Current Issuess In Hotel Industry In Kerala Tourism Essay
Hotel industry and tourisms are fast growing world wide. There are number of studies on the problems and prospects of tourism industry in India and in Kerala. However research on hotel industry has grown only in the recent years . No systematic, detailed and comprehensive study on the hotel industry in Kerala has been made so far . Very poor data base on the availability of Hotel Accommodation ,even at the important tourist centres is a serious problem
Only descriptive literature exist at broad level An attempt is made in this chapter to Review some of the relevant existing literatures.
Anand’ in his study examines the reason for
the poor tourist traffic in India. He says that hotels and other supplementary
accommodations are the core of tourism industry and suggests that, the required
number should be made available for the proper development of tourism. Negi2
deals with all kinds of demands and problems faced by hotel industry. He predicts
that hotel industry has a big scope for expansion in future. The Indian Institute
of Public Opinion in a study considered accommodation sector as one of the
central elements because foreign tourist expenditure accounts with food and
beverages for 55 per cent and dominates foreign exchange earnings’. Seth Pran
Nath’ is of the opinion that there should be close connection between growth
of accommodation facilities and developments in the modes of transport.
Selvam5 in his study also deals with the adequacy and future needs of
accommodation Leela Shellyo has made an attempt to present a broad profile of
the hospitality industry. She has brought a fresh insight into the hotel industry and
has made a critical appraisal of the contemporary scene in the hospitality industry.
Pragathi Mohanty7 in her study has analysed the growth pattern of the hotel
industry in Orissa and has examined the growth trend with respect to different
regions and different types of hotels.
2.1 Trends in the Hotel Industry
In a study8 conducted by the Ministry of Tourism, the Government of India,
it is pointed out that star hotels of four star and above are generally considered to
be of international standards and cater to foreign tourists as well as the most
affluent of domestic tourists. According to Robert Collier9 a new hotel customer
is going to be looking for good value three star accommodation. So focus should
be on the development of three star hotels. He asserts that in order to survive in
today’s global village, hotels will have to be heavily branded or linked to a brand’A°
or positioned in a niche market. He foresees that there will continue to be room
for major chains” to grow with a variety of brands – as well as individual and small
regional chain in niche markets.
2.2 Dependence of Tourism on Hotel Industry.
Lack of accommodation was a serious problem for tourism development
even in the past The Sargent Committee12 set up in 1945, was the first to point
out the lack of suitable accommodation for international visitors and suggested
that a chain of first class hotels should be built in India. In 1956, the Estimate
Committee’3 on tourism said that the paucity of accommodation in India
continued The appraisal of hotel accommodation situation made by the Tourism
Department resulted in the recommendation of setting up of 5000 rooms or 8500
beds within the next three years’. In 1958, the Hotel Standard and Rates Structure
Committee’s recommended the rapid expansion of the hotel industry on a rational
and scientific basis.
In 1962, Hemphili, commented on the Indian hotel accommodation situation
that one has to book accommodation a year in advance to be sure of getting what
he wants. He also pointed out that about 7000 visitors cancelled trips to India
simply due to the non-availability of hotel accommodation’6. The Ad-hoc
Committee” on Tourism 1962, focussed its attention on the failure of the hotel
industry to keep pace with the increasing tourist demand. It pointed out that
during the period 1955-’62 the number of hotel-beds had increased by 11 percent
only against 300 percent increase in the number of visitors to India. The leading
hotelier J.R.D. Tata in 1965 had admitted that acute shortage of accommodation
had curtailed the flow of tourists to India”. Ina survey conducted by M.M.Anand
in 1966, twenty-two per cent of the foreign tourists answered accommodation
shortage as the most important deterrent to travel in India19. The Hotel Review
and Survey Committee 20 1968, set up to survey the requirements of additional bed
capacity at important tourist centres, once again highlighted the accommodation
shortage in India.
The National Council of Applied Economic Research21 (NCAER) had
opined that hotels are undoubtedly the most essential destination facility that a
country must provide, if it plans to build up tourism2?. The Estimate Committee of
Lok Sabha’s report22 for the year 1975-’76 felt that the various measures taken
and efforts made for tourism promotion will not produce the desired results if the
hotel accommodation in the country lags behind. J.R.D. Tata21 was of the opinion
that unless a major sustained programme of construction of new hotel facilities is
undertaken during the next five years, upto a million foreign visitors a year will be
diverted to other countries involving a loss of foreign exchange earnings to the
tune of Rs.500 crore.
Lattin24 stated that the hospitality industry is the only field where supply
must precede demand . The growth of the hotel industry is a pre-requisite for the
growth of tourist traffic . Naik S.D. and Davies
N. V21.
in an article expressed that
the growth of hotel accommodation has not kept pace with the growing demand
for it .
J.R.D. Tata felt that shortage of accommodation makes travel unsafe and
discourages the tourists to visit a particular area26. According to him it is essential
to have up-
to-date hotels for the advancement of a country in general or a city in
particular to provide facilities and comforts to visitors from all parts of the world.
Anand pointed out that lack of adequate hotels of acceptable international
standards is a critical factor in limiting traffic throughout the pacific, especially
India27 .
Haksar suggested that accommodation must be available in sufficient
quantity in the required type and quality to match the demand28 of travellers who
arrive at the destination . Accommodation probably precedes any other type of
development.
Naik S.D. and Davis N.V. observed that the future growth of tourism will
largely depend on the growth of suitable hotel accommodation in the country,
coupled with transport and other infrastructure29. The Sector Working Paper or
Tourism’0 of the World Bank has recorded that usually 60 to 75 percent of the
total expenditure of tourists accounts for food and accommodation and a
remarkable expansion of tourism is possible by increased supplies of moderately
priced accommodation in many countries. Negi asserted that “No Hotels no
Tourism”
The Economic Times` reported that acute shortage of accommodation and
travel difficulties can affect the image that a country presents to the world. The
Southern Economist33 opined that the main problem the foreigners face on landing
in India is the dearth of good hotel accommodation in the place of tourist interest.
The bulk is concentrated in metropolitan cities.
According to Lattin34, out of the various components of tourism industry,
accommodation component, more specially hotels, constitutes the major share,
ranging from 45 to 60 percent . Mukul Guha35 pointed out that hotels bag over 47
percent of the total sales by tourism and hold control over another 15 percent of
the incidentals complementary to the entire trade . For this he suggested that hotels
should be in a position to absorb the varied kinds of visitors ‘ influx. He added that
hotels are responsible to back up the spirit of a transit passenger for the next visit
or to dampen the same36 . He concluded that the growth of tourism industry in a
country depends on many respects on the hotel management of that country37.
Medlik38 is of the opinion that hotels are essential to the economies and
societies as are adequate transport , communication and retail distribution systems
for various goods and services . He said that hotels are important attractions for
visitors39 . The direct and indirect contribution of the hotel industry through the
subsequent diffusion of visitor expenditure to other recipients in the community is
brought out by him40 . He added that hotels may be one of the few sources of
foreign exchange earnings through the medium of tourism’”. Moreover hotels are
important outlets for the products of other industries42 according to him. He also
revealed that many hotels became social centres of their communities43.
In the opinion of Howard L.Hughes44 the amenities of accommodation and
catering must exist if tourism is to happen at all. The hotel and catering industry
will be responsible for whatever benefits and costs the phenomenon of tourism
itself brings and the amount of accommodation will in part, set the capacity of a
tourist destination4S . He also states that an expansion of tourism may require an
increase in the accommodation stock46 . The tourists especially the international
tourists may be influenced in their choice of destination by the availability of
suitable hotels and restaurant S47
According to Medlik48 the proportion of foreign and domestic tourists to
total tourists to a country has relation to the number of hotels in that country. The
larger the proportion of foreign tourists the higher would be the predominance of
hotels and vice versa . According to Sharma K.K, accommodation is the matrix of
tourism49 . Vivek Sharma states that without an adequate development of hotel
resources, all the national scenery , all climatic virtues and all the sporting and
recreational facilities will hardly suffice to sustain a good volume of tourists trade.
Seventy-five per cent of the problems of tourists on land are connected with
unsatisfactory hotel accommodation and services.
Hotels form an integral and vital segment of the tourism infrastructure in
the country and hence the Government of India had initiated steps to double the
hotel room capacity”. Government policies towards industry in general and the
hotel and catering industry in particular, will be a reflection of how far the
industry is able to contribute towards the achievements of government economic
policies
Subramanian points out that for accelerating the growth of tourism
industry, it may be propounded that supply” should be available before demand
can be generated. The centres with demand potential need be converted into
centres with actual tourist traffic4. Maneet Kumar points out that a country’s
tourism traffic is assessed not only by the number of tourists visiting the country
but also by the duration of their stay55. Robert Collier1G asserts that the obvious
reasons for people to stay in hotels are for business, meetings and seminars on the
one hand and for leisure, recreation and holidays or vacation on the other.
According to him the two most important factors relating to successful hotel stay
are comfort and luxury and efficiency.
2.3 Studies in the Context of Kerala
Tourism was declared an industry57 in Kerala in 1986, with a view to
developing tourism in the state, thus enabling those engaged in tourism
promotional activities in the state, to become automatically eligible for concessions
and incentives as applicable to the industrial sector from time to time. The
existence of well known and acclaimed hotels will go a long way in promoting a
tourist destination and unfortunately Kerala state has only a very marginal
representation in any major hotel chains”.
Skipper. G is of the opinion that various groups and individuals are
carrying out excellent work within tourism industry in Kerala but some times it
would seem in a vacuum ; it is unco-ordinated and sometimes adhoc and
piecemeal59 He admits that there are some superb quality hotels across the state
and quality guest houses and attractions, but all too often, it appears that
expectations of overseas customers are not met to the fu1160. According to Najeeb
E.M only very few hotels61 and resorts are available in the state . This results in a
rush with limited inflow to the destinations and subsequent inability to carry more
people
At the world Tourism Meet 1994, major tour operators were reported to
have expressed reservations about tourism infrastructure of Kerala over the lack of
enough luxury hotels62 at Kovalam, Kochi and other tourist centres. Sudheer S. V63
observed that private hotels were rendering better services in providing facilities to
tourists There were complaints, according to him, about poor hygiene and service
rendered by the state hotels. He was of the opinion that more hotels and
restaurants which are clean, moderately expensive and assuring best service”, may
be provided in the close vicinity of the centres. The Asian Institute of
Development and Entrepreneurship, made it clear that in order to increase the
percentage arrivals of foreign and domestic tourists to Kerala it is necessary to
create the necessary additional infrastructural facilities and amenities. Assistance
to hotel industry65 was an important recommendation in the project.
2.4 Back Water Tourism in Kerala
According to a study report66 by Mathews Varghese, Kerala is unparalleled
in the world. He says that Kerala has the added advantage of the sun, sand and surf
the three universal tourist attractions. He suggests that high standard hotels should
come up near back water tourism centres. Jose Dominic is of the opinion that
Kerala’s tourism industry and tourism product are in a stage of infancy67. He
points out that the resource truly unique and peculiar to Kerala is undoubtedly the
back-waters” He brings out that the backwaters can be to Kerala what the Taj
Mahal is to India or the pyramids to Egypt69.. According to him, recently there
have been some welcome development in the creation of backwater based hotel
infrastructure7? centred around Kumarakam. He opines that there is an urgent need
to review existing regulations which are constraints” on the development of hotel
facilities in the backwater tourism centres. According to Skipper G, the
backwaters are Kerala’s Unique Selling Proposition72 (USP).
2.5 Foreign Exchange Earnings
Foreign exchange resource crunch was heavily felt in India in 1991. In
March 1991, the official foreign exchange reserve of the Reserve Bank of India
excluding gold and SDR was $ 2,236 million. Three months later in June 1991, it
came down to just $1,124 million. At this stage it was worth just about two
week’s import, against a critical minimum of three months recommended by the
I.M.F. So the Government of India immediately negotiated a structural adjustment
loan from the IMF. As a part of the agreement, rupee was depreciated by about 20
per cent against US dollar and other major international currencies, in June 1991
followed by the partial convertibility of the rupee 71
Peters observed14 that many countries have embraced tourism as a way to
increase foreign exchange earnings. He added that net foreign exchange earnings
is high in tourism as the leakages75 are the minimum. The import content76 of
tourism industry’s foreign exchange earnings is a mere 5 per cent. The present
estimates77 show that foreign exchange earnings from tourism can be increased to
about Rs. 5000 core per annum (at 1986-87 prices) by the year 2000 A.D in India.
According to Madhav Rao Scindia78, tourism had emerged as the largest foreign
exchange earner for the country. Tourism brings in stupendously large amount of
foreign exchange. Even individual hotels79 brought in hefty chunks of foreign
currency. Tourism can become India’s key foreign exchange earner within the next
five years”
Vasant Sanzgiri81 estimated that with a foreign exchange outflow of Rs. 6-7
crores the hotel and restaurant industry directly earns about 49.7 per cent of the
estimated foreign exchange earnings by the tourism industry. Tourism is the largest
single foreign exchange earner for the country and the earnings mostly account for
by the expenditure on food and accommodation in this country82. Chatterjee83
documented that foreign exchange earnings from tourism are so high that tourism
industry now tops the list amongst other export oriented industries including
engineering goods and jewellery. Hotels and restaurants share fifty percent of the
foreign exchange earnings from tourism84. Syamali Talukdar and Alka Dahar85
opine that tourism is a major foreign exchange earner and hence the industry has
very strong case that it should be treated on par with export oriented industries
and same benefit be extended to it. It is reported that 70-80 percent of the
turnover of hotels is foreign exchange86. On the basis of net foreign exchange
earnings, tourism earnings were actually higher than that from exports of
handicrafts. The net foreign exchange earnings87 from tourism have been as high as
93 per cent. Tourism and hotel industry is already the third largest earner of the
foreign exchange. Still the foreign exchange earnings in India from tourism and
hotel industry are very small compared to many other industries88.
2.6 Employment Generation
The capital-labour ratio of hotel industry vis-a-vis other industries have to
be related in depth for evaluating the employment generations in hotels. The
employment potential for skilled and semi skilled labour in the hotel sector is quite
large. Negi estimates that as regards the direct employment, the room to staff
ratio89 for hotel varies between 1:1.5 to 1: 3. It is estimated that 54 per cent of the
tourist expenditure goes towards the payment of wages and salaries90. On an
average one hotel room should expect to provide employment for 2.5 persons
while connected industries and services would offer employment to nine times the
number of persons who are employed directly by the hotels91. The cycle of
increased income and employment continues until it is exhausted, which
phenomenon is due to employment multiplier in hotel and tourism industries. An
extra-ordinary contribution of two million jobs93 in hotels and restaurant sector
was found in the economic census of 1980. The labour content of $1000 worth
value added or net-output in various industries (1971) suggested that hotels and
catering create more employment94 for any rise in output than many other
industries. It is estimated that on an average, a single hotel room generates
employment to eight people directly or indirectly95. Increase in the hotel room
requirements in the approved sector would generate substantial number of jobs as
one hotel room provides direct employment to 2-4 persons and indirect
employment to ten times that number96. The National Tourism Board reported97
that about 45,000 trained personnel will be required by the hotel industry by 1995.
2.7 Income Multiplier Effect of Tourism
The National Committee on Tourism in its report of May 1988 has stated
that the money spent by the tourist percolates through many levels and generates
additional income at each round of spending and this has a multiplier effect98.
There is high multiplier for hotel industry; 3.8 for every Re. 1/- on hotel
expenditure” It is usually observed that the income multiplier effect of tourism
may be taken as 3.2 and the employment multiplier as 2.82 for foreign tourism and
4.00 for domestic tourism’00. Tourism is an effective instrument of income
redistribution in an economy’o’ According to a report by Chechi & Company 102
the income multiplier of foreign tourist expenditure varies between 0.58 to 4.3.
The multiplier effect of tourism in India has been estimated at 3.2 by the Indian
and 104
Council of Applied Economic Research”‘
It is estimated, for several items of tourist expenditure as many as 13-14
subsequent chain transactions take place105. In 1982, the Tata Economic
Consultancy Services Report had shown that for every job created by tourism
sector, 2.57 jobs are created else-where 106 . According to Peter107 most island
economies have an income multiplier range between 0. 6 and 1 . 2 while developed
economies have range between 1 .7 and 2.0.
2.8 Hotel Finance
In order to overcome the infrastructural short-comings a substantial
injection of funds is required which may be obtained through local borrowings and
borrowings at concessional rates of interests from. financial and aid institution
abroad’”. Statler emphasises the role of “location109i in the success of any hotel.
Hotels frequently compete for sites in town centres and other stations where land
values are high10 The ratio of capital to turnover is high in hotels, since the bulk
of capital, sometimes over 90 per cent, is permanently sunk in fixed assets.
Variable assets form only a small part of the total and stocks are usually low and
there is little or no work-in-progress”‘. Total fixed assets are static irrespective of
the occupancy and total variable costs are more or less proportionate with
occupancy’ 12
A survey of Horwarth and Horwarth International published in 1971
indicates that the average annual room occupancy of first class hotels”; ranges
between 72.6 per cent and 80 per cent in Asia and Far East, parts of Europe
including U.K , Australia and Mexico and to 60 per cent in U.S.A. It was 71.4 per
cent in Swiss city hotels’ 4, according to the report of the Swiss Society for Hotel
Credit 1970. It is found that the rate of return on investment1? in the four star
and five star category hotels is better than in other categories.
Intosh16 observed that expensive hotel accommodations are demanded by
those who want the best and who are willing and able to pay accordingly.
Expensive hotels have the highest occupancy. We have to concentrate on our
guests and try to create a special niche for the hotel’ 17. If tourists are brought in
chartered flights in large scale, the position in regard to hotel accommodation
would be chaotic. Unless a massive programme of hotel construction is taken up
immediately, India will have to miss out all the jumbos and the passengers they
carry1?. John Lea19 states that big hotel companies through their international
operations in origin and destination countries intervene between the would-be-
tourist and a chosen destination.
2.9 Public Sector vs. Private Sector in Hotel Industry
Skipper G120 opines that I.T.D.C and Government hotels are not up to the
standard and it is time for the various governments to get out of running hotels.
According to him there are some things which the public sector does the best and
only they can do and some things which the private sector does the best and only
they can do; put them together121 to have the best of both the world. The Adhoc
Committee on Tourism 1963 made it clear that the public sector will have to play a
major role if adequate accommodation of the right type for the kind of growth of
tourism is to be provided 122. Tourism industry is not a one man show. Private
entrepreneurs12?, big and small, have to come forward to provide services of such
quality that these services themselves should become an attraction. According to
Mahajan, tourism is a people’s industry and it is not possible for the government
alone to develop it, the government would provide necessary basic infrastructure
and give all possible incentives to the private sector to see that this industry is
properly exploited 124. The Estimates Committee of the Lok Sabha in its report on
tourism125, October, 1966 had opined that the hotel industry was predominantly
suitable for the private sector and that the public sector should not encroach upon
this sphere The government should invite the private sector to take up the task of
investing massive amount for creating additional accommodation in all ranges of
hotels’`”
The recommendations121 made in the final draft of the approach paper of
seventh five-year plan 1985-’90 stated that private sector investment will have to
be encouraged in developing tourism and public sector investments should be
focussed on the development of support infrastructure. The objectives of tourism
can be achieved successfully only with the joint effort of both public and private
sectors with government acting as a catalyst 128. Ganapathy is of the opinion that
tourism depends on a great deal on the private sector129 for which adequate
incentives and concessions are necessary . The role of the private sector in tourism
promotion will have to be increased significantly during the eighth five year plan
period, according to the National Development Corporation10. The nation invited
the private sector in a big way in the tourism sector in the seventh plan period
because of the resource constraint at the government level 131. The hotel industry in
India was finding it difficult to attract investors because they found investment in
other industries much safer and more attractive 1312 .
According to Chechi & Co., in most countries an investor can easily get two
to three times more return on his money when put elsewhere than in a hotel 113. It
was pointed out at a conference on tourism in London that it was better to build
shops, offices and other business premises and to make a profit rather than build
hotels and sell them at a ions’ 4.
Delegates from the Third World Countries attending a U.N conference on
industrial development were urged to encourage private foreign investment and
remove government constraints in order to ensure economic recovery 131 . The
government liberalisation had attracted private initiative and investment from
existing hotel companies, the Indian Corporate Industry, Non-resident Indians and
the foreign sector
it is seen that for the accelerated growth of tourism, adequate hotel
accommodation of the required type is a prerequisite. The economic significance of
hotels strongly recommends the setting up of additional hotels of different types,
especially the “class hotels” for which the private sector should involve in a big
way
