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    Swot & Pest Analysis on Hotel Industry Essay

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    INTRODUCTION OVERVIEW OF HOSPITALITY INDUSTRY Hospitality is considered as a service industry, serving the guests with “feel-good-effect”. “Athithi devo bhavha” (Guest is God) has been one of the major trends followed in Indian culture since decades. In India, the guest is treated with utmost warmth, full respect and providing the best services. The industry trend shows, that Hospitality is one of the fastest growing sectors in India. It is expected to grow at the rate of 8% between 2007 and 2016.

    Many international hotels including Sheraton, Hyatt, Radisson, Meridian, Four Seasons Regent, and Marriott International are already established in the Indian markets and are still planning to expand more. Scope of the Report •Provides the top players in the market with their market share, profitability, segments they focus which is required for business and competitor intelligence needs •Contains a brief study of the major internal and external factors affecting Hotels in the form of a SWOT analysis as well as analysis the PEST analysis and Porters 5 force analysis to understand the criticality of the business.

    MAJOR PLAYERS The major players in the Indian hotel industry can be broadly divided into private sector players and the public sector players. The Top Players in Hospitality Sector Public Sector Players: •ITDC hotels •Hotel Corporation of India Private Sector Players: •ITC Welcome Group of Hotels •Indian Hotels Company Ltd. (The Taj Group of Hotels Resorts & Palaces) •Oberoi Group of Hotels(East India Hotels) •Hotel Leela Venture •Asian Hotels Ltd. •Radisson hotels & Resorts •Le Meridien Group of Hotels •The Park Group of Hotels •Welcome Heritage Group of Hotels INDUSTRIAL HIGHLIGHTS Structure of the organization, partnerships, mergers & acquisitions and recent trends are examined which explains that the business segment of the company have been exploring and experimenting along with the analysis of key products and services. •Business and marketing strategies are increasing the earnings & brand equity. •Key financial indicators have to be analyses time-to-time which is helpful in expansion. •Competitive positioning of an organization has been calculated in terms of sales, profitability and stock performance, which can be easily compared with its competitors. Corporate analysis- Hotel industry is considered as premium service oriented sector offering an unmatched depth and breadth of content. •Communicating the Hotel’s marketing strategies to general public is a waste of time. Therefore, Smart hotel marketers use segmentation and profiling to reach a specific customer segment who can buy their product. ENVIRONMENTAL TREND •India is expected to see an influx of 10 Million international tourists by 2010, up from just 5 Million in 2007. •Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Karnataka and Rajasthan are the favorite tourism destinations in India in terms of total tourist arrivals. India has been promoting its healthcare tourism by providing the visitors with private healthcare facilities like recreational spas. It is expected that the total market for medical tourism will reach US$ 2 Billion by 2012, representing a CAGR of 60. 69%. •Personal disposable income during 2002-2007 grew at a CAGR of 14. 16%, thereby driving domestic as well as outbound tourism. •Indian outbound tourist flow is expected to increase at a CAGR of 13. 30% over the five-year period between the years 2008 to 2012. •India’s share in the global tourism is expected to reach 1. 5% by 2010. •The growth in India’s ourism market is driving the growth of several associated industries, including hotel industry, medical tourism industry and aviation industry. COMPETITIVE STRATEGIES •Market analysis is critical for all hotels because it enables the hotels to tap the market potential and also helps them to identify the optimal deployment of resources. •All hotels irrespective of their categories test the waters to know their catchment areas, their occupancy rate and their brand significance. •Creative planning considers effective marketing strategies as supported by the view of 90hotels out of 180 hotels focusing on new plans and new customers. The STAR Hotels in the category of 3 Star and above, focus on their efforts of promoting their brand globally through ads and other promotions. •Ad focus of all the hotels is mainly on attracting new and retaining the repeat customers leading to 98% of the ad direction and only 2% aim at new clientele. SWOT ANALYSIS SWOT Analysis helps to understand the company’s key business structure and operations, history and products, and provides a brief analysis of its key revenue operations and strategic approach. STRENGTHS •A very wide variety of hotels is present in the country. There are international players such as Taj Group and Oberoi Group operating their chain of Hotels in the Market •A manpower cost in the Indian hotel industry is one of the lowest in the world. •India offers a readymade tourist destination with the resources •Natural and cultural diversity •Demand-supply gap •Government support WEAKNESSES •Hotel Industry is heavily staffed in India •Slow Implementation •Only limited Value Added Services •High Tax structure in India •Prone to security and social unrest issues •Only 97,000 hotel rooms are available in India today •Environmental or Seasonal Issues Industry Regulations OPPORTUNITIES •As per long-term prospects, the hotel industry in India has potential for growth •Rising income •Service preferences •Bring uniqueness in services and experience provided, especially in Heritage Hotels THREATS •Guest houses can replace the hotels •Fluctuations due to International Tourists •Increasing Competition •The economic climate of a country have a direct impact on the revenue earned by hotel industry •Political turbulence in the area can affect the tourist traffic •Lack of training man power PEST ANALYSIS Political/ Legal factors •Industry specific taxes, Eg: Bed tax Current situation “war on terror” may result in the decrease number of travellers which will create a negative impact on the hotel industry •Strict labor laws, Eg: Minimum wages •To avoid the negative impact on the environment and the marketplace due to the operations of a hotel, it is necessary to impose the Environment related regulations Economic factors •Due to the seasonal change in demand, income and room occupancy rate can vary significantly during peak and non-peak periods •The salaries are not that much competitive as compare to other industries. Therefore, it is ifficult to attract employees for critical positions •Industries like Hotel are considered as the non-essential type of services for the customers, therefore, this is one of the first areas that would be affected at the time of recession or economic downturn • Strategy to focus on the market segmentation for generating profit, Eg: higher end of the hotels would essentially focus on the higher end of the market which is relatively small in number but high margins can be earned •Diversification of services or business model requires huge investments •Regular modifications to attract the customers Cost incurred on maintaining the infrastructure Social/ Cultural factors •Social cultural factors are one of the major issues to look into for hotel industry because it deals with a large segment of customers who have different demographic profile and cultural background.

    To serve each customer with customized services will increase the chances of hotel industry to expand more •The facilities like Spas, provided by the hotels are considered as a lifestyle change which is expanding in certain sections of middle class as well as upper class •India is slowly adapting the culture of vacation or holiday system for taking rest from work, which is benefiting the tourism industry in turn affecting the hotel industry as well •Because of the changing trend, celebrating occasion or special days in hotels has become popular as the end to end services are provided by the hotels in terms of arranging resources & making things similar for people and for some it is more like a prestigious issue Technological factors The hotel industry has started utilizing the increasing amount of technologies for achieving greater customer satisfaction (Online feedbacks) •With the use of technologies and other advance techniques, hotels can make use of the resources which are extensively used in the industry, Eg: Recycling water •The potential customers can also make use of the technology like internet in order to get the information about a hotel or their charges, etc. This will help in making their choices about a holiday stay or places to visit •With the help of technologies, the availability of information and strategic decision making has become more easier which allows the organizations to plan its future activities and events in advance in an efficient manner Porters Five Forces Model THREAT OF NEW ENTRANTS The competition in an industry easily increases by the entry of other companies in the market. In a situation like this, few changes done by new entrants (like prices, customer loyalty) can create a pressure for existing players in this industry. Foreign hotel chains are tied up with some Indian hotels to decrease the initial cost and increase the brand name •Customers brand loyalty like TAJ, ITC & THE LEELA PALACE, also affects the new entrants •The raw material and distribution channels are established & controlled by existing players which is one of the reasons to avoid the new entrants •The cost of land in India is 50% more from the total project cost as compared to abroad which is 15%. This is also curtailing the opportunities for the new entrants •The amount of taxes such as expenditure tax, luxury tax and sales tax inflate the hotel bill by over 30% •Fixed investment is huge and also the location could be a trouble for the new entrants THREAT OF SUBSTITUTES Such threats exists, if there are alternate products with suitably lower prices are available for the same purpose for better performance.

    This can attract a proportion of market volume and also reduce the profit margins for the existing players. •Only the brand loyalty of the customers can dominate such substitutes •The prices and the customer relationship with hotels can also be the reason for switching to substitutes •Difference in the services price of the same class hotel from various brand •The effect of substitution can also be seen because of the present demand and supply of hotel rooms •Majorly, fixed cost and switching costs affects the operations of the business •Service apartments, private rental rooms, and budgeted hotel & resorts can be a substitute for the price sensitive customers BARGAINING POWER OF CUSTOMERS The hotel prices are not changing frequently because it will have a direct effect on the price sensitive customers •During the unseasoned timings, hotels are introducing discounts and promotions in order to attract the customers as they are the ones having the bargaining power •To diversify, hotels has introduced other services like Conferences, Spas, etc. to attract the customers •As there is no industry specific rates and tariff, hotels like TAJ, ITC & Oberoi use their own tariff plan because of their brand value •Hotel should consider reducing the bargaining power because the customer segment is completely fragmented BARGAINING POWER OF SUPPLIERS The word ‘suppliers’ means all the possible inputs required or needed in order to provide goods and services to the end customers. •As the high class hotels have their hotel chains for operating like TAJ, ITC, THE LEELA PALACE, etc. they are the ones who have the bargaining power and control over the industry •Five Star Hotels which are known for their brand, they don’t frequently change their product and services. It is almost the same only provided with some innovations. COMPETATIVE POWER OF RIVAL PLAYERS This force explains the intensity of the competition between the existing players in the marketplace. A relatively high competitive pressure results in increase in competing prices, margins, and majorly on the profitability for every organization in the industry. •The top players in the hotel industry are having the same kind of services like Spas, Party Halls, Boatels and Motels, etc. This healthy competition among the players also results in the increase in industry expansion •Intense competition in the metro cities, and slowly picking up in secondary cities •Diversification in terms of services can also affect the competition •Mid-price hotels, recreational centers, etc. can create a competition threat. ? CONCLUSION Promotional strategies can be used, apart from the regular advertisements are used to attract the customers and also ensuring the best Customer Relation & Retention for increasing the revenue targets. The study reveals that the increase of profit margins due to efficient marketing strategies is in the range of 0-20% for 29% respondent hotels. In 71% hotels, the increases in revenues are expected around 20-40% due to advertisements and restaurant promotions.

    The visible trend shows that in the hotel sector indicates that the Indian hotels are preferred by the overseas visitor because of several reasons. The hotel industry is positively considering the strategic marketing alliances and brand treaties for expanding and establishing global brands. ? Bibliography http://www. marketresearch. com/product/display. asp? productid=2182281, referred on 28th March ‘2010 http://www. researchandmarkets. com/reports/556321, referred on 28th March ‘2010 http://www. naukrihub. com/india/hospitality/, referred on 28th March ‘2010 http://community. boredofstudies. org/229/hospitality/43780/factors-affecting-hospitality. tml, referred on 22nd March ‘2010 http://www. scribd. com/doc/26045363/Indian-Hotel-Industry-Analysis, referred on 30th March ‘2010 topcimatutor. com/2008-may/PEST_Analysis-Solberi-Hotels. doc, referred on 30th March ‘2010 http://www. entrepreneur. com/tradejournals/article/101938461_3. html, referred on 30th March ‘2010 http://www. indianmba. com/Articles_on_Management/AOM9/aom9. html, referred on 30th March ‘2010 http://www. bharatbook. com/detail. asp? id=50060&rt=Indian-Tourism-Industry-A nalysis. html, referred on 30th March ‘2010 www. ishc. com/uploadedFiles/PublicSite/… /custbehavior. doc, referred on 30th March ‘2010 Images are taken from Google Image

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