Bank Marketing

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					Bank Marketing

1. Introduction

Bank marketing in general and Customer Relationship Management (CRM) in particular are of
vital importance for Indian banks, particularly in the current context when banks are facing tough
competition from other agencies, both local and foreign, that offer value-added services.

   Competition is confined not only to resource mobilization but also to lending and other revenue
  generating areas of services offered by banks. Under the circumstances, it has become
essential to develop a close relationship with valued customers and come out with innovative
measures to satisfy their needs. Customer expectations for quality services and returns are
increasing rapidly and, therefore, quality in future will be the sole determinant of successful
banking corporations. It is, thus, high time that Indian banks organically realize the imperative of
proactive Bank Marketing and Customer Relationship Management and take systematic steps in
this direction.

2. Marketing Approach

Banking industry is essentially a service industry which provides various types of banking and
allied services to its clients. Bank customers are such persons and organizations that have
surplus or shortage of funds and those who need various types of financial and related services
provided by the banking sector. These customers belong to different strata of economy, different
geographical locations and different professions and businesses. Naturally, the need of each
individual group of customers is distinct from the needs of other groups. It is, therefore, necessary
to identify different homogenous groups and even sub-groups of customers, and then with utmost
precision determine their needs, design schemes to suit their exact needs, and deliver them most

Banks, generally, have been working out various services and products at the level of the Head
Office and these are traded through their retail outlets (branches) to different customers at the
grass-roots level. This is the so called 'Top to Bottom' approach. However, bank marketing
requires a change in this traditional outlook. It should be 'bottom to top' approach with customers
at the grass-roots level as the focal point for working out various products / schemes to suit the
needs of different homogenous groups of customers. Thus, bank marketing approach, in general,
is a group or "Collective" approach.

Customers Relationship Management, on the other hand, is an individualistic approach which
concentrates on certain select customers from the homogeneous groups, and develops
sustainable relationships with them for adding value to the bank. This may be termed as
a "Selective" approach

hus, bank marketing concept, whether "collective" approach or "selective" approach, is a
fundamental recognition of the fact that banks need customer oriented approach. In other words,
bank marketing is the design and delivery of customer needed services worked out by keeping in
view the corporate objectives of the bank and environmental constraints.

The following chart gives an overview of the Two Pronged Approach to Bank Marketing.
3. Principal Aspects of Bank Marketing

3.1 Customer Oriented Services

Services offered by the banks are to be worked out in such a manner that they fulfil the needs of
the customers.
   Traditionally, bankers have been accustomed to think in terms of what banks can offer and not
  what customers want. However, bank marketing concept requires them to change this
orientation, and start working out schemes and services by keeping changing customer needs as
the focus of their new and novel products. In order to design and deliver customer needed
services, the banks must learn to seek information about the existing and potential customers,
and their perceived and latent needs on a regular and systematic basis.

3.2 Design & Delivery of Such Services

The word design implies that good marketing services need to be properly designed and
painstakingly crafted so as to suit a particular well-defined group of clients. They do not just
emerge effortlessly. Moreover, such properly designed services must be properly traded. In fact,
poor delivery of smartly designed services is just as bad as smart delivery of poorly designed
services. The quality of delivery is to be ensured not only through focussed advertisement, but
also through proper customer services offered at the bank's retail outlets. Customer satisfaction is
a dynamic process and it is necessary to keep pace with rising expectations of the customers.
Further, the development of IT and spread of Internet are opening up newer mechanisms of
customer contact and services.

3.3 Corporate Objectives of the Bank

The corporate objectives of the bank are to be worked out within the broad framework of the
national policy. The corporate objective are of two types, Short Term and Long Term.

The Short Term Objectives could be of the type: -

a) increasing profitability of the bank next year,
b) widening customer base by offering new services,
c) increasing growth rate of credit next year, etc.

The Long Term Objectives could be: -

a) to rise to number one position in five years,
b) to become the universal bank over the period of next 3 years, etc.

  Once the corporate objectives are clearly spelt out, various schemes can be designed to fulfil
  the needs of the customers within the framework of the chosen corporate objectives. Further,
the resources made available for systematic marketing efforts are also constrained by policies,
vision and attitudes of the management.

3.4 Environmental & Other Constraints

Environmental and other constraints play an important role in bank marketing decisions.
Generally, the environmental constraints fall into four categories: Economic, Cultural,
Legal and Political.

A thorough understanding of local and national economy is essential for taking effective decisions
about what product to be offered, where it is to be offered, at what price it is to be offered, and
how it is to be offered?
Banking schemes which are suitable for a developed economy might not be suitable for a
developing economy. It is essential to have intimate knowledge of income pattern of potential
customers, population growth, nature of industrial and trading activities, extent of agricultural
development, employment levels, wage structures, and other relevant factors, in order to make
decisions about services to be offered.

The cultural environment in which the bank operates also has a bearing on bank marketing
decisions. This includes attitude of local people about saving, borrowing and spending, and also
their traditions and values. The schemes suited for urban sector would be different from those
suited for rural sector.

Legal and political environment mainly constrains the decisions about the price of product to be
offered and the place for offering the product. For example, price of deposits and various types of
advances is constrained by the interest rate policies of the regulators.

Thus, the knowledge of environmental constraints is an essential factor in the designing and
delivery of various types of customer-oriented schemes and services.

4. Marketing Strategy

The marketing strategy consists of a very clear definition of prospective customers and their
needs and the creation of marketing mix to satisfy them. A recent development in

   this regard is Customer Relationship Management (CRM). It is a business strategy to learn
  more and more about customer behaviour in order to create long term and sustainable
relationship with them. It is a comprehensive process of acquiring and retaining selective
customers to generate value for the bank and its customers.

Under CRM, acquisition of customers is done through personal visits, media advertisement or
word of mouth from existing customers. Customer retention is carried out through data
warehousing and mining tools, customer service and call services, and improved customer value
is obtained through cross-selling and upselling to the retained customers.

4.1 Identification of Target Customers & their Needs

This is an important area in formulation of a marketing strategy. Unless the bank has clear idea
about the customers it wants to serve, it is not possible to work out products to satisfy their
needs. This identification process involves: -

 Finding out profile of present customers in terms of their education, occupation, income,
geographical location, population group, age, sex, marital status, products and services they
purchase, their habits, tastes and preferences, their businesses and future prospects, etc.

 Finding out opinions of existing customers about the services provided by the bank and their
suggestions for improvement in present services and introduction of new services.

 Collecting such information from the persons who are not currently customers of the bank.

All this can be done by conducting a survey of customers and non-customers of the bank.
Moreover, this process of seeking information about the market must form an integral part of the
system and must be done on a regular basis. The survey would give valuable information about
profiles and opinions of customers and non-customers of the bank, and it can be analysed to find
out the target group of the customers and their felt and latent needs.

The concept of data warehousing and data mining used in CRM helps in seeking information
about individual customers and their needs on a regular and systematic basis. Data warehousing
builds customer wise data by mapping it from various services

  and products used by the customers such as deposits, credits, foreign exchange, e-business,
 safe custody, lockers, bill collection, etc.

Data mining carries out various types of analysis on collected data to determine customer
behaviour with respect to product, price and distribution channels, and offers a holistic view of
every customer at a given point of time. The customer information gathered by the bank in their
day-to-day banking operations is often sufficient for effective data storage. However, many times,
it needs to be supported by data collected from outside sources and agencies.

Further, the Customer Relations Management focuses on customer classification by classifying
the customers into: a high value (a more profitable) customer and a low value (a less profitable)
customer. Once bank differentiates the customers in terms of their profitability and other traits, it
becomes easy for the banks to customize their services and products to maximize overall value
of their customer portfolio.

4.2 Marketing Mix

The second element in formulation of marketing strategy is development of proper marketing mix,
so as to satisfy the needs of the target group of customers. This would involve decisions
regarding product, place, price and promotion. Decisions about product would answer questions
about the design of the services offered to suit customer needs, the desirable hours for offering
such services, the attractive names of such services and so on. Various alternative ways to
provide the basic services might have to be worked out depending on the needs of the various
target groups.

Decisions about place should answer questions about location of the prospective customers and,
therefore, location for offering such services.

Decisions about price should answer questions about right price for services offered, worked out
by taking into consideration the cost of such services, competitor's charges and other factors.

Decision about promotion answers questions about communication with the customer. After
getting information on needs and location of the prospective customer and after designing
schemes to suit their needs, it is necessary to take decisions on making

   schemes known to the prospective customers through proper communication media and
  through proper words, so as to bring out the salient features of the scheme. Actual delivery of
the schemes at the counters and at the manager's desk also plays a vital role in determining the
success of the scheme. Expectations of the customers in post-reforms period have been
changing very fast and customers have started shifting loyalty to better banks. It is, therefore, all
the more necessary to ensure that not only the felt needs but also the latent needs of the
customers are foreseen and satisfied.

A very good example of formulation of a market strategy under the "collective" approach is
development of the product, "Kisan Credit Cards". The target group identified for this were
farmers with the purpose of dispensation of agricultural and rural credit to them. Agricultural credit
cards and cash credit facilities which were niche-marketed and were exclusively preserved for the
privileged class of farmers were, thus, extended to the small and marginal farmers since 1999.

Keeping this need of target group in mind, the decision on product was made. This product
decision involved questions regarding types of needs to be covered, number of withdrawals and
repayments to be permitted, basis of determination of limits, validity period of the cards, its re-
scheduling, the name of the product, and so on. The place decision answered questions about
the location where the KCCs can be obtained. This involved all branches engaged in agricultural
lending. Price decision required answering questions on margins, collateral, interest rates to be
charged for different slabs, and so on. The promotion decisions answered questions regarding
mode of advertising the KCCs so that it becomes widely known. These methods included radio
and TV commercials and personal contacts by the employees of the bank apart from news paper

An example of marketing strategy under "selective approach" is selecting a depositor with good
track record and offering him services for "car loan", "housing loan", etc., by personal contacts or
through tele-marketing or selecting a valuable borrower, keeping track of his interests and
offering him some surprise gifts to ensure manifold increase in his satisfaction. This approach
requires thinking ahead of time to find out what customers might need in future and fulfil these

Promotional Strategy for Bank Marketing

Even if a scheme is properly developed and designed to suit customer needs, it will not pick up,
unless it is properly marketed at all levels. Some of the strategies which would help banks in their
promotional efforts are given below: -

  To promote "Personal Selling", whether performed by counter clerk, bank officer or customer
 service representatives of the bank.

 To ensure "Proper Knowledge and Awareness" of various schemes of the bank among the
employees of the bank.

 To make efforts so that the "Selling Attitude" becomes part of the "Corporate Culture" of the

 To impart "Sales and Product Training" including tele-banking and net-banking concepts to
employees of the bank. One of the ways of doing this is to organise periodical in-branch
departmental meetings of the employees addressed by Branch Managers / Departmental Heads.

 To develop incentive programmes which reward good-customer oriented selling behaviour.
The incentives need not be necessarily in terms of a cash payment but several other alternatives
can also be thought of, e.g., if a particular employee brings certain minimum amount of business
to the bank, he/she should be eligible for certain special leave or they can be made members of a
special club called "Chairman's Club" for a particular period. Several other such ways giving
cashless incentives to the employees can be worked out.

 To ensure conversion of the entire employees organization of the bank into a well-informed,
disciplined and professional force committed to the corporate values and objectives.
 To make effective use of the large network of the retail outlets of the bank visited by a large
number of customers every day. A typical bank customer visits his/her branch two or more times
a month so one can imagine how many customer visits each branch will have per year. The use
of "In-bank Advertising" would, therefore, help a lot in marketing bank services.

 In this connection the bank may have to think of retail shopkeepers' strategy of exhibiting their
products in an attractive manner. This would include: -

         (a) Careful physical layout of the branch and creation of inviting environment.
         (b) Exhibition windows as found in many departmental stores displaying various products
         of the bank in an attractive manner.
         (c) Attractive table with glass box on top exhibiting literature on various products offered
         by the bank to be kept at an appropriate location on the branch floor.
         (d) Creative ideas to exhibit "intangible products" in "tangible manner", e.g., visual
         images, small models / photographs of life style, customer could achieve with the help of
         proper financial planning done through bank schemes.
         (e) Creation and updating of literature on various schemes and services offered by the
         bank and ensuring its availability at each branch.
         (f) Specially designed in-branch video visuals exhibiting various products and services of
         the bank.

 Public sector banks with a large network of branches have an excellent opportunity to expand
customer relationships and provide them with additional complementary services. Personal
contacts in any case are much better as compared to contacts through phones or Internet.

     In Customer Relationship Management (CRM), results of data warehousing and mining must
  be made available to all the concerned employees so that they have complete knowledge about
the value / profit each individual customer adds to the bank, their future needs and ways and
means to satisfy them.

6. Conclusion

In the current context of free market competitive environment, a two pronged approach is
required in the area of bank marketing: -

First is the "collective" approach to satisfy all the customers of the bank and develop a positive
image of the bank in terms of quality service and products. This could be achieved by introducing
a system of objective assessment of the standard of customer services / customer satisfaction so
as to identify deficient areas, find out causes for deficiencies and initiate corrective measures.

Second is the "selective" approach concentrating on select valuable customers through a
Customer Relationships Management (CRM) programme to detect the felt and latent needs of
such clients, to develop ways and means to satisfy them and to ensure that such clients are
retained by the bank on sustainable basis for improved customer value.

SR.                  TOPICS
01       Hotel industry –an overview
02    Contribution to Indian economy
03    SWOT analysis
04    Trends in hospitality sector
05    Challenges for hospitality industry
06    Use of IT in hospitality industry
07    Importance of human resource in
      hospitality sector
08    Future of hospitality sector
09    The hotel industry
10    Related cases
11    Customer analysation
12    Bibliography

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, inn, 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 tourism

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. This year the number of tourists visiting India is estimated to have
touched the figure of 4.4 million. With this huge figure, India is becoming
the hottest tourist destination. 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
              7.80%   1.40%         10.90%           6.90 %         8.30%        7.70%
  for 2006
  for 2007-   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 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 Airlines.

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

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 clientele 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.

        Hotels,

            Residential

            Public houses

        Motels

        Resorts

        Sanatorium

Bars & Clubs

        Nightclubs

        Public houses

        Restaurants

Travel and Tourism

        Travel Agents
         Airline Cabin Staff

         Travel technology

Service and Support

         Accountancy

         Occupational Health and Spa


The Indian hospitality industry is going great guns presently, with high
operating margins and increase in the number of travellers visiting India -
both inbound and outbound. Thus, the only direction left for the sector
points upwards. However, what needs to be focussed 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 says
Sudeep Jain, executive director of JLLM. 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 Jain.

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 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 traveller, will be nothing less than perfection. Jain says, "They will be
more discerning and more value conscious." 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 travellers' travel persona. "The
same person will have different standards when he/she is on a business trip,
versus an escape with his partner versus a leisure trip with the family," he


Hotels as a product will witness evolution, says Jain. According to him, "As
the market becomes more segmented, especially in the mid-market and
select service categories, more product types will appear." The driving force
behind these will be global brand standards and therefore they will have
standard specifications creating a degree of uniformity and standardisation in
certain limited and mid-market hotel segments. Differentiations in product
type will evolve more at the higher end of the market with boutique hotels,
resorts, convention centres, etc. The need to differentiate design will play an
important role. Various brands and operators will play a larger role in
driving design standards, getting involved at early project planning stages.
"As hotel segments cater to specific demand segments, design typologies
will be more customised to suit traveller's lifestyle," says Jain. Equal
importance will also be given to green-building concepts in terms of
development and operations, which will go beyond cost-saving, placating
the demands from both investors and customers. "From the investment side,
there will be enough environmentally-conscious investors, who will only
invest in green buildings and will also pay a premium for such properties
relative to other properties," predicts Jain. In addition, 'green-conscious'
business and corporate groups will patronise hotels and brands that support
green concepts," he further adds.

Besides all this, the reliance on technology will move beyond Wi-Fi and
internet requirements to tools to support sales and marketing as well as yield
management. Even basic interiors will be upgraded with the use of
technology like self check-in and information kiosks. This will also revamp
sales and marketing as international brands will leverage their central
reservation systems and will initiate networks with third party reservation
agencies. In addition, systems will become more sophisticated and targeted,
customising sales and marketing efforts for each targeted traveller.

F&B, an area of immense importance within a hotel will also evolve,
especially for the select-service hotel categories. Jain gives an example.
"The standard two/three-meal restaurant could be replaced by limited service
24-hr cafés that occupy a smaller area and employ fewer staff and can
provide limited room service." Similarly he speaks of grab-n-go concepts
also that would make inroads in the select service segments. However when
discussing service, which is the main play of this industry, it has to be
understood that the growth phase is still on and the market is currently
undersupplied in terms of trained hotel staff to cater to the large supply pipe-
line. "A larger number of globally recognised training institutes are required
in the country and this is a great opportunity for educational institutions,"
believes Jain.

The driving force

Being part of a real estate money management and services company, Jain
discusses the various driving factors for growth opportunities, quoting
research done by Jones Lang LaSalle Hotels. He believes that if the country
is able to sustain its economic growth specially in the service sector, it will
have a direct influence on the hotel industry. This is directly related to the
incoming foreign investments, not just in the hotels but the economy as a
whole. Also equally important is the fact that India has now discovered the
power of marketing and with campaigns like Incredible India, there are also
the various large scale regional and global events like the upcoming
Commonwealth Games, Asian Games and the recent Indian Premiere
League that builds interest about the nation. "These are just external factors.
The policies and incentives that will be provided over the next decade could
further act as a catalyst to this industry," says Jain. Apart from these external
factors there are other factors where the industry can be given a great boost.
For instance if land prices became more realistic, the process of getting
approvals and licences to build and operate hotels are streamlined, together
with strong infrastructure development and investment and more tax/levy
incentives being provided to build hotels, it would prove very fruitful for the
industry. "Also, moving to a more 'international' FSI guideline will stimulate
development. Today, FSI's for hotels in India are only a fraction of those
that exist in other mature markets," says Jain. He believes that there would
be no stopping the growth in the industry if these measures were undertaken.
But the fact remains that half of these changes will only occur if the
government begins to take some proactive measures and provide the much
needed stimuli to further accelerate development.
                             SWOT ANALYSIS


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

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.

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

forward to join this race. This will increase the competition for the existing
Indian hotel majors

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 durations.

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
changed the 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

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 industry has failed to retain good

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 aviation.

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 industry.

5. Customer expectations: As India is emerging as a destination on
the global travel map, 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.

The Internet is changing the way that resorts are marketing their properties.
With a lean towards Internet vacation directories, the hospitality industry is
making the search for consumers easier than ever.

The popularity and growth of the Internet has changed the way many
businesses and services are marketed. With the potentially unrestricted
access to millions of people, hotel, resorts, and lodges have capitalized on
Internet advertising and promotion as a means of adding value to the
services they are able to offer; thus, enabling them to cater to a niche market.

Those businesses in the travel and tourism sector have benefited
tremendously from online advertising, as the Internet allows them to
economically market in a highly efficient manner. As this market has
stepped away from printed pamphlets and brochures as a primary means of
promoting tourist areas and hospitality properties, and focused more on
online hospitality and vacation internet directories, they have recognized
tremendous financial savings due to the market reach being much larger and
offering unlimited advertising possibilities as compared to traditional print

As the hospitality industry trend gears towards on online advertising, they
have become aware of valuable services, such as vacation directories, that
promote a particular resort region or destination. Unlike other marketing
mediums, online directories not only allow hospitality businesses to
showcase their property to potential customers, they also provide valuable
information about the region, information that is not often provided with
traditional marketing. Additionally, this industry has recognized the value
that vacation directories are able to offer to lesser-known vacation
destinations. By utilizing directory hubs, the playing field is levelled; thus,
allowing much smaller resorts to compete more readily with larger, well
known destinations.

Having a solid understanding of the value that online directories offer to
both visitors and business owners alike, the directory was created to provide
a wealth of area information that is complied into assorted categories for
easy access. Featured on the directory are a wide range of area vacation and
resort properties, as well as area attractions and activities; thus, making it
easy for visitors to find what they are looking for in a vacation, while
providing the business owners with an affordable way to market their
business. This service has shaped the way that the Almaguin Highlands
tourist industry functions and will continue to offer many benefits to this

Vacation directories encourage resort bookings by assisting both resort
businesses and vacation seekers alike. Additionally, this service provides
hospitality owners with a cost effective venue to effectively promote their
property to its best advantage, as well as offering vacationers a source of
information on a specific area and allowing for comparative shopping when
researching a vacation resort. With the start up the new Almaguin Directory,
it is expected that the tourism industry will benefit dramatically, not only
through providing affordable advertising, but also through the increased
number of tourists that will now be able to experience an area that they may
not have otherwise known about.

The national council for hotel management and catering technology
(NCHMCT) is also registered under the societies registration act,1960, and
is managed by a board of governors which includes representatives from the
central government and the private sector.                      The NCHMCT
regulates all academic activities of the institutes of hotel management. It also
oversees all admission, course deign, examinations and certificates. The
faculty development programme, research, cooperation and coordination and
affiliation with professional organizations at the national and international
level also come under NCHMCT. In addition to the central governments
support for training tourism industry personnel; there are other training
courses and programmes carried out by various agencies, including
universities, state government and private organizations.

The department of labor has set up a central apprenticeship council (under
the central apprentice act) to conduct training courses and short courses
lasting three months to one year in cooking, bakery, confectionery,
housekeeping and other services. The Central Apprenticeship Council
trained about 1,600 people every year at Delhi, Fairabad and Meerut centres
ever in 1998. state governments trained about 250 people at craft institutes.
The major hotel chains trained about 250 people, universities trained about
500 people and private institutes trained 750 people. The total number of
trained personnel from theses agencies was 3,350 people.

Comparing this total with the need for 20,000 additional personnel each
year, it is clear that further analysis is required. A survey being conducted to
identify the requirements for trained manpower at each level of employment
would focus on general management trainees, trainees in kitchen
management, housekeeping management, operational trainees, front office
and accounting management, chefs, butlers, captains, bakery, confectionery
and other specialized cooking.

Middle management positions would be filled by people holding three year
diplomas, while other jobs could be filled by craft trainees. Craft institutes
could be targeted for expansion in order to meet the needs for lower level
skills areas.

In India there is a tremendous shortage of trained manpower in the
hospitality sector. Tourism sector on an average requires manpower about
20,000 per year. Against such a requirement the actual trained output from
government institution is only 5000 per year. When we consider all other
private institutions, the total available trained manpower does not exceed
10,000 in a year. Thus there need to develop required human resource in
various segment of the tourism industry, as a consequence of the rapid
growth in tourism, changing technology and markets both national and
international level.

By the very nature of tourism as a service industry, its efficient
administration and successful operation depend largely on the quality of
manpower. In the Asian and pacific region, the shortage of skilled
manpower poses a major threat to the overall development of tourism.
International tourism is a relatively new phenomenon and therefore the lack
of managerial capability exits at all levels of the industry.

In particular, the rapid expansion of hotels of an international standard in the
region is creating a high level of demand for skilled and experienced staff.
The nature of the decisions facing hotel management is continually
expanding. For their business to remain competitive, managers must be
skillful in may diverse areas. For instance, they must a good understanding
of how current events and the economy affect the market and develop skill
in marketing their products. They must also strive to keep up with the
technological innovations in the operational side of the industry. As part of
the service industry, tourism is a labor intensive and generally requires well
developed social and language skills in a cross cultural working
environment. Theses demands have placed considerable strain on small,
independent operators, who cannot rely on the broad management expertise
available to their multinational hotel chain competitors.

The availability of skilled and trained manpower is a crucial element in the
successful long term development and sustainability of a tourist destination.
In the ultimate analysis, skilled and trained human resources will ensure the
delivery of efficient, high quality service to visitors, which is a direct and
visible element of a successful tourism product. High standards of service
are particularly important is sustaining long term growth, since success as a
tourist destination is determined not only by price competitiveness or the
range of attractions available, but also by the quality of the services
provided. Repeat visit a vital factor in maintaining growth, will be deterred
if standard of service do not meet expectations.

Recommendations to the government

The government could constitute a steering committee to review the demand
and supply of the human resources in the hospitality industry and prepare
plans for developing qualitative human resources which are required for the
present day global industry . The committee should constitute with the
members from all concerned areas like :

         State and central tourism development commissioners

         Representatives from all areas of hospitality industry

       Member’s / president / secretary of the hotel management

       Member’s / president / secretary of the travel and tourism

         Representative from hotel employees associations
         One member representative from international hotel chain

The committee should review the present situation and suggest the steps to
be taken to reduce the gap between the demand and supply of human
resources in the industry .

The committee should concentrate on the following issues mainly :

         Create a policy on industry institute interaction

       Establish an apex body t coordinate all the management institutes
      in the country

       For conducting common entrance test for all Govt. university /
      AICTE / private institutes in the country

       Curriculum development from time to time as industry

         Fees structure for different courses in different institutes

       Appoint a committee to identify the requirements of qualified
      manpower for International Hotels and also identify the ways to
      develop .

Recommendations to the hospitality industry :
      Tie – ups with institutes : It is the duty of the Industry t 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 .

Recommendations to hospitality institutes (academic) :

      Industry Institute interface / interaction : Every institute must
     make necessary tie – ups with hotel / tourism industry for providing
     employment to their students .

      Arranging guest lectures from the industry : the management
     of the institutes must arrange guest lectures / visiting faculty from the
       industry to give complete industry information to the students about
       the industry and its development .

        Visits to hotel (students) : The institutes should arrange field
       visits and training in star hotels for their final year students .

        Nominating industry people : Every institute must nominate one
       or two people from industry in their advisory body for the betterment
       of students


        Revise the curriculum: It is the duty of the institute to revise the
       curriculum as r the industry needs from time to time .

        Pay good salaries to trained staff : several educational
       institutions are offering very low salaries to their teaching staff , this
       influence the quality of teaching and there by it produces inferior
       quality managers which indirectly created unemployment though
       there is a demand in the industry .

The need to develop required human resources in various segments of the
tourism industry has become imperative as a consequence of the rapid
growth in tourism , technology and dynamic changes in the International
tourism market . The storage of quality human resources can be solved when
the government and private go together with a standard education and
training system and better working conditions .

To boost up the growth of tourism in India, the government has proposed to
invest Rs. 520 crore in 2007-2008. Tourism in expected to grow further over
the next few years due to the changes taking place on the demand and supply
sides. The factors that will account for the further growth of tourism will
include the following:

 Change in standards of living

 More disposable income
 Better education

 Long leisure time

 Aging population

Owing to growth of tourism sector, infrastructure will improve, competition
will increase, new products will come into markets and better services will
be provided. Due to the rapid growth in tourism, the hotel industry is also
booming. Many international players like Le Meridien and Accor are
heading towards Indian markets to expand their business. With government's
full support in developing infrastructure, increase in demand, open sky
policies and increased competition, the hospitality industry is getting
consolidated and has many more opportunities to grow further.

                       THE HOTEL INDUSTRY
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 and contract caterers.


The hotels in India can be broadly classified into the following segments:
1.Star rated hotels
2.Heritage hotels
3.Budget hotels
4.Unclassified hotels

Star rated hotels: They form 30% of the industry size. These are mainly
situated in the business districts of metro cities and cater to business
travelers and foreign tourists. These are considered to be very expensive.
They are built over an area of up to 18000 sq. meters

1 Five star deluxe
2 Five star
3 Four star
4 Three star
5 Two star
6 One star

 The first 2 types are usually located in business areas of metro cities and
cater to foreign tourists, business travelers, top government officials and
political brass, offering luxury at a high price.

You’ll find the next 2 types in tier II cities and tourist destinations, preferred
by mid-level executives and leisure tourists.

The last 2 types are found in smaller cities and around tourist spots,
preferred by domestic tourists.

Reputed Indian veterans include ITC, Indian Hotels Company (Taj group),
East India Hotels (Oberoi group), Hotel Leela Venture and ITDC
hotels. Foreign hospitality players include Marriott, Radisson, Sheraton,
Meridien, Hyatt, Four Seasons Regent, Carlson group, Jumeirah and
Mandarin Oriental and Dubai’s Istithmar luxury hotels,

Heritage Hotels. These are characterized by lesser capital expenditure
and affordability and include hotels running in palaces, castles, forts, hunting
lodges etc. The heritage hotels are further classified as:
2.1 Heritage classic
2.2 Heritage Grand
2.3 Heritage

Heritage Classic: These include hotels built between 1920 and 1935.
Heritage Grand: These include hotels built prior to 1920.
Heritage: These include hotels built between 1935 and 1950.

Budget hotels: They’re usually preferred by domestic travelers seeking
economical accommodation. These are reasonably priced, offer limited
luxury, seasonal discounts and decent services. Some new global entrants
include UK’s Dawnay Day and Whitbread Premier Travel Inn, Shangri-la,
Aman resorts, Golden Tulip budget hotels, Fairfield inn, Country inns and
suites, Courtyard by Marriott, Hometel, Ibis and Kamfotel among
others. Budget hotels are 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

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.

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.
                            RELATED CASES

        After 17 yrs, McDonald's expects to earn profits in India

NEW DELHI: Riding on the back of a major expansion spree, global fast
food chain McDonald's on Monday said it expects the Indian operations to
be profitable from the next fiscal, 17 years after it set up shop in the country.

The company, which achieved break-even in 2007, is expecting returns on
its investments from the current year.

"We achieved cash break-even last year and we hope our real profits will
start here-on," McDonald's India Franchisee (Northern and Eastern)
Managing Director Vikram Bakshi said.

The company, which currently runs 126 restaurants in the country, has so far
committed an investment of Rs 1,200 crore in India for setting up cold
chains and other infrastructure.

In its latest round of expansion, McDonald's is investing Rs 400 crore over
the next three years.

"We will set up 40 outlets by the end of the current year at an investment of
about Rs 100 crore," Bakshi said.
It is also looking to expand its newly set up kiosks format by opening 40
more in the northern and eastern regions.

The company aims at doubling its turnover every three years, Bakshi said
without disclosing details.

"Our aim is to now push for numbers wherever it is possible. We are talking
of doubling our turnover every three years for at least six years.
Automatically, the number of outlets should also double," Bakshi said.

Amid controversies and opposition to MNC's, Mcdonald's started ground
work for its Indian innings in 1991 and opened its first outlet five years later.

           Indian restaurant chain Tamarai blooms in Britain

LONDON: Indian Tamarai has blossomed in Britain -- the popular
restaurant chain added another feather to its reputation for culinary
excellence, this time by winning an award for the Best Night Bar in London.

Tamarai (meaning lotus in Tamil), India's Old World Hospitality group's
third London restaurant after Chor Bizarre in Mayfair and Sitaaray, has got
the accolade at the Theme Bar Awards 2008.

The award by Britain's widely read magazine, Theme, celebrates the best in
the industry bringing together excellence in modern drinks, design and
hospitality in different categories.

"lt's an exceptional honour for a bar operated by an Indian company in the
most competitive food and drinks city in the world," said a spokesperson for
the group which operates the Habitat World at India Habitat Centre as well
as 12 other restaurants in Delhi.

The restaurant was last year awarded 'The Best Wine List in London' by 'The
Independent' newspaper and 'The Best Pan-Fusion Food in London' by the
'Evening Standard'.
             Hidesign and Khoday check in hospitality sector

BANGALORE: International hospitality firms and domestic hotel operators
are not the only ones tapping into India’s growing hospitality industry. The
sector is attracting players from different backgrounds. In many cases, these
players have no prior hospitality experience.

Among the list of firms that have ventured into this segment are Puducherry-
based leather accessories maker Hidesign and Bangalore-headquartered
liquor firms Khoday Group of Industries and John Distilleries. According to
experts, many people who own land are cashing in on the demand for hotel

In India, a hotel and resorts construction boom is underway across metros
and secondary cities. According to consulting major Deloitte, international
tourism expenditure in India in 2006 was about $8.7 billion and is expected
to rise to over $10 billion in 2008 with the lion’s share of this being
generated from the hotel sector.

There were an estimated 105,000 hotel rooms in India as of July, 2007, a
number comparable to that of Manhattan, according to the Deloitte survey.
This number falls short of the demand and is, therefore, luring entrepreneurs
to invest in this sector. “The number of five-star rooms in the country is less
than what is available in Manhattan. Most people are aware of the need for
quality rooms. Therefore, anybody with access to a piece of land is
venturing to develop hotels,” said, Rajeev Menon, area vice-president,
MIPM, Marriott.

The Khoday Group, for instance, is investing in a 250-room hotel in
Bangalore and is also scouting for land to set up resorts. The spirits major
may tie up with a foreign player for its resorts foray. Meanwhile, Hidesign,
which already has two boutique hotels in Puducherry, is now looking at
building beach villas and resorts. The company is planning a third boutique
hotel in South India.

“We decided to get into the hospitality business because we believe we
could offer something different to the customer, a combination of fashion
and design. We are also getting international recognition for our niche
offering,” says Dilip Kapur, president, Hidesign. Their third property,
located between Chennai and Puducherry, is expected to open by mid-2009.
The 70-room hotel will see an investment of Rs 40 crore.

                   CUSTOMER ANALYSATION
QI] Maximum amount you will prefer to pay in a hotel for a one
night stay?

The answer to this one wasn’t uniform. As it changed depending from
person to person. Again it depends on a person’s spending behavior and his
priorities. If he prefers comfort more than price he tends to spend more for a
one night stay but the situation gets reversed if he considers price as his
priority. The purpose for which he rents the hotel room also plays an
important role in determining his budget. But on an average this is what we
could infer:

Minimum amount one can spend: 1500 – 4000

QII] What basic services according to you should be available in
a hotel?

On asking about basic services all talked about good food ,
cleanliness , prompt service and co – operative staff. But something
very important was brought to our notice and that was satisfaction of
human needs. Human needs refers to the need of an individual when
he is frustrated, disappointed, irritated and during this time he expects
that the hotel staff provides him with the service which is above their
standardized service pattern. Here the fact that how a service is
provided comes into view rather than what service should be

QIII] What is the basic aspect considered by you while selecting
a hotel?
Basic aspect considered while selecting a hotel by a particular
individual were more or less similar to the ones mentioned above i.e
good food , the environment , the way of providing service , behavior
of the staff , the level of comfort and price.

But the aspect that topped our list was the price factor. Majority
people like to go in for a hotel that fits their budget irrespective of the
purpose for which they hire the hotel room. Next thing that is given
due consideration was the level of comfort provided by a hotel. We
can very well see that both the factors do not go hand in hand. If one
pays less one cannot expect high level of comfort and vice versa.

OIV] You would like to have your stay at a club, resort or a

That depends on the purpose for which one rents a room along with
his budget. On a vacation with friends and family and a medium
budget resort is preferable. Premium class might go in for a club or
five or seven star hotels.