Hotel Industry Background

The first modern commercial hotel was opened in Buffalo, New York in 1908, featuring
amenities such as a free morning newspaper. Hotels then took off in the go-go 1920s, before
falling back down to Earth like just about every other industry during the Great Depression.
Post World War II, in the 1950s, the hotel industry experienced somewhat of a revolution, and
motels were created as a lower cost, no frills alternative to the larger and more amenity-based
hotels. In the 1980s, hotels over expanded and struggled. The over expansion was only finally
fixed in the mid to late 90s, which would end up being another boom period for hotels which
increasingly catered to businessmen by offering internet, fax and voice mail. The events of
September 11, 2001 hurt travel throughout the country and put a temporary damper on the
hotel industry. But by the middle of the decade hotels were thriving once again, to the point
where many were even raising their rates.
Current State of the Hotel Industry
Currently, hotels make up a giant industry. In 2013, consumers rented out 4.7 million rooms at
50,800 different properties, and in 2011, the industry took in a total of $127 billion. The
industry employed over 1.7 million workers last year and paid out about $186 billion in wages
to a very diverse group of employees occupying both low and high skill and wage positions.
Hotels and motels are found in the following areas: approximately thirty percent in suburban
areas, thirty percent in towns, nine percent in cities, four percent near airports and seven
percent at resorts. Franchising hotels and motels is appealing because brand name is so
essential. Each name represents reputation and standards as well as a certain niche in the
quality of its facilities and its cost. Often chains have multiple brands representing different
levels of quality and cost.
The internet has become crucial in the search for hotels and motels. In 2008, one quarter of all
reservations was made over the internet, and another quarter of customers looked at reviews
and other information before booking. These numbers have only elevated ever since and will
continue to increase in the future, leading to an added emphasis on techniques such as search
engine optimization to make sure that the hotels and motels come up as early as possible in
online search results. Hotels and motels tend to be a particularly capital intensive franchise
area, but it has also has the potential to be quite lucrative if successful.
Future of the Hotel Industry
The future for the hotel industry looks bright. The 6.6 percent increase in room demand
between 2012 and 2013 was the largest in twenty years. Factors impacting the future of the
hotel business include increasing focus on environmentally friendly. Different certifications
from environmental organizations concentrate on hotels' green design and operation as being
green is becoming increasingly important to consumers. In addition, room supply is raising most
in suburban areas and construction is concentrating on no frills cost conscious hotels rather
than full services entities. Increasing employee related expenses is another ongoing concern for
the industry.

The long term outlook for the Indian hospitality business continues to be positive, both for the
business and leisure segments with the potential for economic growth, increases in disposable
incomes and the burgeoning middle class.
Government of India increased spend on advertising campaigns (including for the campaigns
'Incredible India' and 'Athithi Devo Bhava' - Visitors are like God) to reinforce the rich variety of
tourism in India. The new Indian government has stated that tourism will be a key focus sector.

Supply:
There is a shortage of about 100,000 guest rooms in the country. This is expected to keep ARRs
stable for at least the next few years.
Demand:
Largely depends on business travelers but tourist traffic is also on the rise. Demand normally
spurts in the peak season between November and March.
Barriers to entry:
High capital costs, poor infrastructure facilities and scarcity of land especially in metros.
Bargaining power of suppliers:
Limited due to higher competition, especially in metros.
Bargaining power of customers:
Higher in metros due to increasing room supply.
Competition: Intense in metros, slowly picking up in tier-2 and tier-3 cities. Competition
has picked up due to the entry of foreign hotel chains.
In the long term, the demand-supply gap in India is very real and that there is need for more
hotels in most cities. The shortage is especially true within the budget and the mid market
segment. There is an urgent need for budget and mid market hotels in the country as travelers
look for safe and affordable accommodation. Various domestic and international brands have
made significant inroads into this space and more are expected to follow as the potential for
this segment of hotels becomes more obvious.
The United Nations World Tourism Organization (UNWTO) expects growth to continue in 2014
at 4%, in line with UNWTO long term forecast. While Asia Pacific and America will lead the
growth, Europe and Middle East are expected to remain under pressure. As per WTTC, the
travel and tourism sector in India is forecasted to grow at a rate of 7.9% over the next decade.
While key source markets of America and Europe are expected to continue to be the largest
contributors to tourism, domestic short haul travel across Asia Pacific will remain a growing
trend, with Asia Pacific being a key growth driver for outbound tourism.

The depreciation of the Indian rupee against the dollar is of great concern to almost every
industrial and service sector in the Indian economy. However, India's current economic woes
are good news for tourists. Whether it is foreign traveler arrivals or domestic tourism, India's
tourism industry is experiencing a real boom. The rising value of the dollar against the rupee
has made quite an impact on the foreign travel plans of many Indian holidaymakers, prompting
them to switch to cheaper destinations to make their depreciated currency go further. As a
result, domestic destinations like Goa and Agra are witnessing increasing interest. Anticipating
an inbound travel upswing during the winter season, tourism stakeholders nationwide are
excited about the prospects of a robust tourism revival.
Safety and security issues must be understood with the context of tourism. In addition, safety
has become a more prominent concern for tourists. Concerns about womens safety remains of
paramount importance. Safety and security are vital to providing high quality tourism. Hence,
to promote tourism there should be sound law and order to assure tourists that they are safe.

STRATEGY AND IMPLEMENTATION SUMMARY

Product quality: Food, coffee-based beverages, and entertainment are our products. They must
be of the high quality and value.
Service: Our patrons are paying to have a good time. Their experience will suffer if service is not
of the highest caliber. Each member of the staff will be courteous, efficient, and attentive.
Marketing: We will need to target our audience early and often. While the business is located in
a central and accessible location, many people will have to be re-introduced to the
neighborhood surrounding the Martin Luther King National Historic Site and Auburn Avenue.
Management: We will need to have a firm grasp on food, beverage, and labor costs. The
dining/entertainment/coffeehouse experience must be delivered in a fashion that will not only
inspire repeat business, but encourage word-of-mouth recommendations to others. Proper
inventory, employee management, and quality control is key.