Itc Sonar

Summer internship project report „IMPROVING Acculturation INDUCTION AND TRAINING A study At itc sonAr‟

By: Akshitara Singh 08BS0000219 IBS Kolkata 1

Summer Internship program Final report “iMprovinG Acculturation, INDUCTION AND TRAINING A STUDY AT itc sonAr”

A REPORT SUBMITTED IN THE PARTIAL FULFILLMENT OF THE REQUIREMENTS OF MBA PROGRAME OF

ICFAI BUSINESS SCHOOL, SALT LAKE SECTOR - V, KOLKATA

By: Akshitara Singh Under The Guidance Of: Faculty Guide:

Company Guide:

Prof. Subir Sen

Mrs. Shweta Pillai

IBS Kolkata

ITC Sonar

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ACNOWLEDGEMENT

I would like to express my heartfelt thanks to my faculty guide, Dr. Subir Sen, for guiding me through this project and for his insightful suggestions and advices. I would also like to express my heartfelt gratitude to my company guide Mrs. Shweta Pillai for extending towards me, her extensive knowledge and support, through the entire phase of my internship. I would also like to thank Mr.Sujit Menon, for always providing me with all the insight into the project. I extend my thanks to all who, directly as well as indirectly, helped me to achieve my aims and objectives for this duration; Miss Suheli Das and all the hotel management staff and trainees who extended their helping hands for completion of my project. My thanks and gratitude also goes out to the unmentioned, but not unimportant people, who helped me with their advice and support. Thanking you, Akshitara Singh 08BS0000219

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table of Contents

Serial no. (i) (ii) 1 1.1 1.2 2 3 3.1 3.2 3.2.1 3.2.2 3.2.3 3.2.4 4 4.1 4.2 5 6 7 7.1 7.1.1 7.1.2 7.1.3 7.1.4 7.2 7.2.1 7.2.2

Title Acknowledgement Executive Summary Introduction Hospitality Industry Top Players Problems being faced by the Industry in terms of HR Company Profile ITC Ltd. ITC Sonar Facilities offered by Sonar Features and Activities Brief overview of Operational Departments Front Office- Competency Mapping The Project Objectives Limitations The Cornerstones Of the Study Methodology Main Text Stage 1- Recruitment Process Factors Affecting Recruitment Recruitment Process Recruitment Process in Sonar Temporary Recruitment and Selection Stage 2 - Acculturation Process Acculturation Benchmarking with the Industry best: J.W Marriott

Page no. 3 5 6-8 6-8 8 9-10 11-17 11-12 12-17 12-14 14-17 17-19 19-21 22 22 22 23 24 25-28 25-28 26 26 27 28 29-34 29 30-32 4

7.2.2.1 7.2.2.2 (i) (ii) 7.2.2.3 7.2.2.4 7.3 7.4 8 8.1 8.2 8.3 8.3.1 8.3.2 9

About J.W. Marriott Acculturation in J.W. Marriott Throughout the Year Training Acculturation Timeline in J.W. Marriott Acculturation Process in ITC Sonar Benchmarking Comparison Stage 3 - Problem Identification (AS IS) Stage 4 - Recommendations (TO BE) Appendix Questionnaire – Induction Feedback Form Questionnaire Analysis Economy and Indian Hospitality Industry Article: Recession and Indian Hotel Industry Article: Predictive power of Hotel Cycles References

30 30-32 30 32 33 34 35-36 37-38 39-42 33-41 42

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Executive summary While product quality has been long acknowledged as a critical factor contributing to competitive advantage, acceptance of the similar importance of service quality is more recent (Bitner, Booms and Mohr 1994). This acceptance had manifold reverberations in the service industry which, subsequently, was forced to acknowledge the importance of the human resource providing the indispensable and vital service(s). It has been suggested service workers, because of their decision to work in the service industry, will have a desire to provide good customer service (Zeithaml and Bitner 2000) and this attitude is likely to carry over into their workplace behaviors (Bitner, Booms and Mohr 1994). This attitude can be either further engrained or reversed by the training he receives and the environment he works in. During the acculturation process of a company, a worker is not only taught the dos and dont‟s of his to-be trade, he is also given a peek into his future work environment which can create a positive or negative impact on his work-related attitude. Thus, the process of acculturation is given due importance by employers around the world. This project enumerates the steps and importance of this process in ITC Sonar and provides recommendations for its improvement which would help the hotel in improving its service and therefore its value, in the eyes of both, the prospective customer(s) and the prospective (or current) human resource(s) i.e. the employee(s).

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1.INTRODUCTION 1.1 The Hospitality Industry India - a place where guests are considered and treated as a form of god, hospitality sector is one of the greenest pastures of the Indian industry. Known for its quality and the standards of customer service, India has become a leading destination for the tourists across the world. The hospitality industry can be divided into two basic sectors: Hotel industry and Travel and Tourism industry. While India has always been one of the „Hot Spots‟ of eager tourists, the recent efforts on part of the Indian Tourism Ministry has helped our country become one of the favorite destinations of adventure as-well-as serenity seekers across the world. Encouraged by the booming economy and tourism, increased spending on leisure, the growing demand and the shortages of room space, there has been an influx of globally renowned players trying to capture a chunk of the ever growing Indian market. Few of them are Hilton Group, Accor Hospitality, Marriott International, Inter Continental Hotels Group. On the other hand, the Indian players are foraying into and have established themselves in foreign markets. The names include the biggies like ITC hotels, Radisson Hotels, Indian Hotels Company Ltd., Oberoi Hotels, and Asian Hotels etc. The Indian hospitality sector has recorded the compounded annual growth rate of (CAGR) of 15 percent. The rate of growth has been more or less consistent over the last few years.

The supply and Demand of hotels in India : The current global turmoil of economy notwithstanding, the Indian hospitality industry is riding on a high growth phase. This is because of more than decent growth in economy and the proactive policies initiated by the Indian Government in Travel and tourism sector. It is estimated that demand will exceed supply by at least 100% over the next 2 years. By 2010 the Tourism ministry is expecting the domestic tourists to cross the sixty seven crore mark, Which, thanks to growing affluence of Indian middle class as well as good infrastructure in terms of road and railways looks like a distinct possibility. The future forecasts highlight both positive triggers as well as concerns for the industry. These are as following:

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Acute Supply shortage There is a complete mismatch of demand and supply situation due to the rapid pace of growth experienced by the Indian Hospitality sector that has far exceeded the supplies. According to the industry insiders, the current demand for hotel rooms is approximately 2.5 lac but there are only 1.1 lac rooms available leaving a huge shortfall. Right now hotels in all major cities spanning India are experiencing high room rates and low availability of rooms. Star-rated hotels constitute about 30 per cent of the hospitality industry. In 2008, India had about 204 five-star hotels, yet we need 1,50,000 additional rooms at present to meet the demand. Boost in Demand Considering that three major sporting events are in the offing in the next few years, including the Commonwealth games (2010), demand for the hotel rooms is expected to show a steady curve upwards. This upward trend will be led by both foreign as well as domestic tourists, a segment now said to have finally "arrived" in India due to their rising income and changing lifestyle. Currently, domestic travel is growing at a rate of 15% to 20%. According to the World Travel and Tourism Council, India ranks 18th in business travel and will be among the top 5 in this decade. Five-star hotels in metro cities allot same room, more than once a day to different guests, receiving almost 24-hour rates from both guests against 6-8 hours usage. With this kind of a demand-supply disparity, room rates are most likely to rise 25% annually and occupancy is to rise by 80%, over the next two decades. The Indian Hotel Industry is adding about 60,000 quality rooms, currently in different stages of planning and development and should be ready by 2012. The Hotel Industry giants are flocking India and forging Joint Ventures to earn their share in the race. The Government forecasts an additional requirement of 200,000 rooms by the turn of the century, and has approved 300 hotel projects, nearly half of which are in the luxury range. According to sources said, the manpower requirements of the hotel industry will increase from 7 million in 2002 to 15 million by 2010. Firming up of Average Room Rents Average room rate or ARR is an important indicator of growth. This is because it is the room rent that accounts for the major portion of revenue earned by the Hotel industry of India. Average Room Rates (ARRSs) and occupancy rates have shown a consistent increase in the major Indian cities. The reason attributed to this increasing Average Room Rates (ARRS) and occupancy is the influx of foreign tourists. Even budget hotels are charging up to 250USD per room. Even in the recent future, despite the global inflationary trends, Industry Pundits estimate their arrival to be steady.

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Concerns: Coming to the flip side of the story, owing to acute shortage in supply of hotel rooms there are many big projects in the pipeline. There is sudden fear that once these projects are executed there may be a case of oversupply with considerable room additions. However, in the current recessionary phase of the global market with liquidity crunch, high inflation etc, it would take a substantial time before these projects are fructified. So, there is no immediate threat of oversupply.

1.2 Top Players The major players in the Indian hotel industry can be broadly classified into private players and public players. Public Sector Playe rs: ITDC hotels Hotel Corporation of India Private Sector Players: ITC Hotels Indian Hotels Company Ltd.(The Taj Hotels Resorts & Palaces) Oberoi Hotels(East India Hotels) Hotel Leela Venture Asian Hotels Ltd. Radisson hotels & Resorts

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2.Problems being faced by the Industry in terms of Human Resources: Shrinking Manpower The hotel industry is rapidly losing good professionals to other service segments. With many new opportunities opening up - for both graduates with a hospitality degree and hotel executives with experience and talent - within the business process outsourcing (BPO), ICE and othe r service segments in India, hotels are no longer the only career choice. We can go so far as to say that the hospitality industry faces a serious threat from other sectors: those that offer better comparative remuneration, a better work- life balance, a more challenging work environment, or faster professional growth. Shrinking manpower within the industry is, today, a grave problem. This paucity is being felt across all levels of staff and management now, and across all departments. On a pessimistic note, it can be said that 85 per cent of all management level personnel across hotel chains in India are not happy, and are waiting for the right opportunity to move out.

Growing Disillusionment The growing disillusionment within the sector is indeed worrisome. A love for the business of hospitality, and the desire to excel as a hospitality professional - considered to be the driving factors for a long-term career in the industry - are no longer motivation enough for a new generation of professionals that seeks faster and better gratification. Quite clearly, industry leaders, associations and HR practitioners need to put in time and effort, to provide a nd prepare for long-term planning to resolve the issues. The issue of quality of working life would be the single deciding factor for the new generation.

Changing Aspirations & Expectations The aspirations and expectations of hotel professionals have also undergone a sea change. To quote a senior hotel professional, “During our time, it would take as much as 13 years, through various positions, to rise to the level of food and beverage manager. The new „Generation Y‟ is not prepared to wait for more than six years. People now want a tangible idea as to how they will progress in the organization. The pressure of retaining people in today‟s competitive environment, and the adjustments that this necessitates will, over a period, significantly change both the management structure and 10

working environment in hotels in India. Managers will need to pay more attention to employee motivation and team-building efforts, and see that these 'ideas' are more regularly - and more effectively - put into practice. Age old policies and super structures, will, we believe, have to pave way to newer and faster career progression. HR concepts once alien to the Indian hospitality, like HRIS, OD intervention and Career Pathing, must now be taken very seriously by Indian hotel companies. It is indeed disappointing that, to date, not one hotel company in India has been ranked in the top three in any field of service orientation, or has been included in the list of best employers or best companies to work for. The industry has, without doubt, been inward looking, and owners and management have been slow to understand, recognize and adopt employee best practices.

Attracting Talent The Indian hospitality the industry has failed to create enough excitement for talent from outside the industry to enter and be a partner in its growth. The industry has to find new ways o f attracting talent. At the same time, there is a need for senior management to be flexible in terms of their hiring practices, and more accommodating with new recruits. Hoteliers need to let go of apprehensions and doubts, as to whether 'outsiders' would perform well enough, and adopt a longer-term, more visionary approach: invest in finding and attracting talent and devise ways to retain good performers. In other words, the industry needs to become more competitive. Lessons have to be learnt from the telecom and the other newly emerging, fast- growing sectors where people were 'invited to join the industry and given time and space to perform'.

Compensation The industry‟s compensation practices will go through a radical change. Some companies in India have started the process of aligning their pay structure to those of newly emerging sectors, but the differential is still too much, in the range of 30 - 40 per cent. Hotel owners and management need immediately to plan develop and implement long-term strategies for bridging or, at least, lessening the gap between what the industry offers - and what these professionals would be paid outside. Industry leaders should be more open with their compensation policies and practices. Annual benefits may need to be split into monthly or quarterly incentives, to enable an ongoing process of employee motivation. Performance management linked incentives must be very carefully monitored and should not be delayed. The practice of delaying compensation should be rectified and given urgent and top priority.

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3. Company Profile 3.1 ITC Ltd.: ITC Ltd today stands as one of India‟s largest premiere private sectors in the world with its presence felt in different businesses. Cigarettes-ITC‟s name in terms of the Cigarette business envelopes a wide range of popular brands such as Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake in terms of its portfolio Paper Boards- ITC's Packaging & Printing Business is the country's largest convertor of paperboard into packaging. It was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It also offers a variety of value-added packaging solutions for the food & beverage, personal products, cigarette, liquor, cellular phone and IT packaging industries. ITC's Paperboards business has a manufacturing capacity of over 360,000 tonnes per year and is a market leader in India across all carton-consuming segments. It‟s stationery brands "Paper Kraft" & "Classmate" are widely distributed brands across India. Greeting cards- ITC's Greeting & Gifting products include Expressions range of greeting cards and gifting products. Safety matches- ITC's brands of safety matches include Mangaldeep, VaxLit, Delite and Aim. The Aim is to be the largest selling brand of Safety Matches in India. It also exports premium brands to markets such as Europe, Africa and the USA. It has launched Mangaldeep brand of Aggarbattis with a wide range of fragrances like Rose, Jasmine, Bouquet, Sandalwood. Mangaldeep is also being exported to USA, UAE, Bahrain, Nepal, Singapore, Malaysia, Oman and South Africa. ITC entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Club life evening wear (2003). In 2002, ITC entered into the popular segment with its men's wear brand, John Players. In 2005, ITC introduced Essenza Di Wills, an exclusive line of prestige fragrance products. FMCG- ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the "Kitchens of India" brand. In 2002 it expanded into Confectionery, 12

Staples and Snack Foods segments. ITC's brand in Food category include: Kitchens of India, Aashirvaad, Sunfeast, Mint-O, Candyman, and Bingo! ITC's International Business Division (IBD) is the country's second largest exporter of agri-products. ITC exports Feed Ingredients (Soyameal), Food grains (Rice, Wheat, Pulses), Coffee & Spices, Edible Nuts, Marine Products, and Processed Fruits. The E-Choupal model- ITC has been very effective in tackling the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. It has helped farmers overcome the challenges associated with rural farming to a large extend. ITC Hotels- In 1975 the Company launched its with the acquisition of a hotel in Chennai which has been rechristened 'ITC-Welcomgroup Hotel Chola Sheraton'. Rooted in the concept of creating value for the nation, ITC chose the hotel business for its potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct as well as indirect employment. Since then ITC's Hotels business ha s grown to occupy a position of leadership, with over 90 owned and managed properties spread across India, catering to the different needs and choices of travelers from across the world. It stands today as the only Hotel Chain in the world which is known to have an „Indian Soul‟.

3.2 ITC Sonar: An integral part of the Luxury Collection (a hotel division) of ITC Welcomgroup, The Sonar began operating on the 1st of January 2002. This luxurious hotel known as the „Businessman’s Resort‟ is situated in North Kolkata. Holding true to the ITC slogan „Nobody gives you India like we do‟ hotel was named „Sonar’ meaning „Gold’ in Bengali, the language of its place of origin.

3.2.1 Facilities offered by Sonar: The hotel has three categories of rooms which cater to the different needs and preferences of the travelers. Each category has further sub divisions according to the structure of the room. The rooms are categorized as following:

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The Executive Club ‘For the discerning Business traveler’ There are 126 State-of-the-art rooms (16 smoking) each measuring 380 sq. feet

including

1 room for the

specially-able, 15 twin rooms and 12 interconnected rooms offering luxury buffet breakfast and cocktails with hors d‟ over‟s.

The Towers ‘Where Service is whatever you Want it to be’ The Towers offer 84 rooms (14 smoking) of 415 sq. feet each. These include 1 room for the specially-able, 5 twin rooms and

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interconnected

rooms.

The Towers

incorporate a separate floor –The Eva floor for „The Single Lady Traveler’ with services provided entirely by female personnel. Entry is restricted for the male guests as well as male personnel offering additional sense of security and comfort for its lone lady guests.

The ITC One or I-One Premiere Suites ‘The power Of Personal Space There are 21 rooms each measuring 580 sq. feet. There is one Grand Presidential suite, 2 Queen Suites,

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Junior/Princess

Suites

(2

smoking),

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interconnected rooms and 2 smoking rooms. The amenities

offered

include

complimentary

luxury

breakfast, fruit platters in the room, molten brown bathroom amenities, personal DVD/CD player, fax machine, stepper and personal

library. There is

personalized valet service and in- room check- in. 14

The Presidential Suite or the Virginia Suite is the largest room (smoking) in the hotel. It is non- saleable and is kept ready at all times for the chairman of ITC Ltd. „Mr. Y. C. Deveshwar‟

3.2.2 Features & Activities: Restaurants: Dumpukht It celebrates the rich diversity of rich traditional Indian cuisines and the 200 year old culinary tradition of cooking food in sealed “deghs”. This Indian fine dining restaurant with a show kitchen serves a mix of Awadhi and Lucknawi cuisines. It seats 74 persons and is open only for dinner (7:00 p.m. to 11:45 p.m.)

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Peshawari The most selling restaurant in the hotel, it serves the acclaimed cuisine of the rugged North West Frontier. It a restaurant set amidst a charming ambience where you tie on checked aprons and are encouraged to eat with your fingers. It seats 144 persons and serves lunch (12:30 p.m. to 2:45 p.m.) and dinner (7:00 to 11:45 p.m.)

Pan Asian It is a medley of oriental cuisines, inviting gourmets to a journey across the Pan-Asian belt. At the Pan Asian, you can explore diverse culinary traditions from the hearty fare of Mongolia to the fiery taste of Korea, China and Japan. It serves 140 persons providing lunch (12:30 p.m. to 2:45 p.m.) and dinner (7:30 p.m. to 11:45 p.m.) throughout

Eden Pavilion The Pavilion is a 24 hour multi-cuisine restaurant offering a delectable variety of buffet fare throughout the week for breakfast, lunch and dinner. The buffet includes Indian, Continental, Dakshin spread as well as the Lebanese spread (Maroush). It seat 140 persons.

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West View Bar and Grill It is an exclusive bar (11:00 a.m. to 12:00 a.m.) with interactive grill with the widest selection of imported meats and Crepe-Suzettes cooked right on your table. The novel outlet offering cigars from different parts of the world seeks to be a culinary journey for the discerning diner also offering the finest selection of single malts, cognacs and new as well as old wines. It serves 50 persons offering only dinner (7:00 p.m. to 12:00 a.m.).

Dublin It is an exclusive Irish pub and nightclub with an expansive bar and a dance floor. It accommodates 118 persons. It is open on Wednesdays, Sundays (7:00 p.m. to 12:00 a.m.), Friday (7:00 p.m. to 2:00 a.m.) and Saturdays (7:00 p.m. to 4:00 a.m.). it also offers extensive snack and combo

meals in

evenings.

Conference Facilities and Business Centre The hotel is acknowledged for its inimitable catering services, choice of cuisine and grand orchestration is also a preferred venue for corporate events, especially as it was the first business resort in the country. „Pala’ is Sonar‟s 7000 sq. feet, column- free ballroom comprising of 4 smartly equipped conference rooms and hi tech board rooms with videoconferencing, administrative and secretarial facilities. It can accommodate up to 800 persons. Additionally

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Sonar also boasts of „Sunderban – the Landscaped Garden‟ an outdoor venue of 35,000 sq. feet of lawn area.

The Spa- ‘KayaKalp’ Covering over 15000 sq. feet, the Spa provides a unique range of services, with a variety of Thai, Swedish,

Ayurvedic

and

Hydro- Therapeutic

massages. There are over 95 beauty & wellness treatments to choose from, each dedicated to personal needs and well-being. The Spa also has a fully equipped Gymnasium, an uncompromised rectangular pool, Yoga Centre and an attached restaurant. It is like finding tranquility in the midst of the bustling city.

3.2.3 Brief Overview Of the Operational Departments Housekeeping: Housekeeping plays a vital role in managing the hotel, any establishment being impossible to run without it. „Housekeeping‟ is a department which is responsible for the maintenance, hygiene, sanitation and general upkeep of the hotel premises. A good housekeeping sets the maintenance standards of a hotel and keeps the guest satisfied. The housekeeping also consists of the laundry which comes under the jurisdiction of a laundry manager who is solely in charge of maintaining guest clothes, staff uniforms, room linen, food and beverage linen and providing them to the various departments and maintaining stock. The horticulture department looks over the landscaping of the entire property.

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Food and Beverage Service: This operational department refers to all the point of sales in the hotel. It includes the various restaurants, outlets, In-room dining, banquets and Mithai shops. The basic purpose of this department is to sell the food and beverages in the restaurants or shops creating customer delight and in turn generating revenue. ITC Sonar has a variety of restaurants offering different cuisines like Indian, continental, specialties of the North West frontier province. In room dining refers to room service which is provided to the guests during their stay. The Food and beverage service department attends to the customers during parties or official functions held in the banquets. The Food and Beverage service is greatly dependant on the Food and Beverage production department, however it is the service that can make or break the reputation of the restaurant as well as the mood and mindset of the guest.

Food and Beverage Production: The food and beverage production is commonly known as the Kitchen. It caters to all the restaurants, banquets and shops within the hotel. This department is headed by the executive chef who is appointed after considerable experience in the industry. It is divided into several sections namely the cold food production, bakery, back kitchen, banquet kitchen, south Indian kitchen and butchery. Every section of the kitchen is functional at all times catering to guests 24*7.

Front Office: The front office is the heart of the hotel being the first contact point for any guest entering the hotel. It is composed of the reception, concierge, reservations and the phone service system. The „Reception‟ handles the registration requests, assignment of rooms, the mails/messages of the guests and also processes the guest bills. The „Concierge‟ provides custom services to the hotel guests like reservations for dining, transportation and baggage handling while developing an extensive network of local, regional and national contacts.

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The „Reservation‟ receives and processes reservation requests, conveys information to the guests like rate of the rooms, amenities, etc. They engage in up-selling, cross-selling and handle cancellations, amendments and reconfirmations. The „Phone Service System‟ is the nerve centre of communication. They monitor the guest wake-up calls and coordinate emergency communication. It serves as a channel of two-way communication i.e. from the hotel to the guest and the guest to the hotel. They shoulder a number of roles and responsibilities like welcoming and registering the guest, carrying their luggage, informing them about the special products within the hotel and furnishing them with information about the city, the tourist destinations etc. All the four departments are indispensable for the efficient functioning of the hotel. Food and Beverage service and Front office generate 100 % of the revenue. However if the housekeeping department was not efficient then no client would want to buy a room. Moreover, if the k itchen would not be present the service department would not exist. Thus.each department works in tandem with one another, with the common goal of creating customer delight and generating profits.

3.2.4 Front Office- Competency Mapping Front Office is the show window of the business organization. It is the hub, heart and epicenter of the hotel activities. It continuously has to coordinate with the other departments to provide efficient service to the guest. The main subdivisions of the front office are Reception, Concierge, Reservations and phone service system. These sub departments together monitor the guest cycle and coordinates all guest services such as information, mail, message handling, guest accounting, bill settlement etc. The front office also has the responsibility of ensuring safety and security of the guests. The front office functions during various stages which are explained with the following diagram.

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Baggage Handling Transportation

Reservations

Bill settlement Check Out

Departure

Pre Arrival

Telephone calls Transportation

Registration Room Assignment

Occupancy

Maintaining guest accounts

Arrival

Issuing keys

Baggage handling

Guest Cycle

As seen in the above diagram, the front office has on-going responsibilities before the arrival of the guest and even after the guest departs. During the pre arrival stage the reservations are made by the reservations department of the front office. An effective registration and pre-reservation process helps to speed up the arrival process. Once the reservation is confirmed, the registration cards are printed and the rooms are blocked. On the arrival of the guest, his details are entered in the guest records and the mode of payment is identified. The fro nt office clarifies all the queries of the guest and makes the guest feel at ease with regard to his safety and security during his stay at the hotel. Before the guest leaves the hotel the front office ensures the proper settlement of the guest accounts and also takes the guest feedback and satisfaction tracking. In the post departure phase the guest complaints are followed up by the employees at the front office. Thus, with the help of the Guest cycle we can see that the front office is the nerve centre of all activities in a

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hotel. Being the first and last contact point for a guest they carry the onerous responsibility of leaving a good impression on the guest.

Duties and Responsibilities of the Reception This section of the project attempts to study and map the competencies of two specific subdivisions of the front office, namely the Reception and Concierge. The duties and responsibilities of these two divisions are highlighted below. The reception registers and assigns the rooms to the guests and tactfully handles all the reservation requests after seeing the availability of rooms. They must have detailed information of the arrivals, room requirements and expected departures of the day. Moreover, they must be well equipped to provide information about the hotel and its surroundings. They handle the mail messages of the guest, maintain the guest accounts and process the guest bills. They must have a sound knowledge of different currencies and their exchange rates. The employees at the reception must be confident while handling cash and credit cards. They help to coordinate with other departments for maximum guest satisfaction and comfort and also handle guest complaints and emergencies. They give all the departure rooms to the housekeeping properly and take all the cleared rooms form the housekeeping .Thus, the reception performs the crucial task of being the link between the hotel and the visitor.

Duties and Responsibilities of the Concierge „Concierge‟ is a French word meaning „Doorkeeper‟ or „Porter‟. The concierge is the „information counter‟ of the hotel and furnishes the guests with information as and when required. It is required to be equipped with brochures; travel facilities information at all times and make airline bookings, taxi booking and planning of itineraries for the guest. They take charge of all packets and tickets for guest and ensure follow up. The concierge introduces and sells all hotel services and facilities to the guests. They also review and follow up complaints of guests and coordinate with the other subdivisions of the front office. The concierge maintains a log book, a comparative hotel analysis, daily function sheet and airport pickups and drop records. Thus, the concierge serves as a guest‟s liaison with hotel and non hotel services.

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4. The Project: This project entitled “Improving the Acculturation and the Training Process for the New Joinees” is being implemented in ITC Sonar. It includes the following:

4.1 Objectives of the project : Suggest new methods of imparting training to new joiners. Introduce a follow- up procedure to ensure compliance with the training methodology extending up to three months from the initiation of the training period. Creation of a mentorship program to ensure thorough interaction between the new joiner and the management. Providing a basic checklist for the new joinees to help them observe the important facets of each department. Listing down the roles, duties and tasks of the employees in some of the core departments in the hotel.

4.2 Limitations to the Study: Prior non-conduction of such programs has caused employees to be hesitant and wary about participation in this program and its consequences, thus, causing delays in data collection. Inchoate/dishonest/biased responses due to fear of reprisal from the management or due to biased outlook towards the management. The limitation of area of study, ITC Sonar, will cause the recommendations offered to be relevant only to this hotel and will offer no insight about the problems being faced in other hotels of ITC.

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5. The cornerstones of the study

WHY DO? To improve the acculturation process of the new Associates at the unit

WHAT TO DO? Provision of guidance and a proper process of training to new joiners till they are deemed self- competent

FAILURE? WHEN?

SUCCESS? HOW?

Lack of support or involvement from management/employe es /new joiners

Introduce an effective process and necessary checks to ensure the process is followed

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6. The methodology

Analysis of secondary data collected by the company through company administered questionnaires

Direct interaction with the employees about the acculturation process.

Direct interaction with the training manager in order to achieve the development and implementation of an improved training and acculturation process

Perform Bench marking with J.W.B. Marriot International to identify scope for improvement the standards of ITC Sonar.

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7. MAIN TEXT: The project has been divided into four stages for the facilitation of implementation. The stages with the major activities are being listed below: STAGE OF PROJECT

MAIN ACTIVITY

Stage 1

Conducting the selection process.

recruitment

Stage 2

Observing and gauging the process of acculturation.

Stage 3

Problem identification processes of the hotel.

Stage 4

Enumeration of the identified problems and development of feasible solutions to them

in

and

different

7.1 Stage 1: The Recruitment Process Managing human resources in the hospitality industry presents special challenges, including highly diverse employee backgrounds and roles, an ever-present focus on guest services, and organizational structures that often diverge from generic corporate models. Hospitality human resource (HR) management is a decision-making practice that affects the performance, quality, and legal compliance of the business as a whole and therefore, requires attention for all its components, especially the Recruitment component /phase. Defined as “The process of seeking and attracting a pool of people from which qualified candidates for job vacancies can be chosen.’’, it is basically the process of getting the right kind of people to apply for the right kind of vacancies in an organization at the right time. There are several factors affecting the recruitment process of organizations as illustrated as follows.

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7.1.1 Factors affecting recruitment

ENVIRONMENT FACTORS Social attitude & Beliefs of people (IT, BPO a few years ago)

Size of the organization Situation in labor market

Demand for certain Skills/ professions

Reputation of Organization (Google, TATA)

ORGANIZATION FACTORS

Geographical Location (Bangalore, Noida, Mumbai)

Emoluments

How healthy is the Industry (Healthcare vs BFS)

Channels & Methods used for recruitment

Organization’s culture & Practices—Employer Branding (Infosys, Marico)

Resources Allocated To the recruitment process (how soon the position Is to be filled…how important Is the position)

Law of Land (work permits)

7.1.2 Recruitment Process (Source: ICFAI Hyderabad)

HR Planning

Identifying HR Requirements STRATEGIC

surplus Retrench

demand Determine the criticality Of Vacancy and How many People are required

Organizational Policy Choosing the Right recruitment method

Recruitment method Not efficient

Analyze time & cost Job Analysis

Recruitment process efficient Implement the Recruitment program

OPERATIONAL

Select & Hire

Evaluate the program

27

7.1.3 Recruitment process in Sonar

Influx of CVs/Resumes (year round) from interested applicants

Campus CVs Screened by HR regional Head Short-listing by respective HOD based on requisite demand

1st round of interview conducted by resp. HOD

1st round of interviews conducted by HR regional head and Learning services manager clearance

clearance 2nd round of interview conducted by GM, Resident Manager (RM), HR regional head, Learning Services Manager, resp. HOD

2nd round of interviews conducted by GM, HR regional head and Learning Services Manager

Selection

Acculturation process on joining

28

7.1.4 Temporary Recruitment and Selection Recruitment and selection is done temporarily only for certain big events at the Sonar. Taking on additional manpower temporarily facilitates effective functioning of the numerous banquets and social events that take place in the hotel. Temporary recruitment for farewell banquet Date: 10th of April 2009 Event: The event to be held was a Farewell Banquet for one of the pioneers of the hotel industry Mr. S.S.H. Rehman. Hosted by the Chairman of ITC Ltd. Mr. Y.C Deveshwar, it was the most important event on the ITC calendar for the year 2009-2010. Preparation: Though preparation for the event encompassed many activities, my work entailed entirely of additional temporary recruitment. Students from six Hotel management schools were invited for interviews including: IIHM (International Institute of Hotel Management) IAM IIAS GNIHM (Guru Nanak Institute of Hotel Management) AHA (Air Hostess academy) NIPS Of the 95 respondents from the above schools, 70 were to be selected which were to include 30 girls and 40 boys. Selection parameters: The interviewees were judged on the following parameters: Communication Skills Grooming Domain Knowledge (Food & Beverage Service) Though selection protocol required presence of all three parameters, special emphasis was laid on the communication skills and grooming standards of the interviewee.

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7.2 Stage 2- The Acculturation Process When a new employee joins the organization, the management focuses on making the employee fully effective as soon as possible in order to optimally utilize his services. This process is often myopically defined as Onboarding. HR professionals universally define Onboarding simply as „moving a candidate for a role into that role.‟ The candidate can be new to the organization, or may already be participating in the organization as an employee, contractor, partner, or in any number of per ipheral capacities. The role the candidate is moving into may be any working relationship with the organization, most typically an employment role, but the role may also be an expansion of duty or responsibility, either permanent or temporary. There are two basic approaches to Onboarding: Transactional Onboarding, and Acculturation. Transactional Onboarding It focuses on automating the data transactions and processes related to moving the candidate into their new role. It seeks to automate and perfect processes associated with Onboarding, processes, that are defined through a combination of the organization's business policy, industry best and accepted practices, and by regulatory bodies.

7.2.1 Acculturation Known also as Socializing a candidate, or more big-brotherly as Indoctrinating a candidate, a term more often heard in Europe, focuses on making the process of moving the candidate into their new role as quick and as efficient as possible. Acculturation is about making sure the employee understands their new role and organization and helping them achieve productivity quickly. Acculturation is about making the candidate's transition as smooth and painless as possible. Acculturation can be seen as the right-brain, artistic-thinking side of the Onboarding persona to Transactional Onboarding's left-brain logical-thinking side of the Onboarding persona. Return on investment for acculturation is realized through earlier and more rapid productivity of the new employee and improved long term employee satisfaction and retention. Acculturation‟s value is subjectively measurable and is valuable to employers with high costs associated with recruiting and retaining employees, typically those in more professional roles in the organization. The Acculturation period is currently divided in Sonar in three phases Classroom sessions in Learning Service Orientation in other departments Acculturation in their respective department

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7.2.2 Benchmarking with the Industry Best: J.W. Marriott 7.2.2.1 About J.W Marriott: JW Marriott, one of the best hotel chains in India and across the world, is known to have a very strong training and development side to it, one of the pivotal aspects for a service organization. Marriott may not have as many hotels as compared to the other chains in India; however, it makes its presence felt in the industry due to its exceptional service provided by a superbly trained workforce which makes the experience of staying at Marriott unforgettable. The training provided by Marriott is considered to be the industry best in India The JW Marriott Hotel in Mumbai is situated at the Juhu Beach. It offers the following facilities: Air Conditioned rooms – 274 Air conditioned deluxe rooms - 48 Air Conditioned Suites – 36. Conference rooms - 9 Private spa/Jacuzzi (in selected rooms)

7.2.2.2 Acculturation Process in Marriott: (i) Throughout The Year Training: 15 Minute Training Calendar (prepared monthly)

Training

Calendar Put Up on Department Board

Daily 15 Minute Training Conducted (Briefing)

Trainer Name

Attendant Trainee Names

Topic Covered

Training Audits 15 Minute Training Calendar 31

(ii) Acculturation Timeline in J.W. Marriott:

TIMELINE

ASSOCIATE LEVEL

SUPERVISOR LEVEL

NEW JOINEE

MANAGER LEVEL

3 DAY INDUCTION PROGRAM DEPARTMENT ORIENTATION

60th DAY

FOLLOW-UP TRAINING SESSIONS HELD 30 DAY PERIOD

90th DAY

Online Courses for managers go on board

FINAL SESSION HELD ASSOCIATE LEVEL Department-wise Level based Skills Training

SUPERVISOR LEVEL

Supervisors Development module training

Practical Test Online Clearance Certification

Clearance Certification

MANAGER LEVEL Online Courses Initiation Management Development progress (based on 9 competencies; competency development program based on specific management level)

7.2.2.3 Acculturation process in ITC Sonar (SIPOC) SIPOC stands for Supplier-Input-Process-Output-Customer. SIPOC is a qualitative analytical tool that is designed to focus a project team‟s attention on the key activities involved in a process that flows between a company, its customers and suppliers. It is a high level process flowchart that focuses the team‟s attention on the key processes that require improvement. The output from a SIPOC diagram should be a list of key insights and implications. The implications should state these in a way that leads on to an understanding of problems and opportunities. The SIPOC can be used in combination with more detailed process maps to focus the team‟s attention on the

32

critical processes, flows and performance indicators. The real value of the SIPOC and process maps is in extracting the insights and in understanding their implications.

S

Learn ing Serv ices Dept.

Presentation/Handouts

HODs

SABA e-modules

Line Managers

Informat ion about other Depts. & Property Tour.

DLCs

List of skills & knowledge

Executives

On job training (Welcom procedure)

Supervisors

Suppliers

C

Basic Orientation (no checklist provided)

New Joinee

i Input

Customer Acculturation

Process

Output

O

Trained Associates Performance as per Standards Consistency/ Motivated Workforce

P

Induction Acculturation Depart mental Orientation

Guest Satisfaction Staff Retention

33

7.2.2.4 Benchmarking Comparison:

J. W Marriott

ITC Sonar

 90 day orientation program

 4 Week training

 Daily training for existing staff and intensive training for new joinees

 Periodic weekly training, not daily

 (competency of managers) Skills List

 Not followed

 Continuous performance

 Supposed quarterly

evaluation (assessment of technical skills)

knowledge/skills assessment

 Spirits (Instant Gratification program) Points for performance redeemable for gifts

 Welcom Achievers program. Performance points redeemable for ITC products

 40 hours of training per

 Average training man hours of 5

assessment per year conducted

hours per assessment per month

34

7.3 Stage 3-Problem Identification (AS-IS) The Acculturation program is extremely crucial as these are the initial steps between an employee and the managerial level to get to know each other. It is of significant importance because it Helps improve employee performance Update employee skills Retain and Motivate Employees Create an Efficient and Effective Organization In the Sonar, problems have been identified through the PIE Analysis which maybe illustrated as follows: P – Problem: Processes not adequately complied with. I – Issue: No system is in place E – Expectation: of the Stakeholder/ New Joinee. To look at the problems objectively and sequentially under the PIE Analysis the following were identified: 

P- Process not in place. Some of the mandatory modules are not covered The basic orientation program checklist is not followed The mentors are not assigned The induction timings are not adhered to by the presenters Structured presentation formats are not followed



I- No System is in place No follow- up session by the learning services department No formal guidelines for departments to handle new associates Four weeks are not adequate for orientation No structure to complete the Saba Modules 35

Lack of interactive sessions

 E- Expectation of the stakeholder/New Joinee More interactive sessions Feedback on performance and recognition Warm Welcome by department members Respect from others Relevant training and direction from seniors Performance as per standards

36

7.4 Stage 4- Recommendations (TO-BE): The problems in Sonar, as we have seen, have been identified through the PIE Analysis. However with the problems, feasibility in terms of solutions is a lso crucial. The feasible solutions have been enumerated as following: Update Induction presentations, hand-outs etc. Assign mentor for each new joiner on the day of joining his/her department. „What To Observe‟ (WTO) checklist for acculturation in other departments. Acculturation checklists to be provided by Learning Services (Training Department) and completed by the associate at the end of acculturation. Acculturation period to be increased to three months for providing suitable opportunity and time for the new joiner to learn the required skills and perform as per expectations. Evaluation done at the end of the acculturation in other departments, checking if information based on What To Observe checklist has been comprehended. Follow- up classroom sessions by Learning Services within 3 months of joining to impart more skills and take feedback on progress. Include a session on open communication in the classroom phase to encourage feedback and ideas. List of skills and knowledge to be given department-wise to each new joiner with scheduled time lines. Classroom session to include inputs on audit, hotel score-cards etc. SABA mandatory modules to be completed within 3 months followed by evaluation. Guidelines to existing associates with respect to handling a new joiner. Orientation manuals to be prepared in all the departments. Sessions also to be conducted in Hindi/Bengali. Use more methods for training delivery. Induction schedules to be prepared and sent at- least 48 hours before prior to the date for the sessions so that the sessions can be conducted with minimum waiting time without the hold-up caused by non-availability of trainers. 37

Co-ordination with HR department for selection of joining date convenient for both the new joiner and the hotel. Convening of wrap-up session with GM/HOD. The following PICK CHART highlights the feasibility of recommendations to be implemented.

Possible

Implement

Add topics in the classroom session.

Update material and session on communication.

Wrap-up session with GM/HOD.

Assign department mentors.

Co-ordination of joining date with HR.

WTO checklist for each department and its subsequent evaluation. Increase acculturation period to 3 months. List of skills and required knowledge to be given to new joiner. Guidelines to associate for handling of new joiner. Acculturation checklist given to each associate by Learning services and its collection at end of three months.

Kill

Challenge Sessions in Hindi/Bengali. Follow up sessions. Variation in training Methodology.

------

SABA modules completion in 3 months with compulsory subsequent evaluation. Orientation modules for each department.

Erase Implementation/ Expected Benefits

38

8. APPENDIX 8.1 Questionnaire INDUCTION FEEDBACK FORM 1. I joined ITC Sonar____________________(Please tick whichever applicable) a) 1-3 months back b) 4-6 months back c) 7-9 months back 2. My departme nt is ________________________ 3. Prior to joining Sonar, I was__________________ (Please tick whichever applicable) a) Working in another hotel b) Working in another organization (not a hotel) c) Studying 4. Please give your rating for the following regarding your acculturation process at ITC Sonar S.No

1 2 3 4 5 6 7

1 2 3 4

Strongly Agree

Agree

5 4 INDUCTION SESSION IN THE TRAINING ROOM Topics covered were relevant to my role 5 15 The presentations were interesting 8 12 The presenters were knowledgeable about 13 7 the topic The amount of information was right for me 6 12 The length of the session right for me 6 8 This session helped me make new friends at 12 8 work I have truly benefited by attending this 12 7 program ACCULTURATION IN OTHER DEPARTMENTS This helped me to understand the working of 2 13 other departments The time spent in each department was 7 appropriate The colleagues were keen to share their 3 11 knowledge about their department This was helpful in my current role 6 8

Disagr ee

Strongly Disagree

Total

1

No ans wer 3

2 1 1 1

-

9 9 9

30 30 30

3 5 1

1 -

9 9 9

30 30 30

2

-

9

30

1

2

12

30

8

2

13

30

2

1

13

30

2

1

13

30

39

1 2 3 4 5 6 7 8 9

ORIENTATION IN MY DEPARTMENT My manager met me on my first day in the department I received a warm welcome in my department by my co workers I was provided an orientation to my work area My job responsibilities were explained to me I was given a checklist of the skills and knowledge that I need to do my job well I was assigned a mentor I was given valuable and timely feedback on my performance/progress In case of questions/doubts I know who to approach I received continuous training inputs from my mentor/seniors

YES

NO

23

7

TOTAL 30

21

9

30

19 23 11

11 7 19

30 30 30

18 17

12 13

30 30

30 18

12

30 30

ABOUT WORKING IN ITC SONAR S.No

1 2 3 4

5 6 7

Strongly Agree Disagree Agree 5 4 2 INDUCTION SESSION IN THE TRAINING ROOM I am proud to work here 14 6 3 I enjoy my work 12 13 2 I am treated with respect by my 6 19 2 co-workers and seniors I am committed to create “a 18 11 WOW at every moment of the truth” I know what is expected of me at 17 8 3 work My contributions are valued by 6 14 4 my team members I rarely think of working else 3 14 7 where

Strongly Disagree 1

Total

1 1

30 30 30

-

30

1

30

1

30

1

30

40

What additional inputs would you have liked during your induction session with respect your work?

What additional inputs would you have liked in your departme nt to enhance your skills & knowledge?

Any other comme nts about your first fe w months at ITC Sonar

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8.2 Questionnaire Analysis Induction Session in Training Room Parameters

Weighted Average

Topics were relevant to my role

7.25

The presentations were interesting

7.50

The presenters were knowledgeable about their topic

7.92

The amount of information is right for me

7.00

The length of the session was right for me

6.00

The session helped me make new friends at work

7.83

I have truly benefited by attending this program

7.67

Central Weighted Average

7.31

Acculturation in Other Departments This helped me to understand the working of other departments

5.5

The time spent in each department was appropriate

3.83

The colleagues were keen to share their knowledge about their department

5.33

This was helpful in my current role

5.58

Central Weighted Average

5.04

INDUCTION SESSION IN THE TRAINING ROOM Starting with the parameter that deviated the most from the central weighted average ‟The length of the session was right for me‟ The analysis suggests that most of the people do not agree with it. During the induction people felt that the length of the induction period did not suit their individual needs because of the fact that they needed to know more about the hotel and needed the required time to fully comprehend all that was being told to them. Coming to the second parameter „I have truly benefitted by attending this program‟ was second in line to deviate from the central weighted average. The new joiners felt that they could have been told things in a more structured manner. 42

The third parameter was about making new friends at work. It was seen that since the induction period was not for an appropriate span of time, it created a form of hindrance for the new joiners to make new friends. The last parameter that I chose was about the knowledge of the presenters. The new joiners felt that the presenters did not follow a structured format as a result for them to comprehend was an issue. ACCULTURATION IN OTHER DEPARTMENTS „The time spent in each department was appropriate‟. This was not felt by the employees. They felt that there was not enough time or matter that was covered for them to go through the acculturation process in other departments.

About working in ITC Sonar I am proud to work here

8.42

I enjoy my work

9.67

I am treated with respect by my co-workers and seniors

9.17

I am committed to create a “a WOW at every moment of truth”

11.17

I know what is expected of me at work

10.33

My contributions are valued by my team members

8.25

I rarely think of working elsewhere

7.17

Central Weighted Average

9.19

ABOUT WORKING IN SONAR „I rarely think of working elsewhere‟ is a parameter which I chose as it deviated from the central weighted average. The staff working here felt that they do think about working elsewhere as they faced problems in the hotel in terms of acculturation and induction and subsequently their actual work. „My contributions are valued by my team members‟ was a parameter of issue. Not being recognized for their work leading to low levels of motivation, made the employees feel that their contributions were not valued. „I know what is expected of me at work‟. Owing to the absence of a mentor and continuous guidelines as to how and what to do, led to confusion between the management and the workers as to what to expect of each other. 43

„I am committed to create a WOW at every moment of truth‟. The employees seemed to be a little confused with the platinum standard that the hotel followed. Probably because they could not be reached out to in the way they could comprehended

8.3 Economy and Indian Hospitality Industry: Article: Recession and Indian Hotel Industry Given the current state of the economy, and the growing consensus that a recession is near, if not here, what is the outlook for the hotel industry? The slowdown of the economy didn‟t happen suddenly, it has been happening since last year so the questions are: - Were we following up closely on the happenings in our areas? - What was our budget and our forecast for 2008? - Did we have an action plan for the expected slowdown in the economy? In Europe business went down by more than 40 %, especially during the summer. In Saudi Arabia the demand has increased, although some of the big companies started to reduce their manpower and expenses since the beginning of the year, but still some project agreements are arising and will continue into the next year. I do expect that within few months the demand will be back to 85% of normal, keeping in mind the decrease of fuel prices and this potential influence on flight pricing. In general, in most of the world there will be a slowdown and in the rest there will be more pick up and demand, especially in the resort areas. While all hotels are subject to the same broad economic influences, each market and property is most directly affected by the supply and demand factors in their own back yards. Markets facing significant supply increases will likely experience a greater degree of stress than previously anticipated. Conversely, those with little to no supply increases underway can expect to weather the storm with less difficulty. For individual hotels, the slower periods of the economic cycle present opportunities as well as threats. The reality is that demand doesn‟t just grow or decline, it also moves – from market to market, and from hotel to hotel. Meetings once held in a more distant, more expensive market may relocate to a more affordable local alternative. Business travelers whose expense accounts once ran to a full-service hotel may seek out less expensive – and often equally suitable – alternatives among the select - or limited - service lodging sector and so on. In these circumstances, one property’s decrease can be another’s opportunity for growth. With the revenue management tools available at the property level, property managers now have a greater ability to effectively manage pricing so as to achieve an optimal balance between occupancy and average rate. 44

So how can hotels revenue managers be ready for the expected stagnation in the economy? Reconsider, Reevaluate and make action plans : - During the daily activity, Monitor Changes to your Market Segment. - Manipulate the Rate Structure – but don't lowe r it. - Evaluate the hotel Channel Distribution - Re-evaluate Your Competition set - Create Dynamic Packages as much as you could for rooms and F&B. - Monitor the Online Presence and strengthen - Refer back to your marketing plan and see why people need to travel to your area Using the principles of revenue management could carry you through the current stagnant economy. Don't give in to the desperation of dropping your rates and crossing your fingers; generating business is hard work. As the old saying goes, "you have to kiss a lot of frogs to find a prince". Ahme d Mahmoud Director of Revenue management, Starwood Saudi Arabia Owner of www.revenueyourhotel.com

Article: Focus on hospitality: predictive powers of hotel cycles. by Corgel, John (Jack) B.

Real Estate Issues • Winter, 2003 • Insider's Perspective

Whether we want to accept the fact or not the hotel business (both the sale of rooms and assets) is a cyclical business. Cycles exist in the hotel business for some good and well documented reasons. Most importantly, hotels are not the same as most other commodities like, say, tooth paste. By this I mean that when the demand for rooms suddenly spikes, as it did during the recent holiday season in New York City, the supply of rooms cannot correspondingly expand within a short period to satisfy the new level of demand. Should the same circumstances occur in the market for tooth paste, producers will turn up the machinery not operating at full capacity, add another work shift, and turn out more tubes before you can say 'dental bills.' Thus, hotel supply change lags demand in both the upward and do wnward directions meaning that RevPAR persists at relatively high levels and growth rates following an upward movement in demand and RevPAR persists at low levels and growth rates following a decline in demand. The cycle's story just told appears quite tragic unless participants are somehow clever enough to predict the turning points and avoid downturns and troughs. Despite the financial wreckage they created in the past, hotel cycles now generate some underappreciated predictive powers. These powers are fueled by the availability of Smith Travel Research and other data covering a complete cycle (i.e., down from 1987 to 1992, up from 1992 to 2001, and down from 2001 until quite recently). During the latest complete cycle, all the moving parts behaved much as economic 45

theory suggests. If the hotel market recently made an upward turn at the bottom of the cycle as many feel, then we have in our possession the map of how a recovery will unfold. In this article, I attempt to use the knowledge gained during the latest complete cycle to chart a near-term course of events in the U.S. hotel market.

OCCUPANCY AND ADR CYCLING THROUGH TIME The existence of hotel market cycles is a well-recognized phenomenon. Smooth and regular fluctuations around an equilibrium level may occur for two reasons. First, a strong correlation exists between measures of national and local market economic activity (e.g., GDP, real personal income, and employment) and hotel demand. Consequently, cyclical patterns in hotel performance measures emanate from business cycle patterns through the demand side of the market. Second, supply changes should logically follow shifts in demand, albeit with long delivery lags. If the business cycle is smooth and construction predictably responds, then the hotel market cycle will have a correspondingly smooth appearance over time. Abnormally wide swings in hotel market performance observed during recent decades occurred because of shocks to the economy and hotel markets. These events either impacted the supply of hotel rooms, demand for hotel room nights, or both. Government intervention of the early 1980s, for example, artificially inflated the supply of hotels. With occupancy already below normal levels in the late 1980s, the recession and Gulf War in the early 1990s stymied the market recovery. Similarly, the combined effects of the demand-based general economic recession beginning in 2001, the terrorist attacks in September 2001 that created a stigma on domestic and international travel caused demand for air travel to plummet, and the Iraqi war produced steep declines in hotel occupancy and average daily rate (ADR) during 2001 and 2002. EVENTS DURING THE HOTEL CYCLE The economics of hotel markets suggest that occupancy represents the current relationship between demand and supply. Occupancy reaches levels above (below) normal when demand exceeds (less than) supply. During periods of abnormally high (low) occupancy, ADR increases (decreases) causing occupancy to fall (rise). The economics of hotel markets also suggest that ADR represents the current relationship between demand and supply, and accordingly, ADR reaches levels above (below) normal when demand exceeds (less than) supply. Once ADR reaches a level in the market for which development becomes feasible. To complete the market process, hotel construction eventually satisfies the excess demand that drove occupancy and ADR above normal. As more rooms are added to the stock, occupancy and ADR fall back to normal levels. At the peak of the cycle the market may become unstable with supply growth continuing after demand is satisfied (i.e., overshooting). This problem of overbuilding is an unfortunate byproduct of cyclical markets. The hotel market process involves an observable lag between occupanc y change and ADR adjustment. As markets move from the peak of the cycle to the trough, such as during the recent cycle phase from 1998 to 2002, softness in demand forces hotel managers to reduce room rates 46

in an effort to maintain occupancy percent. These actions retard the decline in occupancy during periods when demand drops. The opposite of this process occurs as markets move from the trough of the cycle to the peak. An increase in the demand for hotel rooms causes immediate improvements in occupancy. The upward trend in occupancy moderates as hotel managers begin to raise room rates, which begins occurring as occupancy approaches the natural level of the market. HOTEL CAP RATES APPEAR COUNTER CYCLICAL Hotel construction reacts to two market signals. The first signal, discussed above, comes from the market for rooms in the form of occupancy and ADR growth reaching levels that make debt and equity financing of hotel development feasible. The second comes from the asset market in the form of pricing that makes it profitable to build and sell hotels. If these two signals conflict then prediction becomes quite difficult. Hotel cap rates appear to move in a counter-cyclical pattern, and thus valuations in the capital market follow the same pattern as occupancy and ADR. The highest rate of slightly above 12% occurred at the end of the early-1990s recession. The average rate reached 11.7% during the recent recession, but fell sharply over the past two quarters. Hotel cap rates moved downward and broke through the 10% barrier for several quarters in 1997 and 1998 when the economy and market for hotel rooms was rapidly expanding. In theory, hotel cap rates should continue to conform to the counter-cyclical pattern they followed during the past ten years because hotel property values logically decline (rise) as incomes become more (less) risky. PREPARING THE MAP FOR 2004 AND 2005 Armed with recent evidence about the cyclical behavior of the hotel markets can we make any predictions? It appears that the U.S. hotel market at the start of 2004 is in the early stage of an upward movement toward a peak. This movement is conditioned by the general economic recovery which governs its direction. Theory suggests that modest increase s in occupancy starting in 2003 will continue until occupancy percents reach the long-run average (i.e., somewhere between 65 to 70% in most local markets). As the market approaches this point, hotels will be able to begin increasing room rates. From thereon up the slope, occupancy gains will slow and room rate increase s will begin to dominate RevPAR growth. In some metropolitan markets, such as New York, occupancy is already near the long-run average. Econometric forecasts from the Hospitality Research Group and Torto Wheaton Research Hotel Outlook indicate that many major markets in the U.S. will experience occupancy at long-run average levels by the end of 2004, meaning there will be room rate growth in 2004 as well. During 2005, room rates will begin approaching development feasibility levels.

47

9. REFERENCES http://www.Scribd.com http://www.hoteliers.com http://www.slideshare.net/utpal_parekh/PPTMR-Utpal-Parekh

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