Hospitality Industry in India: Pre/Post COVID

With this piece, we take a look at the Hospitality industry in India. Unlike all other pieces, today, we’ll start with the epitome of Indian Hospitality (that became a Harvard case study), then move on to look at industry overview, the scope of the industry, startups and trends, challenges faced during COVID and then head on to look at a few examples of Indian hospitality in Marketing and finally the future.

Let’s jump right into the piece.

India is possibly one of the most diverse and culturally vibrant countries in the World. The traditions and the language change every 100 km, but the fact that stays constant in every corner of this country, is that people give highest regards to their guests (goes by the saying अतिथिदेवो भव) and believe in building lasting relationships. This line is the driving force of the Hospitality Industry. Why? Let’s start by taking an example – which is a Harvard case study. The Taj Hotel.

Epitome of Indian Hospitality:

With the Financial crisis of 2008, there another event in 2008 that shook the entire nation. Do you recall what brought Mumbai to its knees? It was the 26/11 terror attacks. The terrorists attacked Hotel Taj while it was brimming with guests (both national and international). While the staff of the hotel could have left to save their own lives, they stood inside the hotel. They took care of all the guests and stayed there until all the guests were evacuated safely. As many as 11 employees of Taj Mumbai, a third of the hotel’s casualties—gave up their lives while rescuing 1,200 to 1,500 guests.

This event became a case study at Harvard that aimed to analyze what created this extreme level of hospitality and customer-centric culture of employees.

Related: Take a look at the story of Titan, India's most successful consumer brand
Hospitality Industry in India: Size and contribution

The Hospitality industry accounted for 7.5% of the country’s GDP in 2017-18. It was valued at approximately INR 986.2 thousand crores in 2015 and is expected to grow at 16.1 per cent CAGR to reach INR 2,796.9 thousand crores by 2022. It also accounts for 8.78 per cent of the total workforce, creating almost 15 million jobs in the past five years.

The KPIs used by the hospitality industry to measure its business and management of hotels are average room rate (ARR) and revenue per available room (RevPAR). ARR of the hotel industry stood at INR 5,844.81 in FY 2019 and is poised to grow at CAGR of ~3.16% to reach INR 6,707.46 by FY 2024. Talking about RevPAR of Indian hotels, it stood at ~INR 4,002.76 in FY 2019 and is expected to reach INR 5,305.91 by FY 2024.

Scope of the Industry:

The hospitality industry is the parent service industry which includes broadly 3 categories: Travel, Hotel, and Food & Beverages. The industry is rapidly growing because of the increasing disposable income, rising middle class and increasing interest among millennials to travel. As a matter of fact, India accounts for the highest number of domestic leisure travellers in the world. In this piece, we’ll only focus on Hotel segment of the Industry.

We can broadly classify hotels as following:

By TypeBy SegmentsAggregators (Rapidly emerging
Chain hotels
Independent Hotels
Service Apartments
Budget and Economy Hotels
Mid and Upper mid-scale hotels
Luxury Hotels
Hotel Room booking Apps
Homestay booking Apps
Travel services like Visa and Tour planning

The Hotel segment of the industry is directly dependent on travel and tourism industry and hence to improve the health of the entire industry, the government is taking various initiatives like Swadesh Darshan and PRASHAD (Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive).

Startups and Trends:

In order to consolidate the highly unorganized hotel businesses in India and cater to the budget segment of the industry, online aggregators like OYO rooms, Airbnb, makemytrip, Treebo hotels, etc. have played a pivotal role. These aggregators have facilitated hassle-free bookings for travellers. Because of online booking platforms, even hotel occupancy rates have increased. The important thing to note here is that along with providing services to the customers, the focus has shifted towards giving a delightful experience to them which will fetch them better reviews.

Related: Take a look at the case study of AirBnB

Another startup that became quite popular among the Millenials is of Zostel, which came up with offerings like staycation and workcation. This allowed customers to work remotely from a holiday destination.

Related: Take a look at the story of Zostel, rising above the rubble of inactivity in COVID

Going with the trends of IoT and AI, the segment has started offering digitally smart solutions to its customers. So much so that the Global Smart Hospitality Market is expected to reach a total market size of US$ 12.727 billion in 2025 from US$ 6.067 billion in 2019. Smart hospitality empowers the guests to select the room, room types, and room numbers, all through their mobile phones. They are also trying to give a virtual experience of how their rooms would look, rather than selecting rooms on the basis of view and bed size.

Have a look at India’s first virtual store by Thomas Cook, which intends to guide customers with all their travel requirements.

Challenges:

The industry is heavily dependent on the travel industry. And, unfortunately, the tourism infrastructure at several major tourist destinations in India is inadequate to support itself; the primary areas of concern being poor and unsafe road transportation, unsanitary conditions, insufficient regional air connectivity, and safety of travellers.

An inadequate amount of skilled labour in the industry, tax regulations by government, high competition, need for being online and generating positive reviews are among some other hurdles.

Hospitality in Marketing:

Talking about marketing, brands in the space have tried to convey to their customers that they understand the cultural heritage of India – because that’s what most important to run a hospitality business in India. The first example I am going to take here is of British Airways. Inspired by a real story, they launched a campaign called ‘Fuelled by love’, where they very beautifully showcased how their service aligns with ‘customer is god’ tradition of people in the country. Take a look at the campaign below:

The next example is of Wagh bakri chai, that not only shows the real essence of being tea-loving but also how the relationships are build and sustained.

We can see how brands don’t highlight the functional benefits, necessarily, here. They focus on emotional benefits, they want their customers to feel like they’re at home.

Conclusion:

The Hotel industry universally is sensitive to economic cycles and face its highs and lows based on the supply and demand of industry at any point, like the one we are seeing in the current pandemic phase. The estimated revenue loss stands almost at ₹ 90,000 crores in 2020. But, we know, necessity is the mother of invention, the hospitality industry of India is also expected to adopt digital routes and come up with exceptional ideas ‘Smart Hospitality’.

I believe as the drug rollout begins in full steam, the industry will revive and become the fastest growing space again in the near future.

Author:

The author of this piece is Geeta Belani, if the piece adds value, head on to LinkedIn, and drop a thank you. You can also share the piece with your best friend on WhatsApp for good karma.

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