Hospitality Product Developement

Contents Introduction

4

Hotel service supply

4

Opportunity for hotel services

6

Hotel room rates

7

Commonwealth games and hotel services supply

9

Conclusion and recommendation

10

Introduction: India is a growing country which have healthy GDP growth rate. Hotel industry of any country is always depending upon tourism growth, infrastructure quality, economy of country etc. India economy, the fourth largest economy in the world, which has huge scope for tourism and hospitality. But the only problem her in India is that hotel room

supply not matching with the demand, when there is huge demand of 2,60,000 room but only rooms available are 1,10,000 so there is huge gap in supply and demand. But the economy of India shows a healthy growth rate in hotel room supply, and hotel industry is facing some problems like expansive land Indian regulatory etc. but India stands forth among the top five travel destination from 167 countries which shows that India is one of the most important travel destinations on the world travel map and has a great capacity to attract a large number of travelers from across the world. This is one of the reasons for the demand for the hotel rooms being higher than the supply. But expansive room rates, sky-high real estate prices and international competition all these factors are resulting the higher demand. And the budget hotel will get more business in current scenario, while luxury high capacity hotels having 20 to 30 per cent unoccupied rooms in every year forecast. Hotel service supply: Hotel Industry is booming in India in recent years. Hotel rooms in India in the hospitality sector are growing at a Growth Rate of 8-10 per cent between 2008 and 2011. The supply of new hotel rooms in key cities would go up by 80 per cent during the current scenario around 52,220 rooms will be added. But still there is big gap in demand and supply of hotel services in India, as hotel Industry is linked to the tourism industry and the growth in the Indian tourism will always increase the demand in the market, the booming economy and increase in business opportunities in the country is acting as a boon for hotel service s in the region. Government seriously working on improving the opportunities for business traveler, few of the steps taken to improve the infrastructure reducing the excise duty on aviation has fueled the growth of industry and helped in reducing the faire prices and low cost airline are doing well in market, so now travelling has increased and need more hotel service to accommodate them. (ventureintelligence, 2007) The new rules and criteria by government have opened the aviation industry in the country, which is creating new opportunities for the hospitality, as 80% of international arrivals are by air, so it is important for hospitality and tourism to always have eye on air travel. Not only growth in airlines effect the hotel supply but other mode of transportation

also like upgrading of national highways have opening new development doors for motel and other services, taking it seriously many big hospitality companies have plan for new concepts like homotel, motels etc. ( iloveindia.com, 2007) India offers great accommodation options for the business and leisure travel the hotels in India realize the special needs of the business travelers, and the actual supply of hotel rooms in India is around 1.14 lacs, but the total demand estimated in India is of 2.65 lacs hotel rooms. So still there is shortage of 1.55 lacs rooms. India is a growing country there is continuous increase in business sentiments, leading to higher businessrelated travel domestically and internationally, and the estimated demand is going to cross the supply by 100% in next few years, so occupancy in markets to go up dramatically. India has 95 four-star hotels catering to 8,000 guests, there are 204 fivestar hotels catering to 30,200 costumers and one- and two-star categories have the highest number of hotels 1,400, accommodating 58,400 tourists. (Business-standard, 2009) India ranks 18th in business travel and with a growth rate of 15% a year in hotel room supply. The ranking in business travel will be among the top 5 in this decade. There is huge opportunity for tourism development. As Indian economy improving day by day, son there is constant demand for domestic and short- duration travel in major cities like Delhi, Bangalore, Pune etc, as market will grow growth of current capacity will set to tempt plenty of availability of rooms in near future and this demand will push the supply of budget hotels than luxury room, but there is huge investment for luxury and business class hotels but demand is more for budget hotels, so it can result to a imbalance in demand and supply India Hotel Industry is adding near 60,000 rooms, currently in different phases of planning and development and should be complete by 2012. Government has approved 300 hotel projects around Delhi, nearly half of which are in the luxury category. And manpower requirements of the hotel industry will be around 15 million by 2010. Especially the budget and mid-market hotel category will witness huge growth during the

commonwealth

games.

(mapxl.com,

2009)

Some

of

new

project

which

will

help

in

supply

of

hotel

rooms:

Sofitel Mumbai have developed approximately 300 rooms in a joint venture with Accor and prominental, Accor have plan to increase the hotel room under their brand Novotel, one is already build in Gurgaon and will recently launch its Mercure brand. Interglobe and Accor have developed 15 Ibis hotel with 2,700 rooms’ capacity. These all are business hotel which are operating under Accor with different joint venture with local companies. Accor have plans to open around 5,000 rooms in India by 2012. Indian Hotels is showing the most hunger for rapid growth in the useful hotels segment. Roots Corporation is aiming 100 hotels over the next decade. Opportunity for hotel services: Medical tourism is next thing booming in Indian hospitality, but there is not much development in this area, there is potential in this segment to grow. To attract the world class business tourist you need to have world class conventions so there is huge opportunity for hotels and convention centers in cities like Mumbai, Delhi or Goa. Cities like Pune, Bangalore, Hyderabad have grater opportunities for hotel development and foreign investment. It is a good market for mid market and budget hotels The economy of India is booming, it is expected that the share of India in world GDP will increase to 11% from 6% current by 2025, and it may come out as third pole of global economy after US and China. The growing numbers of wealthy Indians the domestic traveling will be increasing with a positive growth rate as well as the international traveler are also doubled in last few years. And the huge on infrastructure will work as fuel for development in business and convention travel. Government is encouraging the foreign investment by changing its laws about foreign investment. Such as 100% direct investment on housing, hotels or other commercial properties. (hotel-online, 2006)

Hotel room rates: Hotel room rate are reaching sky high in India because of less hotel room supply than demand, and because of recession every body is in frame of mind to get rid of unnecessary expanses. India needs hotel rooms, there is big disparity in low supply and high demand. There is great disparity between the low supply and high demand. Some other factors like high land cost and increase in wages are also forcing hotel companies to rise the room, but that will effect the new room supply of new hotel projects. Commonwealth games and hotel services supply: It is anticipated that the demand for the hotel rooms in India is again going to rise in the future. According to the ministry of tourism, 4.4 million tourists visited India in 2007 and taking the forth coming Commonwealth Games the demand is expected to raise by 10 million by 2010. India is falling short of about 150,000 rooms which have led the hotel room rates to rise across the country and hence India is become a perfect destination for the hotel chain of the world looking for growth. Taking this demand into consideration the hotel chains like Marriott International, Hilton, Intercontinental Hotel group and many other well known hotel chains have announced major investment plans in the country. To meet this growing demand in the future for the hotel rooms, government has also shown its support by declaring the hotel and tourism industry as a high priority sector with a provision for 100 percent foreign direct investment, which have all the more attracted these hotel chain to India. It is also estimated that about 40 international hotel brands will make their presence felt in India by 2011 and the hospitality sector will see US$ 11.41 billion rise in the next two years. Commonwealth games are will be held in Delhi, but Delhi still have shortage in supply of 20,000 rooms. Delhi is preparing to meet the demand by working on other substitute like temporary accommodation in place of building rooms only for games, so it gearing up in supply to meet the demand. Some of factors like high cost land, reducing the price of

plot aucted for hotel and allotting land for business hotels at lower rate can help reducing the gap of demand and supply. (delhicapital.com, 2007)

Conclusion and recommendation: Indian hospitality sector is growing with the rate of 8 to 10 per cent, there is rapid growth in demand for hotel services supply in India is trying to meet the demand, Government seriously working on improving the opportunities for business traveler, few of the steps taken to improve the infrastructure and increase the supply. Rapid growth in air travel have fuelled the need of hotel room supply, 80 per cent of international arrival are by air so it need to have availability for the requirement. Many big hospitality companies have

plan to increase in supply of hotel rooms by many new concepts like homotel, motels etc. the actual supply of hotel rooms in India is around 1.14 lacs, but the total demand estimated in India is of 2.65 lacs hotel rooms. So still India is shortage of 1.55 lacs rooms, India has 95 four-star hotels, 204 five star hotels and more than 1,400 one or two star hotels all together providing service to more than 1 lac tourists. And some new project including more than 60,000 rooms, currently in different phases of planning and development and should be complete by 2012. Indian Hotels Company is showing the most desire for rapid growth in the many hotels segment and aiming 100 new hotels in next decade. There is huge scope for hotels to meet demand in new cities like Bangalore, Gurgaon etc. the next big event commonwealth games are seem to be short of room supply. Today India need additional room supply, that can satisfy the need of market, and moreover the value for money product, which satisfy demand of individual.

Reference: Business-standard, (2009). “Hotels in India- demand and supply”. Retrieved on 29th March

2009

from

indiademandsupply/351939/

http://www.business-standard.com/india/news/kit-hotels-in-

Delhicapital.com, (2007). “Not enough room for CWG 2010”. Retrieved on 26th March 2009 from http://www.delhicapital.com/commonwealth-games-2010/news/not-enoughhotel-rooms.html Hotel-online, (2006). “Why We’re Building Hotels in India Like Crazy”. Retrieved on 25th March

2009

from

http://www.hotel-

online.com/News/PR2007_1st/Jan07_IndiaHotels.html Iloveindia, (2007). “Hotel industry in India”. Retrieved on 26th March 2009 from http://www.iloveindia.com/economy-of-india/hotel-industry.html Mapxl.com, (2007). “hotel industry in India”. Retrieved on 27th March 2009 from http://business.mapsofindia.com/india-industry/hotel-industry-in-india.html Ventureintelligence, (2007). “The hotel room shortage - and boom - in India” Retrieved on 27th March 2009 From http://www.ventureintelligence.in/blog/2007/03/hotel-roomshortage-and-boom-in-india.html