innovations in the indian hospitality industry - knowledge must

7/28/2019 Innovations in the Indian Hospitality Industry - Knowledge Must

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Innovations in the Indian Hospitality Industry -1

Innovations in the Indian Hospitality Industry

by Daniel Ratheiser, Managing Director Knowledge Must

Table of Contents

1. INTRODUCTION ....................................................................................................................................................... 2

1.1 Hospitality in the Indian Economy ...................................................... .......................................................... ................... 31.2 Historical Overview ........................................................ ........................................................... ..................................... 41.3 Innovation ................................................... ........................................................... ....................................................... 6

2. INNOVATIONS ACCORDING TO PARTICULAR HOSPITALITY CATEGORIES ......................................................... 82.1 Based on Ownership ...................................................... .......................................................... ..................................... 8

2.1.1 International Brands ......................................................... .......................................................... ............................ 92.1.2 Rapidly Emerging Local Brands ................................................................................. ........................................... 112.1.3 New Entrants from Outside of the Industry ............................................................................................ ................ 12

2.2 Based on Location ......................................................... .......................................................... ................................... 122.2.1 Rural Settings ........................................................ .......................................................... ................................... 122.2.2 Special Locations ................................................... .......................................................... ................................... 13

2.3 Based on Service Levels ................................................. .......................................................... ................................... 132.3.1 Bed and Breakfast .......................................................................................... .................................................... 142.3.2 Quality Budget Hotels ...................................................... .......................................................... .......................... 142.3.3 Super Luxury Establishments ........................................................................... .................................................... 152.3.4 Heritage ....................................................... .......................................................... ............................................ 16

2.4 Based on Theme ........................................................................................................................................................ 172.4.1 Ethical Tourism .............................................................................................. ..................................................... 182.4.2 Authenticity ................................................... .......................................................... ............................................ 182.4.3 Eco-Tourism ................................................. .......................................................... ............................................ 192.4.4 Agricultural Tourism ......................................................... .......................................................... .......................... 212.4.5 Unconventional Accommodations.......................................................................................................................... 212.4.6 Medical Tourism ..................................................... .......................................................... ................................... 22

3. INNOVATIONS ACCORDING TO FUNCTIONAL CATEGORIES .............................................................................. 22

3.1 Organisational Level ...................................................... ........................................................... ................................... 223.2 Hotel Construction ........................................................ ........................................................... ................................... 233.3 Mixed Usage .............................................................................................................................................................. 233.4 Technology ................................................. ........................................................... ..................................................... 233.5 Unique Sales Points ....................................................... .......................................................... ................................... 243.6 Human Resources .......................................................................................................... ............................................ 25

3.7 Corporate Social Responsibility ................................................. .......................................................... .......................... 263.8 Diversification ...................................................... ........................................................... ............................................ 263.9 Food and Beverages .............................................................................................. ..................................................... 273.10 Foreign versus Domestic Tourists .................................................... .......................................................... ................. 283.11 Innovation Diffusion ..................................................... ........................................................... ................................... 29

4. READING THE TEA LEAVES ................................................................................................................................... 30

5. BIBLIOGRAPHY ...................................................................................................................................................... 31

This research was conducted for publication in a forthcoming book on the Indian tourism industry to be published byOldenbourg Wissenschaftsverlag in Germany. Please get in touch with our Travel Must Team if you want to benefit from ourunique expertise in the Indian travel industry and beyond.


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1. Introduction

Innovations in the Indian hospitality sector can be analysed on many different levels. This analysis makesthe attempt to give a broad overview on innovations taking place in the industry according to variouscategories of hotels as well as relevant functions, concluding with a brief outlook on future directionsthese innovations might take.

India holds a special place in the international world of hospitality. Culturally the country might very well bethe most diverse place in the world. It is a vivid kaleidoscope of landscapes, magnificent historical sitesand royal cities, misty mountain retreats, colourful people, rich cultures, and festivities. Luxurious anddestitute, hot and cold, chaotic and tranquil, ancient and modern - India's extremes rarely fail to leave alasting impression.

The hospitality industry is defined as "hosts offering services to guests", which includes reception,entertainment, and other services for travellers and tourists. Hospitality is a long running tradition in India.From the majestic Himalayas and the stark deserts of Rajasthan, over beautiful beaches and lush tropicalforests, to idyllic villages and bustling cities, India offers unique opportunities for every individualpreference. However, until fairly recently this was hardly evident when looking at India's hospitalityindustry.

By now, accommodation options throughout India have become extremely diverse, from cosy homestaysand tribal huts to stunning heritage mansions and maharaja palaces. From Kashmir to Kanyakumari, fromGujarat to Assam, there are different cultures, languages, life styles, and cuisines. This variety is

increasingly reflected by the many forms of accommodation available in India, ranging from the simplicityof local guest houses and government bungalows to the opulent luxury of royal palaces and five stardeluxe hotel suites.


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2010 (about 10% of total employment) and is expected to rise to 58,141,000 jobs (10.4% of totalemployment) by 2020 (World Travel and Tourism Council, 2009).

Within the travel and tourism sector, the Indian hospitality industry is one of the fastest growing and mostimportant segments, revenue-wise as well as employment-wise. According to an estimate of theEconomic Survey of India and Technopak (2008), the Indian hotel industry accounts for USD 17 billion,70% (USD 11.85 billion) of which take their origin from the unorganised sector and the remaining 30%(USD 5.08 billion) from the organised sector.

In 2000, India hosted only 2.6 million international visitors. By 2009, the figure had already increased to5.13 million arrivals. Compared to other tourism markets in nearby Asian countries, this is still a limitedsuccess, but one with the potential to develop into a tremendous success story.

1.2 Historical Overview

India has a great tradition of accommodating people of other origins and tolerating their different culture,lifestyle, habits, and religion. In Indian culture stories abound of hosts who lovingly cook up the best foodsavailable to them for their guests beyond what they can afford, rather going themselves hungry than notbeing able to satisfy their guests. This element of Indian culture is based on the philosophy of "AtithiDevo Bhava", meaning "the guest is God" in Sanskrit language. From this stems the Indian generositytowards guests whether at home or elsewhere.


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Welcome Pujaby mckaysavage (http://www.flickr.com/photos/mckaysavage/2458852328/)

The growth story of the Indian hospitality industry started in the 1980s, when several prestigious hotelswere developed to cater to the Asiad Games in New Delhi. Until about ten years ago, however, thehospitality industry in India continued to be characterised by its extremely limited choice of options. Therewas a very limited availability and lesser quality of hotels in cities beyond the usual suspects: Delhi,

Mumbai, Kolkata, Chennai, and Bangalore. Other aspiring hospitality markets have been graduallycatching up, such as Ahmedabad, Jaipur, Goa, Hyderabad, and Pune.

Even during the 1990s India was characterised by a dichotomy of luxury hotels on one end andnondescript unclassified hotels on the other. The massive unclassified market was mainly composed ofno-frills guest houses and lodges in the budget segment, many catering especially to backpackers, suchas in Delhi's Paharganj; nondescript privately-owned standard hotels; and government-ownedaccommodation such as by the Power Department or the Wildlife Department as well as the varioushotels run by the Tourism Departments.


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Only during the last decade did the mid-segment gradually develop beyond non-chain properties, withentrants into the field such as Hilton Garden Inns and Taj Group's Ginger Hotels. Other prospective

entrants consider the mid-market segment most promising, too. Since 2000, India has also experiencedthe rapid emergence of unconventional and innovative hospitality service providers, be it far-off eco-lodges in the jungles or NGOs offering accommodation in tribal villages.

After many years of obscurity, the Indian hospitality industry is suddenly now in the limelight of the globalhospitality industry. The trade press is full of features on the potential of the Indian hospitality sector andpresents ever new stories of successful innovations in the industry.

1.3 Innovation

Innovation is a change in the thought process for doing something, whether it is a revolutionary change oronly an incremental one. By definition, innovation implies positive change, something becoming better.Innovation is a key driver in economic growth via increased productivity as well as new products andservices (McKeown, 2008).

Whether innovation is mainly supply-pushed (such as based on new technological possibilities) ordemand-led (such as based on social needs and market requirements) has been a hotly debated topic. Atechnology push implies that an innovation becomes technologically feasible and is then pushed onto themarket. A market pull describes a demand in the market that inspires innovation.

Push Factors Pull Factors

Revolutions in communication and transportation More foreign guests visiting

Technological progress More Indians travelling abroad

Foreign investment in the Indian hospitalityindustry

Increased client demands

Trends spreading from abroad Increased expectations

Reverse brain drain Mass media impact on demands and expectationFigure 1: Push and Pull Factors for Innovation in the Indian Hospitality Industry

This highly simplistic dualistic model does barely do justice to the complex factors that underlie innovationprocesses. Rather than showing innovation as the result of industrial supply-side innovations coupled withthe articulation of user demands, innovation has to been seen in the context of intricate networks ofactors (including consultants, standards and regulatory bodies, media, etc.) and circumstances.

Often, challenging environments are most conducive to spur innovation. The manifold challenges facedby the Indian hospitality sector, such as the pressing shortage of skilled employees, the difficulty of


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retaining best staff, and the shortage of quality rooms, stimulate the Indian hospitality industry to come upwith innovative answers to these pressing questions.

Cultural boundaries used to render the adoption of innovations in the Indian marketplace rather difficult inthe past. With an increased enmeshment of India in global networks and currents of exchange,innovations flow freer across India's borders. Once innovations reach India, the Indian "bazaar" (market) isknown to rapidly diffuse innovations.

Much hope for the Indian economy lies in harnessing innovations in the hospitality industry. Not only hasthe Indian hospitality industry an enormous growth potential, the industry itself reinforces the diffusion ofinnovations by attracting foreigners, facilitating the movement of people, and so on.

Innovators tend to be risk takers, younger in age, of a higher social class, have great financial lucidity, are

very social, and have closest contact to scientific sources and interaction with other innovators. Earlyadopters follow their risk-taking behaviour and play a central role in diffusing innovations. People chooseto interact with others who are similar to them. Hence, diffusion is facilitated among people sharing thesame culture.

The hospitality business requires entrepreneurs to continuously come up with new services, new ways topresent existing services, new ways of enhancing the experiences of their increasingly demandingclientele, and new processes to economise operations. Without innovation, hospitality service providersface the threat of becoming obsolete- ultimately driving them out of business or forcing them to handthe business over to more efficient and innovative entrepreneurs (Gopal and Shetty, 2008).

Innovations in the Indian hospitality industry can be analysed on various levels. One level of analysis isbased on the category of the hospitality service providers. Another level is based on functions in thehospitality industry, such as management, human resources, technology, and so on. Each of the levelsthrows light on particular aspects of innovation. When combined, analysing the various levels of thehospitality industry creates a broad overview of innovations taking place in the sector as a whole, whichlays an excellent foundation for looking into the future of hospitality in India.


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2. Innovations According to Particular Hospitality Categories

Ownership Location Service Level Theme

Leading domestic chains Urban No frills Ethical

International brands Rural Bed and Breakfast Agricultural tourism

Rapidly emerging local brands Special locations Quality Budget hotels Authenticity

New entrants from outside ofthe industry

Luxury segment Eco-Tourism

Remainder of nondescript,

largely standalone properties

Super Luxury segment Unconventional

accommodations

Heritage Medical tourism

Figure 2: Categorisation of Indian Hotels

Hotel classifications are based on many criteria and classifying hotels into different types is not an easytask. Many hotels do not fit into a single well defined category. Moreover, classifications can be based onmany distinctive characteristics, such as ownership, location, service level, theme, and so on. In thefollowing, innovations across these levels of analysis and in the relevant categories are presented.

2.1 Based on Ownership

Major players in the hospitality industry can be categorised into leading domestic hotel chains,international brands, emerging Indian brands, market entrants from outside of the industry, and theremainder of nondescript, largely standalone properties.


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The Taj Mahal Palace & Tower, Mumbaiby Knowledge Must

The leading Indian hotel chains, such as The Taj Group of Hotels, Oberoi Hotels & Resorts, and ITCWelcomgroup, and the government-run ITDC dominated the Indian hotel market for decades, when onlya handful of international brands had a token presence in India.

2.1.1 International Brands

Of the major international hotel chains Sheraton, Hilton, Hyatt, Radisson, Marriott, and Le Meridien arealready firmly established in the Indian markets and steadily expanding. With China and India as leadingengines of growth in the global hospitality industry, few of the globally operating companies want to beleft out. Considering the immense scope of opportunity in India, more and more international brandsfollow their footsteps. By now, about 50 international hotel chains have entered the Indian marketplace.


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International hotel chains are now in India trying to leverage their market share in about 15 main hotelmarkets in the country, all of which offer a variety of branded hospitality services across different market

positionings. The development of independent micro-markets in the large metropolises such as Delhi andMumbai allows major brands to maintain multiple hotels with the same brand affiliation, without fears ofthreatening their own market.

Foreign Direct Investment (FDI) in the Indian hospitality industry has a huge potential to generateemployment, enhance the competitiveness of the domestic economy through skills and technologytransfer, strengthening infrastructure, and contributing to the long-term economic development of thecountry. The Indian government permits 100% FDI in the hospitality industry. Leading global hotel chainsare continuously making large-scale investments in the hotel industry in India, while laggards are currentlyweighing their options on how to best leverage the Indian market.

With more international players and their sophisticated services, competition in the market is growingincreasingly fierce thus leading to a higher degree of professionalism in the industry, and with the spreadof established hospitality brands, guests are increasing their demands and expectations on the wholeindustry, thus creating an environment conducive to innovation. At the same time, FDI is leading to thetransfer of new technologies, innovative management techniques, and industry expertise.


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2.1.2 Rapidly Emerging Local Brands

Neemrana Fort-Palaceby dixie law (http://www.flickr.com/photos/dixielaw/3352310731/)

In recent years also local hospitality brands have been mushrooming in India. Starting with a single loungeor hotel, some ventures expand to become India-wide or even international hospitality brands. Examplesare the Neemrana group of hotels and Delhi-based Shalom. The latter is a Mediterranean inspiredhospitality provider that started out as a standalone lounge in Delhi and quickly developed into aprofessionally managed company that offers lounges, restaurants, bars, annually released music CDs,music concerts, and a chic hotel in Goa called Soul Vacation. Shalom has become a famous successstory in the Indian hospitality industry, not least due to its innovative ways in which it is positioning andexpanding its brand.


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2.1.3 New Entrants from Outside of the Industry

New entrants to the Indian hospitality industry also come from other segments of the economy. Whilereal estate companies invest in the sector to leverage their properties, financial service providers such asICICI Bank and CitiBank team up with major Indian tourism players like Thomas Cook and Cox & Kings tooffer personal travel loans and "holiday now, pay later" schemes.

Strong companies from other industrial backgrounds also diversify into the hospitality business in order totake advantage of their brand equity. For example, Reliance Industries and the Mahindra Groupsuccessfully entered the hospitality industry.

Others yet engage the hospitality industry to increase their bargaining power, such as eminent ITcompanies, who count among the biggest clients of hospitality services in India. This heavy dependencecoupled with the substantial increase in hotel room rates prompts them to buy stakes in hospitalityventures and even maintain their own accommodation facilities.

2.2 Based on Location

Locations of hospitality service providers can be divided into three main categories: urban settings, ruralsettings, and special locations. Among these three categories, metropolitan cities dominate the industry,accounting for 75% to 80% of total revenues, with Delhi and Mumbai leading the field.

2.2.1 Rural Settings

Increasingly, hospitality services are offered in India's rural areas. Private persons convert their countryhomes, villagers offer home stays, and agriculturalists as well as pastoralists open their farms to visitors.Notably, it is not only foreign tourists who demand these services. More and more Indian families as wellas corporate clients are tempted to the countryside with the advent of quality amenities and improvedfacilities.

Many new and innovative leisure destinations are developed in the remote corners of India. Beaches,mountains, agricultural estates, wildlife sanctuaries, religious pilgrimage places, among others, haveplayed a key role in putting rural India on the hospitality map. This trend has the potential to change theface of rural India enduringly.


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Excluding the massive unorganised sector of the Indian hospitality industry (that mainly caters to economytravellers), as of December 2005 there were the following number of hotels and rooms across the

standard categories of hotels.

Category Number of Hotels Number of Rooms

5-Star Deluxe 82 18764

5-Star 92 11332

4-Star 132 9401

3-Star 704 31039

2-Star 587 190311-Star 212 695

Heritage 83 2216

To Be Classified 50 5127

Total 1934 103973

Figure 3: Number of Hotels and Rooms across Standard Categories of HotelsSource: Government of India - Ministry of Tourism, 2006.

Strikingly, the foremost contribution of the organised sector of the hotel industry comes from five starhotels, which alone account for 58% of the total organised market.

2.3.1 Bed and Breakfast

The Bed and Breakfast concept has arrived in India. The government is now classifying home ownersproviding hospitality facilities as "Incredible India Bed and Breakfast Establishments". Remarkably, alsobig hospitality service providers are attracted to this nascent market. Mahindra Group's Mahindra

Homestays already have hundreds of rooms on a Bed and Breakfast basis in Indian homes countrywidethat can be booked online. Average room rates hover around INR 2,500 for facilities at par with threestar category hotels.

2.3.2 Quality Budget Hotels

Leading hotel groups offering quality accommodation for economical prices are Ginger Hotels, LemonTree, Sarovar Hotels, Fortune Hotels, Ibis, and Choice Hotels. High demand but a still rather limitedsupply in this mid-market segment proves attractive to potential investors and many of the upcoming


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hotel development projects currently taking place, position themselves in this segment (Kumar, Singh,Saigal, and Cebula, 2009).

The Indian Hotels Company Limited (IHCL), a unit of Tata Group known mainly for its Taj luxury hotels,such as the famed Taj Mahal Hotel in Mumbai's Colaba district, is Indias largest hotel chain with morethan 70 hotels in India and abroad as well as more than 100 years of presence in Indias hospitalitysector. One innovative experiment by IHCL is Ginger Hotels, a revolutionary concept in hospitality for thevalue segment focusing on key facilities that meet the key needs of the economically-minded traveller.

Ginger outsources a wide range of services from cleaning and laundry to computer support and cafeteriaservice. To free up space in the very compact rooms, TVs are mounted on the wall. To save on cleaningstaff, the furniture, flooring, and bathroom fixtures are made of easy-to-clean materials. To cut the needfor security, guests stash valuables in lockers. To deal with the increasingly expensive real estate rates in

India, the company has come up with an innovative strategy of offering landowners a share of the hotels'profits. With their concept they are able to offer rooms between INR 1,000 and 1,500, while makinghandsome profits selling highly sought after quality rooms at reasonable rates.

Most bookings are made online and the brand spreads mostly through media reports and word of mouthdue to the very reasonable rates, which allows the Taj Group to save on advertising expenses as well.The concept proves so successful that the company is planning to open hundreds of Ginger Hotels inIndia and around the world. Taj's brand sharpening exercise is bearing fruits. Credit Suisse recognisedIHCL as one of the 27 Great Brands of Tomorrow' (Tandon, 2010).

2.3.3 Super Luxury Establishments

India also has entered the field of Super Luxury Hotels; some are located in the big cities, while othersare located close to nature. Mumbai's Sahara Star hotel, for instance, is one of famous the Super Luxurycity hotels in India. It features the 3-floor Sahara Suite, which might well be India's most expensive suiteat INR 400,000 per night (about USD 8,600). The price is justified by a private elevator, a personalisedspa station with floatation tank, a glass-roofed lounged with artificial rainfall, etc. In the same line, SuperLuxury resorts such as the Aman Bagh in Alwar have entered they fray, where the cheapest rooms arepriced at about USD 600 per night.


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2.3.4 Heritage

Udaipur City Palaceby tvangoethem (http://www.flickr.com/photos/tvangoethem/418737260/)

Often by necessity as much as opportunity in a time of declining importance Indian royalty open theirfamily palaces to guests. Authenticity, a concept that already is in danger of becoming a clich in thehospitality world, is quite an understatement for what is on offer. Guests in India easily know thedifference between brand-new hotels built to look like 200-year-old palaces and authentic 200-year-oldpalaces turned into hotels with modern amenities and history that speaks to guests from every corner.Often the royal family will be present at dinner and be accessible to explain their heritage to hotel guests.

More and more rustic colonial properties, beautiful havelis (stately mansions), and imposing palaces arerenovated to become heritage hotels. Properties that are also converted are ruined castles, planters'clubs, and hunting lodges, among others. All, however, have one feature in common: a minimum of 50%of the floor area was built before 1950 and no substantial changes to the faade have been made.


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2.4 Based on Theme

Beach resorts, diving resorts, river resorts, mountain resorts, ski resorts, family resorts, golf resorts, andso on, the list of hotel themes in the hospitality industry in India is ever more diversifying. Themes such ascultural tourism, religious tourism, eco-tourism, medical tourism, adventure tourism, beach holidays, andwellness vacations offer prospective customers much more focused value propositions. Whether guestsvisit diving resorts from Goa in the west to the Andaman Islands in the far east, riverside camps cateringespecially to canoeing and kayaking, mountain and jungle lodges focusing on trekking enthusiasts, skiresorts in the Himalayas for fans of snow sports, or royal tents during camel, horse, and elephant safaris,all these options tremendously widen the experiences the Indian hospitality industry is able to offer.

Chrome Hotel, Kolkataby ArijeetB@sscindia (http://www.flickr.com/photos/85296574@N00/3615852488/)

Other emerging forms of accommodation in India take a rather untypical theme. For example, recentlythe first futuristic-themed hotels emerged in India. A prominent example here is the brand new ChromeHotel in Kolkata, with its experimental architecture and high-tech facilities.


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2.4.1 Ethical Tourism

Travel ethics are increasingly in focus of travellers worldwide. Countries like India with its diversity andimmense contrast between rich and poor are in the limelight. A growing number of travellers would like toactively contribute to the well-being of the communities that they are visiting. By fostering localcommunity pride in, and protection of, the cultural and natural heritage of their hosts, tourism can indeedmake a difference.

The hospitality industry is utilising this demand and advertise that they are aware of these issues and aimto sustain the character and integrity of their locale. Others even go a step further and committhemselves to provide financial benefits to local communities. In their choice of services they try to ensurethat mainly the local economy is supported, for example, by using only local products, materials, andlabour.

2.4.2 Authenticity

Based on the believe that it depends heavily on the type of accommodation how guests will experiencelocal culture, a rising amount of hospitality service providers focus on cultural content, for example,accommodations that mirror the authentic architecture, flair, and lifestyle of the respective destinations.

New hospitality ventures such as New Delhi-based Travel Must go a step further and take tourists to

fascinating places that are not always easy to navigate on their own, trying to strike a balance betweencultural immersion, vivid history, sheer natural beauty, and enjoyment. They offer exposure to local cultureby giving deep insights into the local culture such as local trades, customs, art, architecture, religion, food,and music. These kind of authentic cultural experiences are tailored according to the demands and needsof the clients, and can be as diverse as a tribal village stay in the jungle-clad mountains of Alwar or anurban homestay run by a university professor and her scientist husband.


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Welcome Rangoliby mckaysavage (http://www.flickr.com/photos/mckaysavage/2225262197/)

Travel Must as trusted intermediary between local communities and the interested public ensures that ameaningful exchange results between guests and hosts. Guests are welcomed into private homes, attendfascinating ceremonies, and gain invaluable insights into ancient, complex cultures often unknown andinaccessible to outsiders. Intricate local networks coupled with deep cultural expertise guarantee that

guests learn about and participate in the rich traditions that make India such a vibrant destination.

2.4.3 Eco-Tourism

Eco-Tourism can be defined as responsible travel to natural areas that conserves the environment andimproves the well-being of native cultures, thereby contributing to the preservation of the diversity of ourworld's natural and cultural environments. According to the World Tourism Organization, Eco-Tourism isthe fastest growing market in the entire tourism industry. From the 1990s, the global Eco-Tourism sectorhas experienced an annual growth rate of between 20% and 34%, thereby growing three times as fast

as the tourism industry as a whole. Until 2014, the Eco-Tourism industry is expected to grow up to aquarter of the world's total travel market (Pandey, 2009).

India had initially been a laggard regarding ecological hospitality models rather following the old troddenpath of mass tourism. However, the ugly face of mass tourism in India was soon visible and ecologyemerged as a popular concept in the hospitality industry, striking a balance between business interestsand sustainability. Given the massive potential Indian hoteliers have jumped on the bandwagon and aregradually harnessing the potential of some of the most outstanding ecosystems in the world, such as inthe Himalayas and the Western Ghats.


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Kerala Houseboatby Christian Haugen (http://www.flickr.com/photos/christianhaugen/3286687515/)

An excellent example here is Kerala, a state on the tropical Malabar Coast of south-western India that isnicknamed as "God's own country". It is famous especially for its houseboats travelling the extensivebackwaters, Ayurveda retreats, jungle lodges in the Western Ghats, pristine beach resorts, eco-lodges,and other Eco-Tourism initiatives. Its unique culture and traditions, coupled with its varied geography, hasmade it one of the success stories in India.

An increasing number of tour operators in India make it a point to minimise the negative environmental

impacts caused by their customers and make positive contributions to the conservation of biodiversity. Sowhen their customers chance upon a Red Panda in the Himalayas or witness the hatching of sea turtleson the Bay of Bengal, they have improved the chances of preserving their habitat by providing a realisticeconomic alternative to exploiting local natural resources.

The environment is becoming more and more of a priority in the Indian hospitality industry. Statutorycompliances are already in place regarding sewage, energy, products, and water. Upcoming propertiesoften have programmes to save water and energy and reduce solid waste in place. Besides the obviouscost advantages of energy conservation and product recycling, the potential to market Ecotels is massive.


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To be certified as an Ecotel, a hotel must adhere to at least two of the following five factors: Energy efficiency

Water conservation Employee education and community involvement Solid waste management Environmental commitment

Rainwater harvesting, tree plantation drives, and converting wet waste to energy through biogas plantsare some of the many strategies Indian hoteliers go nowadays. Ecologically-sensitive hotels can also befound in the high-end luxury market, such as the five star rated Orchid Hotel in Mumbai, which is Asia'sfirst certified eco-friendly five star hotel and the world's only Ecotel to be certified as ISO 14001(Environmental Management Standard).

2.4.4 Agricultural Tourism

Agricultural tourism is widely acknowledged as an instrument for economic development and employmentgeneration particularly in the remote and backward areas. It creates opportunities to generate additionalrevenue, makes for economic diversity, and improves the understanding of farmers in society. The Indiangovernment collaborates with the United Nations Development Program (UNDP) to promote rural tourismand also sanctioned more than 100 rural tourism infrastructure projects to spread tourism and socioeconomic benefits to identified rural sites.

Guests in India can stay on farms ranging from stud farms over dairy farms up to full-fledged agriculturalfarms. They are perfect for urbanites looking to unwind and get back to nature, but with a bit of comfortand the chance to freely choose the activities in what the guests want to engage in, whether they want tomilk the cows, wash the buffalos, learn to grind wheat, pick vegetables, or go fishing. Besides, guestsexperience the natural, cultural, and heritage aspects of the region, such as the local geography, cuisine,and handicrafts.

2.4.5 Unconventional Accommodations

Today's travellers are enthusiastic about travelling in different ways to widen their experiences. This isalso reflected in their choice of unconventional accommodation options. In India religious centres,ashrams, and monasteries are among the popular alternatives to classic choices of accommodation.Given the cleanliness and hygiene of these accommodations, besides their unique cultural content, thissegment offers huge potential. Organisations such as the Krishnamurti Foundation, Bharat SevashramSangha, Ramakrishna Mission, ISKCON, and Aurobindo Ashram are among the religious institutions thatoffer accommodation options across India.


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2.4.6 Medical Tourism

With the introduction of a new category of visa, the Medical Visa, the Indian government seeks topromote medical tourism in India. Afghans, Arabs, Southeast Asians, and increasingly Westerners arrivein droves in India for access to cheap quality medical services. Hospitals like the Apollo Group maintaininformation centres abroad and team up with tour companies to attract medical tourists to India. Whilepatients recuperate in hospital, their relatives enjoy the tourist sights and go shopping. ITC Group evenopened a hotel sharing its premises with a hospital in Thane near Mumbai in order to service medicaltourists.

The expertise of Indian doctors in modern medicine from heart surgery to cataract removal has put Indiaon the world healthcare map. This cutting-edge medical expertise coupled with affordable prices makesthis value proposition hard to resist and consequently there is an increased flow of people to India formedical services. India received 1.1 million medical tourists in 2009, registering a growth of 17% (IndiaBrand Equity Foundation, 2010). The market for medical tourism in India is estimated at half a billionUSD and is expected to grow to USD 3.29 billion by 2018 (Kumar, Singh, Saigal, and Cebula, 2009).

3. Innovations According to Functional Categories

Next to analysing providers of hospitality services based on their categorisation, an analysis of variousfunctions in the industry offers valuable additional insights.

3.1 Organisational Level

Also on the organisational level, the Indian hospitality sector is witnessing far-reaching changes. Thehotel industry in India is gradually developing away from the classical ownership model and franchising,which until now actually never really took off in India, increasingly to management models, therebyinstilling more professionalism in the industry.

To fuel the expansion of their hotel chains, branded companies around the world consistently offerfranchise services. In contrast to many restaurant chains in India such as Nirula's, Pizza Hut, andDomino's Pizza, hotels have been reluctant to adopt the model. Concerns about product consistency andquality management prevented leading hotel chains like Taj Hotels and Oberoi Hotels to jump on thetrend of franchising. Others, such as Carlson Hospitality and the Intercontinental Hotels Group (IHG),withdrew from the franchise model in India after initial forays, choosing to focus on management tie-upsinstead.


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3.2 Hotel Construction

While the potential of investing in the Indian hotel industry is great, there are several constraints for theinterested investor, such as high construction costs, a lack of international standard products that can besourced locally, and the spiralling real estate prices. High development costs pose a serious challenge foranyone looking to build a hotel in India. Land costs have increasingly become the main factor in the costcalculations for any project. Whereas property prices in India generally constitute from 25% to 50% ofthe cost of developing hotels, they only account for 15% to 20% of project cost overseas.

The emergence of Modular Hotels in India speeds up the construction process massively and leads toimpressive cost savings. The modular approach also allows flexible extension of the property and allowsfor rapid dismantling and transfer of modules to other locations, for example, to close demand supplygaps. As an example, Ibis, Accors economy brand, has engineered an innovative building process toconstruct their hotels in India quickly and at minimum costs.

3.3 Mixed Usage

Mixed-use developments incorporating residential, retail, entertainment, hospitality, and corporate officesare fast emerging in Indian metropolises. Hotels that are a part of larger projects encompassing otherrevenue generating assets have much potential in India. A good example is the Mall Hotels coming up inIndia, such as the Hilton Garden Inn in Saket, New Delhi.

3.4 Technology

The Indian hospitality industry has changed tremendously in recent years. Technological innovationsmight very well be the biggest driver behind this change. Speeding up decision-making, facilitating guestreservations, widening information access, improving payment options, and managing outsourcingprocesses, technological innovations lead to ever higher efficiency levels.

Technology in hotels is increasingly giving them a cutting edge over their competition. Rooms becomemulti-functionary and can be used flexibly, as an entertainment centre or as an office. Existing hotels facethe choice of huge modernisation costs or being left behind.

The advent of the Internet has opened up many avenues for the hotel industry, most importantly theability to conduct client bookings. It is reported that by now 25 percent of all reservations are made onlinein India, thus making it a key tool in room occupancy fulfilment. The Internet also has revolutionised themarketing of hospitality services, which is especially evident in the increased marketing potential of nicheproducts, such as NGOs offering accommodation in tribal villages or spiritual retreats deep inside theHimalayas.


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A decade ago, the most popular way of planning a trip was to visit a travel agency to get a rather ready-made itinerary. With the advent of third party travel websites like Hotels.com and Expedia.com as well as

the many home grown platforms such as Makemytrip.com and Yatra.com, information flows betweenhospitality service providers and their potential clients have improved massively. These distributionchannels quickly gain in importance.

Independent hospitality review and opinion websites like TripAdvisor have also become immensely popular,offering users the opportunity to see photos and read actual guest comments, etc., while the hotelsthemselves are able to showcase their products and services to a wider audience. Engaging customers intwo-way communication via Social Networking websites such as Facebook allows the hospitality industryquickly react to customer needs and wants.

3.5 Unique Sales Points

Many higher end hotels in India are realising that their key USP in international competition is not theirhigh-tech facilities, but rather their outstanding staff-to-guest ratios and the longstanding tradition ofIndian hospitality as immortalised by "Atithi Devo Bhava". Hospitality is about serving the guests and toprovide them with a "feel-good-effect". Personalised comprehensive service, such as suites having theirown personal butler, gives guests that extra feel of being valued by their hosts.


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Hospitality Staffby Stuck in Customs (http://www.flickr.com/photos/stuckincustoms/2640815977/)

Journeys to India can be complex and challenging. If any tourist destination asks for support in logistics,knowledge of culture, local connections, and insightful guides, it must be India. At the same time, the

extra amount of support and attention needed is highly affordable in India. Drivers fluently speakingEnglish, high-profile facilitators accompanying guests in tribal villages, staying in the home of a professorand his family or dining with the Maharajas in their family palace, in India the extraordinary becomes therule rather than the exception.

3.6 Human Resources

The lack of skilled employees is frequently mentioned as one of the key obstacles to growth in the Indianhospitality industry. In analogy, hospitality service providers continuously complain about the lack of


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quality education institutes in India, thus forcing many talents to take entertainment or hospitalitymanagement degrees or even MBAs from foreign universities.

However, Indian demographics continue to play into the hands of the hospitality industry, with anenormous English-speaking workforce continuously pushing into the labour market. And with the reversebrain drain taking up in steam, an increasing number of skilled hospitality professionals bring theirinternational expertise back to the industry in India.

Innovative solutions to the continued challenge of attracting and retaining trained hospitality staff take theform of Employee Stock Options, generous healthcare plans, and improved life-work balance. Betterequipped and trained employees together with innovative management techniques will lead to a new wayof organising hospitality firms. There will be less hierarchical layers, with more empowered, multi-skilledstaff. Non-core functions will increasingly be outsourced, while the competence in core areas will

continuously be built up by coaching and a more participative process (P.C. Pandey, 2003).

3.7 Corporate Social Responsibility

Also in the field of corporate social responsibility (CSR) the Indian hospitality industry is becoming moreprogressive and innovative. Today, many women will be found in management positions due to their oftensuperior attitudes and attributes whereas senior citizens and migrants will also be part of the work force.The commitment to counter discrimination based on gender, age, religion, etc. is comparatively strong in

the Indian hospitality industry.

An example for this can be found in the recent drive by several major industry players to employ peoplewith special challenges, such as those who are speech and hearing impaired. Enlisting the help of NGOssuch as Enable India, hotels train differently abled people for the hospitality industry, many finding lateremployment with the hotel itself. In fact, motivation levels and quality of staff are so good that more andmore companies are following these footsteps, also increasing their social responsibility along the way.

3.8 Diversification

Innovative concepts of diversification hold the key to survival in the hospitality industry in the long run.Fierce competition has led to innovative ideas by hotel majors, thereby delivering impressive hospitalityproducts and services. Exotic spas, gorgeous golf courses, multi-cuisine fine dining, spacious conferenceand convention facilities are all among the growing list of facilities found in leading hotels.

Hotels are adapting to innovative operating models by bringing in external brands of restaurants, spas,and lounges on lease or management contracts to capitalise on proven concepts that generatesubstantial revenue by attracting hotel guests and local residents. Cafes and bars which have high profitmargins are increasing their presence in hotels and are quickly developing into core profit centres. A

prominent example is Caf Coffee Day found at Ginger Hotels.


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experiences in India and even now many of the best restaurants and bars are still located in India's fivestar hotels. The concept of high-end standalone restaurants remained a rare exception.

By now, however, any new trend that emerges in any part of the world rapidly spreads to India, such asthe latest fads of ice bars and ethnic lounges. With well travelled upwardly mobile consumers, new andtrendy food concepts find an increasing following in India. The resulting manifold opportunities enticefamed international chefs to move to India. At the same time, foreign tourists increasingly dare to samplethe diversity of local food. Even many domestic guests seek for opportunities to dine on quality localdelicacies, drink traditional beverages, and learn something of the culinary traditions of the locale.

3.10 Foreign versus Domestic Tourists

Earlier foreign tourist arrivals to India were highly lopsided, with a few countries such as the US and theUK accounting for the bulk of arrivals in India. In recent years, foreign tourist arrival figures have beendiversifying. More and more people from Afghanistan, Bangladesh, Sri Lanka, and Nepal visit India now,as are people from Southeast Asian countries, South America, and Africa.

Domestic tourism in India has been a widely neglected topic. Even today, the statistics on foreigntravellers garner all the attention. However, of the total of 500 million trips taken in India per year, onlyabout five million are from international visitors. Domestic travellers form the major component of revenuegeneration in the Indian travel industry (Thadani and Wij, 2009).


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Indian Familyby Wen-Yan King (http://www.flickr.com/photos/medapt/430287982/)

Tourism has taken Indians by storm. Indians travelling within the country have nearly doubled in the pastdecade. Besides business trips, the traditional pilgrimage tourism, and visiting relatives, the emergingIndian middle class with their rapidly rising disposable income are following suit and are discovering theirmyriad India. While family trips are still fairly dominant, the number of Free Individual Travellers (FIT) isincreasing rapidly.

The improved availability of quality hotels in the budget and mid market segment is also providing more

cost-effective travel options, as Indians are very price sensitive (World Tourism Organization, 2006). Withmore Indians travelling internationally, there also is greater awareness of international brands and servicestandards. Consequently, Indian guests will become more discerning in coming years and will take a goodroom and a meal for granted, and will increasingly demand special travel experiences.

3.11 Innovation Diffusion

The diffusion of innovations can be analysed by exploring the existing communication channels in a social

system, as avenues for communication and interaction create platforms for exchange. In India, the


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diffusion process is facilitated by its characteristic "bazaar mentality", with the manifold levels ofinteraction that occur between providers of one type of service or product. Notably, innovations occur

mostly in places like Delhi and Mumbai, where the level of exchange with people of other culturalbackgrounds is at the maximum, thus providing a stimulating environment for the hospitality industry.

In some cases, the foreign influence is even more direct. In places such as Goa with large semi-residentexpat communities, foreigners open hotels and restaurants featuring the hospitality specialties anddiverse cuisines of their home countries. Others bring in their expertise working together with Indianpartners or as foreign employees to local hospitality service providers.

4. Reading the Tea Leaves

India is today in the defining stages of the business of hospitality. Decisions taken today will massivelyimpact the growth trajectory the industry will take. Reckoning the future of the Indian hospitality industryis a very difficult task, especially so due to the ever more rapidly changing market environment. Accordingto World Travel and Tourism Council, India will be a tourism hotspot from 2009 to 2018, having thehighest 10-year growth potential.

Attempting to read the tea leaves, the Indian hospitality industry will experience a gradual consolidationprocess, especially in the unorganised sector. At the same time, more and more players are attracted toenter the field as profit margins and growth projections seem very promising. This increase in supply has

the potential to benefit the hospitality industry as a whole, since new markets can be developed and moresegments can be catered to than previously. More competition in the field also leads to better rates forclients and puts pressure on hospitality service providers to improve upon their quality and diversify theirservice offering.

The guests of the future will become increasingly unpredictable. Social status and wealth will no longerbe good predictors of the needs and objectives of the guests. That is why flexibility is becoming the keyadvantage in a highly volatile hospitality industry. Also technology will play an increasingly important role inthe hospitality equation. Web-savvy India is in a good position to engage its international competition onsearch engine optimisation, web advertising, and e-marketing

Many innovative concepts developed in the Indian market can also be easily adapted by other nationssuch as Nepal, Pakistan, China, and Brazil. One interesting innovation export might very well turn out tobe the quality budget hotels that are mushrooming in India.

While the possibilities for positive change seem endless, it will take an earnest effort, both from theindustry's key stakeholders in the private sector as well as the relevant government authorities to trulyharness the innovation potential of the Indian hospitality industry.


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5. Bibliography

Corporate Catalyst India. "Tourism and Hotel Industry in India". New Delhi, 2008.http://www.cci.in

Gopal, R. and K. Shetty. "Innovative Entrepreneurship - The Key DNA For A SuccessfulTurnaround In The Hospitality Business". Paper presented during the 11th Annual Convention ofthe Strategic Management Forum. Indian Institute of Technology Kanpur: Kanpur, 2008.

Government of India - Ministry of Tourism. "Number of Classified Hotel Rooms in the Country".New Delhi, 2006.http://pib.nic.in/release/rel_print_page1.asp?relid=17402

India Brand Equity Foundation. "Tourism & Hospitality". Gurgaon, 2010.http://www.ibef.org/artdispview.aspx?in=74&art_id=26026&cat_id=120&page=3

Khanna, A. and M. Thadani. "Ten Trends Influencing Hospitality in India: How the Game isChanging". HVS: New Delhi, 2010.http://www.hvs.com/article/4364/ten-trends-influencing-hospitality-in-india-how-the-game-is

Knowledge Must. "Unpublished Research Notes from Travel Must". New Delhi, 2010.http://www.knowledge-must.com

Kumar, L., T. Singh, N. Saigal, and B. Cebula. "Dissecting the Indian Hospitality Industry", in"Perspective Volume 1". Technopak: Gurgaon, 2009.

McKeown, M. "The Truth About Innovation". Prentice Hall: London, 2008. Pandey, P.C. "Predicting Future Human Capital In Indian Hospitality". Express Hotelier and

Caterer Issue 20th October, 2003. Indian Express Group: Mumbai, 2003.http://www.expresshospitality.com/20031020/avenues01.shtml

Pandey, T. "Agri-Tourism - Elixir for Rural India". Yes Bank and ASSOCHAM: New Delhi, 2009.http://www.assocham.org/events/recent/event_418/Tushar_Pandey.pdf

Tandon, S. "Taj Group may open more brands of hotels". Business Line: Chennai, 03.04.2010. Thadani, M. and I. Wij. "Hotels in India - Trends & Opportunities". HVS: Gurgaon, 2009. World Tourism Organization. "India - The Asia and Pacific Intra-regional Outbound Series". Madrid:

2006.

World Travel and Tourism Council. "WTTC Tourism Economic Research 2009 - India". London,2009.

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