Innovations in the Indian Hospitality Industry

Posted by Daniel Ratheiser • Saturday, July 31. 2010 • Category: In Depth
Innovations in the Indian hospitality sector can be analysed on many different levels. This analysis makes the attempt to give a broad overview on innovations taking place in the industry according to various categories of hotels as well as relevant functions, concluding with a brief outlook on future directions these innovations might take.

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

Hospitality is a long running tradition in India. From the majestic Himalayas and the stark deserts of Rajasthan, over beautiful beaches and lush tropical forests, to idyllic villages and bustling cities, India offers unique opportunities for every individual preference. However, until fairly recently this was hardly evident when looking at India's hospitality industry.

By now, accommodation options throughout India have become extremely diverse, from cosy homestays and tribal huts to stunning heritage mansions and maharaja palaces. From Kashmir to Kanyakumari, from Gujarat 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 simplicity of local guest houses and government bungalows to the opulent luxury of royal palaces and five star deluxe hotel suites.

Houseboats in Kashmir by trisb
http://www.flickr.com/photos/trisb/2282110094/

From beach shags along Goa's soothing beaches to British colonial mansions in the many scenic hill stations, the hospitality industry in India sells "great experiences". As the experiences sought by travellers around the world diversify, the global hospitality industry is adjusting accordingly in order to satisfy these complex demands. India is no exception here - quite the contrary. Coming from a rather old-fashioned understanding of hospitality services, India is rapidly catching up and turning into an innovation leader on several key fronts.


Hospitality in the Indian Economy

The contribution of the entire travel and tourism sector in India to Gross Domestic Product is estimated to rise from 8.6% (USD 117.9 billion) in 2010 to 9.0% (USD 330.1 billion) by 2020. Between 2010 and 2019 the demand for travel and tourism in India is expected to grow annually by 8.2%, which will place India at the third position in the world. Travel and tourism in India also accounts for 49,086,000 jobs in 2010 (about 10% of total employment) and is expected to rise to 58,141,000 jobs (10.4% of total employment) by 2020.

Within the travel and tourism sector, the Indian hospitality industry is one of the fastest growing and most important segments, revenue-wise as well as employment-wise. According to an estimate of the Economic Survey of India and Technopak, 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 to 5.13 million arrivals. Compared to other tourism markets in nearby Asian countries, this is still a limited success, but one with the potential to develop into a tremendous success story.


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 foods available to them for their guests beyond what they can afford, rather going themselves hungry than not being able to satisfy their guests. This element of Indian culture is based on the philosophy of "Atithi Devo Bhava", meaning "the guest is God" in Sanskrit language. From this stems the Indian generosity towards guests whether at home or elsewhere.

Welcome Puja by mckaysavage
http://www.flickr.com/photos/mckaysavage/2458852328/

The growth story of the Indian hospitality industry started in the 1980s, when several prestigious hotels were developed to cater to the Asiad Games in New Delhi. Until about ten years ago, however, the hospitality industry in India continued to be characterised by its extremely limited choice of options. There was 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 gradually catching 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 and nondescript unclassified hotels on the other. The massive unclassified market was mainly composed of no-frills guest houses and lodges in the budget segment, many catering especially to backpackers, such as in Delhi's Paharganj; nondescript privately-owned standard hotels; and government-owned accommodation such as by the Power Department or the Wildlife Department as well as the various hotels run by the Tourism Departments.

Only during the last decade did the mid-segment gradually develop beyond non-chain properties, with entrants 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 experienced the 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 global hospitality industry. The trade press is full of features on the potential of the Indian hospitality sector and presents ever new stories of successful innovations in the industry.


Innovation

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

The hospitality business requires entrepreneurs to continuously come up with new services, new ways to present existing services, new ways of enhancing the experiences of their increasingly demanding clientele, and new processes to economise operations. Without innovation, hospitality service providers face the threat of becoming ‘obsolete’- ultimately driving them out of business or forcing them to hand the business over to more efficient and innovative entrepreneurs.


Innovations According to Particular Hospitality Categories

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 the remainder of nondescript, largely standalone properties.

The Taj Mahal Palace & Tower, Mumbai
by Knowledge Must

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

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

With more international players and their sophisticated services, competition in the market is growing increasingly fierce thus leading to a higher degree of professionalism in the industry, and with the spread of established hospitality brands, guests are increasing their demands and expectations on the whole industry, thus creating an environment conducive to innovation.

Neemrana Fort-Palace by 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 lounge or hotel, some ventures expand to become India-wide or even international hospitality brands. Examples are the Neemrana group of hotels and Delhi-based Shalom. The latter is a Mediterranean inspired hospitality provider that started out as a standalone lounge in Delhi and quickly developed into a professionally 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 success story in the Indian hospitality industry, not least due to its innovative ways in which it is positioning and expanding its brand.

Increasingly, hospitality services are also offered in India's rural areas. Private persons convert their country homes, 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 well as corporate clients are tempted to the countryside with the advent of quality amenities and improved facilities.

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, have played a key role in putting rural India on the hospitality map. This trend has the potential to change the face of rural India enduringly.

Other accommodation options emerge in special locations. One popular trend is the houseboat hotel, which is also referred to as a boatel. The houseboats of Kashmir and Kerala offer luxurious accommodation to travellers for affordable prices. Their unique location in nature combined with the rustic architecture of the boats is especially appealing to tourists from abroad as well as within.

Rotels, such as the famous Indian luxury trains "Palace on Wheels" and "Deccan Odyssey", are continuously expanding the hotels on wheels concept. A growing number of other trains in India provide a luxurious hotel atmosphere to discerning tourists.


Budget Hotels

The Bed and Breakfast concept has arrived in India. The government is now classifying home owners providing hospitality facilities as "Incredible India Bed and Breakfast Establishments". Remarkably, also big 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 countrywide that can be booked online. Average room rates hover around INR 2,500 for facilities at par with three star category hotels.

Also leading hotel groups offer quality accommodation for economical prices, such as Ginger Hotels, Lemon Tree, Sarovar Hotels, Fortune Hotels, Ibis, and Choice Hotels. High demand but a still rather limited supply in this mid-market segment proves attractive to potential investors and many of the upcoming hotel development projects currently taking place, position themselves in this segment.

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 India’s largest hotel chain with more than 70 hotels in India and abroad as well as more than 100 years of presence in India’s hospitality sector. One innovative experiment by IHCL is Ginger Hotels, a revolutionary concept in hospitality for the value 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 cafeteria service. To free up space in the very compact rooms, TVs are mounted on the wall. To save on cleaning staff, the furniture, flooring, and bathroom fixtures are made of easy-to-clean materials. To cut the need for 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 making handsome 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 mouth due 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 in India and around the world. Taj's brand sharpening exercise is bearing fruits. Credit Suisse recognised IHCL as one of the 27 ‘Great Brands of Tomorrow'.


Luxury Hotels

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

Udaipur City Palace by tvangoethem
http://www.flickr.com/photos/tvangoethem/418737260/

Often by necessity as much as opportunity in a time of declining importance Indian royalty open their family palaces to guests. Authenticity, a concept that already is in danger of becoming a cliché in the hospitality world, is quite an understatement for what is on offer. Guests in India easily know the difference between brand-new hotels built to look like 200-year-old palaces and authentic 200-year-old palaces 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 are renovated 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 façade have been made.


Authenticity

Based on the believe that it depends heavily on the type of accommodation how guests will experience local 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 between cultural immersion, vivid history, sheer natural beauty, and enjoyment. They offer exposure to local culture by 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 needs of the clients, and can be as diverse as a tribal village stay in the jungle-clad mountains of Alwar or an urban homestay run by a university professor and her scientist husband.

Welcome Rangoli by mckaysavage
http://www.flickr.com/photos/mckaysavage/2225262197/

Travel Must as trusted intermediary between local communities and the interested public ensures that a meaningful exchange results between guests and hosts. Guests are welcomed into private homes, attend fascinating ceremonies, and gain invaluable insights into ancient, complex cultures often unknown and inaccessible 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.


Eco-Tourism

Eco-Tourism can be defined as responsible travel to natural areas that conserves the environment and improves the well-being of native cultures, thereby contributing to the preservation of the diversity of our world's natural and cultural environments. According to the World Tourism Organization, Eco-Tourism is the fastest growing market in the entire tourism industry. From the 1990s, the global Eco-Tourism sector has 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 a quarter of the world's total travel market.

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

Kerala Houseboat by 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 is nicknamed as "God's own country". It is famous especially for its houseboats travelling the extensive backwaters, 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, has made 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. So when their customers chance upon a Red Panda in the Himalayas or witness the hatching of sea turtles on the Bay of Bengal, they have improved the chances of preserving their habitat by providing a realistic economic alternative to exploiting local natural resources.


Agricultural Tourism

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

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


Unconventional Accommodations

Today's travellers are enthusiastic about travelling in different ways to widen their experiences. This is also 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, this segment offers huge potential. Organisations such as the Krishnamurti Foundation, Bharat Sevashram Sangha, Ramakrishna Mission, ISKCON, and Aurobindo Ashram are among the religious institutions that offer accommodation options across India.


Unique Sales Points

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

Hospitality Staff by 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 speaking English, high-profile facilitators accompanying guests in tribal villages, staying in the home of a professor and his family or dining with the Maharajas in their family palace, in India the extraordinary becomes the rule rather than the exception.


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 hospitality products and services. Exotic spas, gorgeous golf courses, multi-cuisine fine dining, spacious conference and 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 generate substantial revenue by attracting hotel guests and local residents. Cafes and bars which have high profit margins are increasing their presence in hotels and are quickly developing into core profit centres. A prominent example is Café Coffee Day found at Ginger Hotels.

Ananda Spa by blaiq
http://www.flickr.com/photos/blaiq/75116242/

Taking the example of India's most famous spa, Ananda Spa, one can feel the extent of diversification in the industry. Renovating the erstwhile palace of a local Maharaja in the Himalayas, Ananda Spa has created a spa resort that heavily draws on India's spirituality. Inviting "resident masters", such as those who teach Yoga and heal using Ayurveda, and combining and packaging spiritual wares with pure luxury, offers a promising revenue model.


Food and Beverages

With the deeper integration of India in global economic exchange and the freer flow of goods across borders, the Indian hospitality industry now has access to better products, such as imported foods and beverages. Until recently, five star hotel restaurants were considered the epitome of fine dining experiences in India and even now many of the best restaurants and bars are still located in India's five star 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 as the latest fads of ice bars and ethnic lounges. With well travelled upwardly mobile consumers, new and trendy food concepts find an increasing following in India. The resulting manifold opportunities entice famed international chefs to move to India. At the same time, foreign tourists increasingly dare to sample the diversity of local food. Even many domestic guests seek for opportunities to dine on quality local delicacies, drink traditional beverages, and learn something of the culinary traditions of the locale.


Foreign versus Domestic Tourists

Earlier foreign tourist arrivals to India were highly lopsided, with a few countries such as the US and the UK accounting for the bulk of arrivals in India. In recent years, foreign tourist arrival figures have been diversifying. 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 foreign travellers garner all the attention. However, of the total of 500 million trips taken in India per year, only about five million are from international visitors. Domestic travellers form the major component of revenue generation in the Indian travel industry.

Indian Family by 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 past decade. Besides business trips, the traditional pilgrimage tourism, and visiting relatives, the emerging Indian middle class with their rapidly rising disposable income are following suit and are discovering their myriad India. While family trips are still fairly dominant, the number of Free Individual Travellers (FIT) is increasing 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. With more Indians travelling internationally, there also is greater awareness of international brands and service standards. Consequently, Indian guests will become more discerning in coming years and will take a good room and a meal for granted, and will increasingly demand special travel experiences.


Reading the Tea Leaves

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

Attempting to read the tea leaves, the Indian hospitality industry will experience a gradual consolidation process, especially in the unorganised sector. At the same time, more and more players are attracted to enter 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 more segments can be catered to than previously. More competition in the field also leads to better rates for clients and puts pressure on hospitality service providers to improve upon their quality and diversify their service offering.

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

Many innovative concepts developed in the Indian market can also be easily adapted by other nations such as Nepal, Pakistan, China, and Brazil. One interesting innovation export might very well turn out to be 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 the industry's key stakeholders in the private sector as well as the relevant government authorities to truly harness the innovation potential of the Indian hospitality industry.



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

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  1. Nice post. I read this article. I think this is quite a innovative article on hospitality industry. Thanks for sharing this information. Keep sharing this.

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