The purpose of this study is to analyze the premium segment of the hotel industry. We have carried out Porter's Five Forces Model analysis of the premium segment of the hotel industry and compared it with some industries like IT, Cement and Textiles which have shown growth potential in recent times. This has been carried out to give an idea of the forces relative to other industries for an investor. Next, we identified some of the dimensions of strategy for the industry and analyzed the major players in the industry based on these dimensions, to position them and apply a SWOT analysis on them. In this regard, we used primary data to focus on two hotels within the groups discussed to understand the relative importance of the strategic dimensions. Based on the positioning obtained, we have tried to understand the strategic groups operating in the industry and map them along certain key dimensions. We have concluded by analyzing the impacts of the forces on members of different strategic groups.
This is an intermediate progress report (of the group project). The industry chosen for the analysis is the Hotel Industry in India. We have chosen to concentrate on Premium Segment of the Hotel Industry.
2. Scope of Project
Hotels can be classified according to the type of property (premium/budget), type of player (foreign/domestic), number of hotels (chains/single/dual).
We are focusing on the premium segment of the hotel industry. General industry analysis and profiling of players form the major part of the project. These have been carried out with the help of Porter’s Five Forces Model, SWOT analysis and Strategic Grouping. We have also gathered information on the key dimensions of strategy as perceived by the management at Taj Residency Ummed, Ahmedabad and Pride Hotel, Ahmedabad.
3. Description of the Industry
On an average setting of a Premium Segment Hotel with a capacity of approximately eighty to hundred rooms costs Rs. 10 million per room. For budget segment it costs around 3-5 million (CRIS INFAC Hotels Annual Review, 2005). Premium hotels include 5-star and 5-Delux star hotels. The segment is targeted primary to business persons / corporate, upper economic class leisure trips and foreign tourists. The proportions of customers of various types for 2004 are shown in Figure 1.
Major firms in this segment in India are: Indian Hotels Company Limited (Taj), Asian Hotels Limited (Hyatt), East India Hotels Limited (Oberoi, Trident), Starwood Hotels (Le Meridien), Pride Group and ITC. In Ahmedabad following are the hotels in this segment:
a.Taj Residency Ummed
b.Holiday Inn Hotel
Figure 1: Customer Profile for Hotel Industry
4. Analysis of the Industry
Hotel industry is more global in nature as compared to most of the other industries i.e. any impact on most of the industries make an impact on the hotel industry (viz. 9/11 attack has a lot of impact on the industry globally). Other industries like Fast moving goods industry (FMCG), auto industry, banking industry (to a large extent) etc do not get affected so much with global changes (http://www.equitymaster.com/ detail.asp?date=7/12/2003&story=5).
The demand in the industry has increased by more than 18% (http://www.hotel-online.com/News/PR2004_4th/Nov04_HVSIndia.html). During the same period average revenue per room has increased by 13% thereby increasing the operating margin to 25% approximately. Average room demand is expected to increase by 18%, mainly due to business travelers and foreign tourists. Most of the firms do not have any major plans of investment in the next few years and hence the interest cost is expected to be lower thus higher overall profitability of the firms can be expected in the coming year.
Indian Hotel Industry (premium segment) is internationally competitive. This has been possible due to continuous improvement in the facilities and services provided...