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Challenges Faced by Hospitality Industry in India.

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Challenges faced by Hospitality Industry in India

Authors:

Dr. Sarah Hussain, Associate Professor, Banarsidas Chandiwala Institute of Hotel Management
and Catering Technology, Maa, Anandmai Marg, Kalkaji, New Delhi, Pin: 110019;
([email protected]); Mobile: 9873098656.

Gagandeep Soni, Assistant Professor, Banarsidas Chandiwala Institute of Hotel Management

and Catering Technology, Maa, Anandmai Marg, Kalkaji, New Delhi, Pin: 110019
([email protected]); Mobile: 9953492549.

Abstract

This research aims at reporting key challenges and upcoming trends expected for the hospitality
industry in India. The study unfolds evolution and main characteristics of Indian Hotel Industry,
discussing what is to be expected in near future and what are the key challenges that the Industry
needs to tackle in an emerging global context and the impact of these changes on human resource
development and management.

The paper summarises the key issues in the context of the hospitality industry in India in the
areas of strategy and finance, licenses and policies, room inventory, technological handicaps,
cost and revenue management, growth issues, safety and security concerns and talent
management.

The trends that are going to dominate the market are discussed which will enable the future
researchers to take up apt topics for research. The paper concludes with suggestions to overcome
these challenges which benefit the industry practitioner to make better decisions.

Key words: Challenges, Trends, Characteristics, Hospitality.

Introduction

The Indian Hotel Industry holds a huge potential due to the positive impact of demand-supply
scenario, growth drivers, investments and government initiatives for tourism sector. To develop a
better understanding of the industry this research has discussed a comprehensive Industry insight
of Indian Hotel Industry, which elaborates trends, future aspects and challenges keeping in mind
the various factors determining Industry functioning.

This paper attempts to analyse the characteristics of Indian Hospitality Industry since it is a
major revenue earner for the country. Hotel industry is playing a vital role in service sector with
regard to economic development of the country. Main characteristics for Hospitality Industry in
India were found out to be its high seasonality, labour intensive nature and being fragmented.
The Indian Hospitality Industry faces numerous challenges which were dominantly identified as
shortage of skilled employees, high turnover of quality workforce, excess of room inventory,
competition faced amongst various players, safety issues in India which is a huge hindrance for
tourism, high guest expectations, employee burnout in Hospitality Industry, infrastructural
bottlenecks, compounding costs, stagnant innovation, uneven progress and poor organization.

This paper further focuses on the key areas hospitality industry has to be watchful about which
were zeroed down to: upcoming markets, demographic, brand, skills and aptitude,
sustainability, latest technological advances and disaster management.

This study will be of value to industry practitioners enabling them in outlining policies and
guidelines helping in growth. The outcomes of the subject matter are useful in this context as
they provide insights on issues that actually matter to the hospitality industry in India.
There are a number of implications for industry practitioners and policy makers that would
support the accelerated growth of hospitality industry and provide worthwhile contribution
towards country’s economic growth.

Objective
The purpose of this study is to comprehend the present situation of the hospitality industry in
India and the challenges ahead. The research identifies the key challenges encountered by the
industry. This study helps in analyzing concerns that are likely to be faced by owners and
managers of the hospitality businesses and those who consume their product and services.

Research Methodology

This research paper is descriptive and applied in nature. The study is based on the published
literature on the numerous issues coped up by the Indian Hospitality Industry. It describes the
state of affairs pertaining to the current scenario of the Indian Hospitality Industry, the trends and
attempts to provide solutions to these challenges.

Background of the study:

The hospitality sector of India has not only surfaced as one of the major industries leading to the
expansion of the Indian service industry, but has even evolved into a sector that is receptive to
the requirements and needs of public, the fortune of which have forever been associated with
tourism as it is the key driving force for the industry. (Desai, 2010).

The future prospects for the Indian hospitality industry are positive, in spite of short term
challenges. India with its strong historical background and a vivid culture will always be sought
after by global travelers. Numerous centers of monetary doings are budding speedily in the
country thereby giving rise to the domestic travelers, who recognize the worth of premium
services and are ready to compensate for opulence and accommodation (Oberoi, 2012).

Key Challenges for Hospitality Industry in India are majorly identified in areas related to the
provision of skilled human resource, land acquisition price and making the most of social media
and latest technological advancements to bring about growth in the hospitality business (Jauhari,
2012).

According to the research conducted by Tourism Satellite Accounting (TSA), and released by the
World Travel and Tourism Council (WTTC), it was revealed that soon India would acquire a 3rd
position in the world as the demand for travel and tourism in the country is likely to rise by 8.2
% between the years 2010 and 2019, placing India at the (Statistics of Hospitality Industry in
India, 2012).

The tourism industry in India has its own set of problems like - low share in the world (0.38 %),
inadequate capacity, costly travel, poor organization, lack of supportive infrastructure, lack of
skilled manpower with respect to the demand of the industry, lapses in security and safety, uneven
progress, which had lead to poor visitor experience, and slow growth of revenue (Hans, 2008).

Introduction to Hospitality Industry

Hospitality Industry is one of the oldest industries in the world, patronized initially by
businessmen (traders), philosophers, religious people and scholars, which is a part of Travel and
Tourism Industry. The key constituents of this industry are hotels, motels, inns, resorts and
restaurants. In a larger and broader perspective Hospitality Industry is involved in tourism,
entertainment, accommodation, transportation (airlines, railways, car rentals, cruise liners and
travel intermediaries including travel agents and tour operators. tour operators.

Before the 2nd World War, areas were visited by the Britishers and the Indian Nobility leading to
the establishment of Hotels by British and Indian entrepreneurs and there were only a few Indian
companies holding hotels in India like Indian Hotels Company Limited (The Taj Group) and East
India Hotel (Oberoi Group). India gained independence in the year 1947, and the hotel industry
saw an era in which no hotel expansion was undertaken. In the year 1956, Pandit Jawaharlal
Nehru, who was the Prime Minister of India during that time, identified that the travel and tourism
industry could act as a driving factor for the country's monetary development and instigated
towards building class hotels in India for foreign personage. This directed the Government of
India to make their first ever investment in hotel industry – The Ashoka Hotel, New Delhi. In
1966, a merger took place between Janpath Hotel India Ltd. and India Tourism Transport
Undertaking Ltd giving birth to The India Tourism Development Corporation (ITDC).
The Indian government gave another push to the tourism sector by creating the Ministry of
Tourism and Civil Aviation in 1967, untying it from the Ministry of Transport and Shipping. The
hospitality industry of India got a boost with the Asian Games which were held in the country in
the year 1982. The first national policy on tourism was announced during that time which
highlighted the objectives that were to be achieved by developing tourism to help the country
meet up with the huge requirement for hotel rooms in the capital city New Delhi, then the location
of the Asian Games.
Tourism was given the status of an Industry in 1986. The government of India after conducting a
critical assessment in 1987 allowed franchising of 3 and 4 star hotels by an Indian firm. In 1991,
Tourism was made a priority sector, creating the hospitality industry eligible for regular approvals
of hotels where 51 % of equity was being made available by a foreign partner.

Several major international hotel chains entered the country in 1998 after tourism gained Export
House status. This made hotel proprietors, travel intermediaries, and tourist transport operators
entitled for diverse incentives provided by the government.

Without focusing on the expansion of the hospitality sector, growth opportunities in travel &
tourism cannot materialize. There is an estimated 114,000 hotel rooms spread across different
hotel classes, which is approximately 150,000 rooms short in India proving that with many
opportunities, the industry has also to deal with challenges as well. The Hotel industry being
sensitive to economic cycles does face its depression as well as elevation based on the supply and
demand of rooms. Issues like poor infrastructure, high cost of land procurement and multiple
licenses heighten the challenge of development in India.

Indian Hotel Industry has shown downward trend lately which was earlier enjoying a period of
high growth due to factor like soaring rates of interest, inflation, strategy stagnation in the
government thereby causing reduction in the growth. The inflow of foreign tourists have also
dropped owing to weak economy across the globe, but the silver lining is that home tourism in the
country has shown considerable improvement with better connectivity and is likely to defy any
breakdown in the inbound tourist influx (US, UK and Eurozone). The future investment plans by
the global and domestic players will have to take into account diverse consumer choices put forth
by the domestic tourist. The Indian hospitality sector is at a very interesting crossroads at this
moment.

Characteristics of Indian Hospitality Industry:

High Seasonality: The Indian hotel industry usually faces high demand during October–April,
whereas the monsoon months experience low demand. It is the quarter of December - March that
earns 60% of the year’s turnover for Indian hotels. During the preceding years a shift has been
seen in the trends as hotels have initiated a variety of schemes to get better occupancy in the so
called lean period. These include targeting the MICE (Meetings, Incentives, Conferences and
Entertainment) segment and offering attractive packages during the lean period.

Labour Intensive: Hospitality Industry lays emphasis on the quality of manpower and employs
skilled, semi-skilled, and unskilled workers both in a direct and indirect manner. The average
employee-to-room ratio in India is at 1.6 (2008-09), which is way greater than international
standards. Since the branded international hotels have entered and are determined to flourish in
the Indian industry across different categories, the hotel companies in India need to reconsider
their staffing requirements by becoming more competent in manpower management.

Fragmented: A large number of small and unorganized players account for a huge market share
in the Indian hotel industry making it highly fragmented. The Taj, Oberoi, ITC Hotels, and East
India Hotels comprise of the major players in the organized segment.

Challenges faced by the hospitality Industry in India

License Issues:
Indian hotels need to apply for multiple licenses undergoing a red-tapism by government
agencies. An upcoming property could require approaching more than forty agencies to procure
more than 100 licenses as per the state in which it is situated. This activity of procuring licenses
delays the project by a year or which is very dreary as compared to progressive countries like
Singapore where only six licenses are need from six government agencies. This kind of ambiguity
arising from delayed processes requires government of India to make the entire process quick,
simple and transparent (Kashyap, 2014)
Shortage of skilled employees:
Unavailability of excellent workforce in different skill levels is one of the biggest hurdles faced
by the Indian Hospitality Industry, this is especially true in the interior regions of the country
which attract tourists but unlike the metros and tier two cities are not able to sustain skilled and
educated employees.

High turnover of quality workforce:

The hotel industry in India finds it very difficult to retain the workforce even with training and
development and the attrition levels are very high. Hotel Industry professionals are easily
absorbed at better paying industries like retail, banking, aviation and other service sectors
(Panwar, 2012).

Excess of Room Inventory:

Working income earnings of finest hotel categories are anticipated to decline in the coming
financial years as there is a gap in the number of rooms coming up and the meager increase in
international traveler. Due to surplus room inventory in 14 major metropolitan cities in the
country, operating profit margins of these hotels are estimated to drop to the lowest as compared
to the last ten years (Naidu, 2012).

Competition faced amongst various players:

The industry is witnessing heightened competition with the arrival of new players, new products
and new systems. The competition from neighboring countries is equally severe with South East
Asia coming up as a cheaper destination with better infrastructure (Kannan, 2005).

Safety issues in India, a huge hindrance for tourism:

The international tourists are wary of getting hassled, cheated and mugged in India. It also showed
that foreign tourist have more incidents of being harassed, defrauded and robbed. Tourists’
confidence of the protection and security in tourism destination is a critical reason that affects
visiting choices and the expansion of tourism industries. (Lin, 2011). The country’s image is also
tampered by poverty, political instability, women safety concerns and diseases. Scares about
natural disasters like tsunami in the Indian Ocean and the potential of epidemic diseases (bird flu,
swine flu, dengue, chikungunya etc) also affect the industry (Ninemeier, 2009). After the attack of
26/11, the hotels have focused a lot on scheduling special training courses for the guards and
security personnel. A lot of thought and consideration is put into the blueprints designed with a
lot of focus on the surveillance systems adopted along with superior lock and access control
mechanisms (Kashyap, 2014).

High Guest Expectations

Due to an increase in the number of players in the hospitality sector there is a lot of competition
both internally and externally and ever changing consumer demands compel the need for latest
services and delivery channels. This results in the hospitality players to brave the challenge of
reconciling the necessary short-term investments (infrastructure, novel technologies and product
standards) with their long term business purpose (prosperity, business stability, operational
competence, sustainability and investor worth creation) (Explore hospitality solutions, 2013).

Employee burnout in Hospitality Industry

Highly personalized services required in the tourism and hotel industries, and no amount of
automation can replace personal service providers. This is related to high burnout rate of hotel
employees which is one of the highest. The reasons for burnout have been found out to be
emotion exhaustion, depersonalizing customers and a lack of personal accomplishment
(Ledgerwood, 2009). An annual study done in Netherlands proved that hotel and restaurant
workers experience burnout at a rate of one in seven. These results are consistent with other
findings throughout the world (Hurley, 2013). The hospitality industry focuses on the customer
first hence putting the employees on a back stage. The rate of staff turnover is extremely high in
the hospitality industry which is not favorable to the employer as a lot of investment occurs in
hiring and training an employee and whenever an employee quits it also leads to the loss of
output and efficiency. Hence it is very important for an owner to focus on retaining the
employees by providing a positive working environment while providing monetary benefits
(Kashyap, 2014).

Infrastructural bottlenecks
Infrastructural facilities are of mediocre quality and need to be upgraded as the hospitality
industry is expected to increase the foreign exchange collection. There is a need to integrate
domestic and foreign tourism. Improper synchronization between the types of transport and
communication wastes times, money and energy of tourists unnecessarily. Therefore a consumer
centric approach and better excess to infrastructure needs to be worked upon for the recognition
of Indian Tourism Industry (Hans, 2008).

Compounding costs:
Hotel Industry in India is losing its sheen as a cost-effective destination due to escalating costs in
hotels. High cost of land in the country often discourages investors to put money in construction
of new hotels. Also, there is no rationalization of taxes as states charge different rates. The other
costs causing a lot of distress to the industry are utilities (electricity, fuel, water, solid waste
disposal etc), payroll, taxes, social media and technology (Property Management Systems fees
etc) (Mayock, 2012). According to Kashyap (2014), declining economy of India leads to putting
up of branded hotels on sale as the return on investment is not always similar to what is expected.
High rates of interest and problems related to funding are another issue which is faced by the
hotel owners.

Stagnant innovation: In order to serve the guest in a superior manner and break out from
commodization, the next generation of hoteliers should think out of the box. Victorino, Verma,
Plaschka & Dev (2005) revealed that service innovation plays a very important role when hotel
guests are making a hotel selection. Innovation is at the heart of the hospitality organizations
success as it allows them to improve the product quality, increase competence, reduce costs, meet
the customer expectations, increase sales and profits and separate them from competitors by
increasing their market share. The industry also needs to update itself on technological front
(Jones, 1996; Ottenbacher and Gnoth, 2005).

Technological Challenges:

1. Dilemma of Choice for software to help in digital interaction with visitors is a major issue as
every company provides different features and to choose the right software for ones needs is a
major decision. Prospective dealers would require being methodical in setting up technology
systems at a high level because hotels are likely to have no-tolerance for any kind of faults.
2. Techno-phobia: Hotel employees working in different hotel departments find it difficult to
learn new technology. Continuous training and tests take away a lot of productive time. This
creates a fear of technology as it is very overwhelming to retain knowledge along with hectic
work schedules. It is very important to incorporate support training along with the technology
training so that employees maintain the discretion policy and protect the information that is
generated and is simply available.
3. Maintaining Guest Privacy: Technology brought about by the guests in the hotels may lead
to certain issues. As hotels do not have a control end-point mechanism it is a major issue,
computer malware can effortlessly be initiated. Data stores which are a great storehouse of
critical and significant information are higher-profile goals for attackers to chase and track.
Accessing of internet by guests is a major weak point in hotels' security system. Hackers can
observe and track customer activities and look for credit card information, user identification
and further susceptible statistics, and as they are not attacking hotels' systems, these activities
may remain hidden and unnoticed to a great extent. (Kansakar, Munir and Shabani, 2017).

The tourism industry in India has its own set of problems like - low share in the world (0.38 %),
inadequate capacity, costly travel, poor organization, lack of supportive infrastructure, gap
between demand and supply of manpower, lapses in security and safety, uneven progress, which
had lead to poor visitor experience, and slow growth of revenue (Hans, 2008).

Introduction to Hospitality Industry

Hospitality Industry is one of the oldest industries in the world, patronized initially by
businessmen (traders), philosophers, religious people and scholars, which is a part of Travel and
Tourism Industry. The key constituents of this industry are hotels, motels, inns, resorts and
restaurants. In a larger and broader perspective Hospitality Industry is involved in tourism,
entertainment, accommodation, transportation (airlines, railways, car rentals, cruise liners and
travel intermediaries including travel agents and tour operators. tour operators.
Before the 2nd World War, areas were visited by the Britishers and the Indian Nobility leading to
the establishment of Hotels by British and Indian entrepreneurs and only a few Indian Companies
holding hotels in India like Indian Hotels Company Limited (The Taj Group) and East India
Hotel (Oberoi Group) existed during that time. India gained independence in 1947, and the hotel
industry saw a period in which no hotel development took place. In 1956, Pandit Jawaharlal
Nehru, then Prime Minister of India, recognized that tourism could be driving factor for the
country's economic development and instigated towards building class hotels in India for foreign
personage. This directed the Government of India to make their first ever investment in hotel
industry – the Ashoka Hotel, New Delhi. In 1966, a merger took place between Janpath Hotel
India Ltd. and India Tourism Transport Undertaking Ltd giving birth to The India Tourism
Development Corporation (ITDC).
Another boost was given to the tourism industry by the government when it created the Ministry
of Tourism and Civil Aviation in 1967, untying it from the Ministry of Transport and Shipping.
When India agreed to host the 1982 Asian Games, a push was given to the country's hotel
industry. The government announced a national policy on tourism and outlined the country's
tourism development objectives to help the country meet the huge need for hotel rooms in New
Delhi, the venue of the Asian Games.

Tourism was given the status of an Industry in 1986. The government of India after conducting a
critical assessment in 1987 allowed franchising of 3 and 4 star hotels by an Indian firm. In 1991,
Tourism was made a priority sector, making the hospitality industry eligible for automatic
approvals of hotels where 51 % of equity was being made available by a foreign partner.

Several major international hotel chains entered the country in 1998 after tourism gained Export
House status. This made hotel owners, travel agents, tour operators, and tourist transport
operators eligible for various government incentives.

Without the development of the hospitality sector, growth opportunities in travel & tourism
cannot materialize. There is an estimated 114,000 hotel rooms spread across various hotel
categories, which is around 150,000 rooms short in India proving that with many opportunities,
the industry has also to deal with challenges as well. The Hotel industry being sensitive to
economic cycles does face its depression as well as elevation based on the supply and demand of
rooms. Issues like poor infrastructure, high cost of land procurement and multiple licenses
heighten the challenge of development in India.

Indian Hotel Industry has shown downward trend lately which was earlier enjoying a period of
high growth due to factor like high interest rates, inflation, policy stagnation in the government
leading to reduced growth scenario. The inflow of foreign tourists have also dropped owing to
weak economy across the globe, but the silver lining is that domestic tourism in India has shown
considerable improvement with better connectivity and is likely to defy any breakdown in the
inbound tourist arrivals (US, UK and Eurozone). The future investment plans by the global and
domestic players will have to take into account diverse consumer choices put forth by the
domestic tourist. The Indian hospitality sector is at a very interesting crossroads at this moment.

Characteristics of Indian Hospitality Industry:

High Seasonality: The Indian hotel industry usually faces high demand during October–April,
whereas the monsoon months experience low demand. It is the quarter of December - March that
earns 60% of the year’s turnover for Indian hotels. Recently there is a shift in the trend over the
last few years as hotels introduced various schemes to improve occupancy during this so called
lean period. These include targeting the MICE (Meetings, Incentives, Conferences and
Entertainment) segment and offering attractive packages during the lean period.

Labour Intensive: Hospitality Industry lays emphasis on the quality of manpower and provides
employment to skilled, semi-skilled, and unskilled labour directly and indirectly. The average
employee-to-room ratio in India is at 1.6 (2008-09), which is much higher than international
standards. Since the branded international hotels in have entered and are determined to flourish in
the Indian industry across different categories, Indian hotel companies need to reconsider their
staffing requirements by becoming more competent in manpower management.
Fragmented:
A large number of small and unorganized players account for a huge market share in the Indian
hotel industry making it highly fragmented. The Taj, Oberoi, ITC Hotels, and East India Hotels
comprise of the major players in the organized segment.

Challenges faced by the hospitality Industry in India

License Issues:
Indian hotels need to apply for multiple licenses undergoing a red-tapism by government
agencies. An upcoming property could require approaching more than forty agencies to procure
more than 100 licenses as per the state in which it is situated. This activity of procuring licenses
delays the project by a year or which is very dreary as compared to progressive countries like
Singapore where only six licenses are need from six government agencies. This kind of ambiguity
arising from delayed processes requires government of India to make the entire process quick,
simple and transparent (Kashyap, 2014)

Shortage of skilled employees:

Unavailability of excellent workforce in different skill levels is one of the biggest hurdles faced
by the Indian Hospitality Industry, this is especially true in the interior regions of the country
which attract tourists but unlike the metros and tier two cities are not able to sustain skilled and
educated employees.

High turnover of quality workforce:

The hotel industry in India finds it very difficult to retain the workforce even with training and
development and the attrition levels are very high. Hotel Industry professionals are easily
absorbed at better paying industries like retail, banking, aviation and other service sectors.
(Panwar, 2012).

Excess of Room Inventory:

Operating profit margins of premium hotels are expected to be under pressure in the next two
financial years considering the number of rooms coming up and the meager growth in foreign
tourist arrivals. Due to surplus supply of rooms in 14 major cities in India, operating profit
margins of these hotels are expected to fall to the lowest in ten years (Naidu, 2012).

Competition faced amongst various players:

The industry is witnessing heightened competition with the arrival of new players, new products
and new systems. The competition from neighboring countries is equally severe with South East
Asia coming up as a cheaper destination with better infrastructure (Kannan, 2005).

Safety issues in India, a huge hindrance for tourism:

According to the perception of international tourists, it is quite possible to be harassed, defrauded
and robbed in India. It also showed that international tourist have more experiences of being
harassed, defrauded and robbed. Tourists’ confidence of the safety in tourism destination is a
crucial factor that affects visiting decisions and the development of tourism industries. (Lin,
2011). The country’s image is also tampered by poverty, political instability, women safety
concerns and diseases. Scares about natural disasters like tsunami in the Indian Ocean and the
potential of epidemic diseases (bird flu, swine flu, dengue, chikungunya etc) also affect the
industry (Ninemeier, 2009). After the attack of 26/11, the hotels have focused a lot on scheduling
special training courses for the guards and security personnel. A lot of thought and consideration
is put into the blueprints designed with a lot of focus on the surveillance systems adopted along
with superior lock and access control mechanisms (Kashyap, 2014).

High Guest Expectations

There is an increased competitive pressure both from within and outside the hospitality industry
and ever changing customer expectations compel the need for new services and delivery
channels. This results in the hospitality players to brave the challenge of reconciling the necessary
short-term investments (infrastructure, new technologies and brand standards) with their long
term business objectives (profitability, business continuity, operational efficiency, sustainability
and investor value creation) (Explore hospitality solutions, 2013).

Employee burnout in Hospitality Industry

Highly personalized services are required in the tourism and hotel industries, and no amount of
automation can replace personal service providers. This is related to high burnout rate of hotel
employees which is one of the highest. The reasons for burnout have been found out to be
emotional exhaustion, depersonalising customers and a lack of personal accomplishment
(Ledgerwood, 2009). An annual study done in Netherlands proved that hotel and restaurant
workers experience burnout at a rate of one in seven. These results are consistent with other
findings throughout the world (Hurley, 2013). The hospitality industry focuses on the customer
first hence putting the employees on a back stage. The rate of staff turnover is extremely high in
the hospitality industry which is not favorable to the employer as a lot of investment occurs in
hiring and training of an employee and whenever an employee quits it also leads to the loss of
output and efficiency. Hence it is very important for an owner to focus on retaining the
employees by providing a positive working environment while providing monetary benefits
(Kashyap, 2014).

Infrastructural bottlenecks
Infrastructural facilities are of mediocre quality and need to be upgraded as the hospitality
industry is expected to increase the foreign exchange collection. There exists a lack of
integration between domestic and international tourism. Improper synchronization between
modes of transport and communication wastes times, money and energy of tourists
unnecessarily. Therefore a consumer centric approach and better excess to infrastructure needs
to be worked upon for the recognition of Indian Tourism Industry (Hans, 2008).

Compounding costs:
Hotel Industry in India is losing its sheen as a cost-effective destination due to escalating costs in
hotels. High cost of land in the country often discourages investors to put money in construction
of new hotels. Also, there is no rationalization of taxes as states charge different rates. The other
costs causing a lot of distress to the industry are utilities (electricity, fuel, water, solid waste
disposal etc), payroll, taxes, social media and technology (Property Management Systems fees
etc) (Mayock, 2012). According to Kashyap (2014), declining economy of India leads to putting
up of branded hotels on sale as the return on investment is not always similar to what is
expected. High rates of interest and problems related to funding are another issue which is faced
by the hotel owners.

Stagnant innovation: In order to serve the guest in a better way and break out from
commoditization, the next generation of hoteliers should think out of the box. Victorino, Verma,
Plaschka & Dev (2005) revealed that service innovation plays a very important role when hotel
guests are making a hotel selection. Innovation is at the heart of the hospitality organizations’
success as it allows them to improve the product quality, increase competence, reduce costs,
meet the customer expectations, increase sales and profits and separate them from competitors
by increasing their market share. The industry also needs to update itself on technological front
(Jones, 1996; Ottenbacher and Gnoth, 2005).

Technological Challenges:

1. Dilemma of Choice for software to assist in digital interaction with guests is a major
issue as every company provides different features and to choose the right software for
ones needs is a major decision. Potential vendors would need to be thorough in setting up
technology systems at a high level because hotels are expected to have zero-tolerance for
any sort of error.
2. Techno-phobia: Hotel employees working in different hotel departments find it difficult
to learn new technology. Continuous training and tests take away a lot of productive time.
This creates a fear of technology as it is very overwhelming to retain knowledge along
with hectic work schedules. In addition to providing technological training, support
training is also provided to employees on aspects of maintaining the confidentiality of
information that is generated and is easily accessible.
3. Technological obsolescence: Another challenge faced in technological aspect is the
speed with which technology becomes out of date. Soon after a new technology is adapted
the possibility of yet newer technology arises, bringing the hotel back to using older
version of technology. This gets more difficult when hardware also needs to be also
changed for the new technology in comparison to mere software (McCarthy, 2018).
4. Cost of technology: Hotels like to invest in technology as long as it is adding to the value
being offered to the customer. Decisions about going for investment in technology are
based upon understanding the importance of balancing the cost of the technology with the
cost of not implementing the technology.
5. Maintaining Guest Privacy: Technology brought into the hotels by guests may cause
problems. The fact that hotels don't control end-point devices is a particular challenge, as
computer malware can easily be introduced. Furthermore, with data stores containing a
potentially large repository of critical information, they are higher-profile targets for
attackers to pursue. Guest internet access could be a weak point in hotels' defenses.
Attackers can monitor and track guest activities and look for credit card information, user
credentials and other sensitive data because they are not attacking hotels' systems, many
of these activities go undetected (Kansakar, Munir and Shabani, 2017).

Uneven progress: The Indian Hospitality Industry is facing an uneven growth in various sectors
like alternative forms of tourism, lack of information about tourist profile etc. The guest is more
conscious in these times and has a changed outlook towards the services that are being offered.
They are more inclined towards alternate forms of tourism like farm tourism, rural tourism,
health tourism, village tourism, eco and community based sustainable tourism. Though India is
making progress in these sectors but is quite slow, for example in Kerala monsoon tourism is a
rich and attractive opportunity that not only helps in reducing seasonality of tourism but also
ensures optimum use of tourist facilities and services (Patel, 2012).

Poor Organization:
Hospitality and tourism industries are fragmented, and the business of these is contained with a
few companies, no single firm has that huge a share of the market to have the kind of monopoly
of fixing prices. (Hospitality and Travel: Introduction, 2013). Advertising in the hotel industry
needs to be more innovative and appropriate marketing strategies should be adopted in order to
increase the hotel revenues. Another important area that needs to be worked upon is the stringent
laws and taxes being imposed by the state governments arbitrarily on the hospitality industry
which is adversely effecting the growth of tourist traffic in the country (On the expectations of
the hotel majors from the government, 2011).

The key areas Hospitality Industry has to be watchful about

The hospitality sector has been put on notice due to changing consumer habits and attitudes and
for the attainment of future prosperity transition must be made now. Some key areas that need to
be focused upon are:
a. Emerging Markets: According to the report released by Deloitte’s Global Tourism,
Hospitality & Leisure, by 2015 India and China will continue to be key markets and tourism
growth would be greater that UK, France and Japan. The greatest future potential in these
markets will lie in developing mid market and economy branded product aimed at domestic
traveler.
b. Demographics: Two key driving economies for the World have been identified as India and
China who will create new patterns of travel in the west and new source markets in the east.
It will be the middle class which will cause major changes in the future as their travel
patterns progress from domestic to regional to international. India would contribute to 50
million outbound tourists by 2020.
c. Brand: Social Media’s growth in past few years has been tremendous and shall keep
growing. Social Media offers both threats and opportunities for operators inspite of all
advantages it provides in fast and effective communication. Brands would benefit by the
clarity and not the ambiguity that social media is known for where it would draw attention to
any discrepancy in delivery of service, providing a fast and improved channel between the
brand providing the service and the end user.
d. Talent: Labor costs are up to 33 percent of revenues with employee turnover being as high
as 31 percent. This high employee turnover continues to be a curse for the industry which
requires operators to have strong strategic plans to retain good employees and cope up with
turnover. In order to retain the employees it is extremely important to provide attractive
salary packages to the employees with a positive ad friendly work environment.
e. Sustainability will become a crucial issue for the hospitality industry by 2015 and post that.
With population explosion and ever scarce resources the business environment will become
challenging in which sustainability will have to be incorporated in all aspects of the industry.
The developments taking place in the field of hospitality should go hand in hand with the
conservation of environment and natural resources. As the guests have become more aware
about the environmental concerns and issues, it becomes the responsibility of the owners to
incorporate such trends and practices as a part of their corporate social responsibility
(Dinakaran, 2018).
f. Technology: For success hospitality companies will need to invest in technology. The
proprietary websites will drive bookings but application and websites for mobile devices will
also need to be developed to meet the consumer demand. As hospitality organisations invest
more and more in technology for better guest service, they come across a number of hurdles.
In order to have a successful technology roll-out, issues pertaining to connections, integration
tribulations and employee-training are some of the hurdles that an organization needs to
conquer. These challenges in installing technology are not new as hospitality organisations as
integration and training issues have always been there. To keep up with the needs of their
guests and ever changing trends, hotels and restaurants have to invest in numerous
technologies.

g. Crisis Management: Crisis Management helps endure unforeseen calamities and reduce
their blow by creating appropriate response systems and protocol. Being ready during
moments of crisis will cause smooth flow of operations. During the times of Crisis new
opportunities should be looked out for bettering the business.

Suggestions to overcome the challenges faced by Hospitality Industry:

Better HR Practices:
a. Pay for Productivity: Hospitality industry, unlike other industries is labour intensive and
the personalised service cannot be replaced by automation. Reconfiguring work process
and then sharing the benefits of increased productivity can have positive results. Raleigh
(2016) suggests pay for productivity stating example of room attendants, that they could
be offered additional pay for improved productivity as long as they conform to standards
and measures.
b. Alternate Scheduling: This comprises of a staffing schedule that differs from usual
work-day from 9 am to 5 pm. This includes Part-Time and Flexi-Time, Compressed Work
Schedules, and Job Sharing. Part-Time workers allow employers to fill in gaps and serve
as helping hands reducing labour costs.
c. Develop Internal Programs: Hotels should design internal programs in order to generate
attractive career opportunities for their employees. The employees should see their job as
a professional development prospect with genuine potential for progression.
d. Better Communication: When goals, objectives and pertinent daily business information
are poorly communicated, they result in confusion and loss of confidence amongst
employees. Many a times reports and communiqués are prepared without taking
perspective of the end users’ requirements, their aptitude, and possibly the limitations on
their time to evaluate, examine, absorb and eventually act on the information made
available. Therefore aligning communication to the ability and requirement of employees
will yield favourable results.

Truly differentiated customer experience delivery: As the expectations of the customers are
changing, the hotels should try to offer a great customer experience by making use of recent and
smart technology along with innovative and out of the box thinking, and being a step ahead in
anticipating guests’ needs.

Guest Workers: Various developed western countries offer guest worker programs that provide
seasonal workers for up to ten months. Under these programs, young college graduates from all
over the world pursue internships at entry level, supervisory and guest contact positions at hotels
and theme parks for certain period of the year which has busy season (Raleigh, 2006).

Promoting Best Practices: Lists of "Best Practices," is often assembled by hospitality

organizations, and such programs are completely overlooked during good periods, being
remembered only during challenging and hard times. If “Best Practices" are constantly practiced
as a mandate, organisations can weather and even flourish in toughest of periods.
Penetration Pricing: Since there is access room inventory, penetration pricing would be a
intelligent way to combat it. The Price charged for services and products is purposefully
positioned less so as to increase the market share. Once the market share increases, the price is
increased. Amongst all strategies used for pricing, psychological strategy is said to garner
improved results as it is a kind of strategy when organisations take the benefit for emotions of
buyers considering them to be driven by emotions instead of logic and reasoning. In this situation
hospitality organizations would charge according to their original plan but charges would be such
that psychologically the guests feel the low price is being charged (Indian Hotels in New Delhi).

Conclusion

The research throws a light on the challenges faced by the Hospitality Industry in India, also
suggesting some measures to combat them. These suggested measures if practiced could fuel
economic growth not only for the hospitality Industry but would also contribute to the Indian
Economy. Technological advances need to be adopted quickly before for savvy guests’ needs.
The delayed process of license acquisition must be worked on by government of India to make
the entire process quick, simple and transparent. There should be rationalisation of taxes and
there should be uniformity of taxes charged in all the states throughout the country. India needs to
project itself as a safe and tourist friendly country by initiating different marketing strategies for
different parts of the world. Markets and trends shift as the economy changes and what is true
today, might be obsolete in a few years and as the hotel industry is forever changing, there is a
need for continuous research and innovation in this field. These days there is a slump in the
market with excess room inventory, therefore there is a shift towards promoting Domestic Travel,
this scenario may not hold good few years down the line. It can be concluded that leisure and
entertainment are growing industries globally. With provision of better infrastructural facilities
along with a stable socio political and economic environment, the sentiments of tourists will
definitely improve towards India.

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