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Hotel industry to reach Rs 230 bn, growing at 12.2%
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Monday, 23 March, 2015, 08 : 00 AM [IST]
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Vaibhav Verma and Manish Malhotra
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fiogf49gjkf0d The Indian tourism and hospitality industry has materialised as one of the key drivers of growth among the services sectors in India. It contributes to 6.23 per cent to the national GDP and 8.78 per cent of the total employment in the country. Constant transformation, functional growth and improving standards have gained the hospitality industry of India approval all over the world.
The industry is broadly compartmentalised into two segments
Tourism: The tourism sector includes medical and healthcare tourism, adventure tourism, heritage tourism, ecotourism, rural tourism, wildlife tourism and pilgrimage tourism.
Hotels: These include business hotels, suite hotels, resort hotels, airport hotels, extended stay hotels, apartment hotels, resort hotels, timeshare hotels, casino hotels, convention centres and conference centres.
Several foreign players have established their strong presence in the country’s hospitality spaces. These foreign companies mainly include Accor, Starwood, Marriott, Premier Travel Inn (PTI), Cabana Hotels, Mandarin Oriental, Hampton Inns, Banana Tree, Satinwoods, and Amanda. Some reputed Indian companies leading in the hospitality sector include Asia Hotels, ITC, East India Hotels (EIH), Bharat Hotels, Hotel Leela venture and last but not the least, Indian Hotels Company (IHCL).
According to the data released by Planning Commission, Indian hospitality sector is the second largest employer in the country as it is capable of offering employment opportunities to a wide range of job seekers from professional to unskilled workers.
By 2015, the Indian hotel industry is expected to reach Rs 230 billion, growing at a robust CAGR of 12.2%. India will be investing approx Rs 448 billion in the hospitality industry in the next five years.
India is currently ranked 12th in the Asia Pacific region and 68th overall in the list of the world's attractive destinations, according to the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF).
Top hospitality trends for 2015 that are going to dominate the Indian traveler’s:
Everything online
The most significant development in 2015 is going to be the increased use of internet, particularly social media, and technology by consumers while taking decisions pertaining to their travel itinerary.
The fascination of the millennial with their digital devices is not a mystery. 2014 marked the e-commerce boom in India. It seems even those less trusting of the faceless internet; trust it with their money now. The convenience is unquestionable. In a survey by Google and Ipsos MediaCT, 70% respondents claimed to begin researching online before deciding where or how they want to travel. More and more Indians are looking up to the internet to find new experiences to enjoy.
Users are looking for smoother interfaces to identify new travel locations and make bookings.
Digital transparency
With large capital infusions by hoteliers into new properties, at almost every price level, in the recent years has led to a situation where the supply exceeds the demand and shifted the pricing power to the consumer.
With competitively priced rooms in every market segment, the choice of a hotel boils down to the service. And how does one learn about the level of service without even visiting the establishment even once? By simply experiencing it vicariously through other’s reviews.
People are no more silent about a bad experience. They lash out and without mercy. Online opinions by guests play a very important role in guiding purchase behavior within their circles of influence. From aggregated ratings to extensive review, a single disappointed guest could result in a butterfly effect that could lead to a lot of lost sales for hotels. The hotel managers need to be on their toes and be prepared to deliver beyond a guest’s expectations
Rise of the meta search
The desire for instant gratification of the Millennials has spawned a new breed of web properties that cater to their need for instant and more efficient ways to access information. These digital properties are meta search engines. Meta search engines like Google Hotel Finder, TripAdvisor, Kayak & Trivago offer users the ability to take informed decisions on booking hotel rooms without having to jump around from one hotel’s website to another. These meta search engines offer real time room availability and pricing from multiple sources along with pictures and detailed information about the hotels.
Search of an experience
The modern day consumers are all about instant gratification. They don’t wait and plan. They just go. No time to stop and think. And once again aiding this obsession is the power of online information. The year should see a significant rise in the number of people who spontaneously decide to vacation and select destinations on the go.
While earlier large marketing budgets decided which hotel offered a richer experience, today it is not the case. Today the consumers tell the story in their own words and there are always prospective guests listening.
The availability of the wide choice in the travel market has resulted in travelers, even business travelers, wanting an experience rather than accommodation. Travelers today do not shy away from smaller independent properties for the sake of experiencing something new. The popularity of Airbnb is a testament to this fact.
Offline means off
The woes of the traditional offline travel agents are going to continue. According to Internet and Mobile Association of India (IAMAI) and IMRB, the air tickets booked online in April 2014 were 1.78 million compared to 0.78 million in the corresponding month last year registering 110 percent growth. Another survey by MakeMyTrip revealed that 97% Indians preferred booking hotels online.
The travel agents had their moment in the pre-internet days. The ease of booking flights and hotels without any intervention is more convenient to the modern day traveller.
Going mobile
The desktop, the laptop and now smartphones. The power to the consumers seems to be increasing inversely to the package size. Every user with a smartphone in their hands has access to a rich world of information. With just a few taps, the modern day traveller can compare rates and amenities offered by hundreds of properties. One can locate rooms as per their needs, compare them for the lowest rates and book one for themselves on the ride from their home to the airport. Mobile bookings also facilitate the urge of the modern day consumers for instant access to information and unplanned travel. Bookings are just a part of the story though. Hotels are also using mobile devices to enhance the guest experience during the stay. The Starwood Hotels have been testing Apple iWatch’s functionality to implement keyless entry for guests in their hotels
Healthy holidays
There is a marked rise in concern regarding health in India. 2015 should bring with it a wave of health conscious travelers. From guests who need their morning yogurt to travelers wanting to get away from the unhealthy lifestyle. The health-mania is sure to affect the hotels and they need to be ready to cater to them. While most large chains that cater to international travelers carry an option of healthy food items, the smaller independent hotels need to put it into consideration as well. The health bug is not limited to high roughage meals and low-calorie drinks. Ganga Kinare, an independent hotel in Rishikesh, hosts the annual International Yoga Festival held there. It sees participation from over 200 participants around the globe. Thereby, seamlessly transforming from a boutique hotel to a health retreat and providing its guests a unique healthy experience.
Most of the trends pivot around the increased proliferation of internet and technology in India and so must be embraced by hoteliers as well. It’s no longer about just the product, price, service or feature on offer. Rather it is about building a rapport and trust with the new generation customer in a world that is always-on and always connected.
The Indian hotel industry is seeing huge spurt of foreign investment and international brands entering the foray. The Indian government’s policy regime and a robust business environment have ensured that foreign capital keep flowing into the country. The government has taken many initiatives in recent years there are many Opportunities available for foreign investors to invest in Indian Hospitality industry such as:
- The Indian hospitality sector has been growing at a Cumulative Annual Growth Rate of 14% every year. The existing gap between demand and supply of hospitality services is expected to widen further as the Indian economy grows. The Indian government estimates the requirement of more than 200,000 rooms by the end of this year. This is where a real opportunity lies for foreign investors to invest in the Indian hospitality sector.
- Most of the reputed foreign players have already collaborated with Indian companies which are into hospitality business. Foreign investors have set up modern motels, hotels and lavish holiday resorts in metropolitan cities of India. The entry of famous foreign players like Kentucky Fried Chicken, McDonald’s, Pizza Hut and Domino’s has offered an international glitz to Indian hospitality sector and it welcomes more foreign players to expand in India.
- Indian Five Star hotel segment has grown very rapidly in the last few years at a growth rate of 12 percent. This segment can be categorized into three sub segments which are Business, Luxury and Leisure. Over the last couple of years, the country has demonstrated large influx of corporate travelers owing to relaxation offered by Indian government for FDIs to invest in Indian hospitality sector.
- Meetings, Incentives, Conferences and Exhibitions (MICE) group has also played an important role in Indian tourism and hospitality industry. It serves especially to business travellers, mainly foreign tourists. It caters to different forms of international conferences, business meetings, conventions, exhibitions and events.
- The constant interest of foreign players in Indian hospitality market demonstrates its potential as a strong sector in times when other sectors are facing the heat of Euro zone crisis.
The Government of India and the Ministry of Tourism have contributed significantly to the growth and development of the industry by providing various policy measures, tax incentives and infrastructural support such as
- Promotion of rural tourism by Ministry of Tourism in collaboration with the United Nations Development Programme
- Availability of Medical Visa for tourists coming into the country for medical treatment
- 100 percent FDI allowed through automatic route in hotel and tourism sector
- Insurance of visa on arrival for tourists from select countries like Finland, Japan and New Zealand
- Capital subsidy programmes for budget hotels
- Elimination of customs duty for import of raw materials, equipment, liquor etc.
- Five-year income tax holidays for 2-4 star hotels established in specified districts having UNESCO-declared 'World Heritage Sites'
The key challenges that the industry faces today are infrastructure, regulatory, availability of product bouquet, rising inflation, intercultural differences and the biggest amongst them the shortage of skilled manpower. India, known the world over as the land of hospitality – is today in the defining stages of the business of hospitality and with unlimited tourism and untapped business prospects. In the coming years Indian hospitality will only see green pastures of growth.
(The authors are asst professors at Banarsidas Chandiwala Institute of Hotel Management & Catering Technology)
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