HOTEL INDUSTRY (Travel & Tourism)...The Goa Tourism Development Corporation (GTDC) is planning to organise familiarisation trips or “fam” trips for international tour operators

HOTEL INDUSTRY

(Travel & Tourism)

SEGMENTS (Business)

TRAVEL & TOURISM

ACCOMODATION & CATERING

Hotels & motels, apartments, camps,

guest houses, lodge, bed &

breakfast establishments,

house boats, resorts, cabins & hostels. Catering facilities includes

include hotels, local restaurants,

roadside joints, cafeterias & retail

outlets serving food & beverages.

TRANSPORTATION

Airline companies,

cruise services, railways, car

rentals & more.

ATTRACTIONS

Theme parks & natural attractions

including scenic locations, cultural &

educational attractions,

monuments, events & medical, social or professional causes.

TOUR OPERATIONS

Offer customised tours, including

travel, accommodation &

sightseeing

TRAVEL AGENTS

A fragmented sector with a

number of independent travel

agents & many online businesses.

They also sell associated products such as insurance, car hire & currency

exchange.

Business travel agencies specialise in making travel & accommodation arrangements for

business travellers & promoting

conference trades.

SEGMENTS (Consumer)

• The aim is to develop interest in heritage and culture; & promote visits to village settings to experience & live a relaxed & healthy lifestyle

Rural Tourism

• Tourists seek specialised medical treatments, mainly ayurvedic, spa & other therapies

• The primary purpose is achieving, promoting or maintaining good health & a sense of well-being

Medical Tourism

• Tourists visit India for its cultural heritage in various cities

• The country’s rich heritage is amply reflected in the various temples, majestic forts, pleasure gardens, religious monuments, museums, art galleries, urban & rural sites

Heritage Tourism

• The luxury travel market in India registered a growth rate of 12.8 per cent in 2016, the highest in comparison with any other BRIC country.

Luxury Tourism

• A wide range of adventure sports are covered under this category with specialised packages

Adventure Tourism

• Vast variety of flora & fauna in various states is a major factor behind their growing popularity as tourist destinations.

• Thenmala in Kerala is the 1st planned ecotourism destination in India.

Eco-Tourism

• One of the biggest contributor to tourism industry. India being religious hub for different cultures attracts a large number of tourists every year

Pilgrimage Tourism

ECONOMIC CONTRIBUTING ACTIVITIES

Travel & Tourism is an important economic activity in most countries around the world. As well as its direct economic impact, the industry has

significant indirect and induced impacts.

The ‘Direct Contribution’ of Travel &

Tourism to GDP reflects the ‘internal’

spending on Travel & Tourism

(total spending within a particular

country on Travel & Tourism by

residents and non-residents for business

and leisure purposes) as well as

government 'individual' spending -

spending by government on Travel &

Tourism services directly linked to visitors, such as cultural (eg. museums)

or recreational (eg. national parks).

The ‘Indirect Contribution’ includes

the GDP and jobs supported by:

-Travel & Tourism investment spending

- Government 'collective' spending

- Domestic purchases of goods and

services by the sectors dealing directly

with tourists.

The ‘Induced Contribution’ measures

the GDP and jobs supported by the

spending of those who are directly or

indirectly employed by the Travel &

Tourism industry.

TRAVEL AND TOURISM SECTOR

(GLOBAL)

Travel & Tourism is a key sector for economic development and job creation throughout the world. In 2016, Travel & Tourism directly contributed INR150 lakh crore (approx.) and 10.9 crore jobs worldwide.

Taking its wider indirect and induced impacts into account, the sector contributed US$7.6 trillion to the global economy and supported 29.2

crore jobs in 2016.

This was equal to 10.2% of the world’s GDP, and approximately 1 in 10 of all jobs.

Tourism & hospitality’s impact includes people travelling for both leisure and business,

domestically and internationally.

In 2016, 76.8% of all travel spend was as a result of leisure travel, compared to 23.2% from

business travel.

Domestic travel generated 72% of the sector’s contribution to GDP, thus making a

significantly larger contribution than international travel, with foreign visitor spending at 28%.

Travel & Tourism is an export sector, attracting foreign spending to a country in the form of

international visitors. In 2016, global visitor exports accounted for 6.6% of total world

exports (approx. 91 lakh crore) and almost 30% of total world services exports.

India is expected to establish itself as the fourth largest Travel & Tourism economy by

2027, both in terms of direct and total GDP, only behind China, the USA and Germany.

Business spending

23%

Leisure spending

77%

Foreign visitors

spending28%

Domestic spending

72%

TOTAL CONTRIBUTION TO GDP

10.2% GDP contribution

29.2 Crore jobs

Contributed INR490 Lakh Crore (approx.)


(GLOBAL)

Tourism & hospitality’s direct contribution to GDP grew by 3.1% in 2016.

This was faster than the global economy as a whole which grew at 2.5%, for

six consecutive years, the Travel & Tourism sector has outperformed the

global economy.

In addition to outpacing global economic growth, the Travel & Tourism

sector also outperformed several other major global economic sectors in

2016. Specifically, direct Travel & Tourism GDP growth was stronger than the

growth recorded in the financial and business services, manufacturing,

public services, retail and distribution, and transport sectors, but was

marginally slower than growth in the communications sector.

A key challenge for Travel & Tourism in short term period

will be a general slowdown in consumer spending power which will impact consumer spending on Travel & Tourism. The combination of

higher inflation caused by recovering oil prices (which could have knock-on impacts for air fares), rising debt servicing costs as interest rates rise, and a slowdown in job creation across the globe is curbing global spending power.

TEN YEAR FORECASTS

Travel & Tourism’s direct contribution to GDP is expected to grow at an

average of 3.9% per year over the next ten years.

By 2027, Travel & Tourism is expected to support more than 38 crore jobs

globally, which equates to 1 in 9 of all jobs in the world and the sector is

expected to contribute around 23% of total global net job creation over the

next decade. Meanwhile, total Travel & Tourism GDP is expected to account

for 11.4% of global GDP and global visitor exports are expected to account for

7.1% of total global exports.


(INDIA)

The Direct contribution of Travel & Tourism to GDP in 2016 was INR4,809.80 crore

(3.3% of GDP) and is expected to grow by 6.8% pa to INR9,948.50 crore (3.5% of GDP) by

2027.

This primarily reflects the economic activity generated by industries such as hotels, travel

agents, airlines and other passenger transportation services (excluding commuter services). But it also includes, for example, the activities of the restaurant and leisure industries

directly supported by tourists.

The Total contribution of Travel &

Tourism to GDP (including wider effects

from investment, the supply chain and

induced income impacts) was INR14,018.50

crore in 2016 (9.6% of GDP) and is

forecasted to rise by 6.7% pa to INR28,491.80 crore by 2027 (10.0% of

GDP).


(INDIA)

Travel & Tourism generated 25,394,500 jobs

directly in 2016 (5.8% of total employment) and

by 2027, Travel & Tourism will account for

31,910,000 jobs directly, an increase of 2.1% pa

over the next ten years.

The total contribution to employment was

40,343,000 jobs in 2016 (9.3% of total

employment). By 2027, Travel & Tourism is

forecast to support 49,868,000 jobs (9.6% of

total employment), an increase of 2.0% pa

over the period.

In 2016, India generated INR1,529.30 crore in

visitor exports*. By 2027, international tourist

arrivals are forecasted to total 17,284,000,

generating expenditure of INR2, 901.70 crore,

an increase of 6.1% pa.

* Visitor Exports is the spending within a country by

International tourists.


(INDIA)

COMPONENTS

Leisure travel spending (inbound and domestic) generated 94.6% of direct Travel & Tourism GDP in 2016 (INR12,07,900 crore) compared

with 5.4% for business travel spending (INR689.0bn).

Domestic travel spending generated 88.0% of direct Travel & Tourism GDP in 2016 compared with 12.0% for visitor exports (ie foreign

visitor spending or international tourism receipts).

Leisure travel spending is expected to grow by7.0%

pa to INR25,391.10 crore in 2027.

Business travel spending is expected to grow by 7.2% pa to INR1,453.50 crore in 2027.

The total contribution of Travel & Tourism to

GDP is nearly three times greater than its direct

contribution.

Domestic travel spending is expected to grow by

7.1% pa to INR23,942.90 crore in 2027.

Visitor exports are expected to grow 6.1% pa to INR2,901.70 crore in 2027.

Business spending

5%

Leisure spending

95%

Direct34%

Indirect53%

Induced13%

Foreign visitors

spending12%

Domestic spending

88%

Travel & Tourism is expected to have attracted

capital investment of INR2,284.90 crore in 2016. This is expected to rise by 5.7% pa over the next

ten years to INR4,14,900 crore in 2027.

Travel & Tourism’s share of total national

investment will fall from 5.8% in 2017 to 5.7% in

2027.


(INDIA)

TRENDS & STRATEGIES

- Online travel operators

Over 70 per cent of air tickets are now being booked online in the country.

A number of online travel & tour operators, which provide better prices & options to consumers, have emerged in India.

- Wellness Tourism

The widespread practice of ayurveda, yoga, siddha & naturopathy that is complemented by the nation’s spiritual philosophy makes India a

famous wellness destination.

- Cruises Government of India has estimated that India would emerge with a market size of 12 lakh cruise visitors by 2030-31. The government is

planning to set up five cruise terminals in the country.

- Adventure It is one of the most popular segments of tourism industry. Owing to India’s enormous geo-physical diversity, it has progressed well over the

years.

Part of India’s tourism policy, almost every state has definite programme to identify & promote Adventure tourism.

- Camping sites Promotion of camping sites has been encouraged with adequate acknowledgement of its adverse effects on environment.

Besides providing unique rewarding experiences, responsible conduct of camping can be a major source for both additional economic

opportunities in remote areas as well as an instrument of conservation.

- Spiritual Tourism India has been known as the seat of spiritualism & India’s cosmopolitan nature is best reflected in its pilgrim centers.

India has been recognised as a destination for spiritual tourism for domestic & international tourists.

- Branding The launch of several branding & marketing initiatives by the Government of India such as Incredible India! & Athiti Devo Bhava provides a

focused impetus to growth.


(INDIA)

TRENDS & STRATEGIES

- Multiple channels

Players are opting for many channels to maximise sales & ensure convenience for their customers. For example, Thomas Cook & Kuoni India

launched their online portals to compete with others. On the other hand, makemytrip.com is planning to go for the offline channel to

complement its existing portal & has already launched mobile apps for maximising sales.

- One stop solution

Players are trying to ensure convenience for their customers by providing all services available on a single portal. For example,

makemytrip.com & a host of other websites provide a comprehensive basket of offerings which include outbound & inbound

travel for leisure & business trips, hotels & car booking, holiday packages within India or abroad, etc

- Marketing Strategy

Players are using innovative marketing strategies to succeed in this sector. For example:

The Goa Tourism Development Corporation (GTDC) is planning to organise familiarisation trips or “fam” trips for international tour operators

to showcase Goa as a tourist destination. It has also planned to promote Goa in international markets through the print & electronic media.

Benefits such as such as priority reservation & Indian rail pass for train travel are also being extended to foreign tourists

Incredible India 2.0 campaign and ‘Adopt a Heritage’ were launched in September 2017.

- M-Visa

Indian government has also released a fresh category of visa – the medical visa or M visa, to encourage medical tourism in India. Indian

medical tourism is expected to reach INR52,000 crore by 2020.

- E-Tourist Visa

In November 2017, a total of 214,000 foreign tourists arrived on e-Tourist Visa, in comparison with 137,000 foreign tourists in October 2016,

registering a growth of 56.2 per cent over previous year.


(INDIA)

GOVERNMENT INITIATIVES

Swadesh Darshan -Based on specific themes, government has identified 13 circuits which

includes Krishna Circuit, Buddhist Circuit, Himalayan Circuit, North East

Circuit & Coastal Circuit.

-Tajmahotsav: the 10 day celebration provide a platform to experience

India’s arts, craft, culture, cuisine, dance & music.

-Under Budget 2017-18, the government allotted INR928 crore (approx.)

for Integrated development of tourist circuits under Swadesh Darshan

scheme.

Pilgrimage Rejuvenation and Spiritual Augmentation Drive

(PRASAD) National Mission on Pilgrimage Rejuvenation & Spiritual Augmentation

was implemented by the Ministry for enhancing the facilities provided &

infrastructure at pilgrimage centres of all cities

National Tourism Policy 2015 -Formulation of National Tourism Policy 2015 that would encourage the

citizens of India to explore their own country as well as position the

country as a ‘Must See’ destination for global travellers

-Under Union Budget 2017, INR96 crore was allocated for promotion &

publicity of various programmes & schemes of the Tourism ministry.

E-Tourist Visa -Since April 2017, the facility has been made available to citizen 161

countries.

-Growth of 67.3 per cent was registered during the month of October 2017,

as a total of 176,000 tourists arrived in India on E – Tourist Visas, as

against a total of 105,000 tourists during October 2016.

-Foreigners travelling to India on e-tourist visa will receive a BSNL SIM

card which will be pre activated and loaded with talktime and data.

TOURISM POLICY

Special boards The Ministry has set up a Hospitality Development & Promotion Board,

which will monitor & facilitate hotel project clearances/approvals.

Tourist Boards The Ministry, in consultation with state/UT administrations, has

proposed to employ tourist police at prominent tourist spots.

Tax Incentives An investment-linked deduction under Section 35 AD of the Income Tax

Act is in place for establishing new hotels in the 2-star category and

above across India, thus permitting a 100 per cent deduction in respect of

the whole or any expenditure of a capital nature.

Incentives from Ministry of Tourism -Assistance in large revenue-generating projects.

-Support to Public Private Partnerships in infrastructure development

such as viability gap funding.

-Schemes for capacity-building of service providers.

Project Mausam Under ‘Project Mausam’ the Government of India has proposed to

establish cross cultural linkages & to revive historic maritime cultural &

economic ties with 39 Indian Ocean countries. In 2015, Government of

India linked China Silk Road project with Project Mausam.


(INDIA)

GROWTH DRIVERS

Infrastructure More than half of the Ministry of Tourism’s Plan budget is channelized for

funding the development of destinations, circuits, mega projects as well as

rural tourism infrastructure projects.

Growing Demand -Domestic expenditure on tourism is expected to rise due to the growing

income of households.

-A number of niche offerings such as medical tourism & eco tourism are

expected to create more demand.

Rising FDI -Hotel & Tourism sector has received cumulative FDI inflows of

INR69,000 crore from April 2000 to September 2017.

-International hotel brands are targeting India .e.g. Carlson group is aiming

to increase the number of its hotels in India to 170 by 2020.

-Hospitality majors are entering into tie ups to penetrate deeper into the

market, such as Taj & Shangri-La entered into a strategic alliance to

improve their reach & market share by launching loyalty programme aimed

at integrating rewarded customers of both hotels.

Policy Support -100 per cent FDI is allowed under the automatic route in tourism &

hospitality, subject to applicable regulations & laws.

-100 per cent FDI allowed in tourism construction projects, including the

development of hotels, resorts & recreational facilities.

-Campaigns such as Incredible India & Athithi Devo Bhava were launched

to harness the tourism industry’s potential.

.

OPPORTUNITIES

Medical Tourism -The presence of world-class hospitals & skilled medical professionals

makes India a preferred destination for medical tourism.

-India’s earnings from medical tourism could exceed INR59,000 crore by

2020.

-Tour operators are teaming up with hospitals to tap this market

-201 thousand medical tourists arrived in India in the 2016 as compared

to 134 thousand in 2015.

Cruise Tourism -Cruise shipping is one of the most dynamic & fastest growing segments

of the global leisure industry.

-Government of India has estimated that India would emerge with a

market size of 12 lakh cruise visitors by 2030 – 31.

-Moreover, India is looking to take advantage of its 7,500Km coastline to

tap growth potential of the cruise tourism segment.

Rural Tourism -The potential for the development of rural tourism in India is high as

most of its population resides in rural areas.

-This can benefit the local community economically & socially, and

facilitate interaction between tourists & locals for a mutually enriching

experience.

Eco-Tourism -India is often termed as hotspot of bio-diversity & this rich natural

heritage is unparallel in many ways.

-Such valuable resource base gives impetus for the practice of variety of

alternate tourism forms & many of which are already in existence.

-For example: The national parks, wildlife sanctuaries & biosphere

reserves.


(INDIA)

PORTERS FORCES

THREAT OF SUBSTITUTES

LOW

Threat of substitute products is minimal as no substitutes are available in the market

THREAT OF NEW ENTRANTS

MEDIUM

Entry is easy as it is not capital intensive, but a player needs to achieve economies

of scale and access to distribution channel to compete

COMPETITIVE RIVALRY

HIGH

The Indian hospitality sector is highly fragmented with a large number of small and

unorganised players; this increases competition

Customers’ low switching cost and price sensitivity are increasing competition among

players

BARGAINING POWER OF SUPPLIERS

MEDIUM

There is the threat of forward integration; for instance, the airline starts selling directly to

customers

The cost of switching suppliers is low

BARGAINING POWER OF BUYERS

HIGH

Low switching cost gives customer high bargaining power

Customers are price sensitive and have information about the services being provided


(INDIA)

Rising incomes mean a steady growth in the ability to access

healthcare & related services

Per capita income is expected to increase at a CAGR of 7.33 per

cent over 2014–18

According to IMF, nominal per capita income in the country is

estimated to increase at a CAGR of 4.94 per cent during 2010-19

In June 2016, the Indian government approved 150 countries under

the Visa on Arrival scheme to attract additional foreign tourists.

The Visa on Arrival scheme registered an average growth of 133.90

per cent over 2010–16.

Indian government has also released a fresh category of visa – the

medical visa or M visa, to encourage medical tourism in India.

The period of October to March

accounts for maximum tourism in the

country.


(INDIA)

LEADING STATES/UTs


(INDIA)

COUNTRY RANKINGS

HOTEL, RESORTS, RESTURANTS SECTOR

(INDIA)

With a consistently growing middle class and increasing disposable income, the tourism and hospitality sector is witnessing a healthy growth.

'Hotel Industry in India' success story is only second to China in Asia Pacific. The World Travel and Tourism Council, says that India ranks

18th in business travel and will be among the top 5 very soon.

The hotel industry is highly cyclical; while demand dynamics are related to the economic cycle, the lumpy nature of supply additions and long

gestation period of project executions aggravates cyclical peaks and troughs.

Demand-supply dynamics have a strong bearing on profitability.

In the long term, the demand-supply gap in India is very real and there is need for more hotels. The shortage is especially true within the budget

hotels and the mid-market hotels segment.

There is a need for budget and mid-market hotels in the country as travelers look for safe and affordable accommodation. Various domestic and

international brands have made significant inroads into this space and more are expected to follow as the potential for this segment of hotels

becomes more obvious.

According to the Economic Survey of India

(2016/17), the buoyancy in the country's GDP

remains unchanged in recent years, with 2015/16 ending at a 7.6% growth and 2016/17 witnessing a

GDP growth of 7.1%. In particular, the country's

services sector grew at 7.7% last year, with the trade,

hotels, transport and storage subsector registering a

7.8% growth estimate.


(INDIA)

DEMAND & SUPPLY TREND

(Occupancy, ARR, RevPAR)

On a nationwide basis, new branded and organized supply grew by merely 5.9% over the preceding year.

Overall demand increased by 9.6% in the same period.

ROOM NIGHT DEMAND VS AVAILABLE ROOM NIGHTS (2002/03 – 2016/17)


(INDIA)

Occupancy:

- Market wide occupancy of 65.6% was consequently 3.5% higher than the 2015/16 performance of 63.3%.

- When viewed by positioning, Five-Star Deluxe and Three- Star Hotels clocked 66.5% occupancy each in 2016/17,

while Four - Star Hotels achieved 65.6% occupancy. Five-Star Hotels were just shy of the 65% mark and closed at a

nationwide occupancy of 64.6%, whereas Two-Star Hotels managed 62.7%.

ARR:

- Average Room Rates too have shown promise as the nationwide numbers appreciated by 2.4% in 2016/17 over last

fiscal and were the highest in four years.

Though, the degree to which rates have grown continues to be marginal.

PERFORMANCE OF EXISTING HOTELS (2012/13 – 2016/17)

Nationwide occupancy for all branded

hotels was 65.6% in 2016/17, hotels

that have existed since 2012/13

achieved 68.4% occupancy last year.

Similarly, hotels that have been

operating since 2013/14 clocked

67.9% occupancy in 2016/17.

On the average rate front, while India's

ARR was Rs.5,658 in 2016/17, for

hotels in existence since 2012/13, the

ARR last year was more than

Rs.6,000.

Occupancy rate: ratio of rented or

used space compared to the total amount of space available

ARR/ADR:

average room rate/ average daily rate

(room revenue per room)

RevPAR:

Revenue per available room


(INDIA)

PERFORMANCE OF NEW HOTELS (2012/13 – 2016/17)

RevPAR:

Nationwide occupancy crossed the 65% mark for the first time since 2007/08, with hotels bagging an overall weighted occupancy of 65.6% in

2016/17, an increase of 3.5% over the previous fiscal. The increase in occupancy was complimented with an increase of 2.4% in weighted

average rate (`5,658) during the same period.

The growth in both occupancy and average rate resulted in the nationwide RevPAR rising by 6.0% over the previous fiscal to reach

Rs.3,709.

Two-Star and Four-Star categories recorded RevPAR growth of 7.4% and 7.2%, respectively.

First-year occupancy of hotels that opened in 2012/13

through 2014/15 was all in the mid-to-late thirties, do

note that hotels that opened in 2015/16 averaged

42.7% and, new openings of 2016/17 averaged 45.9%

occupancy in their very first year.

Similarly, while first year ARRs were successively

lower than their preceding years from 2012/13 to

2014/15, the ARR for hotels that opened in 2015/16

and 2016/17 have seen an increase in comparison to

their preceding year.


(INDIA)

GST

Under GST Indian hospitality industry stands to benefit from homogeneous and uniform taxes, in addition to easy utilization of Input Tax

Credit (ITC).

Average Room Rate

(Rs.)

GST

Below 1,000 Not applicable

1,000 – 2,500 12%

2,500 – 7,500 22%

Above 7,500 28%

Other advantages of the new taxation include administrative ease and clarity for end consumers.

The GST at 28% for rooms averaging is the highest in the region, the overall impact of this indirect tax on the Indian hotel sector is likely to

be favorable.

Barriers to Entry MediumEconomic risks, high capital costs, competition in the industry,

poor infrastructure facilities and scarcity of land.

Bargaining power of Suppliers

Low Higher competition, especially in metros.

Bargaining power of customers

High Higher in metros due to increasing room supply.

Competition HighIntense in metros, slowly picking up in tier-2 and tier-3 cities, entry

of foreign hotel chains, startups/online industry

Threat of Substitutes

Low No direct substiute avaiable

In the past, the taxes that were applied on inputs, such as raw

materials, food, cleaning supplies, and amenities, could not be

adjusted against the output without multiple complications. This

will now be much easier under the GST regime.


(INDIA)

No. OF ROOMS

Category of Hotels

2014 2015 2016 2014 2015 2016

One Star 41 13 26 1193 530 785

Two Star 80 53 68 1902 1149 1922

Three Star 554 419 529 22724 17618 22633

Four Star 134 208 197 7969 9847 9972

Five Star 92 128 125 11744 15043 15230

Five Star Deluxe 113 138 127 23907 30032 27775

Apartment Hotels 113 1 - 249 126 -

Guest House 5 6 7 77 110 110

Heritage Hotels 42 36 30 1237 1163 1065

Silver Bed & Breakfast Establishment 52 481 283 242 2415 1359

Unclassified 117 420 - 8323 26256 -

Total 2333 1903 1394 79567 104289 81011

No. of Hotels No. of Rooms


(INDIA)

FUTURE SUPPLY

- The fiscal year 2016/17 saw the existing rooms supply grow by 6.8% over the previous year, resulting in the nationwide existing supply

totaling 1,19,219 rooms. This takes into account 6,289 new openings during the year.

- The proposed supply pipeline has reduced significantly from 2007/08. In 2016/17, the number stands at 47,067, a decrease of approximately

10,000 rooms from 2015/16. The increase in existing supply, coupled with the decline in proposed supply pipeline, is indicative of a substantial

number of previously announced rooms having entered the market in the last fiscal.

- It is anticipated that around 30,000 branded hotel rooms are to be developed over the following five years, taking the total anticipated branded

supply to 1,49,276 rooms by 2021/22.

GROWTH OF ROOM SUPPLY – INDIA PROPOSED BRANDED HOTEL ROOMS ACROSS MAJOR (2000/01 – 2021/22) CITIES (2016/17 – 2021/22)

ROYAL ORCHID HOTELS

About Company

Royal Orchid (ROHL) is a mid-sized hotel company and operates five star, four star, serviced

apartments, resorts and convention/MICE and budget hotels. The company has 14

subsidiaries (13 domestic, 1 international), 4 Joint Ventures, 49 hotels in 35 locations with an

inventory of 3,300+ rooms. It operates under flagship brands – Royal Orchid, Royal Orchid

Central, Royal Orchid Suites, Regenta Hotels & Regenta Inn. Currently, it’s the 11th largest

hotel company in terms of number of rooms in the country.

Investment Rationale

- Asset light strategy:

Out of the total number of rooms which company currently has, around 70% are under management

contract and only 6% are owned by the company. This strategy makes the business less capital

intensive, saving it from heavy fixed costs related to buildings and major operating costs. The

company charges 2-3% of the revenue as management fees and an incentive fee which varies from

6-8% of the gross operating profit. ROHL bears no expenses and even the responsibility of

renovation is on the property owner.

- UK Bespoke tie-up:

Company declared a strategic partnership with Bespoke Hotels Ltd. Bespoke Hotels manages over

200 properties worldwide, with over 50 represented hotels in India and stands as the UK’s largest

independent hotel group. This partnership will enable ROHL the ability to offer its guest hundreds

of hotels options across multiple global markets.

Share holding pattern as on 201709

Promoter % - 66.91

Free Float % - 30.39

Overview

Market Cap. - 476.4 cr.

Mid cap

52 Week High/Low - 227.40/ 81.75

Industry Hotels, Resort &Restaurant

MCap. (sector) - Rs 5,91,781.82 Cr

Sector Sales - Rs 1,01,639.67 Cr

Sector Net Profit - Rs 2935.99 Cr

Summary

Financials (cr.)

FY15 FY16 FY17

Revenues 147.75 158.53 162.53

PAT -6.79 -3.64 1.41

EPS -1.42 -0.48 0.91

P/E 00.00 00.00 98.87

Industry P/E 86.77

EV/EBITDA 8.03 10.47 19.16

D/E 0.56 0.52 0.54

RoCE 3.79 4.97 6.14

RoE -4.06 -2.26 0.87

ROYAL ORCHID HOTELS

- Growth in hotels & keys:

Company has been increasing the number of hotels in the country on regular basis. Recently, it opened 49th hotel in Nashik and has a target of

50 hotels and 3500 rooms by the end of this fiscal year and addition of more than 1000 hotel rooms by next year.

- Increasing Occupancy & ARR

This year Occupancy ratio went up to 76-77% from 58% in previous year and the company is further expecting a steady growth in occupancy

and a 10% regular growth in ARR in the years to come.

Profit of the company rose by 52% in comparison with the previous year.

- Personnel training:

Human resource is one of the major assets in the industry. For this, company has taken up skill development in a large way; all its associates

are being trained under American Hotel & Lodging Association (AHLA) courses. This will result in enhancement of the services across the

board.

- Sale of non-core assets:

Currently, company has 2 non-core land parcels, one in Powai, Mumbai (15,000 sq. feet) and another in Tanzania.

Company is planning to dispose both the lands and is positive on selling off the Mumbai land in this fiscal year and expecting 50-53 crores

from it. Most probably the receivables from this deal will be utilized to pay off the standing debt, which is around 83 crores (consolidated).

- Reduction in GST rate:

ROHL used to pay 21% tax under the pre-GST regime. GST rate on restaurants and hotel stay has been reduced (room rent upto INR 7500)

from 28% to 18%. As majority of hotel’s room fall under this category, company is expected is get benefitted from this.

Risks and concerns-

- Increase in supply from formal/informal sources can keep a check on ARRs:

Around 66% of sales is done through OTA, mainly IBIBO and Makemytrip and 25% via company’s OTS.

- Brand name- all major league hotels give almost the same look, feel and service quality. It’s the brand that drives loyal customer

memberships which is a key to profits. So any harm to brand value of company will directly hit its financials.

- Joint Venture reducing profitability – Its Joint venture Ksheer Sagar Developers Pvt. Ltd. which is into civil engineering has been posting a

substantial loss since years.

- Large and branded hotels can provide stiff competition.

ROYAL ORCHID HOTELS

* as on 31st December 2017

Pushkar and Nashik were added in January 2018 and February 2018 respectively.

ROYAL ORCHID HOTELS

Business Model (as on 31st December 2017)

Categorization

ROYAL ORCHID HOTELS

Revenue Breakup

Growth – Properties & Rooms

Rooms & Accomodation

57%

Food & Beverage

35%

Others8%

No. of Properties

No. of Rooms

ROYAL ORCHID HOTELS

PROFIT & LOSS STATEMENT

- Most of the expenditure after operating income is incurred in depreciation of assets and interest payment for debt. Decreasing interest expense

over the years has been leading the company towards profitability. And this is further expected to come down.

- On standalone basis, company has been profitable. It’s the subsidiaries that have been reducing the profitability of the company. Though, in

coming year, company is expecting most of its subsidiaries to start booking profits. Over the past 7 years, its other income has grown at a

CAGR of 10.5%. The biggest component on OI is the debenture interest received from subsidiary and dividend income. Interest on fixed

deposits also is a part of OI. This growth is significant as a substantial portion of the company’s investment in its subsidiary has been converted

into debentures, so the interest on the debentures will continue to accrue in the future and its subsidiaries are becoming profitable, so it is able

to get it return in investment from the subsidiaries in form of dividend income.

ROYAL ORCHID HOTELS

BALANCE SHEET

- Other assets include goodwill, deferred tax asset and other current assets.

- The continuous fall down in reserves and surplus is due to the loss that company had occurred since years.

- In the financial year 2013-14, company disposed off its furniture & fixture and plant & equipment in large quantities and it paid off a bank

term loan reducing its outstanding long term borrowings substantially.

ROYAL ORCHID HOTELS

CASH FLOW STATEMENT

- In FY 2014-15, company paid off a big portion of its debt (short term and long term) which reduced its liability and was a major reason for a

drastic change in its operating earnings and cash flow from financing activities. In FY 2014-15, Company also sold off its fixed assets (as

mentioned earlier), making its cash flow from financing activities to record a sweeping hike.

KEY RATIOS

METRIC/FIGURES 2017 2016 2015 2014 2013 2012 2011

RoA (%) 0.41 -1.06 -1.83 -8.30 -2.12 -0.84 2.21

RoE (%) 0.87 -2.26 -4.06 -21.34 -6.09 -2.28 5.35

RoCE (%) 6.14 4.97 3.79 -6.51 0.88 2.9 6.44

Receivable days 35.85 35.34 34.42 33.17 29.21 26.29 22.67

Inventory days 4.75 4.83 5.04 5.51 5.25 4.91 4.19

Payable days 97.52 92.06 71.31 79.41 77.59 60.48 47.32

Cash conversion cycle -56.92 -51.89 -31.85 -40.73 -43.13 -29.28 -20.46

Total debt/equity (x) 0.54 0.52 0.56 0.78 1.24 1.34 1.08

Current ratio (x) 0.69 0.45 0.50 0.58 0.38 0.29 0.66

Interest ratio (x) 1.17 0.81 0.65 -1.30 0.25 0.85 2.51

Cash flow per Share 9.24 8.56 9.58 5.51 17.94 9.30 16.12

Price to Cash flow 9.68 8.23 4.2 5.56 1.62 5.24 4.03

Free cash flow/ Share 4.64 2.26 2.93 -13.95 1 -24.88 -23.25

Price to Free cash flow 9.68 31.18 13.75 -2.19 29.10 -1.96 -2.8

Sales to Cash flow 6.46 6.80 5.67 9.47 3.28 6.34 3.46

EPS (x) 0.91 -0.48 -1.42 -13.77 -4.27 -0.96 4.49

P/E (adj.) (x) 193.25 0.00 0.00 0.00 0.00 0.00 14.50

P/BV (x) 2.91 1.20 0.67 0.49 0.38 0.61 0.81

EV/EBITDA (x) 19.16 10.47 8.03 -15.99 15.74 14.36 9.33

ROYAL ORCHID HOTELS

Du-Pont 2017 2016 2015 2014 2013 2012 2011

RoE (%) 0.87 -2.26 -4.06 -21.34 -6.09 -2.28 5.35

PATM (%) 1.35 -1.77 -3.92 -31.20 -8.08 -1.51 11.23

Sales/Total Assets (x) 75.32 71.94 64.13 56.49 34.44 50.58 57.12

Assets to Equity (x) 57.10 58 53.80 66.83 54.04 71.79 30.20

- Company is operating at negative cash conversion cycle implying efficient use of its working capital. Company does not have to pay for its

inventory until it has sold its final associated product, letting it to use cash on hand for other purposes.

- RoE has been increasing due to improvement in all profit margin, asset efficiency and equity multiplier.

OUTLOOK

Company looks set to take off with its robust expansion plans with increasing efficiency in working of its subsidiaries. With no

downward aspect in sight, the industry is expected to improve as demand growth will be pacing out the growth of supply.

Along with the subsidiaries making profit, the debt portion is also being planned to bring down.

This will not only increase its bottom-line by many folds but will also improve per share value and future earnings prospects.

SINCLAIRS HOTELS & RESORTS

About Company

- Company owns and manages chain of hotels in India. At present the company has 7 hotels

which are located in Darjeeling, Ooty, Port Blair, Burdwan, Dooars, Siliguri, Kalimpomg,

having an inventory of around 400 rooms.

- Debt free:

The company is running debt free for more than 10 years now, unlike most of the competitors in the

industry.

- Ownership:

All the 7 hotels it operates are owned by company itself along with zero debt give company a strong

leverage position for future growth prospects.

- Hill stations:

Company has all is hotels in varied and popular hill stations but are most of them are concentrated

in the eastern region of the country.

Risks and concerns-

- Management Transparency-

Management lacks transparency in its business operations which may keep the investors at bay and

limit its long term growth.


Promoter % - 56.96


Overview


Small cap

52 Week High/Low - 570/281





Summary

Financials (cr.)

FY15 FY16 FY17

Revenues 29.26 39.04 47.06

PAT 4.74 7.05 9.01

EPS 8.51 12.66 16.18

P/E 33.78 25.47 18.4

Industry P/E

EV/EBITDA 13.69 10.02 9.99

D/E 0.00 0.00 0.00

RoCE 10.78 16.09 18.05

RoE 7.13 10.03 11.49


INCOME STATEMENT

- Over the last 5 years, company has been growing its sales at 27% CAGR and bottom line at 24% CAGR.

- The company hasn’t borrowed since years and is virtually a debt-free firm.

-Along with positive EPS, company has also been giving out dividend year after year.


BALANCE SHEET

- Company came out with a buy-back in FY2013-14 at Rs.390 per share (41% premium).

- Capital Work In Progress (CWIP) includes expenditure on new/existing projects which are pending allocation. It has been reducing over the

years implying company has been finishing its ongoing projects.

- Investments in various fixed and floating rate schemes have been done in the current year.


CASH FLOW STATEMENT

- In FY 2013-14, company gave a loan and sold its equity shares to an associated company- Savannah Hotels Pvt. Ltd. which ceased to be an

associate from July 25, 2013.

- In current year, company paid a dividend of INR22,582.

KEY RATIOS

METRIC/FIGURES 2017 2016 2015 2014 2013 2012 2011

RoA (%) 8.62 7.46 5.12 7.56 15.18 3.36 5.98

RoE (%) 11.49 10.03 7.13 9.56 18.16 4 6.91

RoCE (%) 18.05 16.09 10.78 12.93 19.75 6.04 9.51

Receivable days 10.80 10.26 9.27 13.66 15.24 14.86 12.89

Inventory days 2.53 3.38 3.81 4.47 5.13 6.09 4.81

Payable days 14.52 17.70 19.44 23.25 23.35 20.72 18.17

Cash conversion cycle -1.19 -4.06 -6.36 -5.12 -2.88 0.23 -0.47


Current ratio (x) 7.94 2.24 0.67 1.09 1.68 2.33 12.33

Interest ratio (x) 66.26 62.76 53.75 92.84 191.30 86.62 90.51



Free cash flow/ Share 30.95 12.91 -1.83 3.89 7.27 -11.29 -17.41

Price to Free cash flow 12.92 24.97 -156.90 62.93 40.16 -24.04 -18.55


EPS (x) 16.18 12.66 8.51 12.51 23.60 5.09 8.62

P/E (adj.) (x) 18.4 25.47 33.78 19.58 12.37 53.30 37.48

P/BV (x) 2.4 2.46 2.37 2.08 2.2 2.13 2.54

EV/EBITDA (x) 9.99 10.02 13.69 17.07 28.00 26.21 18.02


Du-Pont ratios 2017 2016 2015 2014 2013 2012 2011

RoE (%) 11.49 10.03 7.13 9.56 18.16 4 6.91

PATM (%) 29.62 28.50 24.02 41.39 79.05 31.85 47.44


Assets to Equity (x) 21.82 9.26 26.23 26.38 9.85 10.76 4.69

OUTLOOK

Given its single straight forward business model and debt-free financials, the company is on a firm hold to seize the benefit of

growing industry and keep booking profits year after year.

The factor that the management doesn’t disclose much about its business operations may leave the investors unconvinced,

limiting its long term growth.

BYKE HOSPITALITY LTD.

About Company

The Byke Hospitality is a mid-market leisure hospitality services company. It has a business

model combining asset light approach along with targeting niche vegetarian segmentin budget

hotels. The company has 2 business segments: Owned/Leased hotels and Room chartering.

Currently, it has 12 properties (3 yet to be operational) (2 owned and 10 leased) with an

inventory of 874 rooms.

Investment Rationale

- Asset light strategy:

Byke operates under a unique asset light model in which it acquires properties on lease bases

(usually 15 years) with a lock-in period of 3 years, which is a part of the risk-management policy of

the company. This significantly reduces stress on the balance sheet and gives Byke an advantage

over its peers as it is easier for the company to expand its business and utilize its capital in a more

profitable manner.

- Chartering Business:

Under the chartering business, Byke buys room nights of mid-budget hotels in bulk across leisure,

tourist and religious destinations during off-peak seasons. In the peak seasons they sell these room

nights. During the peak season time, the room-nights are sold to the customers by the travel agents

who in return earn a commission. Currently, the company has a presence in 60+ cities with 300+

active agents. It has relation with 500+ hotel owners and occupancy of chartered rooms has reached

to 95% and contributes to more than 50% of total revenue. This model gives insights to the

company on where to expand in hotel segment.


Promoter % - 45.29


Overview


Mid cap

52 Week High/Low - 220.70/150.25





Summary

Financials (cr.)

FY15 FY16 FY17

Revenues 181.42 231.52 269.98

PAT 20.03 25.94 31.70

EPS 5.00 6.47 7.90

P/E 33.07 24.19 19.75

Industry P/E 65.83

EV/EBITDA 18.00 12.03 10.03

D/E 0.12 0.09 0.06

RoCE 25.69 33.74 34.42

RoE 21.67 23.45 23.55


- Robust Expansion plan:

Byke is a fast growing hospitality services company, currently operating hotels (own + leased) at popular holiday destinations such as Goa,

Matheran, Jaipur, Manali, Udaipur, Shimla and Mumbai (Thane). Its average occupancy level stands at around 65% at the end FY17. Going

ahead, the management has already identified the new locations that it plans to enter and is targeting to add close to 8 new properties by the end

FY18. The 8 new properties are likely to add close to 400-500 rooms. These expansion initiatives would help the company to become a pan

India player. The current expansion is likely to be on the lease model, which would not require any significant capex. Company is also looking

forward to set its footprints in Franchise model.

Risks & Concerns

- Customer Reviews:

Company’s various hotels like Byke Old Anchor in Goa which has an inventory of 240 rooms have been getting negative reviews by customers

for issues related to basic amenities like unclean bed sheets, unhygienic sanitation, impolite and ignorant staffs etc.

- Revenue Concentration:

Around 51% of company’s revenue comes from Charter model and more than 50% from the remaining 49% comes from food and beverages

section, implying that company is earning comparatively minimum revenues from its core business of room rent.

- Lack of long-term moats in Business Model:

For the Charter model, company doesn’t have any moat to sustain the business for long term. This model is completely dependent on agents

and it is easy to lose agents to competition due to margin differentiation. Also, this model can be duplicated with ease.

The hotel owners can also remove the company from the business chain and can go for contacting agents directly. As this model accounts for

most of the revenue for the company, any hit to it will directly lead its financial health to fallback.

This model is also in a stiff competition with other players like OYO rooms, Stayzilla etc.

And given its poor ratings and reviews, expansion through leasing and franchise model doesn’t appear much promising.



Next Phase of Growth


PROFIT AND LOSS STATEMENT

- Other assets include goodwill, deferred tax asset and other current assets.

- With improving reserves, company has been regular in paying off the debt. This will ensure the company to become more competitive in the

market as its expansion plans come into effect.


BALANCE SHEET

- Over last 5 years company has grew its sales at approx. 20% CAGR and bottom-line at approx. 30% CAGR.

- Implying the expenses have been managed effectively and company has made room to improve margins over the years, ensuring continuous

improvement in per share value.


CASH FLOW STATEMENT

- Factors like improved profits, increase in current liabilities resulted in an improved CFO in FY 2015-16 and FY 2016-17.

KEY RATIOS

Metric/Figures 2017 2016 2015 2014 2013 2012 2011

RoA (%) 18.31 17.55 15.33 13.30 7.47 2.91 4.19

RoE (%) 23.55 23.45 21.67 20.21 11.12 3.70 4.70

RoCE (%) 34.42 33.74 25.69 24.38 15.76 5.53 6.62

Receivable days 27.08 25.01 24.89 26.53 26.87 17.21 14.19

Inventory days 11.51 9.65 12.13 14.10 21.72 35.64 21.75

Payable days 11.09 15.85 20.20 28.04 33.32 13.82 1.51

Cash conversion cycle 38.5 18.81 16.82 12.59 15.72 39.03 34.43


Current ratio (x) 2.57 2.12 1.78 1.28 1.12 1.60 4.71

Interest ratio (x) 43.4 26.39 14.79 11.05 5.88 7.47 364.04



Free cash flow/ Share -0.1 1.04 1.28 4.33 -2.84 -7.23 -13.37


EPS (x) 7.9 6.47 5.00 3.96 1.93 0.6 0.59

P/E (adj.) (x) 19.75 24.19 33.07 40.38 58.07 108.36 70.88

P/BV (x) 3.8 5.18 6.62 7.56 6.22 3.87 2.57

EV/EBITDA (x) 10.03 12.03 18.00 22.76 25.90 52.73 38.97


Du-Pont ratios 2017 2016 2015 2014 2013 2012 2011

RoE (%) 23.55 23.45 21.67 20.21 11.12 3.70 4.70

PATM (%) 17.95 17.13 13.98 13.65 11.45 7.23 9.70


Assets to Equity (x) 19.89 22.90 25.79 32.73 37.85 20.62 7.48

OUTLOOK From the business model point of view, company looks a risky bet for long term as its core business of room rents is earning

minimal revenue for it. Although, the management seems aggressive in its expansion plans but looks like one of the basic and

vital factors- Brand development, which is required to determine the long term sustainability of a hotel, is being ignored by the

management.

Hotel is going to get benefitted in short term due to its current strong financial health, improving industry state but if the

management doesn’t address to the basic requirements of its customers then downward trend for the company isn’t very far too.

COMPARISON

METRIC/FIGURES (Cr.) Royal Orchid Hotels Byke Hospitality Sinclairs Hotels EIH Indian Hotels Kamat Hotels

Market Cap. 476.4 652.99 218.9 9065 15400 225.94

Sales 162.53 269.98 47.04 1527 4010 185.45

PAT 1.41 31.7 9.01 109.5 -83.16 44.53

Interest Coverage 1.17 43.4 66.26 10.33 2.31 2.56

RoE 0.87 23.55 11.49 4.29 5.69 116.53

RoCE 6.67 34.42 18.05 6.38 9.93 10.49

P/E 193.25 19.75 18.4 85.46 235.96 5.06

P/BV 2.91 3.8 2.4 3.5 3.75 3.73

D/E 0.54 0.06 - 0.14 0.78 10.44

EPS 0.91 7.9 16.18 1.86 -0.6 18.88

P/CF 9.68 25.94 11.92 28.29 22 1.26

EV/EBITDA 19.16 10.03 9.99 26.43 28 13.12

* as on 20/3/2018

Bibliography

- World Travel & Tourism Council (WTTC)

- Data from individual Company website, annual report, investor presentation, conference call.

- Ministry of Tourism

- HVS website

- IBEF website

Disclaimer

This report should not be taken as a recommendation and is solely for information purpose.

Authored by Karan Agarwal

(An individual investor and not a SEBI registered analyst)

Email: [email protected]

LinkedIn: www.linkedin.com/in/karanagarwal0111

mailto:[email protected]

http://www.linkedin.com/in/karanagarwal0111

Documents

HOTEL INDUSTRY (Travel & Tourism)...The Goa Tourism Development Corporation (GTDC) is planning to organise familiarisation trips or “fam” trips for international tour operators