Indian Hospitality Industry


Published on

Published in: Business, Travel
  • Hi Sir I need your help. I request you to kindly send me your indian hospitality industry ppt to my email id : as I really need it It will be really big help for me I live in Maldives have to make a strong presentation on the same topic
    Are you sure you want to  Yes  No
    Your message goes here
  • Please share it on my email id, as it is apt fr my presentation
    Are you sure you want to  Yes  No
    Your message goes here
  • please forward me on
    Are you sure you want to  Yes  No
    Your message goes here
  • Hi Sir I need your help. I request you to kindly send me your indian hospitality industry ppt to my email id as I really need it It will be really big help for me I live in Brazil & have to make a strong presentation on the same topic
    Are you sure you want to  Yes  No
    Your message goes here
  • please forward me on
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Indian Hospitality Industry

  1. 1. Indian Hospitality Industry Presented By- Mr . Shashank Gawalee
  2. 2. Interdependence Tourism Sector Hospitality Sector Real Estate Sector
  3. 3. Tourism Sector
  4. 4. Overview <ul><li>Important part of global economy. </li></ul><ul><li>Slack season: March to September </li></ul><ul><li>September-March period accounts 60% of the total tourist arrivals. </li></ul><ul><li>Focused largely on foreign tourists, with almost 70% of the business coming from this segment. </li></ul><ul><li>Inbound tourist expenditure per head is third highest in the world and even more than global average tourist spending. </li></ul><ul><li>the cumulative FDI into the hotel and tourism sector from 1991 to March 2007 has been US$ 517.83 million, representing 1.18 per cent of the total FDI in to the country. </li></ul><ul><li>Tourism is the third largest earner of foreign exchange for the country. </li></ul>
  5. 5. Key highlights Source: CRISIL Research 28.97 10.81 Growth (percentage) 2891.75 1.64 April-Aug 2007 2242.26 1.48 April-Aug 2006 44.35 8.33 Growth (percentage) 659.33 0.38 Aug 2007 456.76 0.35 Aug 2006 Tourist Arrival (Million No.) Forex Earnings ( $ million) Particulars
  6. 6. Tourist arrival Source: KPMG Research
  7. 7. Tourism Sector fund Allocation Note : * This fig. corresponds only to the provision for building tourism infrastructure, as against Rs 4,230 mn provided for the year 2006-07 Source : CRISIL Research n.a 5,200* 2007-08 n.a 29,000 Tenth Plan Outlay (2002-07) 8,300 8,300 2006-07 7,860 7,860 2005-06 5,000 5,000 2004-05 3,500 3,250 2003-04 Actual Expenditure (Rs mn) Budget Estimates (Rs mn) Year
  8. 8. Growth drivers <ul><li>Discovering/Expanding new/niche markets </li></ul><ul><li>Booming economy. </li></ul><ul><li>Growth in IT enabled services & IT industry. </li></ul><ul><li>Rising stock indices. </li></ul><ul><li>Entry of low cost airlines. </li></ul><ul><li>Low Cost medical facilities. </li></ul><ul><li>Globalization & Liberalization gave it new impetus. </li></ul>
  9. 9. HOTEL INDUSTRY India's hotel industry is experiencing an unprecedented boom, driven by increasing numbers of business and tourist arrivals. But how long can the good times last?
  10. 10. Overview <ul><li>Revenue generated during F.Y.2006-07 was INR 604.32 bn </li></ul><ul><li>Growing at CAGR 11 % (2000-06) </li></ul><ul><li>Demand Growth CAGR 14 % </li></ul><ul><li>Outpacing Supply Growth CAGR 6% </li></ul><ul><li>Currently there are 1980 hotels approved by ministry of Tourism, Government of India with a total capacity of 1,10,000 rooms. </li></ul><ul><li>Unmet demand for hotel rooms: 150 000 rooms . Additional demand this year: 15 000 rooms. </li></ul><ul><li>Increase in average room rent for the entire hotel industry over the last year: 35 %. </li></ul>
  11. 11. Market Players
  12. 12. Types of hotels
  15. 15. Emerging Hotel Concepts <ul><li>Ecotel </li></ul><ul><li>Resorts </li></ul><ul><li>Motels </li></ul><ul><li>Floatels </li></ul><ul><li>Service Apartments </li></ul>
  16. 16. Ecotel <ul><li>Environment Responsibility within hospitality industry. </li></ul><ul><li>Inspection is based on 5 separate inspections </li></ul><ul><li>1) Environmental Commitment </li></ul><ul><li>2) Solid Waste Management </li></ul><ul><li>3) Energy Efficiency </li></ul><ul><li>4) Water Conservation </li></ul><ul><li>5) Employee education & community Involvement. </li></ul>
  17. 17. Resorts <ul><li>Cater to leisure needs of tourist. </li></ul><ul><li>Usually located at hill stations or seashores. </li></ul><ul><li>It can be further classified : </li></ul><ul><ul><ul><ul><li>Hill resorts </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Health resorts </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Beach resorts </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Summer resorts </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Winter resorts </li></ul></ul></ul></ul>
  18. 18. Motels <ul><li>A single building of connected rooms whose doors face a parking lot &/or common area with common parking. </li></ul><ul><li>They are located along the highways connecting important cities. </li></ul><ul><li>The feature distinguishing a motel form a hotel are </li></ul><ul><ul><ul><li>1) Adequate parking facilities </li></ul></ul></ul><ul><ul><ul><li>2) Cottage style accommodation </li></ul></ul></ul><ul><ul><ul><li>3) Short duration of Stay </li></ul></ul></ul>
  19. 19. Floatels <ul><li>A floating or a boat or a ship operating as a hotel. </li></ul><ul><li>All services are turnkey including catering, linens, housekeeping and security. </li></ul><ul><li>e.g. The Oberoi Motor Vessel Vrinda. </li></ul>
  20. 20. Service Apartments <ul><li>This concept is slowly gaining ground in the industry. </li></ul><ul><li>They mainly target emigrant & long duration visitors [business & leisure]. </li></ul><ul><li>Service apartments are preferred to hotels for the following reasons : </li></ul><ul><ul><li>Business executives find them safe, convenient, affordable & well maintained. </li></ul></ul><ul><ul><li>They are larger than hotel rooms </li></ul></ul><ul><ul><li>No rental deposits required in this case. </li></ul></ul><ul><ul><li>They are beneficial for SME for their roving representatives. </li></ul></ul>
  22. 22. Challenges of Hotel Industry <ul><li>The 3 challenges that clearly emerge for the industry are : </li></ul><ul><li>1) Managing Demand </li></ul><ul><li>2) Optimising Customer Mix </li></ul><ul><li>3) Optimising channel Mix </li></ul>
  23. 23. Managing Demand The hotel industry is inherently prone to fluctuating demand with Occupancy Rate (OR’s) in certain period 10 – 20 % lower than annual average. Source: Crisinfac Annual review of Hotel Industry 2006
  24. 24. Managing Demand <ul><li>A) Seasonality of Demand : </li></ul>Domestic airline Load factor Directorate general of Civil Aviation Foreign Tourist Inflow FHRAI Tourism Statastics
  25. 25. Managing Demand <ul><li>B) The weekend phenomenon </li></ul>Average daily OR: City wise Average daily OR: By Hotel segment Source: FHRAI Hotel Survey 2006
  26. 26. Managing Demand <ul><li>C) Preference of hotels to maximize RevPAR through ARR growth over OR (Occupancy Rate) </li></ul><ul><li>1) It raises the overall industry ARR levels </li></ul><ul><li>2) Revenue growth achieved at no extra cost. </li></ul><ul><li>3) Favorable impact on bottom line </li></ul>
  27. 27. Managing Customer Mix <ul><li>Challenges : </li></ul><ul><li>A) Customer Mix governed by product offerings, brand positioning, segmenting & location </li></ul><ul><li>B) Hotel employs tie ups, promotions, targeted pricing etc. </li></ul><ul><li>Options : </li></ul><ul><li>A) Revenue can increased by strategic customer segmentation & offer management. </li></ul><ul><li>B) This hidden opportunity has potential to boost revenues by 3 to 5 percent. </li></ul>
  28. 28. Managing the Channel Sales Mix <ul><li>Challenges : </li></ul><ul><li>A) Increase in online bookings has restructured the sale channel mix for hotels. </li></ul><ul><li>B) Compelling channel partners to reposition & restructure themselves. </li></ul><ul><li>C) Large number of intermediaries which are integral part of system result in </li></ul><ul><li>i) Higher Complexities </li></ul><ul><li>11) Lower Profitability </li></ul><ul><li>iii) Commoditization of hotels </li></ul><ul><li>Options : </li></ul><ul><li>A) Maximize profitability through optimization of channel mix & minimization of </li></ul><ul><li>intermediaries. </li></ul><ul><li>B) By optimizing channel mix could result in intermediary cost by 1 to 3 percent. </li></ul>
  29. 29. Real Estate Sector
  30. 30. Overview <ul><li>Second largest employer next only to agriculture </li></ul><ul><li>US $ 12 billion industry </li></ul><ul><li>Growing at about 30 % per annum </li></ul><ul><li>Housing sector contributes to 5 %of the country’s GDP </li></ul><ul><li>FDI Inflows: (from 1991 to June 2007 ) </li></ul><ul><ul><li>Housing & Real Estate:US$ 1123 million </li></ul></ul><ul><ul><li>Construction Activities (Including Roads & Highways):US$ 1875 million </li></ul></ul>
  31. 31. Growth Drivers
  32. 32. FDI in Real estate Sector
  33. 33. Indian Real Estate- Catalyst for Growth <ul><li>With Indian economy growing strongly, requirements of housing, commercial and industrial infrastructure bound to rise. </li></ul><ul><li>More than 367 Million Sq. Ft. of additional office space needed by 2012-13 ( Estimated by Ernst & young). </li></ul><ul><li>4.7 million housing units would have to be completed by 2030 ( Estimated by Deutsche Bank). </li></ul><ul><li>Asian Development Bank estimates requirements of 10 million units by 2030. </li></ul><ul><li>Indian Ministry of Tourism forecasted requirements of 2.9 and 6.6 Million hotel rooms to meet the tourism and business by 2010 and 2020 . </li></ul><ul><li>Fast growing Medical tourism will become US$ 2 billion industry by 2012 and will require huge investment in Health Services sector. </li></ul><ul><li>Booming retail trade sector needs 13 Million sq. Ft. of space by 2008 end in top eight large cities in India. </li></ul>
  34. 34. Challenges: Real Estate Industry
  35. 35. Projected investment by segment Residential, 67 % Commercial, 16 % Hospitality, 10 % Retail, 7 % Projected investment by segment (2008-2010)
  36. 36. Projected demand by City Chennai, 17 % Mumbai, 12 % Bangalore, 26 % Kolkata, 5 % Pune, 8 % NCR, 21 % Hyderabad, 11 % Projected demand by city (2008-2010)
  37. 37. Funding Options
  38. 38. Funding Options Strategic Investment Private Equity Initial Public Offering AIM/ Overseas Listing REIT
  39. 39. Strategic Investor <ul><li>Merits: </li></ul><ul><li>Valuation based on long term business plan. </li></ul><ul><li>Global and or/domestic expertise. </li></ul><ul><li>Moderate return expectations. </li></ul><ul><li>Demerits: </li></ul><ul><li>Joint Management of operations. </li></ul><ul><li>Business Sensitivity/confidentiality issue. </li></ul><ul><li>Recent Transaction traffic: </li></ul><ul><li>Around 8- 10 investments aggregating ~ USD 16 bn. </li></ul>
  40. 40. Strategic Investor Source: KPMG 10,000 To develop an integrated township of 40,000 acres Residential Al Nakheel - DLF 4,000 A JV engaged in Pan India projects in residential, commercial, infrastructure & hospitality sectors integrated master plans & SEZ Mixed Use Emmar - MGF 300 For developing 100 Hotels , 10,000 rooms in next 10 years Hospitality Emaar MGF - Accor 220 To acquire & develop 7 properties in the country by 2010 Hospitality Rattha Group - Ascott 550 To develop 75 hotels & serviced apartment over next 7 yrs, subject to necessary approvals Hospitality DLF - Hilton 720 To construct 28 hotels in partnership with Marriott Hospitality Unitech – Marriot Amt Invested (USD mn) Details Project Type Company
  41. 41. Private Equity Investor <ul><li>Merits: </li></ul><ul><li>Negotiable deal; valuation based on view of future. </li></ul><ul><li>Expertise through other investee companies. </li></ul><ul><li>Limited to board reprentation. </li></ul><ul><li>Demerits: </li></ul><ul><li>High return expectations in a limited time frame. </li></ul><ul><li>Defined exit mechanism within 3-5 years. </li></ul><ul><li>Recent transaction traffic: </li></ul><ul><li>Around 30 deals aggregating ~ USD 1.9 bn. </li></ul>
  42. 42. Private Equity Investor Source: KPMG 600.0 NA DLF Assets DE shaw, Lehman Brothers Jul- 07 167.0 13.5 % Anant Raj Industries GIC, Morgan Stanley Dean Witter, Quantum (SOROS) May- 07 152.0 10 % Oberoi Constructions Morgan Stanley Jan- 07 350.0 15 % RMZ AIG Apr- 07 100.0 NA QVC Reality IL & FS Apr- 07 40.0 5 % Indiabulls Real Estate Ltd. Oberon (Farallon Capital) Jul- 07 Amount ( USD Mn) Stake Investee Investor Date
  43. 43. Initial Public Offering <ul><li>Merits: </li></ul><ul><li>No management control. </li></ul><ul><li>No exit issues. </li></ul><ul><li>No business sensitivity/confidentiality issues. </li></ul><ul><li>Demerits: </li></ul><ul><li>Valuation based on market conditions. </li></ul><ul><li>No inputs. </li></ul><ul><li>QoQ expectations of growth & returns. </li></ul><ul><li>Recent transaction traffic: </li></ul><ul><li>Around 8 listing totaling ~ USD 3.7 bn. </li></ul>
  44. 44. Initial Public Offering 114.31 x 11.0 % 126.7 Sobha Developers Dec- 06 61.84 x 18.3 % 220.2 Parshvnath Developers Dec- 06 81.05 x 10.0 % 80.0 Akruti Nirman Jan- 07 3.23 x 10.3 % 2296.9 DLF Jun- 07 6.60 x 14.0 % 371.0 HDIL Jul- 07 68.26 x 10.3 % 138.0 Omaxe Aug- 07 5.75 x 21.8 % 194.5 IVR Prime Aug- 07 1.91 x 10.1 % 214.7 Puravankara Aug- 07 Response received Stake Dilution Amount Raised Company Date of Listing
  45. 45. Initial Public Offering 25 % 13 % One Month Return 23 % 16 % Two Month Return 82 % 37 % Six Month Return Realty Index Sensex Returns
  46. 46. AIM Listing/Overseas Listing <ul><li>AIM stands for Alternative Investment Market. </li></ul><ul><li>The Company gets listed on LSE ( London Stock Exchange) </li></ul><ul><li>It enables a companies from around the world to raise the capital to grow. </li></ul><ul><li>The company get listed on highly efficient, transparent & well regulated market. </li></ul><ul><li>The companies get accessed to worlds deepest & most liquid pool of investment capital </li></ul><ul><li>Benefits : </li></ul><ul><li>1) Less entry barriers </li></ul><ul><li>2) No minimum requirements with respect to initial equity required, market capitalization, & trading history. </li></ul>
  47. 47. AIM Listing/Overseas Listing <ul><li>Merits: </li></ul><ul><li>No management control. </li></ul><ul><li>No exit issues. </li></ul><ul><li>No business sensitivity/confidentiality issues. </li></ul><ul><li>Demerits: </li></ul><ul><li>Valuation based on market and the project prospects. </li></ul><ul><li>No inputs. </li></ul><ul><li>Expectations based on project completion. </li></ul><ul><li>Recent transaction traffic: </li></ul><ul><li>6 companies have raised ~ USD 2.7 bn on the AIM market. </li></ul>
  48. 48. AIM Listing/Overseas Listing Source : KPMG Research -15 % 500 Trinity Apr- 06 -26 % 759 Hirco Apr- 06 -6 % 464 Ishaan Nov- 06 2 % 714 Unitech Dec- 06 -27 % 274 Dev Properties Jan- 07 25 % 325 Ascendas Aug- 07 Return since listing Amount Raised(USD Mn) Name of Company Date
  49. 49. FDI Equity Inflow
  50. 50. Leading the pack…. Indian companies had a higher return on equity than other countries in Asia.
  51. 51. Gains in world stock exchanges
  52. 52. Government initiatives <ul><li>The “Incredible India” campaign. </li></ul><ul><li>Open skies policy. </li></ul><ul><li>New airports. </li></ul><ul><li>International conventional centers. </li></ul><ul><li>Reduction in travel cost. </li></ul><ul><li>Reduction in taxes on hotel industry. </li></ul><ul><li>Extension of infrastructure status. </li></ul><ul><li>Introduction of M-Visa. </li></ul>
  53. 53. Key factors to invest in hotel stocks <ul><li>The Strategy & Capex plan of the company. </li></ul><ul><li>Changes in global Geopolitical situations. </li></ul><ul><li>The hotel chain should not be leveraged on any specific segment. </li></ul>
  54. 54. Concluding Remarks…. <ul><li>Since there is a lot of potential for growth & development of Hotel sector. </li></ul><ul><li>It needs to be infused with fresh inflows of capital. </li></ul><ul><li>The fund raising options are as follows </li></ul><ul><li>Strategic investment, Private Equity, IPO, AIM & REIT. </li></ul><ul><li>The key considerations for the above fund raising alternatives are : </li></ul><ul><ul><ul><li>Valuation Expectations </li></ul></ul></ul><ul><ul><ul><li>Industry Expertise </li></ul></ul></ul><ul><ul><ul><li>Management Control </li></ul></ul></ul><ul><ul><ul><li>return expectation </li></ul></ul></ul><ul><ul><ul><li>Exit Mechanism </li></ul></ul></ul><ul><ul><ul><li>Confidentiality issue </li></ul></ul></ul><ul><ul><ul><li>Transaction structuring </li></ul></ul></ul>
  55. 55. THANK YOU
  56. 56. <ul><li>Size of real estate industry is currently USD 16 million. </li></ul>