyatt Hotels, Residence Club etc.
- InterContinental Hotel Groups: InterContinental Hotel Groups was founded in the year 2003. The company is headquartered in Denham, Buckinghamshire, United Kingdom. Its brands include Candlewood Suites, Crowne Plaza, Holiday Inn, EVEN Hotels, InterContinental, Kimpton Hotels, Holiday Inn Express, Hotel Indigo, Hualuxe, and Resorts and Staybridge Suites. The Americas office is in Dunwoody, Georgia in Greater Atlanta. Asia, Middle East, and Africa offices are in Singapore. The Greater China offices are in Pudong, Shanghai. The company worldwide headquarters and Europe offices are in Denham, Buckinghamshire in England.
- Marriott International: Marriott International was founded in the year 1927. It is headquartered in Bethesda, Maryland. Marriott was founded by John Willard Marriott in 1927 when he and his wife, Alice Sheets Marriott, opened a root beer stand in Washington, D.C. Marriott International was formed in 1993 when Marriott Corporation split into two companies, Marriott International and Host Marriott Corporation. It is one of the top hospitality companies in India. The different Marriott brands are St. Regis, Ritz- Carlton, JW Marriott,
- Radisson Blue Hotels: Radisson Blue Hotels are one of the top hospitality companies in India. It is the group of hotels located nationally and internationally.
- Shangri La Hotels & Resorts: Shangri La Hotels & Resorts was founded in the year 1971. It is one of the best hospitality companies in India. It is a hong-kong based multinational hospitality company. It has hotels in different countries like the Middle East, North America, Australia, Asia, Europe.
- Taj Hotels Resorts & Places: Taj Hotels Resorts & Places was founded in the year 1903. It is headquartered in Express Towers Nariman Point. It was founded by Jamshedji Tata. It is headquartered in Mumbai, Maharashtra. It is one of the India largest business conglomerates.
- Jamsetji Nusserwanji Tata, the founder of the Tata Group, opened the Taj Mahal Palace, a hotel in Mumbai (formerly called Bombay) overlooking the Arabian Sea, on 16 December 1903. It was the first Taj property and the first Taj hotel.
- The Lalit Hotels: The Lalit Suri Hospitality Group is India’s leading hotel company. The company is headquartered in New Delhi. Its first hotel was founded in the year 1988 by Mr. Lalit Suri. The branches of leading hospitality company are located in all top Indian cities including New Delhi, Mumbai, Chandigarh, Udaipur, Kolkata, Khajuraho, Udaipur, Bangalore etc.
- The Leela Palace: The Leela Palaces, Hotels and Resorts is managed by Hotel Leelaventure Limited. The company was established in Mumbai, India in 1983. It was founded by Late Capt. C.P Krishnan Nair.
- The Oberoi Group: The Oberoi Group is headquartered in Delhi, founded in the year 1934. The founder of Oberoi Group is Mohan Singh Oberoi.
- The Park Hotels: It is one of the top 10 and leading hospitality companies in India. It was founded in the year 1967, Kolkata, India. These hotels are located in Bangalore, Chennai, Hyderabad, Kolkata, Navi Mumbai, New Delhi, Visakhapatnam, and Goa. It is also constructing various other properties in different locations.
- The Indian Hotels Company Limited (IHCL): The Indian Hotels Company Limited (IHCL) and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. Incorporated by the founder of the Tata Group, Jamsetji Tata, the Company opened its first hotel - the Taj Mahal Palace, in Bombay in 1903. IHCL has a portfolio of 165 hotels including 20 under development globally across 4 continents, 12 countries and in over 80 locations. Taj Hotels is easily known as one of the finest chains of luxury hotels and resorts globally. From modern business hotels, and idyllic beach resorts to authentic Rajput palaces, Taj Hotels seems to have it all.
India has 38 hotel companies which trade on the stock markets. The biggest, in terms of market capitalization, is Indian Hotels, which runs the Taj chain of hotels. It is valued at USD 2.1 billion (at a conversion rate of INR 70 per USD). It is followed by EIH Ltd, which runs the Oberoi group of hotels, which has a market capitalization of USD 1.24 billion. The third is Lemon Tree hotels with a valuation of USD 0.8 billion, and the fourth most valuable hospitality chain in India is Westlife Dev, which runs the McDonald’s chain of restaurants in India.
The India hospitality industry is expected to grow at a double-digit rate, placing India the second-fastest growing tourism market in the world. Progress like massive investment in hotel infrastructure and open sky policies which are made by the government are pulling the growth in the hospitality sector.
Hotel and hospitality industries are the biggest employment generators in the country. The growth in the hospitality sector and its contributions to the GDP will continue to be substantially higher than other sectors of the economy on the back of huge tourism potential in the country.
However, the hospitality sector is one of the most heavily taxed industries charged with multiple layers of tax such as VAT, service tax, luxury tax, etc. ranging from 20 percent - 30 percent depending upon the type and size of a hotel. This multiple taxations adds to operational costs and reduces profitability.
The hospitality industry relies on a host of enablers to function throughout the value chain like transportation, entertainment, aviation etc. Strengthening these related sectors will lead to the growth and development of the hospitality sector. Therefore, single window clearance for real estate and hospitality projects and providing infrastructure status to the hospitality industry are much-needed steps for the growth of the industry.
Infrastructure development is the backbone and key to the growth of the hospitality sector. Taxes on real estate development for the hospitality sector must be lowered to boost investments as there is an acute shortage of good quality accommodation in the country.
The government must also look at incentivizing investment in the development of luxury and ultra-luxury projects which will provide impetus to the hospitality and travel sector in India.
The hospitality sector has the potential to be the main pillar behind the growth of the economy. It, however, will be possible only with the right amount of support and incentives from the government in all categories of hotels and not only limited to the luxury and ultra-luxury segment.
The future of the hospitality sector looks very promising. With the growth of the economy, an increase in spending on travel, demand for the industry is very likely to improve. With salary increases within the corporate world, leisure travel and disposable income are likely to be on the rise, and a growing number of international travelers each year.
- HOTELS IN INDIA TRENDS & OPPORTUNITIES, HVS, 2017
- Demystifying the Indian Online Traveler, BCG, 2017
- Global Hospitality Insights, EY, 2015