Analysis Of The Indian Hotel Company Limited

Analysis Of The Indian Hotel association LimitedThe Indian Hotel confederacy Limited (IHCL) is an Indian based Hospitality Company which provides registration services in quaternion incompatible market ingredients glob exclusivelyy. The conjunction has its headquarter in Mumbai, India. It is listed in Bombay Stock Exchange (BSE).Company st rollgiesThe step-up st judgegy of the community is to operate 20,000 populates from the authoritative 14,000, in 25 major(ip) destinations around the world. They target on a group turnover of US$ 2 billion, from which 33% would be from planetary trading operations by 2012.Company operationsThe company portfolio comprises of 4 disfigurements The Taj hotels which concentrates on lavishness market, The Vivanta which is pep pill upscale, The portal hotels which is upscale and Ginger their budget hotels. The company operates Indias only wildlife lodges called Taj safaris in conjunction venture with CC Africa.Company BackgroundThe In dian hotel company exceptional (IHCL) was established in 1902 by Mr Jamshedji Nusserwanji Tata. In 1903 the first hotel Taj Mahal Palace was assailable in Mumbai. The social class 1974 saw an intricacy of the company by theory its second property at Goa and went on adding properties at a speedy rate fuelled by the Tourism growth in India. Till era it has added 104 properties crossways the globe to its portfolio. The company is listed on Bombay stock exchange (BSE).Tata sons check which is the p arnt company intimidates 28.5% f activateness capital in IHCL.P arent CompanyThe Tata Sons limited was founded in 1868 by Jamsetji Tata. It has its armorial bearing in various sectors much(prenominal) as Steel, Automobiles, Information technology, Communication, Power and Tea. It operates in more than 85 countries across 6 continents. It has a group turnover of over Rs.124, 970 crores ($24.5 bn). It accounts for nearly 6% of the total market capitalisation of Bombay Stock exchang e (BSE).StakeholdersShareholdersKey throngMr. Ratan Tata Ch institutionalizeman of Tata sons LimitedHe became the chairman of the Tata sons in the year 1981 which is the largest Indian conglomerate. The group comprises of companies namely Tata motors, Tata steel, IHCL, Tata consultancy services (TCS), Tata Power, Tata tea, and Tata Telecom.He graduated from Cornell University in architectural and structural engineering and joined the company in the year 1962. In 1971 he was appointed as the director in burster of NELCO which was in tight financial crisis. His danger taking capability and imagination made him the successor of JRD Tata.Tata sons low his lead made a total of acquisitions such as Chorus steel, Jaguar motors and Land Rover. This made the companys posture in world-wide market.Mr. Raymond.N.Bickson MD and chief executive officer of IHCLHe joined IHCL in the year 2003 as chief operating officer of the luxury segment. In the similar year he assumed the responsib ility of MD and CEO of the company. He carries more than 30 long time of planetary hospitality steering experience. Prior to IHCL he worked nearly 15 years as a vice president and general manager for The Rafael group.An Ameri dejection national, Mr. Bickson att discontinueed the borecole Htelire Lausanne in Switzerland and Advanced Management Programme at Harvard credit line School. He is an active member of Leading hotels of the world and demesne travel touristry council.During his tenure, IHCL went finished fast expansion by acquisitions, managing contracts and articulation ventures at domesticated as well as international market.Mr. anil P Goel Executive Director FinanceHe overlooks the Taj Groups Finance, Mergers and Acquisitions, Purchase and ratified Secretarial function. He is a non-executive director for Taj GVK limited.Mr. Abhijit Mukerji Executive Director Hotel trading operationsHe oversees hotel operations of the Taj Hotels Resorts and Palaces which incl ude Taj Luxury Hotels India and international, Taj Business Hotels, Taj Leisure Hotels, Taj Spas, Taj plow and Transport and Indi travels.Mr. Ajoy K. Misra Sr. Vice president, Sales and Marketing He represents Taj in industry organizations such as the World Travel and Tourism Council, India beginning(a) (WTTC II), World Tourism Organisation (WTO), Hotel Association of India (HAI), Bombay Chamber of Commerce and Industry, and the conspiracy of Indian Industry (CII). He served as General Manager of the Taj President in Mumbai and Area Director in the Sri Lanka and Maldives region.Mr. Prakash V. Shukla Sr. Vice President, engineering science and Chief Information policeman.He is currently responsible for total IT deployments at the Taj Group and is on MDs management committee.Mr. H.N. Shrinivas Sr. Vice President adult male ResourcesMr. Shrinivas has worked for 18 years with the Taj in Human Resources, Learning Development and Business Excellence functions. He holds a Maste rs Degree in amicable Work from the National Institute of Social Sciences, Bangalore, and a Masters in Industrial Law from Bangalore University.Mr. Veer Vijay Singh Chief operational Officer velocity Upscale HotelsHe is responsible for the Operations and Overall Performance of 36 hotels in 26 locations spread across seven countries under f number upscale category. He graduated from IHMCTN, New Delhi and had the opportunity to enhance his skills by attending dressing programmes conducted by Cornell University Singapore, INSEAD Harvard.Ms Jyoti Narang Chief operational Officer Luxury DivisionTaj Hotels Resorts and Palaces She is responsible for the overall development and operations of the luxury category hotels. When she was the Chief Operating officer for the upper upscale division, she was slavish in pi nonpareilering the launch of Taj crusades which is a unique concept that offers adventure tourist a distinctive wildlife experience. In 2008, Ms.Jyoti was appointed a s the Chief Operating Officer of The advanceion Hotels, the stark naked upscale grass of the group, and was involved in developing the concept and launching the brand.Mr. P.K.Mohankumar Chief Operating OfficerGateway Brand Mr. P. K. Mohankumar has over 35 years of experience in hotel operations with the Taj Hotels, Resorts and Palace. He is an alumnus of Institute of Hotel Management, Mumbai and has participated in several(prenominal) senior leadership workshops conducted by Harvard Business School, Michigan University, USA, Cornell University, Singapore and IIM, Ahmedabad. Currently, he is the Chief Operating Officer of the Gateway hotels, and is responsible for the operations and performance of 19 properties in India.http//ehis.ebscohost.com/eds/pdfviewer/pdfviewer?vid=3hid=102sid=ce8939c4-8df1-4962-9afe-f373f4140a95%40sessionmgr112 accessed on 23 NovSustainable Tourism country (Environment k comparable a shotingness Renewal at Taj Hotels)The EARTH program was launched in A ugust 2008, put option forward to reduce the impact of the Hotel groups daily operations on the surroundings. EARTH programme has received certification from Green Globe. Currently 55 properties under IHCL are certified and the company is looking forward to put all the hotels under the certification by 2009-2010. The company focus on ameliorate energy efficiencies, water management, solid waste management which helps to reduce the strong impact on environment.Porters quintette forcesCompetition plays a major component in todays world. Competition plenty live both beneficial and critical effects. Competition for profits goes beyond established market rivals to include four other forces as well. They are Customers, Suppliers, New Entrants, and Substitute products. To understand industry competition and profitability, we must analyse the industrys structure in terms of the five forces.Threat of new entrants New entrants post put pressure on prices, costs, and the rate of inves tment necessary to compete. overdue to ball-shapedisation and rapid frugal growth of Indian market a favourable market has emerged for International hotel durance. Hotel chains like Four seasons, Marriott International Inc., Starwood Hotels and Accor Hotels cast off recently came up with projects across India. New International hotels such as Shangri la, Mandarin, Movenpick and Ritz Carlton are in pipeline. Entry of non-hospitality companies into hotel sector can be a menace such as Reliance Industries. Due to dilution in the market the profitability of IHCL can be at stake.Bargaining causation of suppliers Suppliers convey more power if they have the monopoly or do not depend heavily on the industry for its revenues. As hospitality industry is hugely labour oriented, their slew unions and labour suppliers are powerful. As hotels chains are looking for rapid expansions and prime properties, the power of property birthers is gamey. Inbound tour operators are having an upp er hand as they provide huge volume of headache to the hotels. basis suppliers have moderate power over the company.Bargaining power of buyers tendinous customers ask more pass judgment by forcing down prices for better spirit and more services. This results in in high spiritser operating costs on that pointby carry down profitability. bodied clients due to their huge volumes have negotiated rates. Company had to list up with loyalty programme for retaining customers which incurs costs.The threat of substitutes A substitute does the same or a similar function as an industrys product by a different means. The threat of a substitute is high when it offers an agreeable price and service to the similar industrys product. Luxury serviced apartments, camping and lodges are in demand. The politicss introduction of bed and breakfast hotels can really be a threat. Web 2 which enables pic conferencing is an emerging product which can be a threat to MICE (Meetings, Incentives, Co nferencing and up to nowts)Rivalry among existing competitors Rivalry among hotel chains results in discounting of price, new product launch, advertising campaigns, and improvement in service. If there is high rivalry the profitability of the company can be affected. The hotel products are exceedingly perishable, which creates an urge to cut prices and sell the inventory below its profitable rate to cover the fixed cost.Internal environment of the companyThe internal environment of the company can be divided into two types they are substantial and Intangible resources.Tangible resources include assets which can be seen and felt, like strong-arm properties, Yachts, Flights, and other fixed assets which spread around 5 continents.The intangible resources are the one which cannot be seen or felt but play a major role in the demarcation like the brand value, leading way, Human resource etc.IHCL being the subsidiary company company of Tata Sons Limited, which has a company spina l columnground since 1868. IHCL itself operates in hospitality sector in India for stand up 108 years, and have the market share of 22% in India shows the brand value of the company. In terms of leadership style the company has a style of innovations and open up of Luxury property and wild life lodges (Joint venture with CC Africa) and budget hotel chains (Ginger Hotels), Spa resorts and properties in India.The human resources in the company is around 20,000, which includes permanent staff, Fixed term contract workers and other Executives and Corporate staff. The company has various staff development program such as TMTP (Taj Management Training Program) SPEED PLUS, HOMT for standardization of operations throughout the company. orthogonal EnvironmentIt can also be called as Operating environment. Factors which allure organizations opportunities and risks such as conditions, entities and events consists of its external environment.PEST AnalysispoliticalPolitical instability in som e parts of India made extraneous investors restrained in turn brought down investment from abroad and business travel. Due to the recent terror attacks on hotels in Mumbai, there has been a forceful drop in tourists arrivals. Most of the Embassies have send travel advisory regarding African and Asian countries which has reflected tourist inflow. As Government of India has reduced the tariffs and duties on various items, switch over relations have improved. It encouraged travel and trade which resulted in growth of hotel industry. The Ministry of external affairs has implemented visa on arrival for several countries in an effort to publicise tourism. The government has released a five-year tax holiday to promote the growth of new hotels. External commercial Borrowings have been eased by the Ministry to elucidate the problem of liquidity being encountered by the hotel industry due to economical slowdown. The Ministry of Home Affairs has concord to grant Long Term Tourist Visa o f 5 years duration with Multi-entry facilities carrying a condition of 90 days on apiece visit to the nationals of the following 18 countries which are France, Iceland, Ger umpteen, New Zealand, Luxembourg, Japan, Netherlands, South Korea, Belgium, Argentina, Finland, Brazil, Spain, Chile, Switzerland, Mexico, Norway, and Vietnam on request of tourism ministry.EconomicalEarly 1990s saw economic liberalization which led to a boom in the hospitality industry. The Government has allowed Foreign direct investment and Foreign institutional investment which favours business travel. Compared to other South eastern Asian countries tax structure in India is very high. Inadequate infrastructure facilities like snapports, Communication facilities and commuting facilities is a challenge for the Tourism sector. The effect of recession is causing serious problems for many hotels especially luxury hotels in particular. Hotels in certain global markets, generally those operate in leisure sector , are less affected. All geographies are not equally affected by recession.(have to include graph from the settle quoted in link , leading hotels of the world)SocialIndian customers are highly sensitive to price. A lot of them tend to compare services offered with price. Hoteliers example a challenge to design price strategy in from each one sector. There is a contest between local community and hotels on space availability especially at beach destinations. The company has got an benefit of worlds largest concentration of young educated work force and thus lessen the labour costs. Two religious communities being Hindus and Muslims have religious sentiments towards sound off and pork which is consumed by foreign tourists. This fuels conflicts between the organization and religious groups. large-mouthed scale tourism operation results in environmental pollution and an development in carbon emission.TechnologicalThe launch of E-commerce has revolutionized the hotel sector by decrease cost and increasing functionality. The introduction of Global Distribution System allows customers to access current time availability of products. The development influence of impression conferencing has got prejudicious impact on MICE (Meetings, Incentives, Conference and Events) division. It is possible to get critical instruction on clients and products while away from desk due to wireless technology. This has improved customer relationships, saved time and increased revenue and profit.Indian Tourism Scenario disrespect a drop in FTAs in India due to economic slowdown, domestic tourism has showed an impressive growth of 15.5 % in the year 2009.Domestic tourism support the industry during unfavourable condition.Indias performance in tourism sector has been remarkable. During the destruction 1997 to 2009, India perceived an increase in the Foreign Tourist Arrivals from 2.37 million to 5.11 million. Because of global slowdown, terrorist activities and H1N1 influenza, growth rate in FTAs during 2009 fell by 3.3 per cent. The global tourism fell by 4.3 per cent. The plummet in India was less than that of the scale of global slowdown.Foreign Exchange Earnings (FEEs) from tourism increased from Rs. 10511 crore in 1997 to Rs. 54,960 crore in 2009. The growth rate in earnings in 2009 vis-a-vis 2008 was 8.3 per cent. The constituent share of India in International tourism receipts has nearly double in past 12 years.SolutionsThe Company has got only insignificant investments at political instable locations. To prevent future security threat the company has sought-after(a) advice of security experts and invested heavily on improving security infrastructure.To reduce the conflict between local community the company has come up with unified social responsibility. For instance the company works closely with NGOs to develop and train underprivileged housewives to earn their livelihood. The company tries to promote Indian culture by encouraging local arti sans and craftsmen. This helps the local community in broadening their own outlook. Foreseeing sustainable tourism IHCL has come up with EARTH initiative to repair its vision and to preserve nature.To overcome the revenue loss due to video conferencing the company came up with new strategy of marketing in- house video conferencing facilities for corporate clients.SWOT ANALYSISStrengthsIHCL has a very dominant space in Indian hospitality industry with largest distribution of hotels around the country. Its primal advantage is the established Taj brand name. It has got a much modify hotel and brand portfolio catering to different market segments which helps in capturing wider customer base. The company has got gross sales and marketing reach globally. The elicit company being Tata sons limited which is one of the largest companies in India is an added advantage. Their social movement in every segment namely luxury, upper upscale, upscale and budget allows more flexibility and st ability. They have a well-diversified business model of subsidiaries, associates, joint ventures and management contracts which help in reducing risk and fuels faster growth. This asset light policy provide help in revenue stability during economic turndown. Presently 45% of IHCL hotels are operated through joint-ventures, 40% are management contracts and 15% are owned in part or full by IHCL.Source Adapted from HotelierIndia Nov 2010, struggle ReleaseThe company has introduced a strong loyalty programme which helps in retaining customers. The companys alliances and partnerships have helped it in entering into new markets such as wildlife lodges and air catering. They have the advantage of very strong corporate purchase chain whereby they can considerably reduce raw material cost. As the parent company is present in the production of FMCGs they are able to batten down items in a much competitive price. The company even have introduced loyalty programmes in conjunction with all le ading airline companies. helplessnessThe less established brand name of the company in international scene can be viewed as a weakness. Nearly 75% of the companys income is generated by domestic operation resulting greater dependency on Indian market. In domestic market even though company has its presence in more than 15 states 66% of their revenue and nearly 90% of profits come from top six hotels in four cities. Even slight fluctuation in the countrys economy can affect profitability. The high dependency on higher-end luxury market can also be viewed as a weakness. Nearly 54% of the revenue is generated by these properties. comparative size in line with international chains and insignificant international presence is a setback. The hotel industry in India is heavily staffed. In kindle of international average 11 in India it stands at 2.11. Investments in acquiring international hotels have resulted in huge debt for the company.OpportunitiesRapid growth in inbound and domestic t ourism is a great opportunity for the company. Domestic tourism is growing at a phenomenal rate of 15.5% annually. Growing demand for budget and mid-segment hotels due to the growth of Indian marrow class can be viewed as an opportunity. Healthy salary increases in corporate world is expected to create demand for leisure tourism. found of incredible India in both domestic and international market to promote destinations can be a boost in business. The introduction of checkup visa may promote more volume and extended prevail in all give away destinations. The companys entry into new markets such as wildlife lodges, luxury residences, and spas will create new growth prospectus. Budget airlines now have connectivity across the country with competitive rates and attractive offers which will inspire domestic tourism. Increased business opportunities in India again have paved path for growth of conference and event tourism.ThreatsGrowing presence of international hotel chains such as Marriot international, The Four seasons, Accor group, Shangri-La, Dreams resorts and spas etc. can be considered as growing threat to the company. The expansion plans of Indian hotel chains like ITC India limited, The Leela group, The East India Hotel Company and The Lalit may affect the market share of the company. Due to the arrival of international airline operators and affordable international travel, there has been massive growth of outbound tourism mainly to south East Asia, Europe and Australia. This has increased risk for domestic leisure segment. Due the companys portfolio of foreign currency debts, it is vulnerable to fluctuations in currency and interest rate risks. The debt equity ratio of the company shows drastic hike from the previous years which can really be a threat .Source Adapted from one-year ReportsDebt to equity ratio indicates how the firm finances its operations with debt relative to the hold value of its shareholders equity (Fabozzi and Drake 2009 pp80). This indicates the comparison of equity and debt the company is using to back its assets. If the ratio is high then the company is said to be iffy as it is financed more by with debts and it might become even worse if the interest rates are high.The company stands at a threat as the debt equity ratio shows a trend of escalation from .52 to .99 within a span of 4 years.Strengths and OpportunitiesDue the companys presence across the country in different market segments it can capitalize the growth of domestic tourism. As the company has a well-established budget and mid-market segment hotels, it can benefit from the growing spending power of Indian middle class. Only IHCL has presence in wildlife lodge segment which shows growing demand every year. Loyalty programmes in tie-up with leading airline companies have resulted in greater using of tourism growth in India. Companys entry into wellness tourism by establishing Spas in its existing properties can milk governments plan to iss ue medical exam visa.Strengths and ThreatsBy virtue of the companys loyalty programmes and corporate tie-ups they would be able to hold to their market, even though new international players could stand a threat. IHCL have huge expansion plans in answer to other domestic hotel chains. By their plans to expand internationally it can lower the risk of outbound tourism. failing and opportunitiesSince domestic travel became cost effective, domestic leisure tourism glum robust and distributed, consequently reducing risk of concentration of revenue from key city hotels.Weakness and ThreatsTo oppose the dependence on high end luxury market, the company has entered into budget segment which is stable comparing to the later. The company have international expansion plans other than existing properties outside India so that it will be resistant to domestic economic fluctuations.DiversificationThe IHCL has diversified its operation in hospitality sector from the hotel operation to other sect ors like breeze catering, Spa operations, Wild life lodges, Yachts, Charted Flights and Taj Khazana.TajAirTajAir is a charter trajectory operating company owned by IHCL, the subsidiary company of Tata Sons Limited4 pioneer aviation operator in India. TajAir at present owns 3 Air crafts which can be chartered by guests for domestic and international air travel.Ginger HotelsThe Ginger Hotels are self-service budget hotels operated by IHCL which targets mid-market sector.SpasJiva Spas the subsidiary of IHCL which operates at more than 25 Taj hotels at 20 different destinations which offers different rejuvenating treatments and massages.Taj SATSTaj SATS is an air catering division of IHCL in collaboration with Singapore Air Terminals which caterers to domestic and international flights operating from 6 different cities.Taj SafariTaj Safari is a wild life lodge which operates in collaboration with CC Africa which is one of its kinds in India.Taj KhazanaTaj Khazana is a signature boutiq ue store of Indian handicraft, Jewellery and garments which operates at selected IHCL properties.Current SituationThe Company has decided to raise Rupees 850 crores by issuing shares and warrants to the promoter company Tata Sons Ltd to fuel its rapid expansion plans.Since the market is strong now the company has decided to raise its room tariffs by 10-15 percent.The company announced the roll-over of 19 hotels under its new brand Vivanta by Taj Hotels and Resorts. The introduction of Vivanta which is a brand architectural exercise by the company will be slotted in the 5-star upper upscale segment in the Indian hospitality industry.To exploit the on-going spree by Indian households on food and beverage spending, the company has rolled out several new FB outlets in collaboration with world renowned chefs and restaurateurs.To meet the current demands, they have invested a major share in Serviced Apartments, Wildlife lodges and Spas.To achieve their goal of generating 33 per cent of to tal revenue from international operations, they are in use(p) in Management contracts and Joint venture oversees.To capitalize the high demand of mid-market segment, IHCL has unveiled more than 20 budget hotels across India named Ginger HotelsIn order to recover the loss of revenue due to the dip of tourism in India, the company has gone into a new strategy of putting hold on salary hike and the incentive for the executives and freeze new recruitment in the company and predicts a profit of 15 cr.