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 efficiently. 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 insertions. 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 needs. 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 bank. 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. Hospitality SR. TOPICS NO 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 INDUSTRY – AN OVERVIEW 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. Capital GDP Employment Visitor Export Personal T&T Investment Govt. Expenditure Outlook 7.80% 1.40% 10.90% 6.90 % 8.30% 7.70% for 2006 Outlook for 2007- 6.60% 1.00% 7.80% 6.70% 7.80% 6.60% 2016 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 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 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. Accommodation 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 CONTRIBUTION TO INDIAN ECONOMY 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 explains. Future-wise 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 STRENGTHS 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. WEAKNESSES 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. OPPORTUNITIES 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. THREATS 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 TRENDS IN HOSPITALITY SECTOR 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 goodies. CHALLENGES FOR HOSPITALITY INDUSTRY 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 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 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. USE OF INFORMATION TECHNOLOGY IN HOSPITALITY SECTOR 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 promotions. 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 region. 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. IMPORTANCE OF HUMAN RESOURSE IN HOSPITALITY SECTOR 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. HUMAN RESOURCES IN HOSPITALITY INDUSTRY – DEMAND SIDE 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 associations Member’s / president / secretary of the travel and tourism associations 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 requirement 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 . FUTURE OF HOSPITALITY SECTOR 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. A. HOTELS 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 time. Unclassified hotels: They’re motels spread across the country. They form 19% of the industry size. Low price is their only USP. B. RESTAURANTS These typically include fast food chains, ethnic restaurants, fine dining and coffee bars. The major players include Barista, Mc Donalds, Ruby Tuesday, Bercos, etc. CONTRACT CATERING 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 rooms. 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 provided. 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 hotel? 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.