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Indian Hotel industry

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A detailed study on the Hospitality sector in India

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Indian Hotel industry

  1. 1. CRISIL REPORT - HOTELS 1 By, Mario Allen Ashbin Jose Sam Texeria Anusha Sribhasyam Tinoj V Thomas Rohit C
  2. 2. CONTENTS  The Hotel Industry  Classification  Ownership Model  Distribution Channel  Characteristics of the industry  Demand from destination  Estimate Market  Hotel Performances  Cost Structure  Crisil Opinion  Future Of Bangalore 2
  3. 3. THE HOTEL INDUSTRY  Business opportunities increased room rates occupancy levels.  'Hotel Industry in India' second to China in Asia Pacific.  New government’s promise to boost tourism. Top players to expand presence across Primary and secondary purposes. A broad category of fields within the service industry that includes lodging, event planning, theme parks, transportation, cruise line, and additional fields within the tourism 3
  4. 4. CLASSIFICATION According to concepts : Based on location Based on level of service Based on themes Other concepts  City hotels  Suburban hotels  Airport Hotels  Resorts  Motels  Floatels  Rotels  Boatels  Economy / budget hotels  Mid-segment / mid-scale hotels  Upscale / luxury hotels  ECOTEL  Boutique hotels  Heritage hotels  Destination spas  Timesharing industry  Service apartments 4
  5. 5. Starred Hotels  Star Hotels Facilities and Services 1 2 3 4 5 Size of Bedroom (SqFt) 120 120 130 140 200 Air Conditioning Rooms (%) 25 25 50 100 100 Dedicated Bathrooms(%) 100 100 100 100 100 Size of Bathroom (SqFt) 30 30 36 36 45 Availability of water n n n n n Bottled toiletry products d d d n n Resturants d d n n n Specialisty Resturants n n Skilled Staff(%) 20 20 30 30 60 Dry Cleaning d d d d n Travel Desk n n n n n Health/Fitness d d d d n Saloon d d d d d Kiosk/Shop d d d d n Money Exchange d d d d d Business Centre d d d n n Swimming Pool d d d d n Parking Facilities d d n n n Conference Facilities d d d d n Necessity Desirable Heritage Hotels  Heritage basic  Heritage grand/Classic - 50 per cent of the floor area built before 1950. Classification of hotels by Ministry of Tourism 5
  6. 6. OWNERSHIP MODEL  The management contract model is a largely preferred model.  New entrants - to establish their brand identity  Adopt full ownership.  Lease models.  Full ownership  Substantial capital.  Involves the most risk.  Offers high returns.  Franchise - license their brands to a hotel owner.  Management contract - For owners that do not have the expertise. Franchise Management Contracts Full Ownership Leasing Ownership Model 6
  7. 7. DISTRIBUTION CHANNEL Global distribution system Centralized reservation system Tour agency/ travel agency (booking via a GDS/CRS) Online travel portals (booking via a GDS/CRS) Marketing alliances 7
  8. 8. CHARACTERISTICS OF THE INDUSTRY  Destinations may be classified:  Business  Leisure  The two are not mutually exclusive.  The sector is cyclical in nature.  During positive cycles :  Sustained growth  Healthy average room rates (ARRS)  Healthy occupancy rates (ORs)  Business –  Sensitive to macroeconomic factors.  Leisure  Sensitive to non-economic factors. Mumbai Ahmedabad Bangalore Chennai KolkotaPune Goa Agra Kerla Jaipur 66 76 66 62 60 56 57 56 57 60 74 70 80 85 77 59 54 52 50 55 50 67 76 75 Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec %Demand Seasonal Demand (2014) Business Destination Leisure Destination 8
  9. 9. DEMAND FROM DESTINATION Business Destination  Recorded decadal lows (2013-14)  Estimated to have improved (2014-15)  Room Availability to have Increased (9 per cent)  Demand to have increased (11 per cent) Leisure Destination  Recorded significant lows (2013-2014)  Estimated to have improved (2014-15)  Room availability to have increased (7 per cent)  Demand to be higher (11 per cent – YOY) 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 0 10000 20000 30000 40000 50000 60000 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15E Business Destination (Demand and supply) Room Availability (nos) Room Demand (nos) Revenue/Room (Rs/Per day) 3750 3800 3850 3900 3950 4000 4050 4100 0 2000 4000 6000 8000 10000 12000 14000 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15E Leisure Destination (Demand and Supply) Room Availability (nos) Room Demand (nos) Revenue/Room (Rs/Per day) 9
  10. 10. ESTIMATE MARKET  General elections bolstering business sentiments in India.  Cyclical downturn almost nearing its peak.  Demand for hotel rooms is to have improved in 2014-15.  Market to have grown by nearly 10 per cent during 2014-15.  To reach Rs 374 billion from Rs 340 billion in 2013-14.  Demand in both - premium and mid-market segments (85% revenues) 129 102 164 178 183 191 208 226 182 276 312 321 340 374 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15E Market Size ( Rs BIllion) Premium Market Size Overall Hotel Market Size 16 16 15 28 16 12 12 12 11 0 -21 61 8 3 4 9 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15E Sensitivity of hotels industry to macroeconomic growth Nominal GDP (RHS) Premium Segment (%) 10
  11. 11. HOTEL PERFORMANCES  The foreign tourist arrivals (FTAs) grew by 9.2 % (y-o-y)  “Electronic Travel Authorization” enabled “Travel visa-on- arrival”.  44 countries as against earlier TVoA scheme for 12 countries.  Premium segment hotels located across 12 key destinations in India.  Key developments -  Keys Hotels expanded India operations by foraying into Kochi.  Oakwood brand bought serviced apartments to Hyderabad.  IHG unveiled its first Holiday Inn in Chandigarh Panchkula. 0 100000 200000 300000 400000 500000 600000 700000 800000 900000 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Foreign Tourists Arrival (Y-O-Y) no of tourits 2014-15 2013-14 0% 10% 20% 30% 40% 50% 60% 70% 80% Occupancy Rate 2014/2015 0 1000 2000 3000 4000 5000 6000 Revenue Per Room/Per Day (Rs) 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Average Rooms Rented/Per Day (Rs) 11
  12. 12. COST/REVENUE STRUCTURE Room revenues - comprise revenues received as room tariffs.  Room revenues = Room nights sold * Average room rate.  Food and beverage revenues - from restaurants and banquets  Occupancy rate (OR) of the property.  Banquets and conferences.  Hotel location.  Other revenues  Spa services.  Telecommunication services.  Laundry services. Room Revenues 51% Food and Beverage Revenue 37% Other Income 12% Revenue Breakup Employee Cost 32% Power and Fuel Costs 11% Repairs and Maintenance 7% Selling and Distribution Cost 8% Other Operating Cost 42% Cost Break up 12
  13. 13. CRISIL OPINION  Aggregate RevPARs across 12 Indian destinations increased  Room demand is estimated to have grown by 10 per cent  Foreign tourist arrivals increased by 7 %to 7.5 million in 2014  North American and Western European countries.  Room additions increased by 8 per cent y-o-y in 2014-15.  Demand in both business and leisure destinations (2014- 2015)  Room demand in leisure destinations – 9%  Room demand in business destinations – 10% 13
  14. 14. FUTURE OF BANGALORE Foreign business travelers largest clients for premium hotels  Silicon Valley of India  Global technology players and home breed headquarters  Whitefield, Electronic City and the International Airport areas  Impetus to tourism, positive for hospitality industry  Impact factors  To extend the Visa on Arrival (VoA) facility – 150 countries  Increase the service tax from 12.36% to 14%. Hotel Names No of Rooms Expected Date of Operations Shangrila (1) 397 2015-16 Sheraton Whitefield 325 2015-16 Rennaisance Bangalore 278 2016-17 Shangrila (2) 450 2016-17 Swissotel 144 2016-17 Grand Mercure 234 2016-17 Four Seasons 250 2017-18 Gateway 209 2018-19 Conrad Hilton 125 2018-19 Hyatt Regency N.A Planning 14
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