Hospitality Industry in India

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Hospitality is all about offering warmth to someone who looks for help at a strange or
unfriendly place. It refers to the process of receiving and entertaining a guest with
goodwill. Hospitality in the commercial context refers to the activity of hotels,
restaurants, catering, resorts or clubs who make a vocation of treating tourists.

Helped With unique efforts by government and all other stakeholders, including hotel
owners, resort managers, tour and travel operators and employees who work in the sector,
Indian hospitality industry has gained a level of acceptance world over. It has yet to go
miles for recognition as a world leader of hospitality. Many take Indian hospitality
service not for its quality of service but India being a cheap destination for leisure
With unlimited tourism and untapped business prospects, in the coming years Indian
hospitality is seeing green pastures of growth. Availability of qualified human resources
and untapped geographical resources give great prospects to the hospitality industry. The
number of tourists coming to India is growing year after year. Likewise, internal tourism
is another area with great potentials.
The hospitality industry is a 3.5 trillion dollar service sector within the global economy. It
is an umbrella term for a broad variety of service industries including, but not limited to,
hotels, food service, casinos, and tourism. The hospitality industry is very diverse and
global. The industry is cyclical; dictated by the fluctuations that occur with an economy
every year. Today hospitality sector is one of the fastest growing sectors in India. It is
expected to grow at the rate of 8% between 2007 and 2016. Many international hotels
including Sheraton, Hyatt, Radisson, Meridien, Four Seasons Regent, and Marriott
International are already established in the Indian markets and are still expanding.
Nowadays the travel and tourism industry is also included in hospitality sector. The boom
in travel and tourism has led to the further development of hospitality industry.
In 2003-04 the hospitality industry contributed only 2% of the GDP. However, it is
projected to grow at a rate of 8.8% between 2007-16, which would place India as the
second-fastest growing tourism market in the world. The arrival of foreign tourists has
shown a compounded annual growth of 6 per cent over the past 10 years. Besides, travel
and tourism is the second highest foreign exchange earner for India. Moreover, it is also
estimated that the tourism sector will account for nearly 5.3 per cent of GDP and 5.4 per
cent of total employment.

GDP Employment Visitor Export Personal T&T Capital Investment Govt. Expenditure
Outlook for 2006 7.80% 1.40% 10.90% 6.90 % 8.30% 7.70%
Outlook for 2007-2016 6.60% 1.00% 7.80% 6.70% 7.80% 6.60%
ATITHI DEVO BHAVO (Guest is God) - We have all heard this phrase many times
during our childhood from our parents and grand-parents. We can also find its presence
in the earliest Vedas and religious epics. Hospitality is deep-rooted in our traditions and
comes as an integral part of our heritage. In very simple terms, hospitality is the art of
being warm to strangers and has been derived from the Latin word hospitalitem, which
means “friendliness to guests”.
The hospitality industry covers a diverse range of establishments in the form of
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accommodation, food and drinks. It includes hotels, motels, restaurants, bars, ships,
airlines and railways. The concept of hospitality business started when people started
traveling away on business and they needed a place away from home which could cater
to all their needs.
Today hospitality has evolved from the basic food and accommodation industry and
taken a very important position in almost all businesses. In fact, it has become a huge
industry and drives economies across the globe. The scope of hospitality/ service industry
today is far more than one could have ever imagined a few years back. Earlier people
who graduated from a Hotel School could get employed either in Hotels, Cruises or
But service is the BUZZ word for all businesses today. Be it the Retail Sector, Banking
Industry, BPO, Telecom world, Real Estate or any other sector having direct customer
contact, a person with hospitality background has an edge above the rest, because of their
sheer capability of understanding the needs of a customer better and handling difficult
customers/ situations efficiently.
Hotel industry depends largely upon the foreign tourist arrivals further classified into
business travelers (around 65% of the total foreign tourists) and leisure travelers. The
following figures show that business as well as the leisure travelers (both domestic and
international) formed major clientle for hotels in 2004.
Over the last two years, the hotel industry has seen higher growth rates due to greater
number of tourist arrivals, higher occupancy rate (being around 75% in FY'06) and
significant increase in average room rate (ARR). The major factors contributing to this
growth include stable economic and political conditions, booming service industry, FDI
inflow, infrastructure development, emphasis on tourism by the central as well as state
governments and tax rationalization initiatives to bring down the tax rates in line with the
international levels.

The Indian hospitality industry is going great guns presently, with high operating margins
and increase in the number of travelers visiting India - both inbound and outbound. Thus,
the only direction left for the sector points upwards. However, what needs to be focused
on is the fact that opportunities are not missed, which presently include the large gaps in
rooms supply as compared to demand. India has approximately 100,000 rooms only in
totality, which is lesser than that in Las Vegas, besides contributing to an insignificant
portion of the GDP - just 5.4 per cent. In comparison to nations like China, Thailand and
Malaysia where the hospitality share ranges between 12 and 15 per cent, India's growth
potential is boundless. "By 2020, the hospitality and tourism sector would be a major
contributor to the Indian economy," says Sudeep Jain, executive director of JLLM.
South Asia is and will remain a must-visit destination and India is looking more and more
lucrative. Within the nation, major contribution as destinations will be from the growing
tier I and II cities with a special emphasis on business hotels across categories as well as
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the prime leisure destinations like Goa, Rajasthan, etc, which will remain on the growth
path, creating the aura for India as a leisure destination. Accordingly, the needs of the
traveler will be nothing less than perfection. Jain With an increase in choices available,
they will be less forgiving of service deficiencies. Guests will require higher levels of
service in the full-service segments, which will warrant greater training requirements for
hotel staff. The limited service hotels will require a complete shift in the perception of
customer service. Nevertheless, this is directly related to the travelers‟ travel personal.

1. Natural and cultural diversity: India has a rich cultural heritage. The "unity in
diversity" tag attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala,
snow capped Himalayas and the quiescent lakes are incredible.

2. Demand-supply gap: Indian hotel industry is facing a mismatch between the demand
and supply of rooms leading to higher room rates and occupancy levels. With the
privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five
star hotels. This has led to the rapid expansion of the sector

3. Government support: The government has realized the importance of tourism and has
proposed a budget of Rs. 540 crore for the development of the industry. The priority is
being given to the development of the infrastructure and of new tourist destinations and
circuits. The Department of Tourism (DOT) has already started the "Incredible India"
campaign for the promotion of tourism in India.

4. Increase in the market share: India's share in international tourism and hospitality
market is expected to increase over the long-term. New budget and star hotels are being
established. Moreover, foreign hospitality players are heading towards Indian markets.


1. Poor support infrastructure: Though the government is taking necessary steps, many
more things need to be done to improve the infrastructure. In 2003, the total expenditure
made in this regard was US $150 billion in China compared to US$ 21 billion in India.

2. Slow implementation: The lack of adequate recognition for the tourism industry has
been hampering its growth prospects. Whatever steps are being taken by the government
are implemented at a slower pace.

3. Susceptible to political events: The internal security scenario and social unrest also
hamper the foreign tourist arrival rates.


1. Rising income: Owing to the rise in income levels, Indians have more spare money to
spend, which is expected to enhance leisure tourism.
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2. Open sky benefits: With the open sky policy, the travel and tourism industry has seen
an increase in business. Increased airline activity has stimulated demand and has helped
improve the infrastructure. It has benefited both international and domestic travels.


1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists
can be risky, as there are wide fluctuations in international tourism. Domestic tourism
needs to be given equal importance and measures should be taken to promote it.

2. Increasing competition: Several international majors like the Four Seasons, Shangri-La
and Aman Resorts are entering the Indian markets. Two other groups - the Carlson Group
and the Marriott chain - are also looking forward to join this race. This will increase the
competition for the existing Indian hotel majors


1. Shortage of skilled employees: One of the greatest challenges plaguing the hospitality
industry is the unavailability of quality workforce in different skill levels. The hospitality
has failed to retain good professionals.

2. Retaining quality workforce: Retention of the workforce through training and
development in the hotel industry is a problem and attrition levels are too high. One of
the reasons for this is unattractive wage packages. Though there is boom in the service
sector, most of the hotel management graduates are joining other sectors like retail and

3. Shortage of rooms: The hotel industry is facing heavy shortage of rooms. It is
estimated that the current requirement is of 1,50,000 rooms. Though the new investment
plan would add 53,000 rooms by 2011, the shortage will still persist.

4. Intense competition and image of India: The industry is witnessing heightened
competition with the arrival of new players, new products and new systems. The
competition from neighboring countries and negative perceptions about Indian tourism
product constrains the growth of tourism. The image of India as a country overrun by
poverty, political instability, safety concerns and diseases also harms the tourism

5. Customer expectations: As India is emerging as a destination on the global travel map,
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expectations of customers are rising. The companies have to focus on customer loyalty
and repeat purchases.

6. Manual back-end: Though most reputed chains have IT enabled systems for property
management, reservations, etc., almost all the data which actually make the company
work are filled in manual log books or are simply not tracked.
7. Human resource development: Some of the services required in the tourism and hotel
industries are highly personalized, and no amount of automation can substitute for
personal service providers. India is focusing more on white collar jobs than blue collar
jobs. The shortage of blue collar employees will pose various threats to the industry.


Trends that will shape the future of hospitality sector are:
1. Low Cost Carriers
2. Budget Hotels
3. Service Apartments
4. Technology
5. Loyalty Travel

1. Low cost carriers: Travelers in general are more price sensitive to airfare than they are
to hotel room rates. Often a low airfare will stimulate demand for travel even if hotel
prices are increasing. LCCs are a good option for business travelers, as they have
advantages like low costs, more options and connectivity.

2. Budget hotels: More than 50 per cent of occupancy of a majority of hotels comes from
the business travel segment. The average room rate (ARR) realized from business
travelers is normally higher than from leisure travelers. Heightened demand and the
healthy occupancy rates have resulted in an increase in the number of budget hotels.
Some of the new players entering into this category of hotels include Hometel, Kamfotel,
Courtyard by Marriott, Country Inns & Suites, Ibis and Fairfield Inn.

3. Service apartments: The concept of service apartments, though a recent phenomenon in
India, is an established global concept. Villas in Spain, flats in the UK and apartment
complexes in the US have all created a viable market for those who want more than just a
room in a hotel. Service apartments are the latest trend in accommodation, offering the
comfort and convenience of a home without the hassles of having to maintain or look
after it. Ideally suited for medium-to-long staying guests, service apartments are a natural
choice for corporate employees or expatriates relocating to a particular city, non-resident
Indians visiting the country for long spells and foreigners visiting the city for long

4. Technology: Travel and technology have become inseparable. Technology is making
its own advances with high-tech video conferencing facilities, web cameras and virtual
reality mode of conferencing. On-line bookings, e-ticketing, Wi-Fi Internet connectivity,
easy access to information, etc. are just a few areas where technology has completely
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changed the way we travel.

5. Loyalty travel: Today, airline-credit card company tie-ups have brought a whole range
of benefits to the travelers. These include insurance cover, upgrades, free tickets, access
to executive lounges, and a host of other goodies.

Critical factor to drive future growth and performance


Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry is
inextricably linked to the tourism industry and the growth in the Indian tourism industry
has fuelled the growth of Indian hotel industry. The thriving economy and increased
business opportunities in India have acted as a boon for Indian hotel industry. The arrival
of low cost airlines and the associated price wars have given domestic tourists a host of
options. The 'Incredible India' destination campaign and the recently launched 'Atithi
Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and
international tourism and consequently the hotel industry.

In recent years government has taken several steps to boost travel & tourism which have
benefited hotel industry in India. These include the abolishment of the inland air travel
tax of 15%; reduction in excise duty on aviation turbine fuel to 8%; and removal of a
number of restrictions on outbound chartered flights, including those relating to
frequency and size of aircraft. The government's recent decision to treat convention
centres as part of core infrastructure, allowing the government to provide critical funding
for the large capital investment that may be required has also fuelled the demand for hotel

The opening up of the aviation industry in India has exciting opportunities for hotel
industry as it relies on airlines to transport 80% of international arrivals. The
government's decision to substantially upgrade 28 regional airports in smaller towns and
privatization & expansion of Delhi and Mumbai airport will improve the business
prospects of hotel industry in India. Substantial investments in tourism infrastructure are
essential for Indian hotel industry to achieve its potential. The upgrading of national
highways connecting various parts of India has opened new avenues for the development
of budget hotels in India. Taking advantage of this opportunity Tata group and another
hotel chain called 'Homotel' have entered this business segment.
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According to a report, Hotel Industry in India currently has supply of 110,000 rooms and
there is a shortage of 150,000 rooms fueling hotel room rates across India. According to
estimates demand is going to exceed supply by at least 100% over the next 2 years. Five-
star hotels in metro cities allot same room, more than once a day to different guests,
receiving almost 24-hour rates from both guests against 6-8 hours usage. With demand-
supply disparity, hotel rates in India are likely to rise by 25% annually and occupancy by
80%, over the next two years. This will affect the competitiveness of India as a cost-
effective tourist destination.

To overcome, this shortage Indian hotel industry is adding about 60,000 quality rooms,
currently in different stages of planning and development, which should be ready by
2012. Hotel Industry in India is also set to get a fillip with Delhi hosting 2010
Commonwealth Games. Government has approved 300 hotel projects, nearly half of
which are in the luxury range. The future scenario of Indian hotel industry looks
extremely rosy. It is expected that the budget and mid-market hotel segment will witness
huge growth and expansion while the luxury segment will continue to perform extremely
well over the next few years

A hotel is an establishment that provides paid lodging, usually on a short-term basis.
Hotels often provide a number of additional guest services such as a restaurant, a
swimming pool or childcare. Some hotels have conference services and meeting rooms
and encourage groups to hold conventions and meetings at their location.

Some of the main features of the Indian hotel industry include the following:
• The industry is more dependent on metropolitan cities as they account for 75% to 80%
of the revenues, with Delhi and Mumbai being on top.
• The average room rate (ARR) and occupancy rate (OC) are the two most critical factors
that determine profitability. ARR depends on location, brand image, star rating, quality of
facilities and services offered. The occupancy rate depends on other seasonal factors.
• India is an ideal destination for tourists. Approximately 4.4 million tourists visit India
every year. Thus the growth prospects are very high.
• In the hotel sector, a number of multinationals have strengthened their presence. Players
like Four Seasons are also likely to enter the Indian market in the near future. Moreover,
Indian hotel chains are also expanding internationally. A combination of all these factors
could result in a strong emergence of budget hotels, which could potentially lower the
cost of travel and related costs.

The hotel industry can be further categorized into three segments:

 Hotels
 Restaurants
 Contract Caterers.
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The hotels in India can be broadly classified into the following segments:

1. Star rated hotels:

2. Heritage hotels.
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4. Budget hotels:
They‟re usually preferred by domestic travelers seeking economical accommodation.
These are reasonably priced, offer limited luxury, seasonal discounts and decent
services.. Budget hotels are also preferred by business travelers contributing to greater
ARR (average room rate) than leisure travelers. Increased demand and healthy occupancy
has fueled the growth of budget hotels in a short time.

5. Unclassified hotels: They‟re motels spread across the country. They form 19% of the
industry size. Low price is their only USP.

These typically include fast food chains, ethnic restaurants, fine dining and coffee bars.
The major players include Barista, Mc Donalds, Ruby Tuesday, Bercos, etc.

C. Contract Costing
This includes any catering business unit that is formally not a part of the hotel industry
but is closely allied to it. Some of the major players in this category include Sodexho,
Compass Group, etc.

Type of hotels, location and target customer

Various reputed Domestic and International hotels
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Analysis on some Prominent and Prestigious Hotels


 Radisson is a division of Carlson Hospitality Worldwide, a global leader in hospitality
services encompassing more than 1,530 hotel, resort, restaurant and cruise ship
operations in 80 countries.
 Upscale & Luxury Hotels
 Radisson Hotels & Resorts, one of the world's leading, full-service global hotel
companies, operates, manages and franchises more than 400 hotels and resorts in 66

SWOT Analysis

•Customer satisfaction
•Technological prowess
•Well established brand
•Global presence Weakness

Only serving the upscale market

•Growing terrorism
•Economic downturn
•competitors Opportunities
•Unexplored territories

Porter‟s Five Forces Model
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Key Success Factors (KSF‟S)
• Total customer satisfaction
• Industry leading technology
• Brand value
• Global presence at convenient locations

Taj Groups Hotel
• Taj Hotel established on December16, 1903
• Taj Hotels resorts & places comprise 57 hotels in 40 locations across India.
• 18 International Hotels in the Malaysia,Australia.UK,USA,Sri lanka, Africa.
• Taj is recognised as the premier Hospitality provider.
• Innovator in dining:- Taj was the first to introduce thai,Italian ,Mexican into the

Marketing strategy
 A higher emphasis was placed on the business segment as the profits are higher (this
market being less price-sensitive) as compared to the luxury segment.
 There was a proliferation of the Taj Presidency hotels not only in new cities, but also
smaller towns.
 The action plan is more opportunities, adding to and complementing the brand.

• Health & Fitness facility to its Guests.
• Latest cardico vascular machines, strength-training equipment.
• Spa also includes steam rooms &sauna,specialized treatment rooms.
• Swimming pool, Gardens, Waterfall
• The beauty saloon of the Taj hotel offer a wide range of beauty and hair treatment for
men &women.

SWOT Analysis
 Brand loyalty
 Credibility
 Huge Reputation
 Patent protection Weakness
 High cost service
 Lack of safety measure
 Not proper network in semi- urban
 Fluctuations in international tourist arrivals
 Increasing competition
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 Terrorism
 Rising income
 Globalization
 New Geographical location
Porter‟s Five Forces Analysis


 Technology related:-
Used of advance technology in hotel premises.
 Manufacturing- related: -
High utilization of fixed assets.
Quality control know-how.
Serving customer according to their specification.
 Distribution-related:-
Presence of hotel chain at various places.
A strong network.
 Marketing related: -
Breadth of product line and product selection.
Personalized customer services.
A well-known and well-respected brand name.

Oberoi hotels
The Oberoi Group, founded in 1934, operates 27 hotels and three cruisers in five
countries under the luxury „Oberoi‟ and five-star „Trident‟ brands. The Group is also
engaged in flight catering, airport restaurants, travel and tour services, car rentals, project
management and corporate air charters.

• Cost advantage
• Effective communication
• Innovation
• Loyal customers
• Market share leadership
• Strong management team

• Diseconomies to scale
• Not diversified
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• Poor supply chain
• Weak real estate

• Acquisitions
• Emerging markets and expansion abroad
• Product and services expansion
• Takeovers

• Competition
• Exchange rate fluctuations
• Price wars

Recent figure on Indian hospitality industry

The current scenario
• Existing hotel rooms in India: 202,963, source FHRAI
• Revenue of the Indian hotel industry FY 2007-08: INR 38,558 crore
• 30% of this revenue i.e. INR 11,567.4 crore went back into the market in FY 2008-09 as
operating expenses

Number of hotels and restaurants in India:
Hotel category No. of Hotels No. of Rooms
5 star deluxe/5 star 165 43, 965
4 Star 134 20, 770
3 Star 505 30,100
2 Star 495 22,950
1 Star 260 10,900
Heritage 70 4,200
Uncategorised 7,078 -
Total 8,707 1,32,885
Restaurants 12,750
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Emerging trends in Indian hospitality industry

The Indian Hospitality sector is expected to show a healthy growth in the medium term.
Strong economic growth, increased FDI, greater emphasis on tourism development,
favorable Government policies, impending 2010 Commonwealth games, 2011 Cricket
World Cup and other international events, will be the major drivers for the growth. There
exists a lot of scope for growth in tourism sector. According to the Ministry of Tourism,
the contribution of tourism to India‟s GDP is only 5.9 per cent as compared to the
worldwide average of 11 per cent.
By 2020, the Government of India expects travel and tourism to contribute Rs 8,500
billion to GDP, almost four times the value in 2005. With successive Governments
committed to reform, a strong manufacturing sector and a private sector that already has a
critical mass that is needed to drive growth, it is unlikely that the strong growth in GDP is
likely to be reversed. The rising middle class is also becoming increasingly affluent,
mobile, Internet savvy and more sophisticated in terms of what is demanded in terms of
tourism products and services, and more importantly the price they are willing to pay for

Entry of international brands through joint ventures and tie-ups is likely to enhance the
service levels and will narrow demand-supply gap of rooms. But ICRA expects the
shortage in rooms to remain for next five years leading to higher occupancy levels and
increase in Average Room Rates (ARR). Currently, according to industry estimates, there
are only 1,05,000 hotel rooms in India while in China the figure is much higher at
7,65,000 rooms. The annual growth rate of hotel rooms in India is only 6 per cent,
compared to 22 per cent in China, 18 per cent in Thailand and 15 per cent in Malaysia.

Economic growth in tier II and tier III cities have put these on the hospitality industry
map. ARR are likely to harden in these cities in next 2-3 years due to shortage of room.
Niche areas like health tourism and spiritual tourism are emerging as lucrative business
opportunity for the industry. The overall buoyancy in the market is attracting increased
interest from investors and higher inflow of capital in the industry is expected. The
growth for hotels is also likely to come from proliferation of Special Economic Zones.

Major impediments to the growth are sensitivity to business cycles and adverse political
and social events (including terrorist attacks), high rate of tax, high land price,
bureaucracy, and poor infrastructure. For instance, the effective rate of taxation on
tourism in India is 21 per cent as compared to 7 per cent in Thailand, 4 per cent in
Malaysia and 1 per cent in Hong Kong. Furthermore, owing to high land prices, there are
more five star hotels than budget hotels, making India a high cost deluxe destination.
Additionally, India still does not have facility of modernised e-visa. The existing visa
process is cumbersome and comparatively more expensive than other destinations. Yields
are expected to be low in coming years on account of continuing price-cutting and

The Government is planning to grant infrastructure status to all budget hotels and
convention centres set up in Delhi and National Capital Region till 2010 Commonwealth
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Games. This will enable them to enjoy a 10 year tax holiday as in case of other
infrastructure projects such as roads, ports and power.

Emerging hotel concept in India

Projected investments years 2009-015
• Rooms being built across hotel categories: 114,000, source HVS
• Investment in rupees: INR 40,463.10

Conclusion and Recommendations
The outlook for the hospitality market in India is optimistic and will continue to remain
so, in our opinion. The economy‟s buoyancy, initiatives to improve infrastructure, growth
in the aviation and real estate sectors and easing of restrictions on foreign investment will
fuel demand for hotels across star categories in the majority of markets. India‟s hotel
industry is increasingly being viewed as investment-worthy, both within the country and
outside, and several international chains are keen to establish or enhance their presence
here. We anticipate that, over the next three to five years, India will emerge as one of the
world‟s fastest growing tourism markets and will be hard to ignore.


 Tie – ups with institutes: It is the duty of the Industry to make necessary tie-up /
arrangement for their required human resources with one or two hospitality institutes in
the country.

 Continuous training: There is a need of continuous training to all categories of
employees in the organization. When they have a tie – up with the institutes, the institutes
will offer in – house training to different category of employees from time to time to
update their skills.

 Sponsoring: It is the duty of the industry to sponsor some amount / equipment to the
institute for their betterment. If possible the sponsor a chair for continuous funding and
research for that institute.

 Research: Every institute must spend some amount for the research which is essential
for further development and understand the present situation. The industry should involve
in the researchers by providing timely information and data which is ultimately useful for
them only.

Description: Hospitality Industry in India, more at or