INDUSTRY ANALYSIS FOR HOTEL INDUSTRY

HOSPITALITY INDUSTRY ANALYSIS
PGDM 2017-2019
Trimester IV

Guided by: Dr. Akshay Joshi

Submitted By: Aishwaray Sigh Rajput (A003)
Ashish Verma (A007)
Souvik Bhattacharjee (A029)
Yuvika Agrawal (A034)

Contents
1. Hospitality Industry ................................................................................... 3
1.1 History ................................................................................................... 4
1.2 Hotel Industry ....................................................................................... 4
2. Categorization of Players in the Industry ................................................ 5
3. ITC, EIH, IHCL AND OYO .................................................................. 10
4. PESTAL Analysis ................................................................................... 14
5. SWOT Analysis ....................................................................................... 18
6. Porter's Five Factor Model ..................................................................... 20
7. Value Chain in the Hotel Industry ......................................................... 24
8. Functional Analysis ................................................................................. 25
8.1 Operational Analysis .......................................................................... 26
8.2 Financial Analysis .............................................................................. 28
8.3 Human Resource Analysis ................................................................ 30
8.4 Marketing Analysis ............................................................................ 33
9. Challenges faced by Hotels .................................................................... 36
10. BCG Matrix............................................................................................ 37
11. Mckinsey Matrix ................................................................................... 40
12. Conclusion.............................................................................................. 46
13. References .............................................................................................. 46

1. Hospitality Industry
The hospitality industry is a large umbrella industry that contains several different divisions of
businesses:
 Air and land travel
 Hotel
 Food and beverage
 Entertainment such as movies/theatre/sports
 Tourist attractions

Due to the variety of businesses, the hospitality industry is usually one of the largest revenue
producers for countries. Hospitality usually focuses on extra money that people have to spend on
pleasurable things and leisure, though not always. Business conventions, trainings, and meetings
in different countries can also affect the hospitality industry greatly. While the hospitality
industry can be influenced by a type of visitor, it can also be influenced by domestic and
international travelers.
India is sometimes thought of as a poor economy; however, recently in the last several years the
Indian economy has expanded considerably. The economy has started to grow as well as the
personal wealth of its people. The Indian tourism and hospitality industry has emerged as one of
the key drivers of growth among the services sector in India. Tourism in India has significant
potential considering the rich cultural and historical heritage, variety in ecology, terrains and
places of natural beauty spread across the country. Tourism is also a potentially large
employment generator besides being a significant source of foreign exchange for the country.
During January-April 2018 FEEs (Foreign Exchange Earnings) from tourism increased 17.4 per
cent year-on-year to US$ 10.62 billion. This domestic success has created the need for more
restaurants, hotels, and entertainment venues for travel. However, the domestic side of tourism
isn't all that makes India's hospitality market share so large.
India is a country with a long history, and historically many people visit the country
for spiritual reasons, bringing in visitors from all over the world. The variety of available sites
makes India a popular choice for many visitors. This has inspired many hotel chains like Marriott
to start working with India to create more hotels within the country. What helps this endeavor is
that there are a lot of empty buildings in India, so businesses coming in do not have to spend
money to build a new hotel. Instead, they take old buildings, clean them up, and make them new
again. The rehabilitation of the old is cheaper, and also helps gentrify areas.
Other areas in the hospitality industry come from businesses that have outsourced their work to
India, because the wages are so much cheaper. This brings in business people who are meeting
and working with the international companies, thus strengthening the industry.

India is the most digitally-advanced traveler nation in terms of digital tools being used for
planning, booking and experiencing a journey, India’s rising middle class and increasing
disposable incomes has continued to support the growth of domestic and outbound tourism.
Domestic Tourist Visits (DTVs) to the States/Union Territories (UTs) grew by 15.5 per cent y-o-
y to 1.65 billion (provisional) during 2016 with the top 10 States/UTs contributing about 84.2 per
cent to the total number of DTVs, as per Ministry of Tourism. The number of Foreign Tourist
Arrivals (FTAs) increased 10.8 per cent year-on-year to 3.88 million.
The travel & tourism sector in India accounted for 8 per cent of the total employment
opportunities generated in the country in 2017, providing employment to around 41.6 million
people during the same year. The number is expected to rise by 2 per cent annum to 52.3 million
jobs by 2028.
1.1 History
Pre -1990
• The National Tourism Policy was announced in 1982
• The government formulated a comprehensive plan in 1988 to promote tourism
1990-2000
• The government stressed on private-public partnership in the sector
2000-2005
• A national policy on tourism was announced in 2002, focusing on developing a robust
infrastructure
• Online travel portals & low-cost carrier airlines gave a boost to domestic tourism
2015 onwards
• The government has undertaken various marketing initiatives to attract tourists
• The National Medical & Wellness Tourism Promotion Board formed in 2015.
• 12 Institutes of Hospitality Management sanctioned in north-east states in August 2016.
• E–tourist visa launched and 1.697 million tourists arrived in India in 2017 through this
facility.
1.2 Hotel Industry
The word hotel is derived from the French hotel (coming from hôte meaning host), which
referred to a French version of a townhouse or any other building seeing frequent visitors, rather
than a place offering accommodation. A hotel is an establishment that provides paid lodging on a
short-term basis.

Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry is
inextricably linked to the tourism industry and the growth in the Indian tourism industry has
fuelled the growth of Indian hotel industry. The thriving economy and increased business
opportunities in India have acted as a boon for Indian hotel industry. The arrival of low cost
airlines and the associated price wars have given domestic tourists a host of options.
International hotel chains are increasing their presence in the country, as it will account for
around 47 per cent share in the Tourism & Hospitality sector of India by 2020 & 50 per cent by
2022
The tourism and hospitality sector is among the top 10 sectors in India to attract the highest
Foreign Direct Investment (FDI). During the period April 2000-December 2017, the hotel and
tourism sector attracted around US$ 10.90 billion of FDI, according to the data released by
Department of Industrial Policy and Promotion (DIPP).
India’s travel and tourism industry has huge growth potential. The tourism industry is also
looking forward to the expansion of E-visa scheme which is expected to double the tourist inflow
to India. India's travel and tourism industry has the potential to expand by 2.5 per cent on the
back of higher budgetary allocation and low cost healthcare facility, according to a joint study
conducted by Assocham and Yes Bank.
2. Categorization of Players in the Industry
Based on location
 City center: Generally located in the heart of city within a short distance from business
center, shopping arcade. Rates are normally high due to their location advantages. They
have high traffic on weekdays and the occupancy is generally high.
 Motels: They are located primarily on highways, they provide lodging to highway
travelers and also provide ample parking space. The length of stay is usually overnight.
 Suburban hotels: They are located in suburban areas, it generally have high traffic on
weekend. It is ideal for budget travelers. In this type of hotel rates are moderately low.
 Airport hotels: These hotels are set up near by the airport. They have transit guest who
stay over between flights.
 Resort hotels: They are also termed as health resort or beach hill resort and so depending
on their position and location. They cater a person who wants to relax, enjoy themselves
at hill station. Most resort work to full capacity during peak season. Sales and revenue
fluctuate from season to season.
 Floating hotels: As name implies these hotels are established on luxury liners or ship. It is
located on river, sea or big lakes. In cruise ships, rooms are generally small and all
furniture is fixed down. It has long stay guest.

 Boatels: A house boat hotels is referred as boatels. The shikaras of Kashmir and
kettuvallam of Kerala are houseboats in India which offers luxurious accommodation to
travelers.
 Rotels: These novel variants are hotel on wheel. Our very own "palace on wheels" and
"Deccan Odessey" is trains providing a luxurious hotel atmosphere. Their interior is done
like hotel room. They are normally used by small group of travelers.
Based on Size of Property
The main yardstick for the categorization of hotel is by size the number of rooms available in the
hotel.
 Small hotel: hotel with 100 rooms and less may be termed as small hotels.
 Medium sized hotel: hotel which has 100-300 rooms is known as medium sized hotel.
 Large hotels: hotel which have more than 300 rooms are termed as large hotels.
 Mega hotels: are those hotels with more than 1000 rooms.
 Chain hotels: these are the groups that have hotels in much number of locations in India
and international venues.
Based on the Level of Service
Hotels may be classified into economy, and luxury hotels on the basis of the level of service they
offer.
 Economy/ Budget hotels: These hotels meet the basic need of the guest by providing
comfortable and clean room for a comfortable stay.
 Mid market hotels: It is suite hotel that offers small living room with appropriate
furniture and small bed room with king sized bed.
 Luxury hotels: These offer world class service providing restaurant and lounges,
concierge service, meeting rooms, dining facilities. Bath linen is provided to the guest
and is replaced accordingly. These guest rooms contains furnishing, art work etc. prime
market for these hotels are celebrities, business executives and high ranking political
figures. Example: Hyatt Regency, New Delhi.
Based on the Length of Stay
Hotel can be classified into transient, residential and semi residential hotels depending on the
stay of a guest.
 Transient Hotel: These are the hotel where guest stays for a day or even less, they are
usually five star hotels. The occupancy rate is usually very high. These hotels are situated
near airport.

 Residential hotels: These are the hotel where guest can stay for a minimum period of one
month and up to a year. The rent can be paid on monthly or quarterly basis. They provide
sitting room, bed room and kitchenette.
 Semi residential hotels: These hotels incorporate features of both transient and residential
hotel.
Based on Theme
 Depending on theme hotel may be classified into Heritage hotels, Ecotels, Boutique
hotels and Spas.
 Heritage hotel: In this hotel a guest is graciously welcomed, offered room that have their
own history, serve traditional cuisine and are entertained by folk artist. These hotels put
their best efforts to give the glimpse of their region. Example: Jai Mahal palace in Jaipur.
 Ecotels: these are environment friendly hotels these hotel use eco friendly items in the
room. Example: Orchid Mumbai is Asia first and most popular five star Ecotels.
 Boutique hotels: This hotel provides exceptional accommodation, furniture in a themed
and stylish manner and caters to corporate travelers. Example: In India the park
Bangalore is a boutique hotel.
 Spas: is a resort which provide therapeutic bath and massage along with other features of
luxury hotels in India Ananda spa in Himalaya are the most popular Spa.
Based on Target Market
 Commercial hotel: They are situated in the heart of the city in busy commercial areas so
as to get good and high business. They cater mostly businessmen.
 Convention hotels: These hotels have large convention complex and cater to people
attending a convention, conference
 Resort hotels: These leisure hotels are mainly for vacationers who want to relax and
enjoy with their family. The occupancy varies as per season. The atmosphere is more
relaxed. These are spread out in vast areas so many resorts have solar powered carts for
the transport of guest.
 Suite hotels: These hotel offer rooms that may include compact kitchenette. They cater to
people who are relocating act as like lawyers, executives who are away from home for a
long business stay.
 Casino hotels: Hotel with predominantly gambling facilities comes under this category,
they have guest room and food and operation too. These hotels tend to cater leisure and
vacation travelers. Gambling activities at some casino hotels operate 24 hours a day and
Based on types of rooms
There are several types of rooms provided by the hotels based on their category. Few types of
rooms are explained below

 Standard: This category usually means the most basic room type offered by the hotel. It
has basic, standard amenities and furnishings. Standard rooms in hotels with higher
categories often have no view or have a poor view over the dumpster or parking lot.
 Moderate: Usually a slight bit better than standard, but still not deluxe. It may refer to the
room view as well as the size and type of furnishings offered.
 Superior: This category is always subject to interpretation. It's supposed to mean superior
to a standard room in both size and furnishings, but it often refers to just the view. Some
hotels have only Superior rooms; the categories then are defined by the view and location
of the room.
 Deluxe: These rooms are supposed to be Deluxe in every way: View, location,
furnishings and size.
 Junior Suite: A "junior" suite is typically a larger room with a separate seating area.
Sometimes it's got a small divider between the part of the room that the bed is in and the
seating area, but it is not two separate rooms.
 Suite: A Suite is usually two or more rooms clearly defined; a bedroom and a living or
sitting room, with a door that closes between them. Many hotels use the word "suite" to
define any room with a sofa in it so be sure to check thoroughly if what you really want
are the two or more separate rooms.
 Studio: This is usually configured like a Junior Suite, but has the added advantage of a
"kitchenette," or cooking facilities
Based on Stars
Historically, hotel classification systems were developed to ensure safe and reliable lodging and
food for travelers at a time when very few such trustworthy establishments existed. With the
unprecedented growth of international tourism in the past fifty years, during which hospitality
has reach the status of a mature industry, the focus has moved from consumer protection
(generally guaranteed by national regulations and legislation) to consumer information. Today,
standardization and competitive marketing of hotel services to foreign customers and tourist
professionals have emerged as driving forces for instituting a local or national hotel classification
system.
Many countries allow various classification systems for hotels in accordance to chain name and
type of hotel; however, there is no international classification which has been adopted. There
have been attempts at unifying the classification system so that it becomes an internationally
recognized and reliable standard but large differences exist in the quality of the accommodation
and the size and design of the accommodation. Food services, entertainment, view, room
variations such as size and additional amenities, spas and fitness centers and location are also
vital in establishing a standard. As a rough guide:

In May 2003, after much deliberation the Department of Tourism (DoT) renewed the 1955
initiated Guideline for the Classification of Hotels. This move was aimed at ensuring that hotels
in India meet international standards in services and facilities. Although the five-star and four-
star hotels in India have been able to meet international standards, some of them do not figure
anywhere on the global map.
With the dramatic development of domestic and international travel in the past fifty years,
various public and private-sector interests periodically raise the question of how hotel ratings
compare across the world. There is no real international hotel ratings system. Therefore,
variations between countries' standards naturally exist.
The star classifications of the hotels are a function of the services provided by them. But, the
present star category classification norms in India have been so haphazard that hotels claim to be
six-star or seven-star, when the global norm classifies hotels as one star at the lower end and
five-star deluxe at the luxury end. The reason for differences between the global and the Indian
norms is in the standard of services being offered by the hotels in India. As seen in the past few
years, most of the luxury chains have started renovating their property, as also upgrading existing
services to match the new benchmarks (services offered by international entrants such as
Radisson, Hyatt and Intercontinental). With the entry of the foreign hotels, these norms in India
would have to be reset to reflect the new services offered by foreign chains, which follow a
standard set of service offerings across its property. But at the same time the hotels need to
upgrade their services with changing scenario.
 One-Star Hotels: Hotels in this classification are likely to be small and independently
owned, with a family atmosphere. Services may be provided by the owner and family on
an informal basis. There may be a limited range of facilities and meals may be fairly
simple. Lunch, for example, may not be served. Some bedrooms may not have an en suite
bath/shower rooms. Maintenance, cleanliness and comfort should, however, always be of
an acceptable standard.
 Two-Star Hotels: In this classification hotels will typically be small to medium sized and
offer more extensive facilities than at the one-star level. Some business hotels come into
the two-star classification and guests can expect comfortable, well equipped, overnight
accommodation, usually with an en-suite bath/shower room. Reception and other staff
will aim for a more professional presentation that at the one-star level, and offer a wider
range of straightforward services, including food and drink.
 Three-Star Hotels: At this level, hotels are usually of a size to support higher staffing
levels, and a significantly greater quality and range of facilities than at the lower star
classifications. Reception and the other public rooms will be more spacious and the
restaurant will normally also cater to non-residents. All bedrooms will have an en suite
bath and shower rooms and offer a good standard of comfort and equipment, such as a

hair dryer, direct dial telephone and toiletries in the bathroom. Besides room service,
some provisions for business travelers can be expected.
 Four-Star Hotels: Expectations at this level include a degree of luxury as well as quality
in the furnishings, decor and equipment, in every area of the hotel. Bedrooms will also
usually offer more space than at the lower star levels, and well designed, coordinated
furnishings and decor. The en-suite bathrooms will have both bath and fixed shower.
There will be a high enough ratio of staff to guests to provide services like porter age, 24-
hour room service, laundry and dry-cleaning. The restaurant will demonstrate a serious
approach to its cuisine.
 Five-Star Hotels: Here you should find spacious and luxurious accommodation
throughout the hotel, matching the best international standards. Interior design should
impress with its quality and attention to detail, comfort and elegance. Furnishings should
be immaculate. Services should be formal, well supervised and flawless in attention to
guests' needs, without being intrusive. The restaurant will demonstrate a high level of
technical skill, F&B production to the highest international standards. Staff will be
knowledgeable, helpful, well versed in all aspects of customer care and combining
efficiency with courtesy.
3. ITC, EIH, IHCL AND OYO
ITC Hotels
ITC Limited or ITC is an Indian company located in Kolkata, West Bengal. Its diversified
business includes five segments: Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards &
Packaging, and Agri Business & Information Technology. Though, cigarette business contributes
more than 80% of the profits of the company, 80% of the capital is invested in the non-tobacco
businesses.
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the India Tobacco Company Limited in 1970 and later to I.T.C. Limited in 1974. The
dots in the name were removed in September 2001 for the company to be renamed as ITC
Limited. The company completed 100 years in 2010 and as of 2012-13, had an annual turnover
of US$8.31 billion and a market capitalization of US$ 50 billion. It employs over 30,000 people
at more than 60 locations across India and is part of Forbes 2000 list.
History
 EPS and OPS were formed on 24 August 1910 under the name of Imperial Tobacco
Company of India Limited, and the company went public on 27 October 1954. The
earlier decades of the company's activities centered mainly on tobacco products. In the
1970s, it diversified into non-tobacco businesses.

 In 1975, the company acquired a hotel in Chennai, which was renamed the ITC-
Welcomgroup Hotel Chola' (now renamed to WelcomHotel Chennai).
 In 1985, ITC set up Surya Nepal Tobacco Co. in Nepal as an Indo-Nepali
and British joint venture, with the shares divided between ITC, British American
Tobacco and various independent domestic shareholders in Nepal. In 2002, Surya
Tobacco became a subsidiary of ITC and its name was changed to Surya Nepal Private
Limited.
 In 2000, ITC launched the Expressions range of greeting cards, the Wills Sport range of
casual wear, and a wholly owned information technology subsidiary, ITC Infotech India
Limited.
 In 2001, ITC introduced the Kitchens of India brand of ready-to-eat Indian recipes, which
are produced and sold internationally, at first in cans and later in retort packages, and
more recently online and at festivals.
 In 2002, ITC entered the confectionery and staples segments and acquired
the Bhadrachalam Paperboards Division and the safety matches company WIMCO
Limited.
 ITC diversified into body care products in 2005.
 In 2010, ITC launched its hand rolled cigar in the Indian market.
 The company began online sales in 2014.
ITC's Hotels division (under brands including WelcomHotel) is India's second largest hotel chain
with over 90 hotels throughout India. ITC is also the exclusive franchisee in India of two brands
owned by Sheraton International Inc. Brands in the hospitality sector owned and operated by its
subsidiaries include Fortune Park Hotels and WelcomHeritage Hotels.
ITC Hotels is India's second largest hotel chain with over 100 hotels. Based in the Hotels
Division Headquarters at the ITC Green Centre in Gurgaon, Haryana, ITC Hotels is also the
exclusive franchisee of The Luxury Collection brand of Starwood Hotels and Resorts in India. It
is part of the ITC Limited group of companies. ITC Hotels is regularly voted amongst the best
employers in Asia in the hospitality sector.
ITC Hotels
 ITC Grand Bharat, Gurgaon
 ITC Maurya, New Delhi
 ITC Grand Maratha, Mumbai
 ITC Grand Central, Mumbai
 ITC Sonar Bangla, Kolkata
 ITC Royal Bengal, Kolkata (Opening in 2019)
 ITC Grand Chola, Chennai
 ITC Narmada, Ahmedabad (Opening in 2019)

 ITC Gardenia, Bangalore
 ITC Windsor, Bangalore
 ITC Welcome, Bangalore
 ITC Kakatiya, Hyderabad
 ITC Kohinoor, Hyderabad
 ITC Rajputana, Jaipur
 ITC Mughal, Agra
 ITC hotel Colombo, Colombo (Opening in 2020)
EIH HOTELS

EIH Limited, under the aegis of The Oberoi Group, operates hotels and cruisers in five countries
under the luxury 'Oberoi' and five-star 'Trident' brands. The Group is also engaged in flight
catering, airport restaurants, travel and tour services, car rentals, project management and
corporate air charters.
Oberoi Hotels & Resorts is synonymous the world over with providing the right blend of service,
luxury and quiet efficiency. Internationally acclaimed for all-round excellence and unparalleled
levels of service, Oberoi hotels and resorts have received innumerable awards and accolades.
The last decade has witnessed the debut of new luxury Oberoi leisure hotels in India and abroad.
Trident hotels are five-star hotels that have established a reputation for excellence and are
acknowledged for offering quality and value. These hotels combine state of the art facilities with
dependable service in a caring environment, presenting the ideal choice for business and leisure
travelers.
The Group's commitment to excellence, attention to detail and personalized service has ensured a
loyal list of guests and accolades in the worldwide hospitality industry.
The Oberoi Group is a hotel company with its head office in Delhi. Founded in 1934, the
company owns and/or operates 30+ luxury hotels and two river cruise ships in six countries,
primarily under its Oberoi Hotels & Resorts and Trident Hotels brands.
The company currently manages hotels under the luxury Oberoi Hotels & Resorts brand, with a
further 10 five-star properties under the Trident Hotels brand. The Group also operates the
Clarke's in Shimla and the Maidens Hotel, Delhi. These two properties however are not held
under the Trident or under the Oberoi brand. The Clarke's, after remaining temporarily shut
following its lawns caving in because of construction in the eco-sensitive vicinity, reopened on
September 16, 2012.
The two major holding companies of The Oberoi Group are EIH Ltd and EIH Associated Hotels
(formerly East India Hotels). P.R.S. Oberoi is the current chairman of The Oberoi Group. His

son, Vikram Oberoi, and , Arjun Oberoi, serve in the capacities of the Joint Managing Directors
at the holding companies.
The Oberoi Family is the majority shareholder in EIH Ltd with 32.11% stake Cigarettes to
Hotels conglomerate, ITC Limited owns approximately 14.98% stake in EIH Ltd. To ward off
pressures from ITC Ltd. whose ownership stands precariously close to the automatic open offer
trigger at 15%, the Oberoi family divested 14.12% stake in EIH Ltd. to Mukesh Ambani led
Reliance Industries Investment and Holding Pvt Ltd. The stake sale happened on August 30,
2010 for Rs. 1,021 crores valuing EIH Ltd. at an enterprise value of Rs. 7,200 crores. Recently
the stake of reliance further rose from ITC and it stood at 20% overall for Reliance industries.
Situated in the North Delhi residential area, Maidens Hotel is one of Delhi's oldest hotels, built in
the early 1900s, and has retained its colonial charm and architecture. Set amidst eight acres of
lush gardens, shady trees, it escapes the noise of the main city, but remains within easy access to
some of the most magnificent Mughal monuments, and famous shopping center Chandni Chowk
with its quaint bazaars and meandering lanes.
IHCL
Taj Hotels is a chain of luxury hotels and a subsidiary of The Indian Hotels Company Limited -
headquartered at Express Towers, Nariman Point in Mumbai. Incorporated by the founder of
the Tata Group, Jamsetji Tata, in 1903, the company is a part of the Tata Group, one of India's
largest business conglomerates. The company employed over 13,000 people in the year 2010.
As of 2018, the company operates a total of 100 hotels and hotel-resorts, with 84 across India
and 16 in other countries, including Bhutan, Malaysia, Maldives, Nepal, South Africa, Sri Lanka,
UAE, UK, USA and Zambia.
Two hotels of the Taj group, namely Rambagh Palace in Jaipur and the Taj Mahal Palace &
Tower in Mumbai, were ranked in 2013 by Condé Nast Traveler among its "Top 100 Hotels and
Resorts in the World". In late 2013, the Indian Traveler magazine ranked Taj Lake Palace in
Udaipur and Taj Exotica Resort & Spa in Maldives as numbers 34 and 98, respectively, on its list
of "100 Best Hotels & Resorts". Condé Nast Traveler also ranked the Taj Mahal Palace in
Mumbai as number 13 on its list of "Gold Standard Hotels" in 2014.
OYO
OYO Rooms, commonly known as OYO, is an Indian hospitality service and budget
hotel network. It was founded in 2013 by Ritesh Agarwal and has since grown to over 8,500
hotels in 230 cities in India, Malaysia, UAE, Nepal, China and Indonesia.
In 2012, then 18-year-old Ritesh Agarwal hailing from Bissam Cuttack, Rayagada launched
Oravel Stays, a website designed to enable listing and booking of budget accommodation. After

three months of research and staying in over 100 bed and breakfasts, guest houses, and
small hotels, he pivoted Oravel to OYO in 2013. OYO partners with hotels to give similar
experiences across cities.
Shortly after launching Oravel Stays, Ritesh Agarwal received a grant of $100,000 as part of
the Thiel Fellowship from Peter Thiel.
In March 2015, OYO raised Series a round of funding $24 million from Lightspeed Venture
Partners, Sequoia Capital, Greenoaks Capital and DSG Consumer Partners. In August 2015,
OYO raised another $100 million from Softbank Group, an existing investor. A year later, in
August 2016, OYO raised $90 million from Softbank Group, Innoven Capital and existing
investors. In September 2017, OYO announced it had closed a $250 million series D round of
funding led by Softbank Group, new investor Hero Enterprises led by Sunil Kant
Munjal, Sequoia Capital, Greenoaks Capital and Lightspeed Venture Partners. China
Lodging made a strategic investment of $10 million in OYO in September 2017.
In late 2017, OYO launched OYO Home, an Airbnb-like marketplace for short-term managed
rentals. OYO Home has presence in more than 10 leisure destinations of India including Goa,
Shimla, Pondicherry, Udaipur, Kerala etc. In April 2018, OYO launched its first international
OYO Home in Dubai.
4. PESTAL Analysis
PESTEL (or PESTLE) is a strategic planning tool to scan the context of the campaign. It
examines political, economic, social, technological, environmental and legal external factors
likely to have a bearing on the campaign. When examining the different factors, it is important to
bear in mind that women and men, girls and boys may be affected differently by different aspects
and at different levels.
Political factors
Political factors globally have a direct and deep impact on the hospitality industry. Whether it is
the changing government regimes worldwide or terrorism, the effect is always direct on the
industry. Political stability is always good for the hospitality industry. Tourism flourishes in an
environment free of turmoil. Hotel industry as well as tourism industry has a basic backbone of
the government support without which it won’t be able to sustain the competitive world.
Government charges huge amount of tax from the star and luxury category of hotels and thus has
a huge impact with the political changes that occur. Any small step taken by the government by
changing some law it would seriously affect hotel industry. The hotel industry is getting huge
incentives and the state governments are supporting the development of the hotels and their
growth. This in fact answers the question how is Indian Hotels are planning to expand in the

economic crunch time.
The Terror attack on the city’s [Mumbai] renowned hotels Taj and the Oberoi’s had brought a
concern on the faces of the hoteliers with a substantial drop in foreign travelers to India taking
the terror threat into account.
Economic factors
In India, the sector’s direct contribution to GDP is expected to grow by 7.1 per cent per annum
during 2018-28. The travel & tourism sector in India accounted for 8 per cent of the total
employment opportunities generated in the country in 2017, providing employment to around
41.6 million people during the same year. The number is expected to rise by 2 per cent annum to
52.3 million jobs by 2028.
India ranked 8th in the world in 2017 in terms of absolute direct contribution of travel & tourism
sector’s to its GDP. It is the 3rd largest foreign exchange earner for the country The tourism &
hospitality sector’s direct contribution to GDP in 2017, was Rs 5.94 trillion (US$ 91.27 billion).
This is expected to reach Rs 12.68 trillion (US$ 194.69 billion) in 2028, implying a CAGR of
7.23 per cent during 2012-28.
In CY2017, foreign tourist arrivals in India stood at 10.177 million and reached 3.88 million in
January-April 2018, showing a growth rate of 10.8 per cent year-on-year. Growth in tourist
arrivals has been due to flexible government policies, developed rail & road infrastructure, ease
in availability of e-visas to foreign tourists. The Government of India has set a target of 20
million foreign tourist arrivals (FTAs) by 2020 and double the foreign exchange earnings as
well. The Government of India is working to achieve 1 per cent share in world's international
tourist arrivals by 2020 and 2 per cent share by 2025.
Tourism is an important source of foreign exchange in India similar to many other countries.
During 2017, India earned foreign exchange of US$ 27.69 billion from tourism. Foreign
Exchange Earnings (FEEs) in April 2018 were US$ 2.39 billion, showing an year-on-year
growth rate of 8.2 per cent Foreign exchange earnings (FEEs) from tourism in India witnessed
growth at a CAGR of 9.97 per cent during 2006-17. The number of tourists from India is
expected to reach 50 million by 2020, according to the World Trade Organization. This rapid
increase in outbound tourism from India is going to benefit forex providers in the country.
Rising incomes mean a steady growth in the ability to access healthcare & related services.
India’s GDP Per Capita at current prices is estimated to have reached US$ 1,749.16 in 2017. It is
expected to reach US$ 3,273.85 by 2023, implying a compounded annual growth rate of 7.47 per
cent during 2012-23. Domestic expenditure on tourism has grown significantly. In 2017, it
reached Rs 12.11 trillion (US$ 186.03 billion). It is expected to reach Rs 26.43 trillion (US$
405.84 billion), implying a compounded annual growth rate of 7.29 per cent between 2012-28.

The condition of the global economy is an important factor that affects the state of tourism
industry. The recent recession proved that depending upon the economic conditions, the
consumers of the hospitality industry would willingly cut on their travel expenses. Condition of
the economy affects the purchasing power of the travelers. If the economy is flourishing, the
consumers would be able to spend more on leisure activities. Otherwise economic slowdown
affects their pockets and then the industry. Under such conditions, the players including hotel
brands and airlines are forced to cut down prices to fuel demand. The result is reduced profits.
The exact opposite happens when economic activity is higher.
Social factors
Like the economic trends, social trends too shape the tourism industry. The effects too can be
just as deep. Consumer preference in lodging has taken a shift in the recent years. Their
preference has shifted in the favor of private accommodations. The rise of Airbnb is a challenge
for the established names in the hotel segment. Similarly, ride sharing brands are rising against
the traditional taxi and cab brands. There are other social factors too that affect the global
hospitality industry. Consumer preference is an important factor. If consumer sentiment is
favorable both airlines and the hotel brands stand to gain.
Technological factors
The technological factors have emerged to be the facilitators of demand for the tourism industry
in the 21st century. From airlines to booking and even marketing, technology is the biggest
influencer. Technology has facilitated communication and transfer of information bridging the
gap between several parts of the world. More and more tourists now conduct research and try to
find the best deals before they go for the final booking. If new tourist destinations have emerged
then the credit to a large extent goes to the rise of technology. Hotel and airlines brands are
using information technology to serve their consumers better. Undoubtedly, technology is an
enabler of tourism. However, that does not reduce the value of human touch. Hotel industry has
upped the use of technology. Kiosks are more in use and digital check-ins have grown popular.
Social media and even the mobile technology are affecting it. Mobile technology has fueled the
growth of tourism by facilitating mobile bookings, check-ins, messages and several other things.
Technology has worked in the favor of both sellers and buyers. However, the true power of
mobile is still unexplored and in 2017 mobile technology, cloud technology and Internet of
Things will affect several new changes. So, 2017 could be truly hot and happening for tourism
because of technological factors. Technology is shaping the travel experience at many other
points too including on the ground and in the air. Now, the companies are coming up with new
technologies such as artificial intelligence, IoT, blockchain to make customers’ experience more
personalized. This will make the services given to the consumers on the accommodation basis
according the customer’s needs and will be specialized for each and every consumer which will
make them satisfied.

Environmental factors
Sustainability is a key concern in tourism too. The focus has now shifted on ecotourism. United
Nations has also recognized 2017 officially as the International Year of Sustainable Tourism for
Development. Other environmental concerns are also important for tourism operators including
transport operators and the hotel and restaurant brands. From managing ecological impact to
waste management, all these concerns are important for the tourism operators. One even
important thing is the impact of weather conditions on travel and tourism. Even the airlines
industry is impacted directly by changing weather conditions. Airplanes cannot fly in stormy
weather and if a disaster happens, it affects the entire industry. You all know of seasonal tourism
and how changing seasons affect demand and supply of tourism in various areas. Tourists do not
flock to an area all the year round like you would not like to go to places closer to the equator in
hot season. Thus, environmental or ecological factors have a major impact on tourism industry.
Cities that are greener and cleaner receive tourists in larger numbers.
Legal factors
The Indian government has realised the country’s potential in the tourism industry and has taken
several steps to make India a global tourism hub. Some of the major initiatives planned by the
Government of India to give a boost to the tourism and hospitality sector of India are as follows:
 The Government of India is working to achieve one per cent share in world's
international tourist arrivals by 2020 and two per cent share by 2025.
 Under Budget 2018-19, the government has allotted Rs 1,250 crore (US$ 183.89 million)
for Integrated development of tourist circuits under Swadesh Darshan and Pilgrimage
Rejuvenation and Spiritual Augmentation Drive (PRASAD).
Economic
 Swadesh Darshan- Based on specific themes, government has identified 13 circuits which
include Krishna Circuit, Buddhist Circuit, Himalayan Circuit, and North East Circuit &
Coastal Circuit. Tajmahotsav: the 10 day celebration provides a platform to experience
India’s arts, craft, culture, cuisine, dance & music. Under Budget 2018-19, the
government allotted Rs 1,250 crore (US$193.08 million) for Integrated development of
tourist circuits under Swadesh Darshan and Pilgrimage Rejuvenation and Spiritual
Augmentation Drive (PRASAD).
 Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD) - National
Mission on Pilgrimage Rejuvenation & Spiritual Augmentation was implemented by the
Ministry for enhancing the facilities provided & infrastructure at pilgrimage centres of all
cities. In March 2018, total amount sanctioned by the Ministry of Tourism for this
scheme was Rs 5638.87 crore (US$ 868.87 million) since 2014-15.

 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 travelers. Under Union Budget 2017,
USD14.87 million was allocated for promotion & publicity of various programs &
schemes of the Tourism ministry
The regulatory environment in the tourism industry is complex. It is because both labor and
public security are important concerns. Apart from it, there are other laws too that influence the
sector but public safety and labor laws are two most important concerns for it. Tourism brands
including the airlines cannot lose focus of risk management or they risk losing market share. The
legal pressures and challenges in the tourism environment are big. Airlines have focused a lot on
making air travel safer. For brands operating in several nations, it is important that they are
familiar with all the local laws. Staff training has also become more and more important to
prevent any legal hassles. Cities and nations that are considered safer and have lower crime level
see tourists in larger numbers.
The Ministry of Tourism has launched the Incredible India 2.0 campaign, during the financial
year 2017-18 to promote various destinations and tourism products of the country including
spiritual, medical and wellness tourism in important and potential source markets overseas. The
Incredible India 2.0 campaign aims at a shift from generic promotions undertaken across the
world to market specific promotional plans and content creation with thematic creative on
different niche products including spiritual, medical and wellness tourism.
5. SWOT Analysis
SWOT analysis is a framework used to evaluate a company's competitive position by identifying
its strengths, weaknesses, opportunities and threats. Specifically, SWOT analysis is a
foundational assessment model that measures what an organization can and cannot do, and its
potential opportunities and threats. SWOT analysis is a basic, analytical framework that assesses
what an entity — usually a business, though it can be a place, industry or product — can and
cannot do, for factors both internal and external. Using environmental data to evaluate the
position of a company, a SWOT analysis determines what assists the firm in accomplishing its
objectives, and what obstacles it must overcome or minimize to achieve desired results: where
the organization is today, and where it may go.
Strengths
 India's rich culture heritage: With a historical backdrop of 5,000 years, India is one big
package of culture and legend that never fails to captivate the imagination of the visitor.
Along with endless natural splendors like the mighty Himalayas, the vast Indo Gangetic

Plains, lush tropical jungles and a long coastline. A visit to the country is a changing
spectacle of religions, customs, festivals, sights and sounds.
 Demand supply gap: Indian hotel industry is currently facing a mismatch between the
demand and supply of rooms leading to higher room rates and occupancy levels. With
57,000 odd rooms in the country, the size of the hotel industry represents an abysmal
figure for India's size and growth prospects. Though new capacities are expected to come
in the next five years demand will outpace supply in the short to medium term. The table
below highlights that, over the last 24 months, major cities in the country have witnessed
impressive growth in average room rates, due to strong demand and not much addition to
supply.
 Government support: Till a few years ago, the Indian government had a total apathy
towards promotion of tourism. In fact, the industry did not find a place in the
government's fund allocation. Things have, however, witnessed a change. The
government seems to have realized the importance of tourism and is willing to spend
towards the development of the industry. The 'Incredible India' campaign is a product of
this realization. The focus on infrastructure, modernization of airports, open sky policy,
development of new tourist destinations and circuits, more fund allocation towards
tourism are some of the initiatives taken by the government to promote tourism. The
Indian hotel industry stands to gain from this proactiveness shown by the government.
Weaknesses
 Poor support infrastructure: India is currently spending a miniscule amount compared
with its needs on infrastructure. China is spending seven times as much as India on
infrastructure (excluding real estate) in absolute terms. In 2003, total capital spending on
electricity, roads, airports, seaports and telecom was US$150 bn in China (10.6% of
GDP) compared with US$21 bn in India (3.5% of GDP). However, over the past 2-3
years, the government has realized the importance of infrastructure and has focused on
improving it.
Opportunities
 Rising Income: In the last decade, Indian economy has progressed rapidly.
Correspondingly, India’s per capita Gross Domestic Product (GDP) has gone up from
Rs.71,607 in FY12 to Rs. 117,406 in FY17 at a CAGR of 10.4% fuelling a consumption
boom in the country. Correspondingly, the per capita personal disposable income (Gross
National Disposable Income - GNDI) surged from Rs. 73,476 in FY12 to Rs. 119,296 in
FY17 at a CAGR of 10.2%. Also, the per capita Private Final Consumption Expenditure
(PFCE) too rose from Rs. 40,250 in FY12 to Rs. 68,049 in FY17 at a CAGR of 11.1%.
The growth in country’s per capita GDP in turn has increased the disposable income of
the populace ultimately driving the country’s consumption.

 Also, with rise in income level of Indian populace and increase in plastic money,
discretionary spending on travel and tourism has become an important demand driver for
the Hotels industry.
 Also, there has been an overall transformation in consumption pattern in the last five
years. The increase in number of young people, their rising aspiration levels, and an
increase in their spending power has led to a change in the consumption pattern. There is
a marked shift from spending on traditional categories like food and grocery, clothing and
jewelry, to lifestyle categories such as leisure, and aspirational products and services.
 Open sky benefits: The opening up of the aviation industry in India brings exciting
opportunities for the hotel industry (airlines transport around 80% of international
tourists). Increased airline activity has stimulated demand and has helped to improve
India's troubled infrastructure. Increased competition among airline companies will
further lead to the development of new and improved services. Also the open skies policy
has benefited both international and domestic travel.
 New business opportunities: Medical tourism, Cruise tourism, rural tourism and
Ecotourism are the new opportunities emerging in India. People want new experiences
and always looking for something new to try. The new niches created in the tourism
industry are going to provide more employment and increase the contribution of this
industry to the country.
Threats
 Event risk: Dependency on foreign tourism can be a double-edged sword as travel
decisions are based on global patterns and events that happen elsewhere can have serious
impact the performance. Events like 9/11, SARS outbreak and Afghanistan and Iraq wars
have severely impacted the tourism industry in the past and the threat remains.
 Increasing competition: Global hospitality majors like the Four Seasons, Shangri-La and
Aman Resorts are all making their entry into the Indian market. They are not the only
ones who are turning their attention to India. The Hilton Group is deciding on a
comeback and has tied up with the Oberoi Group. Two other groups - the Carlson Group
and the Marriott chain are furiously hunting for new hotels in India's top cities. This will
increase the competition for the existing Indian hotel majors.
6. Porter's Five Factor Model
The five forces that impact on the competitiveness which are outlined in the Porter's 1980 work
are: the barriers to entry, threat of substitutes, the bargaining power of the buyers and sellers, and
the rivalry among existing competitors. In considering these factors in light of the Tourism,
Leisure and Hospitality industry, the theory provides the best means for analysis. According to
Porter each of the above factors has a difference in relevance or impacts differently on the

businesses so they are presented below in order of impact. Porter (1980) indicated that the most
important determinant of a marketplace's profit potential is the intrinsic power of the buyers and
the sellers.
Threat of Substitute Goods
In the Tourism, Leisure and Hospitality industry there is usually higher chances to start a new
business and progress successfully. The firms appear in all price ranges, with variations in the
levels of service and the amenities. The constant challenge will always be to get the customers to
choose your services over the competitor. With the technological advancements, the internet
makes the overall market to be more efficient while expanding the size of the potential market
and creating the new substitution threats. Given the potency of this industry a superb strategic
plan is vital.
The threat is that another firm chain may erode the customer base with a newly formulated
internet approach or the marketing campaign. According to Porter the development of a value
chain process analysis, supported by the collaborative event management, the structuring and
sharing of the customer focused value chain data, powerfully enhances the performance of the
value chains and of the electronic commerce.
Bargaining Power of Buyers
Business persons choosing a firm for business in the Tourism, Leisure and Hospitality industry
are the savvy consumers and they are at par with the changes in the ability of their consumers. It
has become very simple for the consumers to go online and survey on the best firm that offers
great services. They no longer need the assistance from the travel agents, the corporate travel
consultants or the middle men of any kind to determine where they will get their services.
Porter's model predicts the ability of the buyers bargaining power to elimination the
intermediaries.
The Tourists who are the major consumers in the Tourism, Leisure and Hospitality industry are
more and more capable of making use of the technological advancements in the means of
communication such as the internet to increase their bargaining power thereby creating the
fulfillment of Porter's model. Due to the increased bargaining power of the consumers, they are
finding internet businesses websites which will negotiate or discover the bargains for them.
These processes shifts the bargaining power to the end user as it had been predicted by the Porter
model and these buyer freedom reduces the cost of switching so that the loyalty to a single firm
is a thing of the past unless the particular firm uses its one time opportunity when the customer
sticks to the firm it deeply impress other customers with a very unique and valuable
differentiator.

The Rivalry among existing competitors
The rivalry amongst the competitors in the Tourism, Leisure and Hospitality industry is fierce.
When the potential customers learn about a hotel on line, the internet reduces the differences
amongst the competitors. Business people tend to seek the best prices for the best experience and
the tendency is to reduce the prices to a competitive level. This industry covers wide area so the
market is widened which increases the number of the competitors. For example, someone who
wants to spend the day in the historic site can easily choose a tourist firm in the nearby town if
the amenities or the prices are low. The Variable and fixed costs can be different in the areas
which are more expensive to live.
Barriers to Entry
The initial investments in the Tourism, Leisure and Hospitality industry creates quite a barrier to
the entry but certain barriers to entering the tourism market are reduced by the internet. The
presence on many efficient communication channels reduces the upstart marketing costs
somewhat, and gives the new competitors the access to the potential suppliers and the resources.
Even a starter in the industry can use the channels of large chains to understand the key
marketing concepts and the lures for the customers.
A vital barrier is the differentiation. A firm that can successfully differential itself by the
location, service, amenities or other quality has the greatest potential to attract and keep the
clients. Another barrier to entry into business in the Tourism, Leisure and Hospitality industry
would be the expertise. Unfortunately, in a mobile society employees can leave one firm chain to
work in another and they take that expertise in terms of the training given or the experience with
them. It is in the areas of expertise and of differentiation that a firm can make the greatest
impacts on its clients and thereby on the bottom line. Many established tourism, leisure and
Hospitality companies have the synergies between their established business and business
channels.
Bargaining power of the suppliers
This is not a substantial threat in the Tourism, Leisure and Hospitality industry it can have the
impacts especially in the area of the suppliers. The employees to the firms are the major
suppliers, the bargaining power of the labor supply is higher when there are fewer people to fill
service section of the industry, and the firms can attract excellent staff and create a chance for
providing excellent and exceptional experiences to their clientele. As part of their strategy all the
firm chains should have section employee recruitment. The other supplies that are needed by
hotels are also easier to attain through internet channels whether originated by the supplier or by
the hotel chain. With their products in the greater demand by greater numbers of the firms the
suppliers gain more measure of power by competition for their offerings.

Findings about the industry
All of the firms in the Tourism, Leisure and Hospitality industry can benefit from Porters model
of analysis because of the applications that produce greater value in the value chain, the industry
is dominated by a few large companies. They have the greatest market shares and in most cases
they influence the structure and shaping of the industry. The firm's planning sector can benefit
from analysis. They usually aim at making the profit and are usually commercial companies.
When they fail to make a profit over a long period of time they are likely to cease trading. These
include the parks, restaurants, tour operators and the travel agents. The Human resources can be
managed by the analysis as part of the overall strategy as well as the provision for self service
personnel and benefits, Value can be increased by standardizing the firms across multiple
locations, forming knowledge directories, and allowing real time access to the resources by the
consumers. , every firm could benefit by controlling and forecasting systems with suppliers as
explained by Porter. These improvements can also lead to greater profitability (Porter, 1980)
Each type of firm needs to identify its unique strengths and the target market and align its
strategy to support their identity, the firms' chains choose to be low cost, or to command the
premium price. Distinguishing a firm from the competition becomes vital. This can easily be
enhanced by porter's model, through the superior inputs, through better training of the staff as
part of the supplier or through the better management. Differentiation adds value which makes it
hard to maintain the distinctive strategic positions of a firm because it eases change to best
practices and it improves the operational effectiveness. These distinctions make the business
more profitable.
The firms in the Tourism, Leisure and Hospitality industry are fragmented. Therefore there is
need for a strategy which makes it easier for consumers from far and wider areas to learn about
the firms or to order for the services, the consumers must still access the services. It is more
likely for the profitability to be there for when process is easy to transact and complete. Porter
points out similar examples within the industries. Dealing directly is great for the firms. Other
than travel agencies who arranged hotel stays the tourism business has always been a face to face
business and this normally sustains the economic value of the transactions. For all of the firms'
chains the porter's model complements rather than cannibalizing the established ways of doing
business. Hence it becomes a link in the value chain.
For existing players in the market:
Red Ocean Strategy
 Gap Analysis ( Surveys, Interviews )
 Enhance Value Proposition
 Increase Market Share
 Existing Piece of Cake

By:
 Low Cost Leadership
 Differentiation

For new players:

Blue Ocean Strategy
 Buyer Utility (Utilitarian or Hedonic)
 Price ( Premium or Mass Pricing )
 Cost ( Break Even Target )
 Adoption (Operational and Implementation)
 New Piece of Cake

A Commercially Viable Blue Ocean Idea
7. Value Chain in the Hotel Industry
The primary activities in the Hotel industry:
Starting from the Inbound Logistics where we have all the contracts with supplier that are
delivering the food and beverage, providing laundry service and other services; Back of the
house storage and distribution within the hotel's departments and inventory control and stock
requisitions.
The Operations are represented from all the procedures and processes that, with the support from
all the advanced equipments and tools, will produce goods and service to offer on the market.
Outbound Logistics in the hotel can be the way the services and final products are offered and
distributed to the different outlets and different guests.
Marketing and Sales: all the activities that are trying to get customers and people interested in the
hotel for rooms, conferences, restaurants but also the promotion of the hotel with advertise and
pricing considering the competitors
Service in the hotel industry is crucial for its success. The quality of service is created with a
certain number of employees in proportion with the hotel capability and with the respective
training. A good service will enhance the product's value and will be crucial for the guest that
will have to chose in which of the many hotels to stay.
Support activities in the Hotel industry

The Procurement in the hotel can be the facilities offered to guest, the building, and the
equipment that will support all the operations to make easy and smoothly the service.
Technology Development is very important within the hospitality as it is a modern industry in
constantly growth where new technologies are needed to save time and work smarter. The
Propriety Management System is the most important to take into consideration which is the
software to manage all the operations and share all the information with all the hotel departments
in real time. The innovation and the technology are developing the hotel industry.
The Firm Infrastructure is represented from the management team with the long term planning,
the quality management, public affairs, finance and accounting.
Conclusions
All the primary activities of the Value Chain are used to increase the "Margin of Value" and the
support activities have special role for the success. As we can see in the above analysis, in this
complex industry there is a very high amount of operations and procedures within all these
activities all with the same role to reach the customer and delivery a good service. There is also
al lot of effort to increase this margin from all the hotel departments. In the Hospitality all the
process are linked and if a small activity is generating problems, will affect the efficiency and the
quality of all the other processes. Therefore is important the Value Chain Analysis to get ideas
and find out what can be done at operational level to add value to the product and service
offered. This analysis will help the operations director to understand how he can achieve the
fixed objectives.
ITC Limited or ITC is an Indian company located in Kolkata, West Bengal. Its diversified
business includes five segments: Fast-Moving Consumer Goods, Hotels, Paperboards &
Packaging, and Agri Business & Information Technology. Though, cigarette business contributes
more than 80% of the profits of the company, 80% of the capital is invested in the non-tobacco
businesses.
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the India Tobacco Company Limited in 1970 and later to I.T.C. Limited in 1974. The
dots in the name were removed in September 2001 for the company to be renamed as ITC
Limited. The company completed 100 years in 2010 and as of 2012-13, had an annual turnover
of US$8.31 billion and a market capitalization of US$ 50 billion. It employs over 30,000 people
at more than 60 locations across India and is part of Forbes 2000 list.
8. Functional Analysis
Operations, Marketing, Human Resources and financial analysis are done in functional analysis.

8.1 Operational Analysis
Cyclicality
The hospitality industry is cyclical in nature. i.e., during positive cycles the industry witnesses
periods of sustained growth and sees healthy average room rates (ARRs) and occupancy rates
(ORs). Until the economy goes through a downturn or if there is excess supply, the trend
continues. When recession sets in, the ORs begin to decline followed by the ARRs. In the
recovery phase, ORs starts to move up and eventually the ARRs also start to increase.
While the macro-economic factors affect the business destinations (RevPARs – revenue per
available room, growth is sensitive to the macro-economic indicator such as the nominal GDP),
the leisure destinations show a greater sensitivity to non-economic factors such as terror attacks,
health related travel warning, etc. (decline in FTA in 2008-09 was largely on account of the
Mumbai terror attacks on November 26, 2008 and the swine flu linked travel advisories).
Consequently, the average RevPARs of 12 major cities had registered a decline of about 13.9%
in 2008-09 and 9.7% in 2009-10. While in 2010-11, with higher growth in nominal GDP and an
increase in FTAs post-recession, these 12 major cities recorded an average increase of about
2.6% in RevPARs. Similarly, due to increased domestic and international trade activities and
various initiatives taken by the government, the number of foreign travelers in the country has
increased. This was reflected in the overall RevPARs in India that increased by about 4.5% in
2015-16.
Seasonality
The hotel industry demand is seasonal in nature. Though the peak season for both business and
leisure destinations is the same (January – March), during the remaining year both demonstrate
different behaviors. While the business destinations maintain constant ORs (5-10% lower than
Jan-Mar period) from April – November. However, in December, a sharp correction is witnessed
in the business destinations as it coincides with the international holiday period. Leisure
destinations on the other hand register lower ORs during May - October period, while the
occupancy rates improve in December on account of holiday season.
Average length of stay (ALOS)
The demand for hotel rooms in business destinations is usually concentrated around weekdays,
i.e., the ORs are generally lower on weekends. The ALOS for business hotels is usually in the
range of 2 – 2.5 nights with low levels or double occupancy (fewer occasions where more than
one person shares the room). While the hotels in leisure destinations the ORs are higher during
the weekends and have ALOS of around 2-3 days. The occurrence of double occupancy is also
typically higher in leisure destinations.

Existing Inventory
The upscale segment of the hotel industry in India is highly organized and concentrated in few
key cities. The total number of ‘keys’ (rooms) in the top 11 key cities covered by CARE Ratings
is estimated at 84,396 as at the end of FY16. Majority of the room inventory is concentrated in
Mumbai, NCR and Bengaluru.
The existing room supply for the country grew by 5.5% in FY16 totaling to 113,622 rooms (as of
31 March 2016). This considers the 5,619 new rooms that entered various markets during the
year, as well an expansion of the existing properties.
Upcoming Supply
The future supply landscape is ever-changing and subject to several external forces that may
often delay project openings. It is noteworthy that the pipeline for proposed supply totaled
114,466 rooms back in FY08 – the highest in a decade, whereas in FY16 it contracted
significantly to just 56,912 rooms.
Pan-India Hotels Performance
The Occupancy rates (ORs) witnessed a marginal increase of about 1.3% during FY16 on pan-
India level. ORs increased from 61.3% in 2014-15 to 62.1% in 2015-16 on back of increased
demand from domestic and foreign travelers for business and leisure activities. In line with the
increase in demand, the average room rates (ARRs) increased by about 7% to Rs 5,125 per day
in FY16.
All India RevPAR performance of major markets recorded a substantial growth of about 6.1%
over the preceding fiscal and reached Rs 3,512 per day in 2015-16. This rate was last achieved in
the year 2011-12. The nationwide weighted occupancy increased by about 6% and reached
63.4%, corresponding with a marginal increase of about 0.2% in average daily rate that stood at
Rs 5,541 per day. A concurrent increase in OR and ARR was last seen in 2010-11.
Average Room Rates (ARR) and Occupancy rates (OR)
5 star hotels recorded a growth of 6.8%, the second highest in the group followed by the 3 star
categories that recorded a growth of over 7.5% during the year. However, the only star category
that logged a miniscule drop of 0.3% in its average room rate last year was the 5 star categories.
In contrast, two-star hotels that had seen a marginal decline in their overall performance in
FY15, revived to achieve a y-o-y increase of 4.3% in occupancy and 2.5% in average room rate
in FY16. This may be attributed to the gradual escalation of commercial activity in Tier II and
Tier III cities as well as increased domestic travel.

RevPAR
Each star category witnessed a y-o-y increase in RevPAR in FY16, with the 3 star categories
leading the pack, recording a 10.5% growth during the year. The improvement in RevPAR
across all star categories can be attributed to both occupancy and average rate, with the exception
of 5 star hotels.
The expected future inventory in 11 major markets (across categories - only branded) is lower at
around 57,000 rooms for the next 5 years (FY16 to FY21). Therefore, with increasing demand on
back of improvement in economic activities and lower room additions, we expect the industry to
sustain the average room rates (ARRs) going forward and grow at an average of 3.5% per
annum. Also, we expect the occupancy to inch up to an average of about 66% by the end of
FY21 compared with 63.4% in FY16.
8.2 Financial Analysis
Net sales witnessed a marginal increase of about 2.5% y-o-y in FY17 as compared to growth of
about 8.9% in FY16. However, the revenue registered a CAGR growth of about 6% for the 5
year period between FY12 and FY17. The demand slow down for hospitality industry in FY17
could be the outcome of the terrorist attacks in various International locations such as Paris,
Brussels, and Orlando that had a significant impact on the travelers’ sentiment. Also, unrest in
Kashmir could be a spanner to the demand. However, going forward, the sentiments look
positive and demand is expected to pick up on back of increased economic activities due to
recovery in the global conditions resulting in higher movement in the MICE segment. We expect
the momentum to pick up and the industry to register a growth of about 7-9% in revenues for
FY18. However, the rupee (INR) appreciation as compared to currencies of other countries,
liquor ban in some states, etc would restrict the growth to some extent.
Revenue and Cost structure of Hotels
Revenues in hotels can be classified under three broad headers - room revenues (revenues
received as room tariffs), food & beverages (F&B) revenues and other revenues. While the room
revenues are a direct function of room rates and occupancy rates, the F&B revenues comprise
revenues from restaurants and banquets/convention centres. Other revenues mainly consist of
income from auxiliary services provided by the hotel such as laundry, spa services, telephone
services and transport. In terms of expenses, employee cost is the largest cost component for
hotels.
Room revenue
The total room revenue for a property can be calculated as:
Room revenue = Room nights sold * Average room rate,

Where, Room nights sold = No. of rooms * Occupancy rate *No. of days (Time period)
Generally, the revenues from rooms constitute about 50 – 55% of total hotel revenues.

F&B revenues
It includes revenues from restaurants and banquets. Usually the revenues from F&B division are
about 35-40% of the total hotel revenues. It depends on various factors such as occupancy rates
of the property, size of banquets and conferences, connectivity and technology in the banquet
area, hotel location, etc
Other revenues
Other revenues include revenues from telecom services, spa services, dry cleaning and laundry
services and transport facilities offered by the hotel. These revenues usually constitute about 10-
15% of the total hotel revenues.
The contribution by rooms’ revenue to the top line has been declining in the past few years with
2015-16 being an exception. In 2015-16, the Rooms Revenue witnessed an increased
contribution of 51.7% to the total revenue. On the other hand, contribution from Food &
Beverage and Banquets declined to 41.5% from 42.6% recorded in 2014-15. The contribution of
the other operating departments has remained range-bound for the past five years.
Employee costs are one of the largest cost components of the hotels accounting for about 25-
30% of the total expenditure. Hotels therefore have large fixed costs and marginal costs per
additional guests are comparatively low. Selling & distribution costs account for about 15-20%
of the operating costs which includes advertising expenses and marketing costs. Power & fuel
account for 8-10%. Also, the F&B consumes about 10-15% of the costs on an average. Other
operating costs account for the remaining 35-40% of the costs that include the repairs and
maintenance, travelling expenses, etc. among others.
GST implications on Hotel industry
The GST Council decided that the 28% tax would be imposed on hotel rooms with a tariff of Rs
7,500 above against the previous proposal of Rs 5,000 and above. Rooms with tariffs between Rs
2,500 and Rs 7,500 will attract 18% tax rate.
The GST on restaurants in five-star and luxury hotels has been brought down from 28 to 18%,
bringing it at par with standalone air-conditioned restaurants. Food & beverages form 30-40%
revenue for five-star hotels.
 Under GST regime, the overall tariffs for premium hotels (four star and above) may see
an increase, which may have some impact on the demand which had seen a pick-up in the
last financial year.

 Further, the practice of bundling of meals with room tariffs may see a decline, especially
for four star category hotels, as higher tariffs above the stipulated levels of Rs 7,500 per
day may attract higher tax rates.
 Hotels having centralized registration will have to get registered in each state whether
providing hotel services on own account or through agent (franchise)
 The biggest relaxation for the industry is the ease of compliance for the industry as there
would be no different taxes for the different services provided by the industry.
 Also, GST would benefit the industry by the input credit system by reducing the overall
tax flow for the industry, as earlier they did not have the option to set-off the taxes
already paid on inputs of the industry.
8.3 Human Resource Analysis

Recruitment Objectives:
 To effectively manage the manpower recruitment in coherence with long term and short-
term manpower planning of the organization through a standard recruitment and selection
policy.
 To proactively and systematically identify the recruitment needs in time. To ensure that
all the recruitment are within the manpower budget and as per the laid down policy.
 The recruited people with required level of skilled and aptitude for learning and growth.

I. Internal Recruitment:
 Promotions and Transfer
 Job Position
 Employee Referrals

II. External Method:
 Campus Recruitment
 Advertisements
 Head Hunters

Selection Procedure:
 Test
o The ratio between the number of vacancy and the number of candidate to be
called for test/interview should normally be 1:5.
o Depending on the requirement of the job if required, management may conduct
written/aptitude/psychometric/physical or any other test as deem fit
 Interview
o All the candidates short listed for interview will be informed through a formal call
letter for attending interview at least 15 days in advance
o The candidate will be interviewed by the interview panel
 Joining Formalities

o Employees joining shall first report in the HR department that will facilitate in
completing the joining formalities such as filling of joining report and other
necessary forms.
o HR department will ensure that the candidates will be allowed to join subject to
their being found medically.

Changing Role of HR:
o Employee Advocate
o Change Champion
o Strategic approach to HR in the recession

HR Practices in ITC

Organizational Profile:

o Powering Growth with Multiple Business Drivers.
o Creating World-Class Brands.
o Certification, Honors and Award.

Governance, Commitments and Engagements:

 Effective management of multiple businesses through a three-tiered governance
structure
 Clearly defined roles and responsibilities
 Robust and comprehensive framework of strategic planning and performance
management
 Building an institution of tomorrow

Recommendations

 ITC has one most powerful recruitment and selection procedure in India. They use the
internal and external sources of recruitment in best manner. They give more emphasis
on motivation of employees and give freedom to employees for their innovativeness.
They always welcome new ideas from employee’s side.
 The recruitment and selection process of ITC is very long and time consuming. Make
their recruitment and selection process flexible in some extent.
 Only freedom for innovativeness is not enough to motivate employees. Reward for
innovativeness is required.
 Extra benefits for employees, especially in terms of monetary benefits.

HR Practices in EIC

1. Self Defense Training for Women.
2. Signature Amenities.
3. General Manager cooking for the Team.

HR Practices in IHCL

 Selection of various departments like collection, security, housekeeping, etc. is quite
STRICT & DIFFICULT.
 Judged on their value system and trained for 18 months
 Particularly looks for employees on their values and whether the recruits would be able to
adapt to the culture of the organization
 The process of selection is as follows: 1. Application Form 2. Written Examination 3.
Medical Examination 4. Various rounds of Personal Interview.
 Training and development
o 18 months training - 6 months more than the industry standard
o Build Leaders - Each employee is given an authority to take the decisions
pertaining to his work and this empowers them and helps in building a leader in
all.
o Strong talent management - Trains not only on the area of expertise but all the
related functions. Also, it keeps track of their performance to assess and future
career planning for them.
 360-degree Feedback
o Employees, including the managers and departmental heads are evaluated not
only just by their bosses or peers but also evaluated by their immediate
subordinates
o Counseled at a personal level and apprised of where they fell short of the
expectations and how to go about it
o Guides them to prepare a roadmap for the future endeavors and tone their skills.
 Employee Satisfaction Tracking System
o Conducting surveys to elicit response from the employees and the records
collected are used to rate the overall satisfaction level of the employees.
o Targeted to achieve 100% satisfaction in the course of its operation.
o Regularly looks into the employees’ concern and strives to address them.
o Forums for the employees to voice their recommendation or compliment their
colleagues.
o Mandatory for the review committee to reply to the employees suggestions within
2 days or he shall be allotted default points.
 Individualism of HR department
o Unlike many organizations, who consider HR as a support function, Taj
amalgamates the HR practices with all the other activities taking place within it.
This helps to make HR an integral part of the organization.
 Balance Score Card
o The major focus is to align the individual’s performance with that of the
organization. Employees at every hierarchical level are assigned concrete and
well defined targets and then their performance is tracked to find out the
deviations, this forms the basis for assessing the employees.
 Special thanks and Recognition System
o Employees were not just assessed on their performance but also on parameters
like honesty, trustworthiness, concern for the environment, team spirit,
cooperation etc. Besides, appreciations from the customers also fetched points

o Level 1: Silver level was attained when the employee accumulated 120 points
within 3 months.
o Level 2: Gold Level was attained by employees who accumulated 130 points
within 3 months from the date of achieving the silver level.
o Level 3: Platinum level attained by employees scoring 250 points, 6 months from
attainment of level 2.
o Level 4: Membership of COO club on scoring points in the range of 510-760.
o Level 5: Scoring points above 760 would enable membership to MD’s club.
 Overall outcomes
o A great impact on the employee commitment and ERR (Employee retention rate)

8.4 Marketing Analysis

Marketing strategies are laid to achieve long term objectives of the company (Johnson n.d.) and
this applies to 5 star hotels too. General goals of most hotels are to expand their presence in more
regions, increase customers, improve the quality of their services and earn more profits. Goals
can be specific as well; for instance, the long term goal of the Oberoi Hotels is to tap the
international market of short haul destinations like China, Singapore and the Middle East (East
India Ho 2015). As for the ITC hotel group, their long term objective is to establish a range of
“green” luxury hotels, using an eco-friendly approach (ITC 2014). The 7P analysis of the four
hotels is done as this is a service industry. The 7Ps are product, price, promotion, place, physical
evidence, people and process.

1. Product
Rooms: The rooms in hotels are based on the Category of the hotel. The facilities in the rooms
are based on the type of hotel and price of the rooms are based on the type and facilities provided
in the room.
Conference Rooms: The conference rooms are provided by hotels for the meetings and other
requirements as per the request by the customers. The price depends on the facilities, space and
time utilized.
Banquets & Halls: Banquet halls are provided by hotels for parties and functions. These halls
provide extra revenue for the hotels.
Restaurants & Bar: Along with the rooms hotels provide restaurants and bars which are charged
separately. This adds revenue as well as a facility for the customers who are staying in hotels.
Recreation facility
Apart from the basic requirements, the various products offered by the four hotels are which
distinguishable from each other are:

East India Hotels
 Victorian architecture along with local and ethnic culture
 In Flight Services
 More than thirty hotels of luxury settings and two ships for a river cruise.
 Airport Restaurants

Indian Hotels Company Limited
 Taj, Vivanta, and Gateway
 IHMS
 Indian palaces to Hotels to give them an authentic royal touch

ITC Hotels
 Resorts, havellis, heritage palaces, five-star hotels and super deluxe hotels
 Ready-to-eat line of food products titled Kitchens of India
 Welcome Heritage
 Fortune
 Sheraton
 Luxury Collection

Oyo Rooms
 Budget Hotels

2. Promotion-The promotions done by these hotels to increase the visibility and hence, salability
are more over the same.

IHCL
 Word of Mouth publicity
 On and off-peak seasons promotions
 TV advertisements, Direct Marketing and Social Media advertisements
 Memberships

EIH
 Campaigns for better visibility via magazines, tour and travel operators and social
media platforms
 Word of Mouth publicity

ITC
 Celebrity Endorsements to allure more customers
 Responsible Luxury
 Brand logo “Namaste” to maximize the connectivity and to identify with the
customers
 Executive Travel Value Plan (ETVP)

OYO
 Digital Advertisements

 Hoardings
 Promotional Discount

3. Price- The structure of the hotels in this industry varies drastically. There are premium price
hotels available in the industry as well as budgeted hotels.

EIH, ITC, IHCL
 Premium Pricing
 Hedonic Values
 Niche market like royal
Oyo
 Budget Pricing
 Utilitarian Values
 Mass market

4. Place

EIH
 EIH has 35 hotels in India, Sri Lanka, Nepal, Egypt, Australia and Hungary.

ITC
 ITC has 100 hotels across 70 destinations.
 It exists only in India

IHCL
 99 hotels and hotel-resorts
 83 across India and 16 in other countries, including Bhutan, Malaysia, Maldives, Nepal,
South Africa, Sri Lanka, UAE, UK, USA and Zambia

OYO
 OYO has hotels in 230 cities with more than 8500 hotels
 They are also in Malaysia and Nepal
 They are going to enter South-East Asia, Africa and South America soon

5. Process- The process in the hotels is very much alike. Some basic processes are:

 Check-in to Check-Out
 Room Service or Call Service
 Website
 Dine & Wine options

6. People- The people in this industry are the employees who are running the business. Certain
characteristics of these people are:

 Dedicated, energetic people to make the experience of the customers memorable

 Customization in order to serve each and every customer in a better way. People want
personal attention and the hotel which provides more customization to the customers
according to their needs and wants will have the competitive advantage and will win
the race.
 Customer Satisfaction is the priority of the employees in hotel industry. More the
satisfaction level of the customers, more the bookings will be with the particular hotel

7. Physical Evidence
 Space, color, light & such other element; as these affect guest impression about the hotel
 Lobby- It being the first & the last part of the hotel that the guest sees; its designing plays
a very important role. It must be designed with fine art, elegant finishing & comfortable
furnishing.
 Conference Room
 Restaurants and Bars
9. Challenges faced by Hotels

1. Government approvals and licenses
Major issues for most of the industries in India are related to multiple windows of clearances,
even for the hotel industry. Hoteliers face regulatory constraint at every step in the process of
development of hotels beginning from land acquisition stage (for which laws differ from state-to
state) to approval by various ministries & association on various matters.
A company requires approximately 100 clearances for setting up an upscale category hotel in
India. The clearances have to be taken from multiple government bodies. It is tedious and a time-
consuming process.

2. Land availability and cost issues
The process of identifying new land parcels as per the requirement for hotels is a tedious task in
India. Compared to international standards, where land costs accounts for 15-20% of the total
project cost, in India this is often in the range of 40-50%. This is also one of the reasons for low
development of budget & mid-market hotels in comparison to upscale luxury hotels as budget
hotels with lower average rates are unlikely to become viable with such high land cost. As a
remedy to the problem, hoteliers have started mixed-use development projects comprising of
hospitality, commercial, residential and retail components.

3. Human Capital
Indian hotels face the continual challenge of shortage of trained employees, especially at the
manager and supervisor levels. Most of the companies are falling short of skilled employees for
their hotels. Major reason for this shortage is absence of organized training and educational
institutes for development of skilled employees like in aviation and other service sectors. Only
few major Indian players like Taj, Oberoi and ITC have set up their training institutes with a few
international brands like IHG, Carlson etc. Also, hotel and catering management institutes

approved by All India Council of Technical Education (AICTE) is less than adequate and much
of the talent graduating each year is unsuited for direct employment in the industry due to lack of
required skills.

Retaining the workforce even through training and development in the hotel industry is a tedious
task as attrition levels are too high. One of the reasons for this is unattractive wage packages.
Though the industry has been growing at a fast pace, hotel management graduates opt to join
other sectors like aviation and catering services where they are paid higher.
4. Management Contract related issues
Performance clause in management contracts is one of the most debated clauses between owners
and operators of the hotel. It is most often the only clause that provides a window for an owner to
terminate the management contract with the brand. However, unlike in other industries where a
client has the choice to reject/ discontinue a product/ service if he/she is dissatisfied with the
performance, hotel owners do not enjoy such a privilege and in turn have to pay a hefty
termination fee to disengage with the operator.
Also, owners are seldom informed/ involved in the hotel operations. Non- involvement of
owners in hotel operations and lack of transparency can result in a gap for desired objectives.
Such non coordination between owners and operators pose a threat to the industry.
10. BCG Matrix
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray
firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry growth
rate factors to evaluate the potential of business brand portfolio and suggest further investment
strategies.
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and it’s potential. It classifies business portfolio into four
categories based on industry attractiveness (growth rate of that industry) and competitive
position (relative market share). These two dimensions reveal likely profitability of the business
portfolio in terms of cash needed to support that unit and cash generated by it. The general
purpose of the analysis is to help understand, which brands the firm should invest in and which
ones should be divested.
Characteristics of Each Quadrant
1. Dogs (or pets): If a company’s product has low market share and is in a low rate of growth
market, it is considered a “dog” and should be sold, liquidated, or repositioned. Dogs, found in

the lower right quadrant of the grid, don't generate much cash for the company since they have
low market share and little to no growth. Because of this, dogs can turn out to be cash traps,
tying up company funds for long periods of time. For this reason, they are prime candidates
for divestiture.
2. Cash cows: Products that are in low growth areas but for which the company has a relative
large market share are considered “cash cows,” thus, the company should milk the cash cow for
as long as it can. Cash cows, seen in the lower left quadrant, are typically leading products
in markets that are mature. Generally, these products generate returns that are higher than the
market's growth rate and sustain themselves from a cash flow perspective. These products should
be taken advantage of for as long as possible. The value of cash cows can be easily calculated
since their cash flow patterns are highly predictable. In effect, low-growth, high-share cash cows
should be milked for cash to reinvest in high-growth, high-share “stars” with high future
potential.
3. Stars: Products that are in high growth markets and that make up a sizable portion of that
market are considered “stars” and should be invested in more. In the upper left quadrant are stars,
which generate high income but also consume large amounts of company cash. If a star can
remain a market leader, it eventually becomes a cash cow when the market's overall growth rate
declines.
4. Question marks: Questionable opportunities are those in high growth rate markets but in
which the company does not maintain a large market share. Question marks are in the upper right
portion of the grid. They typically grow fast but consume large amounts of company resources.
Products in this quadrant should be analyzed frequently and closely to see if they are worth
maintaining.
The matrix is a decision making tool, and it does not necessarily take into account all the factors
that a business ultimately must face. For example, increasing market share may be more
expensive than the additional revenue gain from new sales. The matrix is not a predictive tool; it
neither takes into account new, disruptive products entering the market nor rapid shifts in
consumer demand. Because product development may take years, businesses must plan for
contingencies carefully.

11. Mckinsey Matrix
GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for the multi
business corporation to prioritize its investments among its business units.
GE-McKinsey is a framework that evaluates business portfolio, provides further strategic
implications and helps to prioritize the investment needed for each business unit (BU).
In the business world, much like anywhere else, the problem of resource scarcity is affecting the
decisions the companies make. With limited resources, but many opportunities of using them, the
businesses need to choose how to use their cash best. The fight for investments takes place in
every level of the company: between teams, functional departments, divisions or business units.
The question of where and how much to invest is an ever going headache for those who allocate
the resources.
Multi business companies manage complex business portfolios, often, with as much as 50, 60 or
100 products and services. The products or business units differ in what they do, how well they
Question Mark Star
Cash Cow
Dog

perform or in their future prospects. This makes it very hard to make a decision in which
products the company should invest. At least, it was hard until the BCG matrix and its improved
version GE-McKinsey matrix came to help. These tools solved the problem by comparing the
business units and assigning them to the groups that are worth investing in or the groups that
should be harvested or divested.
In 1970s, General Electric was managing a huge and complex portfolio of unrelated products and
was unsatisfied about the returns from its investments in the products. At the time, companies
usually relied on projections of future cash flows, future market growth or some other future
projections to make investment decisions, which was an unreliable method to allocate the
resources. Therefore, GE consulted the McKinsey & Company and as a result the nine-box
framework was designed. The nine-box matrix plots the BUs on its 9 cells that indicate whether
the company should invest in a product, harvest/divest it or do a further research on the product
and invest in it if there’re still some resources left. The BUs are evaluated on two axes: industry
attractiveness and a competitive strength of a unit.
Industry attractiveness indicates how hard or easy it will be for a company to compete in the
market and earn profits. The more profitable the industry is the more attractive it becomes. When
evaluating the industry attractiveness, analysts should look how an industry will change in the
long run rather than in the near future, because the investments needed for the product usually
require long lasting commitment.
Industry attractiveness consists of many factors that collectively determine the competition level
in it. There’s no definite list of which factors should be included to determine industry
attractiveness, but the following are the most common:

 Long run growth rate
 Industry size
 Industry profitability: entry barriers, exit barriers, supplier power, buyer power, threat of
substitutes and available complements (use Porter’s Five Forces analysis to determine
this)
 Industry structure (use Structure-Conduct-Performance framework to determine this)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (use PEST or PESTEL for this)
 Seasonality
 Availability of labor
 Market segmentation

We have considered these factors:

› Market growth rate
› Market size
› Demand Variability
› Industry profitability
› Global opportunities
› Industry rivalry

Industry attractiveness = factor value1 * factor weighting + factor value2 * factor
weighting2……..

Along the X axis, the matrix measures how strong, in terms of competition, a particular business
unit is against its rivals. In other words, managers try to determine whether a business unit has a
sustainable competitive advantage (or at least temporary competitive advantage) or not. If the
company has a sustainable competitive advantage, the next question is: “For how long it will be
sustained?”
The following factors determine the competitive strength of a business unit:

 Total market share
 Market share growth compared to rivals
 Brand strength (use brand value for this)
 Profitability of the company
 Customer loyalty
 VRIO resources or capabilities (use VRIO framework to determine this)
 Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
 Strength of a value chain (use Value Chain Analysis and Benchmarking to determine
this)
 Level of product differentiation
 Production flexibility

Factors considered by us for plotting business unit strength are:

› Market share
› Growth trend in market share
› Brand equity
› Profit margins relative to competitors
› Capacity

Invest/Grow box- Companies should invest into the business units that fall into these boxes as
they promise the highest returns in the future. These business units will require a lot of cash

because they’ll be operating in growing industries and will have to maintain or grow their market
share. It is essential to provide as much resources as possible for BUs so there would be no
constraints for them to grow. The investments should be provided for R&D, advertising,
acquisitions and to increase the production capacity to meet the demand in the future.
Selectivity/Earnings box- The company should invest into these BUs only if you have the money
left over the investments in invest/grow business units group and if you believe that BUs will
generate cash in the future. These business units are often considered last as there’s a lot of
uncertainty with them. The general rule should be to invest in business units which operate in
huge markets and there are not many dominant players in the market, so the investments would
help to easily win larger market share.
Harvest/Divest box. The business units that are operating in unattractive industries don’t have
sustainable competitive advantages or are incapable of achieving it and are performing relatively
poorly fall into harvest/divest boxes.
To plot the GE matrix of hospitality industry the following factors are considered.
Market attractiveness –
1. Market size
2. Market growth
3. Demand variability
4. Industry profitability
5. Industry rivalry
6. Global opportunities

Competitive positioning –

1. Market share
2. Market share growth
3. Brand equity
4. Production capacity
5. Profitability vs competition

Different weights are assigned to different factors –

1. Normal
2. Important
3. Critical
To indicate the size of the market of each company, scores are given as follows-

1. 0-20% - 1
2. 20-40% - 2
3. 40-60% - 3
4. 60-80% - 4
5. 80-100% - 5

The weights are assigned on the basis of relevance of each factor in determining the position of
the companies of hotel industry.

MARKET
ATTRACTIVENSS
WEIGHT COMPETITIVE
POSITIONING
WEIGHT
Market size 1 Market share 1
Market growth 2 Market share growth 2
Demand variability 3 Brand equity 3
Industry profitability 2 capacity 3
Industry rivalry 3 Profitability vs.
competitors
2
Global opportunities 3

Since the market share of the Hotels business is largely scattered in the organized and
unorganized hotels. Large portion of customers’ requirements is catered by the unorganized
hotels leaving a little portion of customers for the major players of the industry. This leads to low
weight to the factors such as Market size and Market share as these major players do not cater to
mass but to a niche market.
Factors such as Demand variability, Industry rivalry, brand equity, global opportunities and
capacity are critical for these hotel chains as they fight for the niche market on the above
mentioned factors.
Market growth, market share growth, profitability vs. competitors and Industry profitability are
marked as important for the GE matrix analysis.

Inference
Since the comparison is done between the major players of Hotel industry, the plotting of the
matrix looks peculiar. They all are plotted on the same point in market attractiveness.
Looking at the curve we see that all the business units are very close. This is due to fact that
these business units compete with each other on very close levels. The business strategy of all
the companies is competent and similar. In terms of market share ITC lag behind as it has only 0-
20% market share of the niche market customers who seek for luxurious and comfortable
lodging facilities. EIH and IHC lie in the same range of 20-40% market share.
IHC is the one on the safer side when compared to others two brands.
2
12
0.0
3.0
6.0
9.0
0.0 3.0 6.0 9.0
Low Medium High
Low Medium High
Competitive Positioning
IHCITCEIH

12. Conclusion
From the different analysis that we have done, the conclusion could be that the industry is very
attracted to the investors as well as the new entrants. The various government schemes
introduced are the sign for future growth of the industry. India, being an emerging country,
shows the growth rate of hospitality industry is a very faster pace because of the growing
disposable income of the people. With the untapped market emerging in the hospitality industry,
the contribution of this industry will definitely grow in future. Technological advancement will
help the industry to personalize the services offered to the customers in order to increase the
satisfaction level and profits eventually.
13. References
www.ibef.org
Care ratings- Indian Hotel Industry Structure and Prospects, 2017
https://www.marketing91.com/marketing-mix-itc-hotels/
www.quickmba.com
http://www.rediff.com/business/report/oyo-rise-of-a-little-giant/20180628.htm
https://www.mbacrystalball.com/blog/strategy/ge-mckinsey-matrix/
https://www.mbaskool.com/marketing-mix/services/17547-oberoi-hotels.html
http://business.rediff.com/special/2010/oct/11/spec-indian-hotels-four-brand-strategy-for-success.htm
https://www.projectguru.in/publications/battle-strategies-hotels-india/
Indian Hospitality Industry Review, 2016 by JIL
Indian Hotel Industry Survey, 2015-2016 by FH&RA

INDUSTRY ANALYSIS FOR HOTEL INDUSTRY

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