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Hotel and Restaurant Industry Still Has A Long Way To Go
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Wednesday, 02 December, 2015, 08 : 00 AM [IST]
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Vaibhav Verma and Manish Malhotra
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The hotels and motels we know today evolved from small, one-room, private dwellings that served merchants as early as 500 B.C. From this modest beginning, the hotel industry has come to play a vital role in the development of trade, commerce, and travel throughout the world.
The first record of inn keeping law is found in the Code of Hammurabi, who ruled Babylonia in approximately 2000 B.C. The code sets forth specific regulations for the operation of Babylonian taverns and inns, including corporal penalties for watering down beer. In this period, taverns and inns were prevalent throughout Greece, Italy, Egypt, and Asia. Greek taverns were frequently located near a temple for easy preparation and transportation of sacrificial animals. These establishments provided travellers with food, drink, and sometimes a bed. The Olympic Games, which began in Greece in 776 B.C., involved travel for both spectators and players, creating a demand for accommodations.
Long trips - Europe, US
During the rise and fall of the Roman Empire, pleasure travel became possible due to good roads, stable government, economic prosperity, and increased leisure time. Educated, affluent Romans vacationed in Greece and toured Egypt. An excellent network of consular roads and post houses was developed to handle this increased travel demand.
A resurgence in lodging demand started in England during the Industrial Revolution (1760), when the British government arranged for mail to be delivered by coach. A national posting system was created and a network of posting inns was established to accommodate the young post boys and provide a change of horses. Travel by coach became fashionable and long coach trips gave rise to demand for overnight lodging and the development of the English inn. These lodging facilities, forerunners of the modern motel, were located on coach trails to provide refuge for weary travellers and protection from highwaymen. Accommodations in these inns typically consisted of single, unheated rooms with straw beds for the nobility and common sleeping areas on stone floors for their servants. Travellers and local townspeople alike enjoyed hearty food and drink.
The American counterpart of the English inn was the colonial inn and tavern. Such inns sprang up in seaport towns and along stagecoach roads and canals in the 1700s and 1800s. In addition to providing travellers with overnight accommodations, colonial inns were often public gathering places used for courts of law, town meetings, and school classes. Massachusetts recognised the importance of inns to statewide commerce and passed a law penalising any town that did not provide this convenience.
Indian traveller
In India, the concept of shelter for travellers is not new. In fact, it is as old as its recorded history. The historical records are replete with mention of viharas, dharamshalas, sarais, musafirkhanas, etc.
These establishments provided a home to all wayfarers, be they pilgrims, scholars, adventurers or merchants. The shelters under various names have always been a part of India’s culture as a valuable institution providing a vital service.
Food and shelter
The ancient Buddhist monks were probably the first to institutionalise the concept of a shelter in India. The cave temples scattered all over the south-western region of India have both a chaitya (sanctuary) for worship and prayer and a vihara (monastery). These monks, although living in their quiet retreats, away from towns and villages, were nevertheless mindful of the needs of travellers and pilgrims who found shelter and food at these monasteries. It is interesting to note that these monasteries are located on the ancient trade routes between important deities of the region.
It is gathered from some inscriptions that merchants gave liberal donations for the construction and maintenance of these establishments. Mere charity was obviously not the motivation in these displays of generosity. The trader travelled with their merchandise and money on these routes and the viharas were their hotels.
In the medieval period this ancient institution gradually assumed a more secular character. Although religious centres invariably had dharamshalas and musafirkhanas attached to them, the caravanserai appeared as an exclusive traveller’s lodge with a nanbai or cook attached with it.
Sher Shah Suri, the Afghan Emperor and the builder of the Grand Trunk Road, is credited with having built caravanserais at regular intervals all along this highway creating favourable conditions for commerce and travel. However, he was not alone in this venture. The Mughals built such facilities all over their empire.
Later kings, rajas, nawabs, rich businessmen and philanthropists built sarais making travel less arduous. At approximately the same time, the inn was the Western counterpart of India’s sarais. With the expansion of commerce, travelling became profitable and with it emerged the business of providing comfortable shelter and good food to the growing number of travellers.
The sarais in India like inns in Europe or the stagecoach stations in the USA of the eighteenth and nineteenth centuries stood all along the well-travelled routes. They provided food and shelter to the travellers and fodder to their horses.
The amenities these early hotels offered would seem to us to be primitive but they conformed to the lifestyle of that age.
The modern hotel
With the passage of time the age-old institution of the sarai or the inn adapted itself to the ever-changing and constantly growing requirements of the market and has evolved into the modern hotel. From the age of the bullock cart and horses through the age of the rail road into the era of the jumbo jet and supersonic aircraft, the hotel industry developed with the simultaneous development of transportation systems. It also reflects the standard of living and the lifestyle of the society in which it operates.
The development of hotel industry in India is also continuous and satisfactory. The British introduced hotels in India mainly for their own use or for foreign visitors.
Some 70 years back, barring the Taj Mahal Hotel in Mumbai, almost all hotels in India were owned and operated by the Britishers and the Swiss. There were Albion Hotels, Victory Hotel and the Hope Hall. The arrangements in these were excellent.
Western-style hotels in India
Western-style residential hotels are comparatively of recent origin in India. These hotels were first started about 160 years ago mainly for princes and aristocrats and high dignitaries.
The credit for opening the first Western-style hotel in India in the name of British Hotel in Mumbai in 1840 goes to Pestonjee who is the pioneer of Western-style hotels in India. The Auckland Hotel was started in 1843 and in 1858 it was renamed as the Great Eastern Hotel.
Today there are a number of Western-style hotels in Kolkata Great Eastern, Oberoi Grand, Kenilworth Park, Hindustan International, Taj Bengal and so on.
By the end of the 19th century, there were many Western-style hotels in the South like Imperial, Albany, New Woodland, Elphinstone, Napier, Pandyan (Madurai), Bangalore International, West End (Bangalore), Savoy, Ritz (Hyderabad), and Palm Beach (Visakhapatnam).
The 20th century can be called the turning point in the history of the hotel industry in India. It was during this period many big business owners entered into the field. In 1904, Jamshedji Tata opened the Taj Mahal Hotel in Mumbai. Front facing the Mumbai harbour and overlooking the Gateway of India, it was until recently, the largest hotel in the East. It is rated among the top 10 hotels in the world. Jamshedji felt that it was essential for the advancement of the country that it should have an up-to-date hotel to provide facilities and comforts to visitors from all parts of the world.
Key drivers of growth
The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in India. The third-largest sub-segment of the services sector comprising trade, repair services, hotels and restaurants contributed nearly US$ 187.9 billion or 12.5 per cent to the Gross Domestic Product (GDP) in 2014-15, while growing the fastest at 11.7 per cent Compound Annual Growth Rate (CAGR) over the period 2011-12 to 2014-15. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country.
Did you know that in some parts of Singapore and Thailand apartments do not even include a basic cooking facility? So ubiquitous are affordable eating outlets that consumers use the space meant for kitchenette for other purposes. While such a situation may be still be a far cry in India, when it comes eating out, Indians too seem to be marching ahead with gusto.
Food service industry in India
Take a moment and think about what tickles your palate. Chinese, Lebanese, Italian, Mediterranean, South Indian or African? Research reports seem to indicate that Indian consumers seem to be patronising Italian cuisine the most, gulping down pizzas and pastas. Chinese comes next. This, reports say, is largely fuelled by young consumers aged 14-45 years.
It’s not surprising that the higher frequency of eating out has also evolved the market for the food services sector. The Indian food service market has come a long way from the early 90s when it was dominated by unorganised players and few brands
The current size of the Indian food service industry to be Rs 2,47,680 crore. It is projected to grow to Rs 4,08,040 crore by 2018. In terms of market segment, quick service restaurants (QSR) and casual dine-in formats account for 74% of the total chain market. Cafes make up for 12% while fine dining and pubs, bars, clubs and lounges (PBCL) comprise the rest. NRAI says the chain and licensed standalone industry will contribute an estimated Rs 11,500-11,900 crore in 2013. The projection more than doubles to Rs 24,600-25,000 crore by 2018. The government has the opportunity to generate an additional Rs 17,000-26,000 crore should it closely monitor tax collection from the unorganised segment. The key growth drivers and emerging trends indicate an increasing share of delivery and take-away formats with a focus on convenience.
Experimentation with new formats, themes and menus is another factor. Indian brands going international, greater focus on value meals and the increasing importance of online/social media, food websites and mobile applications also figures. However, the industry faces challenges from high food cost inflation, fragmented markets and increasing competition. Operational challenges include costly and limited real estate, manpower, a fragmented supply chain and liquor sourcing. Existing high taxes, the burden of new taxes and over-licensing are other hurdles facing the food service business
Market size
The number of Foreign Tourist Arrivals (FTAs) has grown steadily in the last three years reaching around 4.48 million during January–July 2015. Foreign exchange earnings (FEEs) from tourism in terms of US dollar grew by 3.2 per cent during January-July 2015 as compared to 1.9 per cent over the corresponding period of 2013. FEEs during the month of July 2015 were Rs 11,452 crore (US$1.74 billion) as compared to FEEs of Rs 10,336 crore (US$1.57 billion) in July last year.
Foreign Exchange Earnings (FEEs) between January-July 2015 were US$11.41 billion compared to US$11.06 billion in the same period last year. The growth rate in FEEs in rupee terms in January-July 2015 was 6.9 per cent.
Investments
The tourism and hospitality sector is among the top 15 sectors in India to attract the highest foreign direct investment (FDI). During the period April 2000-May 2015, this sector attracted around US$8.1 billion of FDI, according to the data released by Department of Industrial Policy and Promotion (DIPP).
With the rise in the number of global tourists and realising India’s potential, many companies have invested in the tourism and hospitality sector. Some of the recent investments in this sector are as follows:
Fairfax-owned Thomas Cook has acquired Swiss tour operator Kuoni Group's business in India and Hong Kong for about Rs 535 crore (US$85.6 million) in order to scale up inbound tour business
US-based Vantage Hospitality Group has signed a franchise agreement with India-based Miraya Hotel Management to establish its mid-market brands in the country.
Thai firm Onyx Hospitality and Kingsbridge India hotel asset management firm have set up a joint venture (JV) to open seven hotels in the country by 2018 for which the JV will raise US$100 million.
ITC is planning to invest about Rs 9,000 crore (US$1.42 billion) in the next three to four years to expand its hotel portfolio to 150 hotels. ITC will launch five other hotels - in Mahabalipuram, Kolkata, Ahmedabad, Hyderabad and Colombo - by 2018.
Goldman Sachs, New-York based multinational investment banking fund, has invested Rs 255 crore (US$40.37 million) in Vatika Hotels.
Japanese conglomerate SoftBank will lead the Rs 630 crore (US$95.6 million) funding round in Gurgaon based OYO Rooms.
MakeMyTrip will acquire the travel planning website Mygola and its assets for an undisclosed sum, and will together look to focus on innovating the online travel segment.
Government initiatives
The Indian government has realised the country’s potential in the tourism industry and has taken several steps to make India a global tourism hub. Some of the major initiatives taken by the Government of India to give a boost to the tourism and hospitality sector of India are as follows:
Government of India plans to cover 150 countries under e-visa scheme by the end of the year besides opening an airport in the NCR region in order to ease the pressure on Delhi airport.
The Tourist Visa on Arrival (TVoA) scheme enabled by Electronic Travel Authorisation (ETA), launched by the Government of India on November 27, 2014 for 43 countries has led to sharp growth in usage of the facility. During the month of July, 2015 a total of 21,476 tourist arrived on e-Tourist Visa as compared to 2,462 during the month of July, 2014 registering a growth of 772.3 per cent. During January-July, 2015 a total of 1,47,690 tourist arrived on e-Tourist Visa as compared to 14,415 during January-July, 2014 registering a growth of 924.6 per cent.
The Government of India has set aside Rs 500 crore (US$79.17 million) for the first phase of the National Heritage City Development and Augmentation Yojana (HRIDAY). The 12 cities in the first phase are Varanasi, Amritsar, Ajmer, Mathura, Gaya, Kanchipuram, Vellankani, Badami, Amaravati, Warangal, Puri and Dwarka.
Under ‘Project Mausam’ the Government of India has proposed to establish cross cultural linkages and to revive historic maritime cultural and economic ties with 39 Indian Ocean countries.
Road ahead
India’s travel and tourism industry has huge growth potential. The medical tourism market in India is projected to reach US$3.9 in size this year having grown at a CAGR of 27 per cent over the last three years, according to a joint report by FICCI and KPMG. Also, inflow of medical tourists is expected to cross 320 million by 2015 compared with 85 million in 2012. The tourism industry is also looking forward to the expansion of E-visa scheme which is expected to double the tourist inflow to India. Rating agency ICRA estimates the revenue growth of Indian hotel industry strengthening to 9-11 per cent in 2015-16. India is projected to be the fastest growing nation in the wellness tourism sector in the next five years, clocking over 20 per cent gains annually through 2017.
(The authors are asst professors at Banarsidas Chandiwala Institute of Hotel Management & Catering Technology)
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