HOTEL INDUSTRY TRENDS IN INDIA

8/7/2019 HOTEL INDUSTRY TRENDS IN INDIA

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TOURISM AND HOTEL INDUSTRY

TRENDS IN INDIA


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TABLE OF CONTENTS

1. INTRODUCTION 1-3

2. PURPOSE OF RESEARCH STUDY 4

3. RESEARCH METHODOLOGY 5-7

4. DATA ANALYSIS 8-53

5. FINDINGS 54-55

6. RECOMMENDATIONS 56

7. CONCLUSION 57-62

8. BIBLIOGRAPHY 63-64

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INTRODUCTION

Tourism In India:

India is well known worldwide for tourism places. Indian culture, history,

historical monuments, ice capped mountains, lush green valleys, vast

forests and rich wildlife always excites tourists all over the world. As you

may know tourism is a major part of Indian economy, every year we add

million of dollars in our foreign exchange reserve.

Tourism industry of India is today is being a part of interest for many nationaland international organizations. Today this industry presenting the

business opportunity of a lifetime for anyone interested in investing in

India's 'Tourism Infrastructure'. India has more then 300 million domestic

and foreign tourists. The graph of this industry will surely increase in

coming years as the liberalization of the economy permeates deeper and

deeper.

Opportunities abound in the traditional tourism related areas and in novel

exciting fields. From the setting up of international class star hotels,

motels, wary-side amenities, heritage hotels and restaurants. To the

setting up of golf courses, amusement parks, adventure and water sport

complexes, aerial ropeways, cruises, domestic airports and more.

Recognizing that the logistics of identifying locations for the type of

investments you are interested in making is difficult and time-consuming,

the Department of Tourism of the Government of India in consultation with

the various State Governments has worked out a plan of potential

projects. The department of tourism of government also help investors and

facilitate them in getting project clearance and permits for this industry.

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Booming industry

Indian travel and tourism experienced a boom during 2005. There was a

surge in arrivals and departures as well as robust expansion indomestic tourism. After growing by 15% in 2004, the number of

incoming arrivals rose by a hefty 22% in 2005 over 2004. Not

surprisingly, incoming tourism receipts also rose sharply by about 16%

in 2004 and 32% during 2005.

Strong government support

The strong support provided by the government played an important

role in boosting tourist arrivals. In particular, the Incredible India

publicity campaign implemented by the government during 2003-2005

proved successful in attracting tourists by highlighting the diverse

attractions of India. There was also a major improvement in the tourist

infrastructure through both private and government initiatives.

Resurgence in departures

During 2004, departures declined by 9%, mainly because of the

troubled situation in the Middle East, which is the main destination for

Indians, as well as the Severe Acute Respiratory Syndrome (SARS)

crisis which adversely affected travel to South East Asian countries.

However, this decline will be more than compensated for by trends

during 2005, when departures are expected to rise by 20%. The rising

incomes of affluent and upper-middle-income consumers led to the

increasing popularity of holidays abroad and contributed to growth in

departures.

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Local holiday spirits

Domestic tourism is also expected to grow robustly in 2005 though not

to the same extent as international arrivals and departures. Growing

incomes as well as improvements in tourist facilities contributed to the

expansion in domestic tourism.

Sky wars

The major changes in the airlines industry had a strong influence on

transportation. Intense competition between private and government-owned carriers took the form of cuts in air fares. A major development

was the commencement of operations of Indias first low-cost no-frills

airlines company, Air Deccan, in 2004. With Air Deccan expanding its

network to a national footprint in 2005 and offering very low fares,

competition increased for other carriers. This will undoubtedly provide a

further impetus to the growth of tourism in India.

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PURPOSE OF THE RESEARCH STUDY

THE PURPOSE OF MY RESEARCH STUDY IS TO

UNDERSTAND AND CRITICALLY ANALYZE THE VARIOUS

IMPORTANT ASPECTS OF TOURISM IN INDIA: AND TO

ENABLE THE MARKET ANALYSIS OF THE TOURISM

MARKET IN INDIA.

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research skills as a causal study, and would entail on the same high

standards in its design and execution. These are proposition that typically

state the existence, size, forms, or distribution of some variables. For

example a statement such as The tourism industry in India is expected togrow at 8% in the next five years can be validly tested from data collated

or status of infrastructure relating to tourism and other aspects as have

been validated in this study. Exploration is particularly useful when

researchers lack a clear idea of the problems they will encounter during the

study. Through exploration the researcher develops concepts more clearly,

establishes priorities, develops operational definitions, and improves the

final research design. When these approaches are combined, two

exploratory techniques emerge for the study as have wide applicability for

the researcher:

1. Secondary data analysis

2. Personal Interviews

Data collection MethodsThe research variables were so chosen as to aid the analysis of the

supportive questionnaires administered to the strategic management heads in

the hotel and tourism industry as and also in the other organizations taken in

the sample. Through a process of in depth interviews (primary data) from

functionaries in the sectors, hotels and tourism, Tourism Financial Corporation

of India, the study was developed. Secondary data as considered in the study

were resourced from travel magazines, travel websites, internet, etcetera.

Limitations of the Research

(i) The responses are likely to be biased.

(ii) There was a phenomenal lack of time to conduct research more

extensively than could have been possible had there been more time

allocated for undertaking this study.

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(iii) The sample chosen was a convenient sample, which was felt to be

appropriate to the context though the responsiveness of the

respondents in answering the questions posed by the interviewer,

featured some element of resistance in extent of data disclosurebesides that of attitudinal preferences.

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DATA ANALYSIS AND PRESENTATION

Data Analysis

City Trends: According to The survey Of The Tourist and Hotel Sector

(2005), the year 2004-05 witnessed a period of considerable buoyancy and

upswing for the hotel industry in India. Most cities saw occupancy levels

improve over the previous year and, for the first time in six years, both

occupancy levels and average room rates improved.

According to the Tourism in India Report, a nation that has the right, but notnecessarily the best infrastructure could still reap the biggest benefits out of

tourism, which, at the end of the day, is a sheer volumes game. The country

neglects domestic tourism at its own peril. The millions that travel from one

end of the globe to the other and within the country can give every industry

related to tourism a critical mass, which in turn will encourage the dollars as

well as rupees to come in. The links in the chain need to be aware of their role

and their mutual interdependence. If there was ever a sector that needed a

high element of co-existence between its inter dependent value chains

besides healthy inter sectoral linkages needing to be established it is the hotel

and the tourism industry. (A House In Disorder)

The Truth Behind Hotel Pricing: Few clients would normally check into a

hotel without looking over the room rates. And in this sector it is the high rack

rates that currently limit occupancy. Rack rates are room rates quoted in the

hotel brochures and on the websites by the respective hotels.

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Rack Rates

Hotel

category

Avg

RoomRates *

(Rs)

Discount ** (%) Effective Saving (Rs.)Corporate Individual Corporate Individual

5 Star 9000 40 20 3600 18003 Star 4000 40 20 1600 800Budget

Hotel

2500 30 10 750 250

Room for more, Tourism in India, Economic Times Intelligence Group (2005)

The researchers informal interviews with numerous senior hotel managers

revealed two distinct industry rates prevailing, that are the rack title (or the

published rate) and the actual payment rate. The actual payment rate in most

cases is the final settlement price which could be anywhere up to 40% lower than

the rack rates. While refusing to go on record, most hotel functionaries

interviewed agreed that rack rates were relevant and were published to set a

benchmark rate as an indicative price for this product depending on the demand

scenario, as is also linked to the availability of rooms. Another VP of a Delhi Five

Star hotel agreed that they normally publish the rack rates for, the respective

busy season. However, the price at the end that the customer lands up with may

vary. There is a common perception that room rates are negotiable in higher star

hotels as well. When it comes to corporate clients such pricing techniques as for

instance the publishing of rack rates etcetera have no meaning. In reality thereexists a practical demand supply situation for the hotel concerned. Occupancy

rates drop off in the off-season and shoot up in the peak season. If the hotels

could have a realistic rate, everyone would land up being the ultimate gainers.

One of the major costs for hotels is the land or real estate costs and which is

the reason why fewer hotels are found in the budget and the lower class

categories apart from the consideration of time taken to develop these hotels.

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Internationally, land cost forms around 15 % of the total cost of a hotel project

while in India, it comprises almost 45-50% of the total costs in such projects.

This is partly the reasons why the hoteliers prefer to invest in middle and

luxury class hotels so as to be able to recover the costs in a shorter span oftime. In addition, to this there are around 55 licenses to be sought and

awarded before one can actually start off a hotel. So such procedural

bottlenecks also impact on the project coming up. In the US and Europe, it

takes around 14-18 months to develop a hotel property while in India it takes

around four years to start up and, as a result, the finance and interest costs hit

the project costing made at the time of inception of such projects.

Since this is a people intensive-industry, it has a high proportion of manpower

costs compared to some other industries and this can be seen from the staff

to room ratio, which is about 3:1 for, hotels in India compared to the

international ratio of 1:1 prevailing for the same in the respective season.

However, this proportion may vary. There is a common perception that room

rates are negotiable in budget and mid-star segments but a few interviewsconducted by the researcher in this segment reveal negotiations having taken

place on this issue even in the higher star hotels as well.

Employment Pattern in Hotels: Tourism is an economic activity, which is

one of the biggest employment generators and has a multiplier effect on the

economy. The average employment figure in the hotels is higher than in

restaurants. According to a study in the Indian Journal of Labour Economics,

in 1988-89 the hotel sector employed 1.74 lakh persons. In 1993-94 this

number stood at 3.49 lakh, implying that the hotel sector employment had

increased by 101 per cent order this period. The direct enterprise (DE) hotels

employ about 2.99 lakh workers or 85% of the workers employed in the hotel

industry.

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According to Tourism In India (2005), like any other business, tourism is big

enough to warrant a very strategic approach and so there has to be a target

for developing proper infrastructure for tourism. While the target is clear: five

million visitors by 2006(double the present numbers), the path to that numberis an old but oft-beaten one. The researchers discussion with a vast number

of players in the industry bearing varying size and volumes of businesses

threw up some interesting aspects, which are detailed below:

1. Government policy or the lack of it was the single biggest reason

why infrastructure had not picked up.

2. Almost everyone in the business agrees that the lack of proper

infrastructure was the biggest flaw bedeviling the tourism and hotel

sectors as thwarted its full potential from taking off.

3. India's infrastructure, even at the prevailing measly tourism levels

of 2.6- million, was already creaking in several areas of operation.

4. The ability to scale up infrastructure is therefore a vital issue

needing to be urgently addressed in this carrying forward. The

industry believed that even if the government policy were tomiraculously change and modernize, India would find it very difficult to

accommodate the sharp surge in visitors that could ensue in the wake

of such development.

5. There seemed to be a kind of mentality prevailing that only the

foreign tourists, with their dollars, felt a need and appreciated the

existence of good infrastructure. Look at the business generated in

this sector. International arrivals, presumably of tourists, numbered

2.6 million, while even the most conservative estimate for domestic

tourists put it at around 250 million. Developing a good infrastructure

for the Indian masses would therefore imply that it would result in

automatically developing these for the dollar segments as well. But

the Indian tourists do not seem to be on anybodys radar present or in

the scheme of things relating to the value chain extant in this sector.

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6. Private players were not willing to partner the government in

projects in this sector because because of an innate abhorrence of

red tape, long lead times and lack of permission for FDI in this sector

as was a source of vital funding.7. In many locales around India, private operators had also flouted

government rules on the ground that paying off the government on the

sly was cheaper than really investing into the business, a thought

process impossible to understand given that tourism benefits

everyone concerned.

8. Several associations like TAAI, IATO and WTO have made

presentations to the government over the years. A few suggestions

have been implemented, but otherwise not much impact is visible.

9. It would not be entirely correct to say that the government has no

policy or vision. But a look at the Ninth Five Year Plan document

reveals a central government allocation of about Rs 800 crore for this

sector while the Tenth (2002-07) allocated Rs 1,800 crore to this

sector. So while there has been an increase in allocation, its visibilityof impact on the ground is low. The action points outlined in Nineth

Plan still hold valid in the Tenth Plan.

An assessment of the situation would therefore be needed before any

meaningful assessment of potential can be gauged. According to the Tourism

Ministry , Government of India, had conducted the following important tourism-

related surveys/studies through consultancy agencies appointed for the

purpose during 2004-05:

1. A 20-year perspective plan had been developed for tourism development in

almost all the States/UTs of the country.

2. A study on the impact of tourism on the socio economic development in

Rajasthan and Kerala was conducted

3. A survey of foreign tourists expenditure on handicrafts was conducted.

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4. A development plan for Haridwar and Rishikesh in Uttaranchal was

developed.

5. A master plan for integrated development of tourist circuits in the North-

Eastern regions and central circuits (Madhya Pradesh) was developed.6. A study to examine the taxes levied by State/Central Government in the

Indian tourism sectorhad been conducted.

7. A development plan for Mahabalipuram was formulated.

8. An international passenger survey 2003-04 was conducted

9. A domestic tourism expenditure survey was conducted.

Study on the impact of tourism: on employment generation and future

employment potential at selected destinations was carried out. The Tenth Five

Year plan allocations for the tourism industry, while detailing plan of action for

almost every segment of this industry, still reveal a very low level of

commitment as respect these aspects was the major finding.

1. Liberalizing in Indian skies to increase air seat capacity was proposed by

the Government as part of the above findings.2. Having a visa-less/visa-on-arrival facility for tourists from selected

countries has also been mooted

3. Improving and modernizing airport infrastructure and services is being

undertaken.

4. Allowing free inter-state tourist vehicle movement has also been

contemplated.

5. Rationalizing and reducing taxes for the end customer and for making

destinations competitive inter-se have also been initiated.

6. Measure closing down Government of India Tourist Offices located

overseas and conducting publicity increasingly over the Internet and

other electronic media has been initiated.

7. Making tourism a national strategic priority for employment generation

has since been seriously addressed.

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8. Incorporating the sustainability perspective in the various tourism

development plans/ projects to prevent the kind of environmental

degradation that has taken place in Himachal Pradesh, Goa and Jammu

& Kashmir has been incorporated.9. Providing impetus to rural tourism by linking village development with

restoration of heritage properties has been undertaken.

10. Creating public awareness about the economic and social benefits of

tourism is being advertised predominantly.

The tourism infrastructure in India has therefore been analyzed based on an

assessment carried out on consideration of the following. Analyzed from these

the status basic building blocks as prevailing in India in this sector by the

researcher undertook to study the extent of the development and growth in

these vital parameters in relation to the hotel and tourism sector.

1. Connectivity

2. Transport

3. Hotels(A House In Disorder)

Connectivity: According to Tourism in India, 2005, the issue of connectivity,

is not for tourism alone. It is one requiring of seamless coordination. India,

unlike many other leading tourist destinations is a huge and complex country

with significantly varying levels of quality of roads, rail, and air and sea links.

All these have to come together in as best integrated form at least in their

correct required sequence, to make a tourist experience a memorable one- or

one perceived to be causing least discomfort.

Air, road and rail are the three main connectivity players in India. Given that

the vast majority of tourists to India are from Europe and the US, both of long-

haul origins, air travel is the mainstay of such transportation and, in fact, the

only way to reach India as the country does not as yet attract any cruise liners.

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This makes the airports, at least those in the metros, the key gateways to

India. In this section, analysis of India's air tourist connections with some

international examples has been done.

Connectivity Infrastructure: Connectivity is not just about getting to a place.

Once a person gets there, it becomes necessary to know how to go about

within the place that is the destination incurring the least cost in and minimum

time. The researchers meetings with the trade suggested that problems with

connectivity were multifold and needed a complex series of solutions.

The common refrain of the airline trade was that there were not enough seats.

In the peak seasons, it was difficult to get any seats into India. This was partly

due to the fact that airlines did not really step up their service during those

times on the perception that a large Indian NRI population would heads back

to India. That NRIs do not really count as tourists and certainly do not spend

the dollars that India wants from tourism was the common refrain. During the

off peak period, in contrast, seats would go begging. While such a cycle wasperfectly normal trade feedback suggested that the aviation industry had not

really got its act together to phase out seat availability.

India is actually short of 1.4 million seats, which would be seen as not really

making a difference to inbound tourism. Explaining the logic behind the

shortfall, Amitabh Kant, Joint Secretary in the Ministry of Tourism, New Delhi

and the architect behind Kerala's success as a tourism destination, noted in

his article for ASSOCHAM's study of 'Aviation and Tourism' in 2005 that the

expected traffic had been pegged at 130.66 lakh, each on an annualized

basis. Based on a load factor of 70%, the requirement of seats in 2004-05

could therefore be worked out to be 186.6 lakh seats whereas the capacity

created was only about 170.42 lakh. Thus, there was a shortfall of about 16.2

lakh seats within the country itself.

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Apart from the physical infrastructure at the airports, India is fortunate to

already have a robust information technology system for bookings in place,

which could be, scaled up with Amadeus and Galileo both operational in India.

Travel Agencies' Network

Amadeus GalileoTravel Agency

Locations

61870 4700

Airlines 470 493Car Rentals 48 28Hotels 61500 52000Employees 4490 3000

Countries 200 116For a common cause, Tourism in India, Economic Times Intelligence Group

(2005).

India, notably Goa and Kerala is a preferred destination for most chartered

flights but more than just bringing in charters ground handling standards are

also crucial. According to charter rules, there are 14 airports, like Patna,

Jaipur and Agra, where customs and immigration facilities exist and charters

can be landed. There are three airports where the states involved provide this

service while there are 15 in the third category, namely those where customs

and immigration can be provided on request. Strangely, Jaipur, the gateway to

one of India's best-known tourism spots in the country is categorized in this

third category. One could expect Jaipur to be a full-fledged international

airport given the kind of revenues it generates from tourism. However question

frequently raised that Jaipur is too close to Delhi to merit a full set up, but the

revenues from tourism that may be generated at Jaipur itself could warrant

expanding that time and expense on it. Charters, as a means of making up

for the lack or commercial flights, have some merit for India, as bilateral rights

are always an issue for airlines in the country.

A CII pre-budget 2004-05 analysis reveals that for the same money, a

passenger can travel 41 %, greater distance on an international circuit than he

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can on a domestic circuit. The CII memo further stated that domestic fares are

23-30% higher than international fares for a comparable block time and

distance. (A House In Disorder)

Timeshare: The profile of Indians using timeshare is changing. Earlier, the

average family income of buyers was Rs 25,000 per month, now it lips to Rs

50,000 - Rs 150,000. This means more disposable incomes and a greater

propensity to travel. This is good news for the timeshare industry. The other

thing is, when the travel industry is down, as it was these past 2-3 years, the

timeshare industry does well. These are because people have already paid in

advance for their weeks, and are loath to see it go waste.

Timeshare Sales

Year Sales [US $]1975 501986 950

1996 22002003 5500Room for More, Tourism in India, Economic Times Intelligence Group (2005)

Timeshare is already a big business overseas. In the US, which is its biggest

market, sales volumes rose 14% to US$ 5.5 billion, in spite of the troubles

after September 11th 2001. As per a market research report by Ragatz

Associations for RCI, one of timeshare's largest companies, nearly 1,600 US

timeshare resorts serve 3 million households, who own 4.9 million weeks or

equivalent in points. The report stated customer satisfaction with timeshare

being at 84%, converting into a 92% use of timeshares owned. This, in turn,

meant an expenditure of US$ 5.4 billion in local communities where timeshare

resorts existed and still rising all the time.

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Even if these numbers sound big, the RCI report found that fewer than 3%

households in the US owned a timeshare. The market penetration of

timeshare increased with income so that over 7% of households with incomes

over US$100,000 a year owned timeshare. Around 73% of all timeshares soldwere by property developers The average purchase price from a developer

was US$ 14,200 per week of annual use (once a year the 7 days could be

used at the resort).

Dream Merchants [US Timeshare Sellers]

Developers

73%

Consumer Resale

15%

P roperty Owners

Association

8%

Gifted, Inherited,

Others

4%

Gifted, Inherited, Others Property Ow ners Association

Consumer Resale Developers

Dream merchants (US Time share Sellers)

Note: Tourism in India, Economic Times Intelligence Group (2005)

According to report, timeshare is as good a demand generator as any other,

which could serve as an indicator for Indian tourism as well. The average

American part spent US$ 1,205 on timeshare or about US$152 a day. No

clear numbers for India are available, but these will be high, as timeshare is

presently limited to the upper or upper-middle classes in India.

Timeshare as a viable tourism option has been developing for a restricted

class of Indians, that is those who know the means to boost tourism more than

any other class. As economic conditions improve, timeshare should also

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improve, and hopefully pull its weight in the overall scheme of arrangement

things in the tourism sector in India. (For a common cause)

Timeshare is as good a demand generator as any other (see table 24), whichcould serve as an indicator for Indian tourism as well. The average American

part spent US$ 1,205 on timeshare or about US$152 a day. No clear numbers

for India are available, but these will be high, as timeshare is presently limited

to the upper or upper-middle classes in India.

Spending Locations

Location of Spending Spend (US$ million)

Restaurants & Bars 1459

Admissions 849

Rental Cars 601

Groceries 596

Entertainment, Sports 447Rental Lodging 348

Sightseeing, Tours 253

Gambling 217

Shopping 117

Other Transport 41

Others 511

For a common cause, Tourism in India, Economic Times Intelligence Group

(2005)

Timeshare as a viable tourism option is developing for a restricted class of

Indians, but those who know the means to boost tourism more than any other

class. As economic conditions improve, timeshare should also improve, and

hopefully pull its weight in the overall scheme of things in tourism in India.

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The foreign tourist charter flights generally originate from many places outside

India. Tourist charter flights can land at all 12 designated international airports

(namely, Ahmedabad, Amritsar, Bangalore, Kolkata, Chennai, Cochin, Delhi,

Goa, Gowahati, Hyderabad, Mumbai and Thiruvananthapuram and fouradditional airports, namely, Agra, Jaipur, Varanasi and Port Blair. In addition,

tourist charter flights may also be permitted to land at airports having customs

and immigration facilities. Each tourist shall have a foreign passport with an

endorsement to visit India. However, their spouses can travel with them, even

if they hold Indian passports. Indian passport holders may be permitted to

travel on tourist charter flights on the return leg of the first flight and on the

onward leg of the last flight of the series of charter flights, provided a minimum

of 12 charters are operated in the series; and to Gaya, Patna, Varanasi,

Bhubaneshwar, Khajuraho, Port Blair, Guwahati and Bagdogra.

The charter flights will not be permitted, to be used for purposes other than for

carrying on board bona fide tourists. Since Free movement of cargo is

permitted within the country. DGCA data till 2000-01 showed a rise in suchtraffic since 1998-9. The researchers discussions with tour operators also

suggest that a far greater growth was possible, but there were certain

procedures as only under the 'Open Sky Policy', carriage of cargo may be

permitted on tourist charter flights, etcetera as was retaining the full blooded

growth in this sector.

The charter flights shall operate to the airports in India as specified in the flight

clearance issued by Director General Of civil Aviation (DGCA). For any

change, the operator shall obtain prior approval of Director General of Civil

Aviation. All tourists carried on these flights should have booked the package

tours in the originating countries. The stay of tourists in India will be for a to a

maximum period of 45 days.

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All arrangements in India for the tourists had to be done through Indian

Principal/Travel Agent/Tour Operator/Hotelier recognized by the Department

of Tourism and the charges for arrangements will be paid in foreign currency

in advance. A tourist charter flight could transport the tourists brought into thecountry by the same operator, on domestic sectors in India as well. However,

the initial place of arrival and the final place of departure from India could be

from the airports listed. The tourists coming to India by tourist charter flights

may perform their return journey by other scheduled flights also.

There are also some other issues. For example, typically, the average spend

of a tourist arriving on a charter is lesser than that by those on a commercial

flight. This is so because the charter tourists book an entire end-to-end trip

where extra expenditure is limited. Moreover, charters typically attract budget

tourists only who spend only around US$ 80 or so a day in tourist spots like

Goa. This is not exactly what Goa or India needs in terms of average spend,

to really boost up this industry.

Airport Charges: India is ranked at 115 out of 224 airports worldwide in terms

of charges for B-747 aircraft, as far as their landing and take off in the country

are concerned. The charges at the Indian airports are around US$ 2,285 as

against the high charges of around US$ 10,292 at Frankfurt Airport, Germany

and lowest charges of US$ 101 at Guinea Bissau Airport for B-747 aircraft.

India charges Rs 8,040 to Rs 27.451 for Route; Navigational Facility Charges

(RNFC) depending upon a distance of 100 to 2000 nautical miles as

compared to charges in Australia (Rs 5,258 to Rs 105,162), Brazil (Rs 11,141

to Rs 222,824), Canada (Rs 3,824 to Rs 76.472) and Etiro Control (Rs 11,876

to Rs 237,520) for B-747 aircraft. RNFC is low in India when compared to

other countries in the world. However, the charges vary with the level of traffic

and the earning from on-traffic, revenue sources interviewed in this sector.

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For this study, IATA furnished some indicative figures on airport charges in Asia.

A typical 295 tons B747 ('Jumbo') would find it quite expensive to refuel and load

up out of Mumbai. . This is another factor that hinders airlines from using bilateral

landing rights to the fullest and thereby, bringing in more tourists/visitors to India.

Even if seats were to be increased, the airlines face steep charge structures

which hike their costs involved in landing, navigating refueling at Mumbai's

airport thus making this quite expensive for the airlines, concerned which limit

their commitments about putting flights to India. The Charters flying in and flying

out from Goa, in fact, and parking their respective aircraft prefer to fuel up at

Dubai and not in Goa since it is relatively cheaper there.

India's international airports do not bear any mentionable class in so far as

amenities provided for tourists are concerned. This is because there is a point of

view that Indian airports are mere transit points for visitors for getting in and out

of the country. But this kind of opinion nevertheless leads to India missing out on

moneymaking opportunities for the airports as for instance from more revenuesthat could have been secured duty-free restaurants and even the MICE segment.

But for making money one has to pump in money as well where it is required..

Most airports in India it is needless to mention get hopelessly overburdened

during peak traffic hours (usually during unearthly hours coming from 11 pm and

3 am etcetera) when the airports most closely resemble a Mumbai suburban

station at the peak 'rush hour'. The quality of such an experience by a tourist

leaves much therefore for him/her to desire.

Most international flights land in Mumbai at night, mainly because India, not being

a hot destination, gets rather inconvenient take-off times. Take the example of a

tourist who lands at Mumbai -- which is India's gateway in the absence of other

international landing links for flights to Aurangabad for that tourist who desire to

hunt the Ellora caves. The international flights land at night may be around 1 am.

Since there are no connecting flights to Aurangabad the same night, the tourist

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has not necessarily spend the night of no less than 10 hours, in a hotel near the

airport. The hotels near the airport do not enhance the experience at all. There are

either third rate overnighters at low prices or there are the five-stars where it

makes no money sense to spend US$ 100 for 10 hours. In other words,evacuation of the tourists, once they land in India, is severely lacking. There have

to be enough facilities inside the terminals to, at least, ease the waiting period. But,

whatever facilities are available are rudimentary and worse than those offered by

many African airports, which allegedly are poorer than India. Cochin, in South

India, can show a way out.

Projections: According to Tourism In India (2005), as discussion on facility

and ideas becomes imperative against the backdrop of ambition and without

vision, of the government of India for which proper planning and

implementation need to be carried out. The projections of airline passengers

coming into India should result in airport revenues rising for Mumbai, the

gateway airport, from at least from Rs 500 crore to over it Rs 1, 000 crore. The

Tenth five year plan had allocated over Rs 12,000crore, as outlays for thissector since a the Standing Committee of the Rajya Sabha had noted thus in

one of its meetings held in Nov 2003: About 65 percent of the total five-year

investment plan, generated from the Airport Authority of India's internal

resources, is t be kept for expansion modernization and construction of new

terminal buildings to be mainly located at Delhi, Mumbai and

Thiruvananthapuram. An additional 28 per cent had been reserved for

upgrading navigational aids and cargo warehouses at the airport. In addition

to the planned outlays, preliminary feasibility studies and proposals were

being reviewed and revamped by the various State governments in India in

consultation with the private sector for vitalizing this sector and making it

vibrant.

Other initiatives, as were not included in the Airports Authority of India's plan,

envisaged an outlay of the order of about Rs 19,100 crore. Such investments

as were contemplated for the new airports namely Mumbai, Bangalore, Goa

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and Hyderabad amounted to about Rs 14,600 crore, and embraced

modernization programme for the terminal buildings at the various airports

aggregating to Rs. 2,400 crores, creation of related supporting airport

infrastructure aggregates Rs 1,500 crore and cargo facilities of Rs 600 crore.If all these investments proposals were to be realized, the total investment gap

would increase significantly l from the original estimate of Rs 1,101 crore to Rs

20,201 crore.

The Ministry Of Civil Aviation has brought out the fact that the present system

of management at airport as entrusted to the responsibility of public sector

entity such as the Airports Authority of India has several in-built deficiencies

such as the following:

(i) The service conditions of employees are formulated by the directives

originated from Department of Public Enterprises, which make it very

difficult to reward/punish errant staff leading to a lack of professionalism

and poor commitment to work and in consequence result in poor service

standards.(ii) AAI being a public sector entity, every aspect of its functioning is open to

scrutiny under an elaborate institutional mechanism of accountability

riddled with problems of misuse as may at times focus on procedural

formalities rather than substantive results, leading to fostering a civil tax

of cautious working style being adopted by the management. Invariably,

the development of such an attitude often stifles initiative risk

management innovation. These are even delays in decision making that

render the functioning of airports unauthorized and hence commercially

uncompetitive a fiercely competitive from the perspective of a global

backdrop.

(iii) Because of such service conditions, there is a relative lack of sensitivity

about needs and aspirations of the passengers and other users, leading

to poor quality of service being rendered or standards maintained despite

heavy investment made to modernize facilities at the airport.

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(iv) Lack of professionalism and initiative creates an atmosphere not

conducive or facilitate for rapid and total absorption of new technology as

well as new management techniques.

Being a public sector organization, the Airports Authority of India has to go

navigate the course of lengthy procedures involving the Ministry of Civil

Aviation, the Public Investment Board and Cabinet Committee on Economic

Affairs for getting a clearance on major investments contemplated. This leads

to a delay in implementation and over/under-investment and never the

optimum. (A House in Disorder)

It may not be out of the place to mention changes need not necessarily cost

money. A lot of ideas can be implemented without money- it only needs a

vision and a leader/manager to drive the human resource component in this

system. Some examples could be the following:

1. At most Indian airports toilets and facilities are poor, or are very

poorly maintained. It takes hardly much money to just swipe a mopacross the floors to keep them clean anyway, as should be made

in task assigned to the sweepers on the airport.

2. Every Indian airport is overstaffed with many people just hanging

around the terminal. While downsizing may not be possible all at

once, it should be possible to prevent unnecessary loitering around

the people. This needs a boss who leads from politicized unions

can be handled is another issue altogether.

3. The total lack of an attractive and appealing atmosphere inside the

premises of the airports generates lethargy and low enthusiasm

levels with the result that interest secure, no one really cares much

for jobs being accomplished or goals being achieved.

4. The least the AAI could do is to talk to the taxi unions to ask their

drivers to dress well. Agreed, the flights do land at night, but if taxi

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drivers can spruce up their dress/appearance, it would go a long

way in cheering up the overall image.

5. There are literally no designated places to drop off a luggage

trolley at the airports. The result is that: trolleys litter the roads andpassages everywhere at the airports. It just needs signage and

some discipline to ensure that trolleys don't create this kind of a

clutter.

The Ministry's brief however states that the Airports Authority of India's 9th

Five Year Plan target is, on the one hand, unrealistic when compared to its

past investment performance and, on the other hand, unambiguous in relation

with such investments proposed contemplated in the other countries of the

world. Besides this, it is doubtful that the proposed investments levels will help

upgrade the principal international gateway provide airports to compelling

world -class standards.

The above text adopted from the interactions within the government reveal towhat extent the development of infrastructure is difficult in India. Everyone

recognizes the need, but no one agrees on the requirement of implementing

small changes everywhere that do not cost monetary outlays but which

nevertheless can significantly improve tourist experience and engender

allowed satisfaction.

Apart from the costs associated with the airports in India, the sales taxes on

aviation fuel is also quite high, which drives up costs (see table 25). The issue

gets more complicated because each state has its own tax structure, which in

turn does not enable proper tax planning or quick route expansion denied by

most airlines.

Aviation Turbine Fuel Tax

Sale Tax On ATF

State-wise sales tax (2004-2005)

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States Rate (%)Delhi 20Kerala 39.10Tamil Nadu 25.20

Maharashtra 25Bonded 20Madya Pradesh 28.75Rajasthan 26.70

* Bonded 13.48Uttar Pradesh 20Jammu & Kashmir 21Punjab 22Chandigarh 22Himachal Pradesh 20

Manipur 20Assam 22Bihar 26.25Goa 20Gujrat 27.60

Bonded 36Karnataka 28Tripura 25Orissa 20West Bengal 25Andhra Pradesh 4

Note: * Upto 31/03.2005 only

Air to Rail: According to Tourism Of India (2005), from the airport the,

evacuation of passengers can be by rail or road as well. There has been a

debate raging all over the world that could rail ever take the place of road

(cars/ buses/ vans) for primary evacuation of passengers and their luggage

from airports. The argument in favour of a rail link is that it would cut transit

times, reduce pollution, evacuates faster out of the airports than any other

kind of wild transport could. But the arguments against it are the quantum and

level required for it of investments, the expenses on the maintenance function

and the fund requirement for eventual replacement of all worn out rail it out

and systems after 30 years of non-stop use is of daunting magnitude that

defies revenue consideration. Air passengers typically carry a larger bulk ofluggage which would be difficult to load and handle with so many other

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passengers desiring to board on the train. Taxi services will assist in enabling

the passenger reach his doorstep .One would still need taxi/buses to take one

person home therefore involving increased outlay of time, effort and money.

The argument in favour of using the rail link is clearly laid down in the Air/Trainwebsite of New York's JFK International airport, which states the benefit of

utilizing the Air/ Train, when complete, would:

1. It reduces highway congestion and; improves air quality.

2. It generates 4,150 construction jobs in the US aggregates to payment of

the order of $580 million in wages and $980 million in sales

3. It stimulates the countrys economy.

4. It provides the local residents who work at JFK airport with a transit

connection to their work place from their homes and vice versa.

5. It would boost New York City's international business and $15billion-a-

year tourism industry.

Arguments notwithstanding, rail links would be a crucial for infrastructure

requirement, if the planning and vision were there. The prime connector couldbe the rail link. No Indian airport is linked by a railhead to the rest of the city or

the country. A study of all major airports will reveal that airports are part of the

chain, not as an elite entry point. The airport Schipol Airport in Amsterdam,

Netherlands is an indicator the near perfect and synchronized benefits of

having an Air/Rail link for travel to any point within the city and to destinations

across the country.

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Rail Links

Airport Distance from

CityCentre(Kms)

Links Entrypoint of

rail linkin

airport

Type of RailLink

Cost byTrain to

CityCentre

Cost byTaxi To

City Centre

Mumbai 23 Road Nil Nil Rs 80 Rs 350KualaLumpur

75 Rail.Road

At checkIn

'Dedicated highspeed

RM 35 RM 67

Singapore 12 Rail.Road

AtCheck In

Metro SGD2 SGD 26

Dubai 5 Road Nil Nil Nil AED 15Hong

Kong

10 Rail,

Road

At

Check In

Dedicated high

speed

HKD 100 HKD 335


(2005)

Compared with the analysis given below Mumbai gets far lesser passengers

and flights than do counterpart airports in Asia. The absence of a railhead

connection is in itself not a problem. The issue relates to the evacuation of the

people away from the terminal as fast as they land so that even a biggerterminal would prove insufficient under the circumstances. A tour of the

airports around India would reveal the extent to which India lags behind

foreign countries in functional capabilities such as forecasts, planning and

implementing the development of the plans relating to development of the

infrastructure linking railways with air transport and all just not for tourism

but also for improving quality of life of the locals. Each major city should have

links, of a scalable magnitude, which should increase as the city expands,

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Annual Non-Scheduled Operations of Pawan Hans

Years Aircraft Leased

at Year End

Hours Flown Passengers

Flown

Revenue (Rs.

Mn)2000-01 25 21,472 469,378 1,211.42001-02 22 18,027 354,017 1,068.62002-03 21 17,890 401,584 1,083.72003-04 26 17,937 404,495 1,103.12004-05 24 18,798 399,410 1,211.9

For a common cause, Tourism in India, Economic Times Intelligence

Group (2005)

For a starter, take Singapore's Changi airport. It was long voted as one of the

world's best airports and now has the ail to the city. The Metro was not a

dedicated rail link, connecting the city to Changi, which is at one end of the

island. This link was opened in February 2005. The MRT station is located in

Terminal 2 and is also accessible via the Sky train from Terminal 1. It takes

about 27 minutes to reach the city. The travel fare (from the airport to the city)

is below S$2.00 (not inclusive the S$l refundable deposit for a single tripticket). In fact, a trip from Changi airport to Orchard Road, located in the

centre of the city, will take about 3 minutes and cost S$ 1.6 for a single

journey, as per the SMRT, which operates the Singapore Mass Rail Transit

System.

Or take Hong Kong, the other city in Asia that vies with Singapore for a

leadership in infrastructure system subsisting in the tourism sector. Its 'Airport

Express', a service dedicated to linking the airport to the city, has its own site

service facilities and stations. It is one of the few dedicated airport railways

link in the world, covering the 35.3km between the airport at Chek Lap Kok

and Central Hongkong district in just 23 minutes.

Kuala Lumpur is a smaller city vis-a-vis the other cities in Asia, but its vision is

to become a preferred destination for Asia. The rail link becomes vital andmore crucial for KL because its Kuala Lampur International Airport is 75 km

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from the city. KLIA express started up in 2002 under a 30-year contract with

Express Rail Link. This RM 2.4 Malaysian Rengitt(MR)billion project carried its

1 millionth passenger in January 2003. The rail link is cheaper for a single

traveler, but for more than two people traveling together it makes as muchmore sense in taking a taxi, which costs the same as the train. Yet, the

concept is ready. Under its Vision 2020, the administrative capital of Malaysia

at, Putrajaya is coming up between KI City and the airport, which should see

the usage of the express increase manifold compared with this no such

parallax exists in India .However this country has the Pawan Hans helipcopter

service in Mumbai which is presently being used mainly by the government

and ONGC officials for their trips to Mumbai High and similar such

installations. Technically, these helicopters could be extended for tourism

purposes as well. However sufficient demand need to develop for such

linkages to materialize to places like Alibaug, Lonavala or within Mumbai itself.

Rail Links: The railways have their own role to play. Indian railways is the

largest transport system in the world, and with all its, failings, it needs to beadmitted that it renders an absolutely invaluable and, on the whole, very good

services to the Indian masses to travel from one destination to another. The

railways have been traditionally seen as cheap and appropriate transport by

Indians, but tourists from overseas are neither encouraged by the condition of

the railway nor they are visible any significant city this mode of transport except

at Agora and one or two similar tourist site. There, however exist, provision for

foreigners wanting to cut costs and see more of India. To start with, there are

Indrail passes, similar to the Euro pass for railways in Europe. The two serve the

same clientele and segment, but the rates are not comparable because of the

complications in travel rules, the sheer size of India and the overall quality of

travel experienced. The rates besides are also high and leave much scope for

rationalization.

Indian Rail Tourist Passes

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Validity

(Days)

AC Class AC-2 Tier, First Class

AC-3 Tier, AC-Chair

Car

Sleeper Class II

Class (Non AC)

Adult Child Adult Child Adult Child1/2 57 29 26 13 11 61 95 47 43 22 19 10

2 160 80 70 35 90 154 220 110 110 55 50 257 270 135 135 68 80 4015 370 185 185 95 90 4521 396 198 198 99 100 5030 495 248 248 126 125 65

60 800 400 400 200 185 9590 1,060 530 530 265 235 120

(US$)For a common cause, Tourism in India, Economic Times Intelligence Group

(2005)

Indrail passes can only be purchased by foreign nationals and NRIs on payment

of US Dollars, Pound Sterling or other convertible foreign currencies. This pass is

issued by Indian Railways to foreign (that is non Indian) nationals and Indians

residing outside India to undertake travel by to destination of their choice within

India

The pass allows unlimited travel on all regular rail tourist routes as per the wish of

the traveller but only during the validity of the pass for which reservations must be

made separately. The pass may be purchased for 1st class, AC sleeper (2-tier or 3-tier) or AC chair car class, or 2nd class, for varying durations as desired ranging

however from a half-day pass to a 90-day one. A pass for one class is also valid for

use in on the lower (that is. less expensive) class of travel should the tourist so

desire. Fares differ in respect of adults and children. Payments need to be made in

US dollars or any other convertible foreign currency. Identity of the tourist that

he/she may carry in the form of his passport or some other document is required.

The main advantage of an Indrail pass is the convenience it provides by way of not

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having to buy separate tickets for segment or all segments of the journey. It also

saves money which is that if holding a first class or AC class travel (although not as

much as it used to do) states the tourist need not by his buying all the tickets and

making reservations separately, especially if one intends to travel a lot. The passesfor shorter durations are less of a bargain than the ones for longer durations. One

also gets access to the Tourist and VIP quotas for reservations, and an Indian rail

pass usually makes things much smoother at a Tourist Guide or Tourist Booking

Counter at a railway station.

Taxis: If one cuts out rail for intra-city travel, the only solution, which remains,

is a taxi. But experiences of even Indians returning from overseas have been

horrific. Taxis are old, drivers unshaven and uncouth. and there's absolutely

no attempt to help. Instead. the first look makes one suspicious of being

cheated, which unfortunately does happen often. The Indian tourist office in

Mumbai, of course has a different view: it does not acknowledge any problem.

Ram Chopra, regional director, Mumbai office of India tourism says it has

trained over 5,000 taxi drivers of the black and yellow cabs, and that 'there arevery few complaints, mainly related to touting or cheating.

That is understating the case. The taxi fleet must rate as one of the worst in

the world, with most yellow tops being extremely shoddy in quality driven by

equally bad drivers. Its not uncommon to find a surly and uncouth driver; its

quite common to find the pre-paid taxi counter issuing a receipt for a taxi

whose driver is not there nor is the taxi easily traceable in a badly lit parking

lot. Policemen are hard to find. For an Indian, it's like returning to the earth

with a thud; for a foreigner it's the worst nightmare at night in a new city and

an arrival like this. It hardly does anything for India's image. And yet nothing

changes fast enough. There have been occasions when taxis have stopped at

remote locations or a flyover and drivers have demanded extra money to

carryon with the journey. But while Mumbai is far better disciplined, other cities

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in India receive a far worse review from most of the international sites or

traveler books, with almost every review advising caution.

Caution is usually advised when there is lack of information about a subject. InIndia's case, lack of knowledge is the key issue. Foreigners are aware of India's

situation, and come to India after a conscious decision. Imparting the best

information one can simply remove some obstacles to spending, if it take that

view. Take, for example a comparison of airport websites around Asia and India.

Mumbai comes out the worst (see table 29). A look at the internet-based chat

and feedback rooms reveals the extent of the malaise, and the feedback is bad,

to put it mildly. Information infrastructure, as it is physical is today as important to

development as anything else.

Reaching Out Information From Indian International Airport Websites

Parameter Mumbai Delhi Kolcutta Chennai CochinWebsite Accessible Yes Yes Yes Yes Yes

Contact Information Yes Yes Yes Yes YesRight Timetable No Yes Yes Yes YesOnline Right

Information

No No No .No Yes

Travel Details Taxis,

Buses

No Yes' Yes Yes Yes

Customs Information No Yes Yes Yes YesTourist Information No Yes Yes Yes YesConsulate details No Yes Yes Yes YesEase Of Navigating

The Site

Yes Yes Yes Yes Yes


(2005)

Currently only Cochin airport has any online flight status link or data. Neither

Delhi nor Mumbai have any links or data at all and these are supposed to be

the leading airports of India. While all the airport websites visited have the

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standardized list of links on their left side of the page, in the case of Mumbai

(www.saharairport.com) none of these links connect to anything. Most other

airport sites have an offline airline timetable, like railways have, which is still a

good enough guide. Only Cochin airport has an online flight status on theirsite, which can be compared to any airport in Asia.

There are options that have been developed over the years in India as well as

overseas. In India, for example, there are hired taxis (mainly a range of cars

with the yellow number plates) that may be hired by the passenger's relatives

or business associates to pick him up at the airport. Such taxis are bountiful in

India. Now with the cost of cars falling and the general tendency to avoid the

pre-paid taxis is rising. But these can be expensive, since the pricing is based

on the assumption that any person flying into International airports could well

afford a little overcharging - a fact that no one disputes yet.

The other option is that hotels send their own cars to pick up people who stay

with them. But such numbers are very few. Call-a-taxi from telephones is stillnot common in Mumbai or Chennai, though somewhat more common in Delhi.

Overseas, there are taxi services that specialize in airport transfers. For

example, for London's Heathrow, a firm called' Airport Taxis' has its own call

centers where travelers can book any variant of vehicle by providing flight

details. The taxi driver would wait outside with the name on a board; very

similar to India's hired taxi routine. In this case, though, online booking is also

possible.

IT and Tourism: The study deals into with the two segments of business

hotels and resort hotels, separately making the observation that several

business hotels also get a number of holiday travelers and vice-versa. In the

business hotel category, the study has found that 96.3% of the 5 star and 5

star deluxe hotels have 24-hour access to Internet through a dial-up service.

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Data Presentation

Presentation

1. All India average revenue has grown substantially from Rs. 5.18 crore

during 2003-04 to Rs. 9.15 crore during 2004 05 and is expected tosee a significant improvement in the next few years.

2. The All India average Net Income (Net income before depreciation,

interest payment and taxes) also increased from Rs. 1.95 crore (24.0%)

in 2003-04 to Rs.2.80 crore(30.7%)in 2003-04,reflecting overall

improvement in the industry.

Indian Hotel Industry-Revenue & Profitability-Average Per Hotel

4.49 4.59 4.54 5.18

9.15

1.25 1.25 0.971.95 2.8

01

23456789

10

2000-2001AllIndia Average

2001-2002 AllIndia Average




Rs.(Crore)

Revenue (in Rs crore) Net Income (in Rs crore)Figure: Indian Hotel Industry-Revenue and Profitability Average per Hotel

Note: The Indian Hotel Industry, Survey Of The Tourist And Hotel Sector,

Ministry Of Tourism (2005).

3. House profit (gross operating profit after deducting franchise and

management fees) as a percentage of revenue increased from 29.2% in

2002-03 to 34.8 %in 2003-04. This is the second successive year that

house profit has shown upward growth.

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House Profit (in %)

32.30% 31.70%

25.90%

29.20%

34.80%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1999-2000 All

India Average

2000-2001 All

India Average

2001-2002 All

India Average

2002-2003 All

India Average

2003-2004 All

India Average

Figure: House Profit



4. The number of hotels having training department increased in all star

categories, with all India average being 25.8 % compared to 19.9 % in

2002-03. Five star deluxe hotels had the highest percentage of hotels

with a training department. There has been an increase in the number

of three star hotels with a training department: 24.3% in 2003-04

compared to 21.0% in the previous year. This reflects the growing

importance being paid to employee retention and productivity

enhancement through training.

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6. While print advertising continues to be the most popular marketingmedium used by hotels across India (93.0%), there has been an

increase in the use of hotel websites as effective marketing media

across all segments of hotels. Direct mail is also the preferred

marketing media for all categories, with an increase in utilization to

81.4% from 78.8% in the previous year.

7. Use of telemarketing as marketing media has increased, particularly in

the three star segments. Although the utilization of loyalty card

programmes has increased from 27.9% to 31.0 %, there is decline in its

usage by five star deluxe and five star hotels, possibly due to saturation

in the market, with hotels targeting the same customer profile.

8. Interestingly, radio advertisement and television advertisement have

grown in use as marketing media during 2004-05. Five star and four-

star hotels used this mode of marketing the most, particularly for F& Bpromotions and weekend or holiday packages.

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Table

Trends in key operating Statistics

Avg total roomsper hotel

63 62 63 66 82 63 62 63 66 82 63 62 63 66 82

Avg occupiedrooms per hotel

11829 12659 11727 13129 18435 11829 12659 11727 13129 18435 11829 12659 11727 13129 18435

Avg occupancyper hotel

51.7% 55.6% 53.2% 54.8% 59.7% 51.7% 55.6% 53.2% 54.8% 59.7% 51.7% 55.6% 53.2% 54.8% 59.7%

Avg rate perhotel Rs2123 Rs2046 Rs2058 Rs2004 Rs2689 Rs2123 Rs2046 Rs2058 Rs2004 Rs2689 Rs2123 Rs2046 Rs2058 Rs2004 Rs2689Percentage of Revenue Amount of Available Room Amount Per Occupied Room

RevenueRooms 55.9% 56.4% 53.2% 50.8% 54.8% Rs

400721Rs416158

Rs380561

Rs398802

Rs607328

Rs2123

Rs2046

Rs2058

Rs2004

Rs2689

food andbeverages

27.8 28.5 30.9 .31.3 29.6 199665 210327 220976 245970332217

1058 1034 1195 1236 1417

Banquet &conferences

6.0 6.5 6.8 8.9 7.8 42851 48016 48324 69850 87662 227 236 261 351 338

Telephone andOthers

4.2 3.6 3.1 2.5 2.3 29982 26622 22063 19884 25202 159 131 119 100 112

Minor operated* 3.1 2.2 2.7 2.8 3.4 21957 16341 19336 21901 38420 116 80 105 110 170Rental& OtherIncome

3.1 2.8 3.4 3.6 2.7 22178 20538 24338 28581 30172 117 101 132 144 134

Total 100.1 100.0 100.0 100.0 100.0 717334 738003 715599 784949 1121000 3800 3629 3869 3945 4965

Departmentalexpenses

Rooms 17.1 19.4 20.6 20.7 17.8 68650 80534 78234 82462 108205 364 396 423 414 479Food andbeverages

62.4 61.7 62.2 58.7 55.9 151340 159268 167450 185236 234771 802 783 905 931 1040

Telephones&others

57.5 56.8 57.7 50.0 47.6 17237 15124 12732 9921 12007 91 74 69 50 53

Minor operated* 59.1 50.5 51.8 52.7 53.7 12981 8256 10016 11547 20624 69 41 54 58 91Rental &otherincome

12.8 7.3 10.1 7.3 8.1 2834 1502 2466 2097 2919 15 7 13 11 14

Total 35.3 35.9 37.9 37.4 33.7 253041 264658 270898 293662 378052 1340 1302 1465 1476 1674Departmentalincome

64.8 64.1 62.1 62.6 66.3 464303 473318 444701 491286 742949 2459 2328 2405 2469 3291

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OperatingexpensesAdministrative &general

9.4 8.9 10.3 8.5 8.4 67592 65596 73323 66228 94401 358 323 396 333 418

Management fee 2.0 2.0 2.4 2.3 2.3 14541 14525 16944 18302 25842 7 71 92 92 114Marketing 2.8 2.8 3.5 3.2 3.6 20154 20409 24718 24980 40681 107 100 134 126 180Franchise fees 0.4 0.4 0.4 0.5 0.4 2725 3301 2796 4145 3874 14 16 15 21 17Propertyoperation &

maintenance

7.2 7.1 7.3 6.9 6.2 51296 52644 52179 54321 69735 272 259 282 273 309

Energy 10.7 11.3 12.5 12.3 10.5 76502 83005 89228 96439 118093 405 408 482 485 523total 32.5 32.5 36.2 33.4 31.5 232809 239480 259188 262117 352626 1233 1178 1401 1317 1562House profit 32.3 31.7 25.9 29.2 34.8 231491 233839 185512 229169 390323 1226 1150 1003 1152 1729

Fixed expensesProperty taxes 0.9 1.0 1.1 1.1 1.0 6558 7584 7831 8919 11068 35 37 42 45 49Insurances 0.8 0.6 0.7 0.8 0.6 5874 4236 4992 6131 6845 31 21 27 31 30Other fixedexpenses

1.9 2.1 1.8 1.1 1.6 13957 15253 13104 8740 17840 74 75 71 44 79

Rent 0.7 0.8 0.9 1.3 1.0 5016 5650 6482 10115 10947 27 28 35 51 48Total 4.3 4.4 4.5 4.3 4.2 31505 32723 32408 33905 46700 167 161 175 170 207NET INCOME** 28.0% 27.2% 21.4% 24.9% 30.7% Rs

199989Rs201116

Rs153103

Rs195264

Rs343622

Rs1059

Rs989

Rs828

Rs981

Rs1521

*Minor operated departments include: laundry, gift, business centre, news stand, sports, health club, garage, parking and so forth

** Net Income is before depreciation, interest payment and tax

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To enable better comparability of data it has been presented as the financial

statements up to net income, before any deduction of depreciation and

interest, which are too hotel /owner specific to render their comparison to be

meaningful.

All amounts presented in this report have been rounded up the nearest whole

number and are in Indian rupees (Rs) for fiscal year 2004-05(April-March).In

the financial statements ,Rupee amounts are shown as amounts per available

room(PAR) and per occupied room(POR) in order to eliminate differences in

the size of hotels surveyed. Market mixes, ratios of various sales and

appropriate departmental expenses have also been presented. In addition,

highlights have been throughout the document to reflect certain key aspects of

our findings. Market data has been presented as an average of the respective

segments and as a percentage. Financial data has been presented according

to the most common measures of industry performance: as a percentage of

revenue and as amount PAR and POR.

The amounts and ratios presented should not be considered a standard for

any type of property, region, city, star category or price category, but only as a

guideline for comparison with the operating results of a specific category.

Readers of this report must also keep in mind that large differences from one

year to the next for a particular item may be partly on account of a different

mix of survey participants (thus affecting the average figure), rather than an

actual year-to-year change.

Air connectivity takes on an even greater importance given the projections of

the department of civil aviation, tourism and Director General Of civil Aviation

(DGCA), who are the ones to implement the goal of five million tourists by

2006. The AAI has projected till 2011 the scenario facing it. Considering the

forecasts made by different organizations and taking a reasonably pragmatic

view, the expected traffic scenario up to the year 20 10-11 has been projected

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by the Foundation for Aviation and Sustainable Tourism. These projects have

been extended up to the year 20 16-17 by AAI.

During the next twenty years, there is a quantum jump in the projected traffic,four times in passenger and six times in cargo traffic. It will, therefore, be

necessary to take a host of measures so that the ground infrastructure keeps

pace with the growth of traffic.

ICAO forecasts predict worldwide growth in air traffic at 5% a year or doubling

in the volume of traffic once in 14 years. The Asia Pacific region is set for

higher than average growth. According to an AUTC study, it might account for

more than 50% of the world air traffic by 2010. Clearly, there's a long way to

go yet.

Compare the 1.58 million visitors that the Indian airports serviced in 2003-04

with the massive numbers elsewhere in the world, and the plans for the future

take on a totally different hue.

Projected Domestic Traffic Up To 2016-17*

DomesticPassengers *

Increase(%)

InternationalPassengers *

Increase(%)

1996-97(Actual)

120.0 10.5 108.9 7.0

1997-98 132.6 116.51998-99 146.5 124.71999-00 161.9 133.42000-01 175.7 141.42001-02 190.6 8.5 149.9 6.02002-03 206.8 158.92003-04 224.4 168.42004-05 243.5 178.52005-06 250.5 7.0 188.4 5.52006-07 278.7 198.72007-08 298.2 209.6

2008-09 319.1 221.62009-10 341.5 233.3

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2010-11 365.4 246.22011-12 390.9 259.72012-13 414.4 6.0 272.4 4.92013-14 439.3 285.82014-15 465.6 299.8

2015-16 493.5 314.52016-17 523.2 329.9

Room For More, Tourism In India, Economic Times Intelligence

Group(2004)

Responses to Questionnaire Administered In Survey Conducted By ITDC

Managers views on the tourism industry in India?

Asia has been fast emerging as a chosen destination among globetrotters.

India has always been a strong contender with its main market sources being

UK, US, Sri Lanka, France, Germany, Canada, Japan, Australia and

Singapore. Rajasthan and Agra in the north, Goa in the west and Kerala in the

south have been attracting overseas travellers from these countries.

India has been a late starter in tourism. However, international arrivals have

grown over the last eight years and have recorded a figure of 2.6 million in

2000 (India Tourist Statistics) - a far cry from 15,000 in 1950.

Majority of these are in the younger age bracket (25-44 years). India is still far

behind China, Hong Kong, Thailand, Dubai and the Maldives.. Indias share in

the world tourism has also virtually stagnant at 0.38% for a greater part of the

last decade.

Statistics reveal that the average stay of an international traveller to India has

been 31.2 days. This indicates that the character of the average visitor is a

serious minder and studious explorer of history and culture. This is also the

way India has been promoted overseas. Interestingly over 63.3 million tourist

days do not find reflection in corresponding hotel room nights.

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There exists a hidden dimension to Indian tourism that has figured little in the

policy planning of most industry players. This is the rise of domestic tourism.

Over the last 10 - 12 years, there has been an increase of over 100 million

travellers. Today, there are over 176 million visitors who travel within India.This is a by-product of economic development. People are using their

disposable income to travel. A significant amount of this is for religious

purposes, but a lot of it can be attributed to sightseeing. As the earnings are

going up, people are looking for better and often more expensive methods of

travel arid accommodation.

Future requirement of hotel accommodation during the Tenth Five-Year Plan'

is estimated at 1,25,000 rooms in the approved categories from the 80,000 or

so rooms that exist currently.

Tourism has been the second largest contributor to Indian economy. A start

has been made and some steps have been taken to improve the situation.

The new aviation policy will hopefully attract serious private players. Effortsare being made to privatize national carriers - Indian Airlines and Air-India.

Indian skies are being opened up. The proposed dismantling of FIB will lead to

a more investment friendly climate. Tourism Awareness Program launched in

1999 by PATA has given the industry a greater focus.

Manager thinking about where this industry is headed in the future and what

further developments can it incorporate? What is the kind of cooperation it

need from the government for hospitality to play a large role in tourism?

India, as a leisure destination, offers a unique bounty of nature. One can do so

much here - from climbing to rafting to lazing in the sun to bird watching. This

complements the rich heritage sites dotting the country. India is also one of

the few countries that have a thriving business community and high levels of

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entrepreneurship. To many overseas players, its considered an emerging

market in Asia.

Some of the immediate measures that are essential to establish a stablefoundation for tourism include upgrading basic tourist facilities. Private sector

participation should be welcome to maintain and market India's national

heritage. Opening of more international airports and upgrading the existing

ones will certainly help. This will help in increased air traffic and augment seat

availability. Visa procedures should also be simplified. Lower taxes will mean

better scope for hoteliers and this will encourage new players and will also

help in consolidating the market. The Government of India should recognize

the potential for this industry and work towards uniform policy decisions that

will help in its growth. State priority and programs have to be radically altered

to help tourism.

India has to be projected not as Agra, Rajasthan or Kerala but as India. India

today is not only a country that has an envious past but also an exciting future.It is important that this young fresh face of India is projected overseas.

Managers thinking on events like September 11 attacks or war impact the

industry?

Travel advisories and warnings issued by foreign governments have ignored

the powerful. 'Peace Making' role of tourism and constitute a' form of

'Economic Sanction' against India. This is the conclusion reached in a snap

survey conducted among 147 experienced international travelers, staying in

17 leading hotels in 12 major tourist destination cities in India by the apex

hotel industry organization, the Hotel Association of India (HAl). An

overwhelming 99.2% of tourists who participated in the HAl Survey in the

second week of June 2002 did not perceive any threat to their safety and

security. Over 97.8 % described the standards of safety and security in hotels

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they stayed in as "excellent", "100% safe and secure" and "having perfect

security.

A vast majority of 98% of those surveyed preferred air travel in India only onaccount of safety. As many as 96% of foreign tourists unhesitatingly stated

that On their return home they would recommend to their family and friends to

visit India as a preferred holiday destination. A miniscule 4% of foreign tourists

expressed need for caution while traveling by road in India owing to poor road

conditions, occasional congestions and trash driving. The survey reveals that

experienced foreign travelers to India shrugged off the travel advisories and

warnings as coloured by political considerations or based on inadequate

knowledge of ground realities. The steps taken by the various governments in

USA, Western Europe, Japan and Australia with a lead role played by

America have been hasty and have ignored the "peace-making" role of

tourism.

The effect of travel advisories issued by the foreign governments, fuelled bymedia hype, on the tourism economy, business and leisure travel and hotel

occupancies has been catastrophic, leading to large-scale cancellation of

visits by foreign travelers over the next two months. A recent study of

international visitor arrivals in the metro city of Mumbai indicated that the

numbers have dropped from 46,128 in May 2001 to 34,943 in May 2002,

recording a decline of 24.2%. As a consequence, the local hospitality industry

has witnessed 25% downtrend in foreign visitors in just one month. A similar

downward trend is visible in other major centers of tourist interest in the

country.

The unfortunate events since the September 11 attacks in the USA, the war in

Afghanistan, followed by travel advisories and warnings, mass-scale

withdrawal of diplomatic staff, pressure on MNCs and foreign corporate bodies

to send their executives back home to their respective countries and wide

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publicity advising people not to visit or stay in the country have unfairly

projected travel to India as being hazardous. The withdrawal of travel

insurance cover by foreign insurance companies under pressure from their

governments has proved a major deterrent and stumbling block to touristmovements.

Managers thinking on training programs?

Training is an integral part of our culture. It starts at the department level

where all HoDs work closely with the HR Department to identify specific

training courses for each employee. The detailed induction programme

introduces the new entrant to the company culture.

Over and above this, all management trainees undergo an exhaustive training

in various disciplines under the supervision of internal and visiting faculty.

Every year candidates from within the units are identified and are also sent to

various institutes overseas to hone their skills. Senior Managers arenominated for special courses to Cornell Hotel School.

Address security concerns of tourists?

Security is an integral part of the hotel. The specially trained security

personnel are on constant vigil throughout the public spaces. Closed circuit

cameras keep an eye on all that is happening.

Security personnel are on-duty in the corridors at night. Manager on Duty

systems introduced in the hotels ensures that each night a Head of a

Department is on personal rounds.

Electronic room key cards to each room create its own safety barrier. No two

cards are the same and one cannot open the other room. These are specially

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programmed to store data that can be decoded to reveal the details of the

room usage. In the rooms there are fire escape plans. The staff is trained to

handle emergencies. First-aid kits are available with the various departments.

Doctors are on call and any emergencies can be easily handled.

To ensure that the valuables of the guests are protected, In-room safes are

provided in addition to the safe deposit lockers available at the front office.

Guest information is kept completely confidential.

Why do hotels publish rack rates and then give discounts? Isn't it better to

offer one invitation rate in which case the clients drawn in could be more?

Discounts are usually given on the number of room nights promised by a

corporate.

Managements approach to hospitality as part of the tourism industry?

The tourism and hospitality sector has the 'potential of boosting the GDP to a

higher growth path. Tourism and hospitality sector has demonstrated its vast

potential to generate foreign exchange and investment far more effectively

and gainfully than the industrial and manufacturing sectors.

Hospitality forms an integral part of tourism; inadequacy of hotel rooms is a

deterrent to growth of tourism. Hence, promoting hospitality is a primary task,

which should be undertaken prior to promoting tourism. There are at present

only 82,114 hotel rooms in India in the approved categories (recognized by

the Ministry of Tourism), as against over 9,00,000 hotel rooms in China,

3,00,000 in Thailand, 2,50,000 in Indonesia and 1,10,000 in Malaysia.

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Hotels provide primary support in the development of the economy by

providing -accommodation, which is the basic need along with transport and

other facilities considered. The hotel sector helps In (i) generating greater real

employment opportunities, (H) developing remote and industrially back wardareas, (Hi) promotion and development of rural art and culture, and (iv)

earning foreign exchange for the country.

What is the percentage of Indian and overseas tourists in hotel/chain?

Due to our positioning a niche has been created a niche in the industry, both

nationally and internationally. The percentage of overseas tourists vis--vis

Indian will perhaps be at about 40:60.

What has been the effect of SARS for the Park Group of Hotels? Has the

number of guests coming in dwindled? If yes, what is the percentage vis a vis

last year? Which part of the world's traveling population has stopped

travelling, according to the Hotel's regular guest inflow and which part has

increased?

The effect of SARS has not been substantial. There has been no cancellation

from the East so far. The effect of SARS has not dwindled the percentage of

guest bookings. The guest inflow has not dropped. However, it has been seen

that the banking and IT people travelling to Singapore and from Singapore has

reduced as seen at The Park Chennai.

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Questionnaire

Survey Result

1. Out of the respondents interviewed 60% were of the opinion that the

government concern addressing the tourism sector as of today areSatisfactory

1.

2. In respect of question two in the questionnaire regarding the impact of

crime rates in Delhi as could affect foreign tourist arrival 55.5% of the

respondents stated that it would.

Question 2

yes,

55.50%

no, 44.50%

Question 1

Satisfactory,

55%

Unsatisfactory,45%

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3. As regard to question three relating to percentage increase in funds

needed to reach a satisfactory level in the tourism sector a huge

majority of 70% confirmed that funds of the order of 30-40% would need

to be infused in this sector.

Question 3

30-40%,

70%

20-30

Documents

HOTEL INDUSTRY TRENDS IN INDIA