A detailed study on the Hospitality sector in India

1. CRISIL REPORT -
HOTELS
1
By,
Mario Allen
Ashbin Jose
Sam Texeria
Anusha
Sribhasyam
Tinoj V Thomas
Rohit C

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
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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. 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. 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
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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
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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
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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
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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)
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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 (%)
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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)
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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
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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%
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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
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