INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD

GENERIC STRATEGIES OF INDIAN HOTEL INDUSTRY

Submitted by GROUP 6 - SECTION B

Dipti Sethi (1011118) Deepika Singh (1011007) Shivam Bhasin (1011071) Nidhi Yadav (1011051) Manish Vishnu M (1011026) Nikhil Singh (1011093)

East India Hotels Ltd. Taj Group of Hotels Kamat Hotels (India) Ltd. ITDC-The Ashok Group of Hotels Royal Orchid Hotels Mahindra Hotels and Resorts (I) Ltd.

26/12/2012

ABSTRACT
This report is a comprehensive analysis on the Generic Strategies of leading luxury Hotels in the Hotels and Restaurant Industry. In this we are analysing about the strategies followed by the hotel companies in order to have a competitive advantage over the others in the same industry. These strategies are generally in tandem with the mission and vision of the company.

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CONTENTS
INTRODUCTION3 GENERIC STRATEGIES................................................................................................4 REFERENCES13

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INTRODUCTION
In the third phase of the project we are discussing about the generic strategies of the six leading hotels in the Hotel Industry Sector. By generic strategy we mean the core idea about how a company can best compete in the market place. Three basic generic strategies applied by any industry are-: Cost Leadership, Differentiation, Focus. As far as the hotel industry is concerned, we are focusing on the generic strategies of the high-end luxury hotels in India. Therefore cost leadership is not significant in this case. Hence the focus is on Differentiation and the Focus strategies.

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EAST INDIA HOTELS LTD

INTRODUCTION The founder and ex-Chairman Mr Mohan Singh Oberoi was the first hotelier to open up modern five-star hotels in India. The Oberoi Inter-Continental (I-Con, as it is popularly known) was therefore the first luxury hotel which started in Delhi in 1965.Mr Oberoi was the first hotelier to work in association with international hotel chains in order to attract international tourists. This further led to increase in international tourism and obviously huge influx of foreign exchange. GENERIC STRATEGIES  DIFFERENTIATION

Notable Firsts-Among the many notable firsts in the domain of the EIH Group, few of them are: employment of women in the hotels, ancillary industry for the production and supply of high quality consumables and stationery, excellent flight catering operations in India etc. This feature makes the Group the pioneer of innovativeness in the hospitality industry. Vertical Integration- The Group believes in tackling with its challenges at an early stage before its competitors could even think of. After realising the hotel industry is greatly dependent on Travel Agency and it is a vital link in the distribution chain, Mr. Oberoi decided to vertically integrate this by establishing his own travel agency, Mercury travels which is performing excellently throughout the world. Cruises and Spas- The Group offer luxurious experiences not only through hotels but also through cruises and spas. It has cruises on Nile and Kerala backwaters. The Oberoi spas provide a calm and memorable experience of relaxation in the calm surroundings using massage therapies provided by expert western and eastern Therapists. Environmental Protection- Responsible environmental practices continue to be an area of focus for the Company. New technology, equipment and processes are evaluated; energy sources such as solar energy and wind energy are under active evaluation and implementation. EIH Group has energy conservation committees and periodic energy audits. As the company is environmentally conscious, it has taken several energy conservation measures like the installation of high efficiency chillers, cooling towers, high efficiency boilers, advanced evaporative cooling systems, occupancy sensors, energy efficient LED, IR and florescent lamps. Internal Control Systems and Risk Management: The Company continues to seek ways to further strengthen its internal control systems especially after the terror attack in Mumbai on Trident and Taj on Nov 26, 2008. The Company has developed and implemented a risk

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management framework to identify business risks and take measures to mitigate such risks. The Board is regularly informed about these risk management initiatives. Marketing and Sales: The re-branding of some of the hotels have been done not only to strengthen its brand but also to remove various misconceptions in the mind of the customers. For example, the management renamed Vilas hotels as The Oberoi Rajvilas, The Oberoi Amarvilas , The Oberoi Udaivilas, etc. in order to remove the misconception from mind of customers that the Vilas hotels were separate from the Oberoi brand People Philosophy-The Company firmly believes that its greatest strength lies in the quality of its manpower. The Company believes its people philosophy gives it a competitive edge. It has highly motivated and well trained staffs that provide attentive and warm service which are difficult to find elsewhere across the hotel industry. The goal is to ensure that guests are served by bright, enthusiastic and committed employees who predict the wants of their guests and deliver exceptionally great service. The numerous awards and accolades conferred upon many of the hotels of EIH are due to the dedication of its staff who continues to improve and provide world class services. Prosperity in general and societal growth in particular The EIH Group had recognised this fact quite early that well trained employees will be able to provide better services to the guests which will eventually lead to customer satisfaction. Pursuing this philosophy in 1966 they established The Oberoi Centre of Learning and Development. The Oberoi Group also does philanthropic activities like imparting education and providing aid to differently-abled people. They also believe in preserving and maintaining the cultural heritage of India. Expansion and Growth-Since last decade, the Group has been focussing on building new luxury hotels not only in India but also abroad. It plans an oversees foray with both its Trident and Oberoi brands with focus on growth in places like Middle East (West Asia), Thailand, Cambodia, Vietnam, China, Philippines, Malaysia, and Singapore.

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TAJ GROUP OF HOTELS

GENERIC STRATEGIES Cost Leadership: To be successful with the cost leadership strategy, Taj Hotels must be able to maintain low costs across all markets and pass the savings on to customers. Being a large group gives Taj greater buying power. A large chain of hotels, has the ability to purchase all its linens through a central supplier at a greatly discounted rate. Being a cost leader does not mean being the cheapest, but it does mean being the most affordable in its class, so even Taj hotels can be cost leaders in the luxury class. Taj enjoys the economies of scale based on the occupancy rate. When the occupancy rate is high the Taj hotels enjoy the economies of labour and fixed cost is distributed over large number of rooms effecting in the increase of the revenue and the various other costs like maintenance will remain same whatever the occupancy, if the occupancy is high the expenses are distributed occupied rooms resulting in the increase of revenue. Other than the savings in cost many hotels charge 24hours rent on rooms used fortnight halts (i.e. is for 8 to 10 hours) thus enjoying the chance to rent same room to other customers for 24 hours. Economies of Scope Opportunities for the Taj hotel continue to be in the budget and midmarket segment. The luxury segment of Taj hotels is set to perform extremely well over the next few years until the supply- demand gap is bridged. The developments in the leisure segment leads to believe that the leisure segment is clearly benefiting from the increase in foreign tourist arrivals and growth in domestic travel. Taj hotels are more involved in channel management, especially online channels to expand their hotels all over the world. Differentiation: Taj differentiates itself by the services it offers. It have Worldwide chain of hotels and resorts. It has outstanding hospitality to its guests. It is Well known for its level of customization for customers. It is Popular among international tourists, especially from Europe and US. Focus: Taj main focus is on reaching out to our clients in maximum areas with always improved and innovative products and services. To reach out to customers and believe in increasing profitability by bringing the best products and concepts from all over the globe to our customers and giving value for money. Focus to regular and formal channels of communication, which reflects openness and transparency.

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KAMAT HOTELS (INDIA) LIMITED Introduction

Kamat Hotels (India) Ltd (KHIL) was incorporated on 21st March, 1986 by Lt. Mr Venketesh Krishna Kamat and his companions. KHIL is involved in the business of hospitality and associated businesses and its activities may be broadly classified into (i) operation of hotels owned by the Company, (ii) management of hotels owned by other parties under contract (iii) catering services and (iv) timeshare. It has strongly established four hotel brands that are- The Orchid-An ecotel Hotel in 5-star segment, VITS luxury business Hotel in 4-Star segment, Gadh Hotels and Lotus Resorts. It is Asias first environmentally sensitive hospitality group.

GENERIC STRATEGIES

 Differentiation
Technological prowess-: Progressively making use of latest technologies to improve efficiency and standardize operations. Using the hotel website as a forum for marketing and communicating with customers to designing customized revenue management solutions for hotel chains, it is also being used to provide better service and contact with the customers. It is also being used to monitor staff performance, manage turnover and to facilitate career planning of hotel employees. Philosophy of 3Rs -: It has been creating a nationwide green hotel's chain not only in bigger cities but also in smaller cities as well. Working on the philosophy of three R's - Reduce, Reuse and Recycle, the group strongly believes that the real growth of the group as well as the hotel industry lies not only in metros but also in smaller towns. The group follows stringent environment norms and is whole-heartedly committed towards the cause of environment and improving social awareness. Energy Conservation-: Company continued energy conservation efforts during the year and closely supervised power consumption and running hours on day to day basis, which resulted in optimum utilization of energy. The hotel is fitted with energy saving devices to conserve energy in the long run. Go Green Iniatives Awards- Its one of the hotel The Orchid, Asia's first and only ISO 14001 certified Eco-friendly Five Star Hotel, continues to maintain the track record of winning prestigious awards. It has been honoured with the following awards in the yeary y y Golden Peacock Environment Management Award for the year 2010 In 2011 1st prize for Traffic Island Executive Chairman and Managing Director of the Company was awarded the prestigious Rajiv Gandhi Environment Award on 5th June, 2010 World Environment Day, for the exemplary work carried out by him in the field of protection of environment.

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He was honoured with the runner up award for Green Hotelier of the Year on 16th December, 2010.

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ITDC - THE ASHOK GROUP OF HOTELS

The Ashok group of Hotels is the flagship hotel business of the state-owned ITDC Ltd. These hotels are mainly 5-star deluxe and 5-star and are priced moderately as compared to other hotels of the luxury segment. Their generic strategy is FOCUS as their targeted customers are only a niche segment of luxury-seeking guests like high income group, politicians, bureaucrats, upper market foreigners and other VIPs. They have attained their position and recognition as a brand through cost- focus strategies. The group provides luxury services at very moderate prices and also offers special discounts to government employees and inexpensive summer packages. The strategies used to attain cost advantage are as follow Advantage of sister businesses under ITDC: Ashok group, apart from their usual services, offers complementary services like air tickets, transportation services to tourists spots, light and sound shows at the hotels, etc. Here, it has got advantage of economies of scope as most of these services offered are being offered by sister businesses under ITDC. For example, Air India is handling air services of the guests. Ashok Alliance Scheme: Under this scheme, the group is pulling in existing hotels under the Ashok brand name. Currently, they are focusing to bring 35 hotels under the Ashok brand. By this scheme, the group is expanding and increasing its reach without constructing new physical entities. The only cost incurred is in the renovation and up gradation of these acquired non brand hotels. Hence, they are saving hugely upon time and cost of construction of new hotels. Also, the group has the largest chain of hotels in the country and the current expansion scheme will help in improving its brand image and revenue as the philosophy of product which is seen the most sells will work in favor of the group. A government owned entity: Since the group is government-owned and was started under the plan of promotion of tourism in India and attracting foreign travelers, it enjoys the benefits of low tariffs and subsidies as enjoyed by any other government entity. Due to this, getting financing from banks, land acquisition for new projects, clearances, etc. are fast and easier for the group, whereas, the same activities are very cost-intensive for the competitors. Also, the group is protected and sailed through easily during any crisis or legal issues on the account of backing from the government.

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ROYAL ORCHID HOTELS

GENERIC STRATEGIES Royal Orchid Hotels is a one of its kind in the country. The group mainly focuses on business clients and they follow a low cost strategy in establishing their hotels. The company reduces their initial setup cost. This helps the company in ensuring that the payback period for each hotel is less when compared to the other established players in the industry. Royal Orchid Hotels have pioneered different strategies which focus on a low cost leadership model. The hotels are usually established by a revenue sharing model, where the company assures that a certain percentage of revenue is shared with the developer of the property. The contract period is usually for 25 30 years. This helps the company to reduce the initial investment. The company is also into management contracts where they enter in contracts with the developer (partner) to manage the hotel on behalf of the partner. The contract is typically for 15 years and the developer pays percentage of the total revenue to the company for managing the hotel. This is one of the best strategies adopted by almost all the major players in the industry. The company has established a centralised reservation system which helps them in coordinating the reservations and ensures a clutter free management. They also employee a set of highly skilled revenue management team, which serves as a massive support function for the company. They analyse the business trends and the marketing mix which helps the company to develop its future strategies. The company ensures that their offerings are available to the customers, through its global distribution system and hence ensures the best service for its regular customers. The company has also established few loyalty programs for its customers, like Gold Cards for F&B group bookings, Vanity, an exclusive membership for women and Smile which is a loyalty program for the bookers and travel agents. The pan India presence of the company helps in developing business and ensures that their loyal customers are served in the almost all prominent cities. Also the presence of Royal orchid Hotels among the four star deluxe segment and for star segment has helped them in gaining popularity amongst middle level executives. As the technology improves, the competition also increases. The mushrooming of new generation business hotels is a threat to the potential business of traditional business hotels. The company focuses on giving its customers a refined experience each time and to maintain the customer loyalty.

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MAHINDRA HOLIDAYS AND RESORTS INDIA LIMITED

GERNRIC STRATEGY DIFFERENTIATION MHRIL is one of the leading leisure hospitality providers in and outside of India, offering quality family holiday with wide range of service designed to meet the customer needs and in the interest of the family. MHRIL believe in key differentiator in the form of integrated business model by acquiring new members through their strong sales and marketing, member servicing, also by building new resort and operation of these resorts. And these activities will result in delivering of wonderful experience to the members. MHRIL like to target customer from urban family for holidays in India and outside. MHRIL focus is to enhance the number of customer base, service excellence, offering innovative packages/deals, brand value and variety of resorts. For increasing customer base in India, MHRIL launched Club Mahindra FUNDAY to target corporate clients. They also launched ZEST, which is targeting the youth customer from the urban India. MHRIL also have a CLUB MAHINDRA TRAVELS to cater the traveling needs of customers. This service is also enables their members with greater convenience in fulfilling their leisure travel needs. In July 2008, MHRIL launched MAHINDRA HOMESTAY, which is especially targeting the tourist from the United Kingdom and India. This kind of service offering is not only changing the way of Indian holidays but also the targeting the new segment to increase the revenue of company. On the other side this kind of service offering is also result in Club Mahindra Fundays and Zest members users becoming Club Mahindra Holidays members in the future. MHRIL is very keen to diversify their business by providing new offering related to their other businesses and competences like a mass market vacation ownership membership targeted at the mid-income segment. MHRIL is also like to explore the option of new segments like teenagers and senior citizens by offering as extensions to the existing business targets. They also offer fractional homes to discerning affluent families at attractive locations. To explore new segment of customers and to increase their presence in India, MHRIL need highly skilled work force. Keeping in mind of the high demand for skilled hospitality

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personnel in India, MHRIL intend to develop and operate hospitality management colleges in India. They believe these colleges will enable them to source skilled and trained personnel.

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REFERENCES
For EAST INDIA HOTELS LTD Present Scenario in EIH www.hospitalitynet.org/news/4043128.html (24/12/2011) Cost Differentiation (24/12/2011) http://www.scribd.com/doc/20811971/hotel-industry-project-report

Internal foray http://www.thehindubusinessline.com/todays-paper/tpcorporate/article1620483.ece?ref=archive (25/12/2011)

For TAJ GROUP OF HOTELS

www.openlearningworld.com/books/Business Strategies/(24/12/2011) http://www.mapsofindia.com/tourism/group-hotels(24/12/2011) http://www.tajhotels.com/About-Taj/Investor-Relations/ http://www.docstoc.com/docs/85343994/Annual-Report-2010-11---Taj-Hotels-Resorts-and-Palaces (24/12/2011)

For KAMAT HOTELS (INDIA) LIMITED Official Website http://www.khil.com/ (24/12/2011)

Annual Report http://www.khil.com/hospitality-management/annual_reports/annualreport_2011.pdf (25/12/2011)

For ITDC - THE ASHOK GROUP OF HOTELS

The Ashok group of Hotels Webpage http://www.theashokgroup.com/# (18/12/2011) ITDC Hotel Management discussionsIndiainfoline

http://www.indiainfoline.com/Markets/Company/Fundamentals/ManagementDiscussions/India-Tourism-Development-Corporation-Ltd/532189 (23/12/2011)
ITDC to bring 35 hotels under the brand http://www.livemint.com/2009/08/27162705/ITDCto-bring-35-hotels-under.html (24/12/2011)

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For ROYAL ORCHID HOTELS Royal Orchid Hotels http://www.royalorchidhotels.com/ (25/12/2011)

SEBI website http://www.sebi.gov.in/dp/royal.pdf (25/12/2011)

For MAHINDRA HOLIDAYS AND RESORTS INDIA LIMITED

Travel Service http://www.clubmahindra.com/travelServices.asp (25/12/ 2011) Funday http://www.clubmahindra.com/fundays.asp (25/12/ 2011) Lifetime http://www.clubmahindra.com/lifetime.asp (25/12/ 2011) Differentiation http://www.clubmahindra.com/IR_files/Prospectus.pdf (25/12/ 2011)

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