Hotel sector

HOTEL INDUSTRY
(Travel & Tourism)

SEGMENTS
(Business)
TRAVEL &
TOURISM
ACCOMODATION
& CATERING
Hotels & motels,
apartments, camps,
guest houses,
lodge, bed &
breakfast
establishments,
house boats,
resorts, cabins &
hostels. Catering
facilities includes
include hotels, local
restaurants,
roadside joints,
cafeterias & retail
outlets serving
food & beverages.
TRANSPORTATION
Airline
companies,
cruise services,
railways, car
rentals & more.
ATTRACTIONS
Theme parks &
natural attractions
including scenic
locations, cultural &
educational
attractions,
monuments, events
& medical, social or
professional causes.
TOUR OPERATIONS
Offer customised
tours, including
travel,
accommodation &
sightseeing
TRAVEL AGENTS
A fragmented
sector with a
number of
independent travel
agents & many
online businesses.
They also sell
associated products
such as insurance,
car hire & currency
exchange.
Business travel
agencies specialise
in making travel &
accommodation
arrangements for
business travellers &
promoting
conference trades.

SEGMENTS
(Consumer)
• The aim is to develop interest in heritage and culture; & promote visits to village settings to experience & live a relaxed
& healthy lifestyle
Rural Tourism
• Tourists seek specialised medical treatments, mainly ayurvedic, spa & other therapies
• The primary purpose is achieving, promoting or maintaining good health & a sense of well-being
Medical Tourism
• Tourists visit India for its cultural heritage in various cities
• The country’s rich heritage is amply reflected in the various temples, majestic forts, pleasure gardens, religious
monuments, museums, art galleries, urban & rural sites
Heritage Tourism
• The luxury travel market in India registered a growth rate of 12.8 per cent in 2016, the highest in comparison with any
other BRIC country.
Luxury Tourism
• A wide range of adventure sports are covered under this category with specialised packages
Adventure Tourism
• Vast variety of flora & fauna in various states is a major factor behind their growing popularity as tourist destinations.
• Thenmala in Kerala is the 1st planned ecotourism destination in India.
Eco-Tourism
• One of the biggest contributor to tourism industry. India being religious hub for different cultures attracts a large
number of tourists every year
Pilgrimage Tourism

ECONOMIC CONTRIBUTING ACTIVITIES
Travel & Tourism is an important economic activity in most countries around the world. As well as its direct economic impact, the industry has
significant indirect and induced impacts.
The ‘Direct Contribution’ of Travel &
Tourism to GDP reflects the ‘internal’
spending on Travel & Tourism
(total spending within a particular
country on Travel & Tourism by
residents and non-residents for business
and leisure purposes) as well as
government 'individual' spending -
spending by government on Travel &
Tourism services directly linked to
visitors, such as cultural (eg. museums)
or recreational (eg. national parks).
The ‘Indirect Contribution’ includes
the GDP and jobs supported by:
-Travel & Tourism investment spending
- Government 'collective' spending
- Domestic purchases of goods and
services by the sectors dealing directly
with tourists.
The ‘Induced Contribution’ measures
the GDP and jobs supported by the
spending of those who are directly or
indirectly employed by the Travel &
Tourism industry.

TRAVEL AND TOURISM SECTOR
(GLOBAL)
Travel & Tourism is a key sector for economic development and job creation throughout the world.
In 2016, Travel & Tourism directly contributed INR150 lakh crore (approx.) and 10.9 crore jobs worldwide.
Taking its wider indirect and induced impacts into account, the sector contributed US$7.6 trillion to the global economy and supported 29.2
crore jobs in 2016.
This was equal to 10.2% of the world’s GDP, and approximately 1 in 10 of all jobs.
Tourism & hospitality’s impact includes people travelling for both leisure and business,
domestically and internationally.
In 2016, 76.8% of all travel spend was as a result of leisure travel, compared to 23.2% from
business travel.
Domestic travel generated 72% of the sector’s contribution to GDP, thus making a
significantly larger contribution than international travel, with foreign visitor spending at
28%.
Travel & Tourism is an export sector, attracting foreign spending to a country in the form of
international visitors. In 2016, global visitor exports accounted for 6.6% of total world
exports (approx. 91 lakh crore) and almost 30% of total world services exports.
India is expected to establish itself as the fourth largest Travel & Tourism economy by
2027, both in terms of direct and total GDP, only behind China, the USA and Germany.
Business
spending
23%
Leisure
spending
77%
Foreign
visitors
spending
28%
Domestic
spending
72%
TOTAL CONTRIBUTION TO GDP
10.2% GDP contribution
29.2 Crore jobs
Contributed INR490
Lakh Crore (approx.)

(GLOBAL)
Tourism & hospitality’s direct contribution to GDP grew by 3.1% in 2016.
This was faster than the global economy as a whole which grew at 2.5%, for
six consecutive years, the Travel & Tourism sector has outperformed the
global economy.
In addition to outpacing global economic growth, the Travel & Tourism
sector also outperformed several other major global economic sectors in
2016.
Specifically, direct Travel & Tourism GDP growth was stronger than the
growth recorded in the financial and business services, manufacturing,
public services, retail and distribution, and transport sectors, but was
marginally slower than growth in the communications sector.
A key challenge for Travel & Tourism in short term period
will be a general slowdown in consumer spending power which will impact consumer spending on Travel & Tourism. The combination of
higher inflation caused by recovering oil prices (which could have knock-on impacts for air fares), rising debt servicing costs as interest rates
rise, and a slowdown in job creation across the globe is curbing global spending power.
TEN YEAR FORECASTS
Travel & Tourism’s direct contribution to GDP is expected to grow at an
average of 3.9% per year over the next ten years.
By 2027, Travel & Tourism is expected to support more than 38 crore jobs
globally, which equates to 1 in 9 of all jobs in the world and the sector is
expected to contribute around 23% of total global net job creation over the
next decade. Meanwhile, total Travel & Tourism GDP is expected to account
for 11.4% of global GDP and global visitor exports are expected to account for
7.1% of total global exports.

(INDIA)
The Direct contribution of Travel & Tourism to GDP in 2016 was INR4,809.80 crore
(3.3% of GDP) and is expected to grow by 6.8% pa to INR9,948.50 crore (3.5% of GDP) by
2027.
This primarily reflects the economic activity generated by industries such as hotels, travel
agents, airlines and other passenger transportation services (excluding commuter services).
But it also includes, for example, the activities of the restaurant and leisure industries
directly supported by tourists.
The Total contribution of Travel &
Tourism to GDP (including wider effects
from investment, the supply chain and
induced income impacts) was INR14,018.50
crore in 2016 (9.6% of GDP) and is
forecasted to rise by 6.7% pa to
INR28,491.80 crore by 2027 (10.0% of
GDP).

(INDIA)
Travel & Tourism generated 25,394,500 jobs
directly in 2016 (5.8% of total employment) and
by 2027, Travel & Tourism will account for
31,910,000 jobs directly, an increase of 2.1% pa
over the next ten years.
The total contribution to employment was
40,343,000 jobs in 2016 (9.3% of total
employment). By 2027, Travel & Tourism is
forecast to support 49,868,000 jobs (9.6% of
total employment), an increase of 2.0% pa
over the period.
In 2016, India generated INR1,529.30 crore in
visitor exports*. By 2027, international tourist
arrivals are forecasted to total 17,284,000,
generating expenditure of INR2, 901.70 crore,
an increase of 6.1% pa.
* Visitor Exports is the spending within a country by
International tourists.

(INDIA)
COMPONENTS
Leisure travel spending (inbound and domestic) generated 94.6% of direct Travel & Tourism GDP in 2016 (INR12,07,900 crore) compared
with 5.4% for business travel spending (INR689.0bn).
Domestic travel spending generated 88.0% of direct Travel & Tourism GDP in 2016 compared with 12.0% for visitor exports (ie foreign
visitor spending or international tourism receipts).
Leisure travel spending is expected to grow by7.0%
pa to INR25,391.10 crore in 2027.
Business travel spending is expected to grow by
7.2% pa to INR1,453.50 crore in 2027.
The total contribution of Travel & Tourism to
GDP is nearly three times greater than its direct
contribution.
Domestic travel spending is expected to grow by
7.1% pa to INR23,942.90 crore in 2027.
Visitor exports are expected to grow 6.1% pa to
INR2,901.70 crore in 2027.
Business
spending
5%
Leisure
spending
95%
Direct
34%
Indirect
53%
Induced
13%
Foreign
visitors
spending
12%
Domestic
spending
88%
Travel & Tourism is expected to have attracted
capital investment of INR2,284.90 crore in 2016.
This is expected to rise by 5.7% pa over the next
ten years to INR4,14,900 crore in 2027.
Travel & Tourism’s share of total national
investment will fall from 5.8% in 2017 to 5.7% in
2027.

(INDIA)
TRENDS & STRATEGIES
- Online travel operators
Over 70 per cent of air tickets are now being booked online in the country.
A number of online travel & tour operators, which provide better prices & options to consumers, have emerged in India.
- Wellness Tourism
The widespread practice of ayurveda, yoga, siddha & naturopathy that is complemented by the nation’s spiritual philosophy makes India a
famous wellness destination.
- Cruises
Government of India has estimated that India would emerge with a market size of 12 lakh cruise visitors by 2030-31. The government is
planning to set up five cruise terminals in the country.
- Adventure
It is one of the most popular segments of tourism industry. Owing to India’s enormous geo-physical diversity, it has progressed well over the
years.
Part of India’s tourism policy, almost every state has definite programme to identify & promote Adventure tourism.
- Camping sites
Promotion of camping sites has been encouraged with adequate acknowledgement of its adverse effects on environment.
Besides providing unique rewarding experiences, responsible conduct of camping can be a major source for both additional economic
opportunities in remote areas as well as an instrument of conservation.
- Spiritual Tourism
India has been known as the seat of spiritualism & India’s cosmopolitan nature is best reflected in its pilgrim centers.
India has been recognised as a destination for spiritual tourism for domestic & international tourists.
- Branding
The launch of several branding & marketing initiatives by the Government of India such as Incredible India! & Athiti Devo Bhava provides a
focused impetus to growth.

(INDIA)
TRENDS & STRATEGIES
- Multiple channels
Players are opting for many channels to maximise sales & ensure convenience for their customers. For example, Thomas Cook & Kuoni India
launched their online portals to compete with others. On the other hand, makemytrip.com is planning to go for the offline channel to
complement its existing portal & has already launched mobile apps for maximising sales.
- One stop solution
Players are trying to ensure convenience for their customers by providing all services available on a single portal. For example,
makemytrip.com & a host of other websites provide a comprehensive basket of offerings which include outbound & inbound
travel for leisure & business trips, hotels & car booking, holiday packages within India or abroad, etc
- Marketing Strategy
Players are using innovative marketing strategies to succeed in this sector. For example:
The Goa Tourism Development Corporation (GTDC) is planning to organise familiarisation trips or “fam” trips for international tour operators
to showcase Goa as a tourist destination. It has also planned to promote Goa in international markets through the print & electronic media.
Benefits such as such as priority reservation & Indian rail pass for train travel are also being extended to foreign tourists
Incredible India 2.0 campaign and ‘Adopt a Heritage’ were launched in September 2017.
- M-Visa
Indian government has also released a fresh category of visa – the medical visa or M visa, to encourage medical tourism in India. Indian
medical tourism is expected to reach INR52,000 crore by 2020.
- E-Tourist Visa
In November 2017, a total of 214,000 foreign tourists arrived on e-Tourist Visa, in comparison with 137,000 foreign tourists in October 2016,
registering a growth of 56.2 per cent over previous year.

(INDIA)
GOVERNMENT INITIATIVES
Swadesh Darshan
-Based on specific themes, government has identified 13 circuits which
includes Krishna Circuit, Buddhist Circuit, Himalayan Circuit, North East
Circuit & Coastal Circuit.
-Tajmahotsav: the 10 day celebration provide a platform to experience
India’s arts, craft, culture, cuisine, dance & music.
-Under Budget 2017-18, the government allotted INR928 crore (approx.)
for Integrated development of tourist circuits under Swadesh Darshan
scheme.
Pilgrimage Rejuvenation and Spiritual Augmentation Drive
(PRASAD)
National Mission on Pilgrimage Rejuvenation & Spiritual Augmentation
was implemented by the Ministry for enhancing the facilities provided &
infrastructure at pilgrimage centres of all cities
National Tourism Policy 2015
-Formulation of National Tourism Policy 2015 that would encourage the
citizens of India to explore their own country as well as position the
country as a ‘Must See’ destination for global travellers
-Under Union Budget 2017, INR96 crore was allocated for promotion &
publicity of various programmes & schemes of the Tourism ministry.
E-Tourist Visa
-Since April 2017, the facility has been made available to citizen 161
countries.
-Growth of 67.3 per cent was registered during the month of October 2017,
as a total of 176,000 tourists arrived in India on E – Tourist Visas, as
against a total of 105,000 tourists during October 2016.
-Foreigners travelling to India on e-tourist visa will receive a BSNL SIM
card which will be pre activated and loaded with talktime and data.
TOURISM POLICY
Special boards
The Ministry has set up a Hospitality Development & Promotion Board,
which will monitor & facilitate hotel project clearances/approvals.
Tourist Boards
The Ministry, in consultation with state/UT administrations, has
proposed to employ tourist police at prominent tourist spots.
Tax Incentives
An investment-linked deduction under Section 35 AD of the Income Tax
Act is in place for establishing new hotels in the 2-star category and
above across India, thus permitting a 100 per cent deduction in respect of
the whole or any expenditure of a capital nature.
Incentives from Ministry of Tourism
-Assistance in large revenue-generating projects.
-Support to Public Private Partnerships in infrastructure development
such as viability gap funding.
-Schemes for capacity-building of service providers.
Project Mausam
Under ‘Project Mausam’ the Government of India has proposed to
establish cross cultural linkages & to revive historic maritime cultural &
economic ties with 39 Indian Ocean countries. In 2015, Government of
India linked China Silk Road project with Project Mausam.

(INDIA)
GROWTH DRIVERS
Infrastructure
More than half of the Ministry of Tourism’s Plan budget is channelized for
funding the development of destinations, circuits, mega projects as well as
rural tourism infrastructure projects.
Growing Demand
-Domestic expenditure on tourism is expected to rise due to the growing
income of households.
-A number of niche offerings such as medical tourism & eco tourism are
expected to create more demand.
Rising FDI
-Hotel & Tourism sector has received cumulative FDI inflows of
INR69,000 crore from April 2000 to September 2017.
-International hotel brands are targeting India .e.g. Carlson group is aiming
to increase the number of its hotels in India to 170 by 2020.
-Hospitality majors are entering into tie ups to penetrate deeper into the
market, such as Taj & Shangri-La entered into a strategic alliance to
improve their reach & market share by launching loyalty programme aimed
at integrating rewarded customers of both hotels.
Policy Support
-100 per cent FDI is allowed under the automatic route in tourism &
hospitality, subject to applicable regulations & laws.
-100 per cent FDI allowed in tourism construction projects, including the
development of hotels, resorts & recreational facilities.
-Campaigns such as Incredible India & Athithi Devo Bhava were launched
to harness the tourism industry’s potential.
.
OPPORTUNITIES
Medical Tourism
-The presence of world-class hospitals & skilled medical professionals
makes India a preferred destination for medical tourism.
-India’s earnings from medical tourism could exceed INR59,000 crore by
2020.
-Tour operators are teaming up with hospitals to tap this market
-201 thousand medical tourists arrived in India in the 2016 as compared
to 134 thousand in 2015.
Cruise Tourism
-Cruise shipping is one of the most dynamic & fastest growing segments
of the global leisure industry.
-Government of India has estimated that India would emerge with a
market size of 12 lakh cruise visitors by 2030 – 31.
-Moreover, India is looking to take advantage of its 7,500Km coastline to
tap growth potential of the cruise tourism segment.
Rural Tourism
-The potential for the development of rural tourism in India is high as
most of its population resides in rural areas.
-This can benefit the local community economically & socially, and
facilitate interaction between tourists & locals for a mutually enriching
experience.
Eco-Tourism
-India is often termed as hotspot of bio-diversity & this rich natural
heritage is unparallel in many ways.
-Such valuable resource base gives impetus for the practice of variety of
alternate tourism forms & many of which are already in existence.
-For example: The national parks, wildlife sanctuaries & biosphere
reserves.

(INDIA)
PORTERS FORCES
THREAT OF SUBSTITUTES
LOW
Threat of substitute products is minimal as
no substitutes are available in the market
THREAT OF NEW ENTRANTS
MEDIUM
Entry is easy as it is not capital intensive,
but a player needs to achieve economies
of scale and access to distribution channel
to compete
COMPETITIVE RIVALRY
HIGH
The Indian hospitality sector is highly
fragmented with a large number of small and
unorganised players; this increases
competition
Customers’ low switching cost and price
sensitivity are increasing competition among
players
BARGAINING POWER OF
SUPPLIERS
MEDIUM
There is the threat of forward integration; for
instance, the airline starts selling directly to
customers
The cost of switching suppliers is low
BARGAINING POWER OF
BUYERS
HIGH
Low switching cost gives customer high
bargaining power
Customers are price sensitive and have
information about the services being provided

(INDIA)
Rising incomes mean a steady growth in the ability to access
healthcare & related services
Per capita income is expected to increase at a CAGR of 7.33 per
cent over 2014–18
According to IMF, nominal per capita income in the country is
estimated to increase at a CAGR of 4.94 per cent during 2010-19
In June 2016, the Indian government approved 150 countries under
the Visa on Arrival scheme to attract additional foreign tourists.
The Visa on Arrival scheme registered an average growth of 133.90
per cent over 2010–16.
Indian government has also released a fresh category of visa – the
medical visa or M visa, to encourage medical tourism in India.
The period of October to March
accounts for maximum tourism in the
country.

(INDIA)
LEADING STATES/UTs

(INDIA)
COUNTRY RANKINGS

HOTEL, RESORTS, RESTURANTS SECTOR
(INDIA)
With a consistently growing middle class and increasing disposable income, the tourism and hospitality sector is witnessing a healthy growth.
'Hotel Industry in India' success story is only second to China in Asia Pacific. The World Travel and Tourism Council, says that India ranks
18th in business travel and will be among the top 5 very soon.
The hotel industry is highly cyclical; while demand dynamics are related to the economic cycle, the lumpy nature of supply additions and long
gestation period of project executions aggravates cyclical peaks and troughs.
Demand-supply dynamics have a strong bearing on profitability.
In the long term, the demand-supply gap in India is very real and there is need for more hotels. The shortage is especially true within the budget
hotels and the mid-market hotels segment.
There is a need for budget and mid-market hotels in the country as travelers look for safe and affordable accommodation. Various domestic and
international brands have made significant inroads into this space and more are expected to follow as the potential for this segment of hotels
becomes more obvious.
According to the Economic Survey of India
(2016/17), the buoyancy in the country's GDP
remains unchanged in recent years, with 2015/16
ending at a 7.6% growth and 2016/17 witnessing a
GDP growth of 7.1%. In particular, the country's
services sector grew at 7.7% last year, with the trade,
hotels, transport and storage subsector registering a
7.8% growth estimate.

(INDIA)
DEMAND & SUPPLY TREND
(Occupancy, ARR, RevPAR)
On a nationwide basis, new branded and organized supply grew by merely 5.9% over the preceding year.
Overall demand increased by 9.6% in the same period.
ROOM NIGHT DEMAND VS AVAILABLE ROOM NIGHTS (2002/03 – 2016/17)

(INDIA)
Occupancy:
- Market wide occupancy of 65.6% was consequently 3.5% higher than the 2015/16 performance of 63.3%.
- When viewed by positioning, Five-Star Deluxe and Three- Star Hotels clocked 66.5% occupancy each in 2016/17,
while Four - Star Hotels achieved 65.6% occupancy. Five-Star Hotels were just shy of the 65% mark and closed at a
nationwide occupancy of 64.6%, whereas Two-Star Hotels managed 62.7%.
ARR:
- Average Room Rates too have shown promise as the nationwide numbers appreciated by 2.4% in 2016/17 over last
fiscal and were the highest in four years.
Though, the degree to which rates have grown continues to be marginal.
PERFORMANCE OF EXISTING HOTELS (2012/13 – 2016/17)
Nationwide occupancy for all branded
hotels was 65.6% in 2016/17, hotels
that have existed since 2012/13
achieved 68.4% occupancy last year.
Similarly, hotels that have been
operating since 2013/14 clocked
67.9% occupancy in 2016/17.
On the average rate front, while India's
ARR was Rs.5,658 in 2016/17, for
hotels in existence since 2012/13, the
ARR last year was more than
Rs.6,000.
Occupancy rate:
ratio of rented or
used space
compared to the
total amount of
space available
ARR/ADR:
average room rate/
average daily rate
(room revenue per
room)
RevPAR:
Revenue per
available room

(INDIA)
PERFORMANCE OF NEW HOTELS (2012/13 – 2016/17)
RevPAR:
Nationwide occupancy crossed the 65% mark for the first time since 2007/08, with hotels bagging an overall weighted occupancy of 65.6% in
2016/17, an increase of 3.5% over the previous fiscal. The increase in occupancy was complimented with an increase of 2.4% in weighted
average rate (`5,658) during the same period.
The growth in both occupancy and average rate resulted in the nationwide RevPAR rising by 6.0% over the previous fiscal to reach
Rs.3,709.
Two-Star and Four-Star categories recorded RevPAR growth of 7.4% and 7.2%, respectively.
First-year occupancy of hotels that opened in 2012/13
through 2014/15 was all in the mid-to-late thirties, do
note that hotels that opened in 2015/16 averaged
42.7% and, new openings of 2016/17 averaged 45.9%
occupancy in their very first year.
Similarly, while first year ARRs were successively
lower than their preceding years from 2012/13 to
2014/15, the ARR for hotels that opened in 2015/16
and 2016/17 have seen an increase in comparison to
their preceding year.

(INDIA)
GST
Under GST Indian hospitality industry stands to benefit from homogeneous and uniform taxes, in addition to easy utilization of Input Tax
Credit (ITC).
Average Room Rate
(Rs.)
GST
Below 1,000 Not applicable
1,000 – 2,500 12%
2,500 – 7,500 22%
Above 7,500 28%
Other advantages of the new taxation include administrative ease and clarity for end consumers.
The GST at 28% for rooms averaging is the highest in the region, the overall impact of this indirect tax on the Indian hotel sector is likely to
be favorable.
Barriers to Entry Medium
Economic risks, high capital costs, competition in the industry,
poor infrastructure facilities and scarcity of land.
Bargaining power
of Suppliers
Low Higher competition, especially in metros.
Bargaining power
of customers
High Higher in metros due to increasing room supply.
Competition High
Intense in metros, slowly picking up in tier-2 and tier-3 cities, entry
of foreign hotel chains, startups/online industry
Threat of
Substitutes
Low No direct substiute avaiable
In the past, the taxes that were applied on inputs, such as raw
materials, food, cleaning supplies, and amenities, could not be
adjusted against the output without multiple complications. This
will now be much easier under the GST regime.

(INDIA)
No. OF ROOMS
Category of Hotels
2014 2015 2016 2014 2015 2016
One Star 41 13 26 1193 530 785
Two Star 80 53 68 1902 1149 1922
Three Star 554 419 529 22724 17618 22633
Four Star 134 208 197 7969 9847 9972
Five Star 92 128 125 11744 15043 15230
Five Star Deluxe 113 138 127 23907 30032 27775
Apartment Hotels 113 1 - 249 126 -
Guest House 5 6 7 77 110 110
Heritage Hotels 42 36 30 1237 1163 1065
Silver Bed & Breakfast Establishment 52 481 283 242 2415 1359
Unclassified 117 420 - 8323 26256 -
Total 2333 1903 1394 79567 104289 81011
No.of Hotels No.of Rooms

(INDIA)
FUTURE SUPPLY
- The fiscal year 2016/17 saw the existing rooms supply grow by 6.8% over the previous year, resulting in the nationwide existing supply
totaling 1,19,219 rooms. This takes into account 6,289 new openings during the year.
- The proposed supply pipeline has reduced significantly from 2007/08. In 2016/17, the number stands at 47,067, a decrease of approximately
10,000 rooms from 2015/16. The increase in existing supply, coupled with the decline in proposed supply pipeline, is indicative of a substantial
number of previously announced rooms having entered the market in the last fiscal.
- It is anticipated that around 30,000 branded hotel rooms are to be developed over the following five years, taking the total anticipated branded
supply to 1,49,276 rooms by 2021/22.
GROWTH OF ROOM SUPPLY – INDIA PROPOSED BRANDED HOTEL ROOMS ACROSS MAJOR
(2000/01 – 2021/22) CITIES (2016/17 – 2021/22)

ROYAL ORCHID HOTELS
About Company
Royal Orchid (ROHL) is a mid-sized hotel company and operates five star, four star, serviced
apartments, resorts and convention/MICE and budget hotels. The company has 14
subsidiaries (13 domestic, 1 international), 4 Joint Ventures, 49 hotels in 35 locations with an
inventory of 3,300+ rooms. It operates under flagship brands – Royal Orchid, Royal Orchid
Central, Royal Orchid Suites, Regenta Hotels & Regenta Inn. Currently, it’s the 11th
largest
hotel company in terms of number of rooms in the country.
Investment Rationale
- Asset light strategy:
Out of the total number of rooms which company currently has, around 70% are under management
contract and only 6% are owned by the company. This strategy makes the business less capital
intensive, saving it from heavy fixed costs related to buildings and major operating costs. The
company charges 2-3% of the revenue as management fees and an incentive fee which varies from
6-8% of the gross operating profit. ROHL bears no expenses and even the responsibility of
renovation is on the property owner.
- UK Bespoke tie-up:
Company declared a strategic partnership with Bespoke Hotels Ltd. Bespoke Hotels manages over
200 properties worldwide, with over 50 represented hotels in India and stands as the UK’s largest
independent hotel group. This partnership will enable ROHL the ability to offer its guest hundreds
of hotels options across multiple global markets.
Share holding pattern as on 201709
Promoter % - 66.91
Free Float % - 30.39
Overview
Market Cap. - 476.4 cr.
Mid cap
52 Week High/Low - 227.40/ 81.75
Industry Hotels, Resort &Restaurant
MCap. (sector) - Rs 5,91,781.82 Cr
Sector Sales - Rs 1,01,639.67 Cr
Sector Net Profit - Rs 2935.99 Cr
Summary
Financials (cr.)
FY15 FY16 FY17
Revenues 147.75 158.53 162.53
PAT -6.79 -3.64 1.41
EPS -1.42 -0.48 0.91
P/E 00.00 00.00 98.87
Industry P/E 86.77
EV/EBITDA 8.03 10.47 19.16
D/E 0.56 0.52 0.54
RoCE 3.79 4.97 6.14
RoE -4.06 -2.26 0.87

ROYAL ORCHID HOTELS
- Growth in hotels & keys:
Company has been increasing the number of hotels in the country on regular basis. Recently, it opened 49th
hotel in Nashik and has a target of
50 hotels and 3500 rooms by the end of this fiscal year and addition of more than 1000 hotel rooms by next year.
- Increasing Occupancy & ARR
This year Occupancy ratio went up to 76-77% from 58% in previous year and the company is further expecting a steady growth in occupancy
and a 10% regular growth in ARR in the years to come.
Profit of the company rose by 52% in comparison with the previous year.
- Personnel training:
Human resource is one of the major assets in the industry. For this, company has taken up skill development in a large way; all its associates
are being trained under American Hotel & Lodging Association (AHLA) courses. This will result in enhancement of the services across the
board.
- Sale of non-core assets:
Currently, company has 2 non-core land parcels, one in Powai, Mumbai (15,000 sq. feet) and another in Tanzania.
Company is planning to dispose both the lands and is positive on selling off the Mumbai land in this fiscal year and expecting 50-53 crores
from it. Most probably the receivables from this deal will be utilized to pay off the standing debt, which is around 83 crores (consolidated).
- Reduction in GST rate:
ROHL used to pay 21% tax under the pre-GST regime. GST rate on restaurants and hotel stay has been reduced (room rent upto INR 7500)
from 28% to 18%. As majority of hotel’s room fall under this category, company is expected is get benefitted from this.
Risks and concerns-
- Increase in supply from formal/informal sources can keep a check on ARRs:
Around 66% of sales is done through OTA, mainly IBIBO and Makemytrip and 25% via company’s OTS.
- Brand name- all major league hotels give almost the same look, feel and service quality. It’s the brand that drives loyal customer
memberships which is a key to profits. So any harm to brand value of company will directly hit its financials.
- Joint Venture reducing profitability – Its Joint venture Ksheer Sagar Developers Pvt. Ltd. which is into civil engineering has been posting a
substantial loss since years.
- Large and branded hotels can provide stiff competition.

ROYAL ORCHID HOTELS
* as on 31st
December 2017
Pushkar and Nashik were added in January 2018 and February 2018 respectively.

ROYAL ORCHID HOTELS
Business Model (as on 31st
December 2017)
Categorization

ROYAL ORCHID HOTELS
Revenue Breakup
Growth – Properties & Rooms
Rooms &
Accomodation
57%
Food &
Beverage
35%
Others
8%
No. of Properties
No. of Rooms

ROYAL ORCHID HOTELS
PROFIT & LOSS STATEMENT
- Most of the expenditure after operating income is incurred in depreciation of assets and interest payment for debt. Decreasing interest expense
over the years has been leading the company towards profitability. And this is further expected to come down.
- On standalone basis, company has been profitable. It’s the subsidiaries that have been reducing the profitability of the company. Though, in
coming year, company is expecting most of its subsidiaries to start booking profits. Over the past 7 years, its other income has grown at a
CAGR of 10.5%. The biggest component on OI is the debenture interest received from subsidiary and dividend income. Interest on fixed
deposits also is a part of OI. This growth is significant as a substantial portion of the company’s investment in its subsidiary has been converted
into debentures, so the interest on the debentures will continue to accrue in the future and its subsidiaries are becoming profitable, so it is able
to get it return in investment from the subsidiaries in form of dividend income.

ROYAL ORCHID HOTELS
BALANCE SHEET
- Other assets include goodwill, deferred tax asset and other current assets.
- The continuous fall down in reserves and surplus is due to the loss that company had occurred since years.
- In the financial year 2013-14, company disposed off its furniture & fixture and plant & equipment in large quantities and it paid off a bank
term loan reducing its outstanding long term borrowings substantially.

ROYAL ORCHID HOTELS
CASH FLOW STATEMENT
- In FY 2014-15, company paid off a big portion of its debt (short term and long term) which reduced its liability and was a major reason for a
drastic change in its operating earnings and cash flow from financing activities. In FY 2014-15, Company also sold off its fixed assets (as
mentioned earlier), making its cash flow from financing activities to record a sweeping hike.
KEY RATIOS
METRIC/FIGURES 2017 2016 2015 2014 2013 2012 2011
RoA (%) 0.41 -1.06 -1.83 -8.30 -2.12 -0.84 2.21
RoE (%) 0.87 -2.26 -4.06 -21.34 -6.09 -2.28 5.35
RoCE (%) 6.14 4.97 3.79 -6.51 0.88 2.9 6.44
Receivable days 35.85 35.34 34.42 33.17 29.21 26.29 22.67
Inventory days 4.75 4.83 5.04 5.51 5.25 4.91 4.19
Payable days 97.52 92.06 71.31 79.41 77.59 60.48 47.32
Cash conversion cycle -56.92 -51.89 -31.85 -40.73 -43.13 -29.28 -20.46
Total debt/equity (x) 0.54 0.52 0.56 0.78 1.24 1.34 1.08
Current ratio (x) 0.69 0.45 0.50 0.58 0.38 0.29 0.66
Interest ratio (x) 1.17 0.81 0.65 -1.30 0.25 0.85 2.51
Cash flow per Share 9.24 8.56 9.58 5.51 17.94 9.30 16.12
Price to Cash flow 9.68 8.23 4.2 5.56 1.62 5.24 4.03
Free cash flow/ Share 4.64 2.26 2.93 -13.95 1 -24.88 -23.25
Price to Free cash flow 9.68 31.18 13.75 -2.19 29.10 -1.96 -2.8
Sales to Cash flow 6.46 6.80 5.67 9.47 3.28 6.34 3.46
EPS (x) 0.91 -0.48 -1.42 -13.77 -4.27 -0.96 4.49
P/E (adj.) (x) 193.25 0.00 0.00 0.00 0.00 0.00 14.50
P/BV (x) 2.91 1.20 0.67 0.49 0.38 0.61 0.81
EV/EBITDA (x) 19.16 10.47 8.03 -15.99 15.74 14.36 9.33

ROYAL ORCHID HOTELS
Du-Pont 2017 2016 2015 2014 2013 2012 2011
RoE (%) 0.87 -2.26 -4.06 -21.34 -6.09 -2.28 5.35
PATM (%) 1.35 -1.77 -3.92 -31.20 -8.08 -1.51 11.23
Sales/Total Assets (x) 75.32 71.94 64.13 56.49 34.44 50.58 57.12
Assets to Equity (x) 57.10 58 53.80 66.83 54.04 71.79 30.20
- Company is operating at negative cash conversion cycle implying efficient use of its working capital. Company does not have to pay for its
inventory until it has sold its final associated product, letting it to use cash on hand for other purposes.
- RoE has been increasing due to improvement in all profit margin, asset efficiency and equity multiplier.
OUTLOOK
Company looks set to take off with its robust expansion plans with increasing efficiency in working of its subsidiaries. With no
downward aspect in sight, the industry is expected to improve as demand growth will be pacing out the growth of supply.
Along with the subsidiaries making profit, the debt portion is also being planned to bring down.
This will not only increase its bottom-line by many folds but will also improve per share value and future earnings prospects.

SINCLAIRS HOTELS & RESORTS
About Company
- Company owns and manages chain of hotels in India. At present the company has 7 hotels
which are located in Darjeeling, Ooty, Port Blair, Burdwan, Dooars, Siliguri, Kalimpomg,
having an inventory of around 400 rooms.
- Debt free:
The company is running debt free for more than 10 years now, unlike most of the competitors in the
industry.
- Ownership:
All the 7 hotels it operates are owned by company itself along with zero debt give company a strong
leverage position for future growth prospects.
- Hill stations:
Company has all is hotels in varied and popular hill stations but are most of them are concentrated
in the eastern region of the country.
Risks and concerns-
- Management Transparency-
Management lacks transparency in its business operations which may keep the investors at bay and
limit its long term growth.
Promoter % - 56.96
Overview
Small cap
52 Week High/Low - 570/281
Summary
Financials (cr.)
FY15 FY16 FY17
Revenues 29.26 39.04 47.06
PAT 4.74 7.05 9.01
EPS 8.51 12.66 16.18
P/E 33.78 25.47 18.4
Industry P/E
EV/EBITDA 13.69 10.02 9.99
D/E 0.00 0.00 0.00
RoCE 10.78 16.09 18.05
RoE 7.13 10.03 11.49

INCOME STATEMENT
- Over the last 5 years, company has been growing its sales at 27% CAGR and bottom line at 24% CAGR.
- The company hasn’t borrowed since years and is virtually a debt-free firm.
-Along with positive EPS, company has also been giving out dividend year after year.

BALANCE SHEET
- Company came out with a buy-back in FY2013-14 at Rs.390 per share (41% premium).
- Capital Work In Progress (CWIP) includes expenditure on new/existing projects which are pending allocation. It has been reducing over the
years implying company has been finishing its ongoing projects.
- Investments in various fixed and floating rate schemes have been done in the current year.

CASH FLOW STATEMENT
- In FY 2013-14, company gave a loan and sold its equity shares to an associated company- Savannah Hotels Pvt. Ltd. which ceased to be an
associate from July 25, 2013.
- In current year, company paid a dividend of INR22,582.
KEY RATIOS
METRIC/FIGURES 2017 2016 2015 2014 2013 2012 2011
RoA (%) 8.62 7.46 5.12 7.56 15.18 3.36 5.98
RoE (%) 11.49 10.03 7.13 9.56 18.16 4 6.91
RoCE (%) 18.05 16.09 10.78 12.93 19.75 6.04 9.51
Receivable days 10.80 10.26 9.27 13.66 15.24 14.86 12.89
Inventory days 2.53 3.38 3.81 4.47 5.13 6.09 4.81
Payable days 14.52 17.70 19.44 23.25 23.35 20.72 18.17
Cash conversion cycle -1.19 -4.06 -6.36 -5.12 -2.88 0.23 -0.47
Current ratio (x) 7.94 2.24 0.67 1.09 1.68 2.33 12.33
Interest ratio (x) 66.26 62.76 53.75 92.84 191.30 86.62 90.51
Free cash flow/ Share 30.95 12.91 -1.83 3.89 7.27 -11.29 -17.41
Price to Free cash flow 12.92 24.97 -156.90 62.93 40.16 -24.04 -18.55
EPS (x) 16.18 12.66 8.51 12.51 23.60 5.09 8.62
P/E (adj.) (x) 18.4 25.47 33.78 19.58 12.37 53.30 37.48
P/BV (x) 2.4 2.46 2.37 2.08 2.2 2.13 2.54
EV/EBITDA (x) 9.99 10.02 13.69 17.07 28.00 26.21 18.02

Du-Pont ratios 2017 2016 2015 2014 2013 2012 2011
RoE (%) 11.49 10.03 7.13 9.56 18.16 4 6.91
PATM (%) 29.62 28.50 24.02 41.39 79.05 31.85 47.44
Assets to Equity (x) 21.82 9.26 26.23 26.38 9.85 10.76 4.69
OUTLOOK
Given its single straight forward business model and debt-free financials, the company is on a firm hold to seize the benefit of
growing industry and keep booking profits year after year.
The factor that the management doesn’t disclose much about its business operations may leave the investors unconvinced,
limiting its long term growth.

BYKE HOSPITALITY LTD.
About Company
The Byke Hospitality is a mid-market leisure hospitality services company. It has a business
model combining asset light approach along with targeting niche vegetarian segmentin budget
hotels. The company has 2 business segments: Owned/Leased hotels and Room chartering.
Currently, it has 12 properties (3 yet to be operational) (2 owned and 10 leased) with an
inventory of 874 rooms.
Investment Rationale
- Asset light strategy:
Byke operates under a unique asset light model in which it acquires properties on lease bases
(usually 15 years) with a lock-in period of 3 years, which is a part of the risk-management policy of
the company. This significantly reduces stress on the balance sheet and gives Byke an advantage
over its peers as it is easier for the company to expand its business and utilize its capital in a more
profitable manner.
- Chartering Business:
Under the chartering business, Byke buys room nights of mid-budget hotels in bulk across leisure,
tourist and religious destinations during off-peak seasons. In the peak seasons they sell these room
nights. During the peak season time, the room-nights are sold to the customers by the travel agents
who in return earn a commission. Currently, the company has a presence in 60+ cities with 300+
active agents. It has relation with 500+ hotel owners and occupancy of chartered rooms has reached
to 95% and contributes to more than 50% of total revenue. This model gives insights to the
company on where to expand in hotel segment.
Promoter % - 45.29
Overview
Mid cap
52 Week High/Low - 220.70/150.25
Summary
Financials (cr.)
FY15 FY16 FY17
Revenues 181.42 231.52 269.98
PAT 20.03 25.94 31.70
EPS 5.00 6.47 7.90
P/E 33.07 24.19 19.75
Industry P/E 65.83
EV/EBITDA 18.00 12.03 10.03
D/E 0.12 0.09 0.06
RoCE 25.69 33.74 34.42
RoE 21.67 23.45 23.55

- Robust Expansion plan:
Byke is a fast growing hospitality services company, currently operating hotels (own + leased) at popular holiday destinations such as Goa,
Matheran, Jaipur, Manali, Udaipur, Shimla and Mumbai (Thane). Its average occupancy level stands at around 65% at the end FY17. Going
ahead, the management has already identified the new locations that it plans to enter and is targeting to add close to 8 new properties by the end
FY18. The 8 new properties are likely to add close to 400-500 rooms. These expansion initiatives would help the company to become a pan
India player. The current expansion is likely to be on the lease model, which would not require any significant capex. Company is also looking
forward to set its footprints in Franchise model.
Risks & Concerns
- Customer Reviews:
Company’s various hotels like Byke Old Anchor in Goa which has an inventory of 240 rooms have been getting negative reviews by customers
for issues related to basic amenities like unclean bed sheets, unhygienic sanitation, impolite and ignorant staffs etc.
- Revenue Concentration:
Around 51% of company’s revenue comes from Charter model and more than 50% from the remaining 49% comes from food and beverages
section, implying that company is earning comparatively minimum revenues from its core business of room rent.
- Lack of long-term moats in Business Model:
For the Charter model, company doesn’t have any moat to sustain the business for long term. This model is completely dependent on agents
and it is easy to lose agents to competition due to margin differentiation. Also, this model can be duplicated with ease.
The hotel owners can also remove the company from the business chain and can go for contacting agents directly. As this model accounts for
most of the revenue for the company, any hit to it will directly lead its financial health to fallback.
This model is also in a stiff competition with other players like OYO rooms, Stayzilla etc.
And given its poor ratings and reviews, expansion through leasing and franchise model doesn’t appear much promising.

Next Phase of Growth

PROFIT AND LOSS STATEMENT
- Other assets include goodwill, deferred tax asset and other current assets.
- With improving reserves, company has been regular in paying off the debt. This will ensure the company to become more competitive in the
market as its expansion plans come into effect.

BALANCE SHEET
- Over last 5 years company has grew its sales at approx. 20% CAGR and bottom-line at approx. 30% CAGR.
- Implying the expenses have been managed effectively and company has made room to improve margins over the years, ensuring continuous
improvement in per share value.

CASH FLOW STATEMENT
- Factors like improved profits, increase in current liabilities resulted in an improved CFO in FY 2015-16 and FY 2016-17.
KEY RATIOS
Metric/Figures 2017 2016 2015 2014 2013 2012 2011
RoA (%) 18.31 17.55 15.33 13.30 7.47 2.91 4.19
RoE (%) 23.55 23.45 21.67 20.21 11.12 3.70 4.70
RoCE (%) 34.42 33.74 25.69 24.38 15.76 5.53 6.62
Receivable days 27.08 25.01 24.89 26.53 26.87 17.21 14.19
Inventory days 11.51 9.65 12.13 14.10 21.72 35.64 21.75
Payable days 11.09 15.85 20.20 28.04 33.32 13.82 1.51
Cash conversion cycle 38.5 18.81 16.82 12.59 15.72 39.03 34.43
Current ratio (x) 2.57 2.12 1.78 1.28 1.12 1.60 4.71
Interest ratio (x) 43.4 26.39 14.79 11.05 5.88 7.47 364.04
Free cash flow/ Share -0.1 1.04 1.28 4.33 -2.84 -7.23 -13.37
EPS (x) 7.9 6.47 5.00 3.96 1.93 0.6 0.59
P/E (adj.) (x) 19.75 24.19 33.07 40.38 58.07 108.36 70.88
P/BV (x) 3.8 5.18 6.62 7.56 6.22 3.87 2.57
EV/EBITDA (x) 10.03 12.03 18.00 22.76 25.90 52.73 38.97

Du-Pont ratios 2017 2016 2015 2014 2013 2012 2011
RoE (%) 23.55 23.45 21.67 20.21 11.12 3.70 4.70
PATM (%) 17.95 17.13 13.98 13.65 11.45 7.23 9.70
Assets to Equity (x) 19.89 22.90 25.79 32.73 37.85 20.62 7.48
OUTLOOK
From the business model point of view, company looks a risky bet for long term as its core business of room rents is earning
minimal revenue for it. Although, the management seems aggressive in its expansion plans but looks like one of the basic and
vital factors- Brand development, which is required to determine the long term sustainability of a hotel, is being ignored by the
management.
Hotel is going to get benefitted in short term due to its current strong financial health, improving industry state but if the
management doesn’t address to the basic requirements of its customers then downward trend for the company isn’t very far too.

COMPARISON
METRIC/FIGURES (Cr.) Royal Orchid Hotels Byke Hospitality Sinclairs Hotels EIH Indian Hotels Kamat Hotels
Market Cap. 476.4 652.99 218.9 9065 15400 225.94
Sales 162.53 269.98 47.04 1527 4010 185.45
PAT 1.41 31.7 9.01 109.5 -83.16 44.53
Interest Coverage 1.17 43.4 66.26 10.33 2.31 2.56
RoE 0.87 23.55 11.49 4.29 5.69 116.53
RoCE 6.67 34.42 18.05 6.38 9.93 10.49
P/E 193.25 19.75 18.4 85.46 235.96 5.06
P/BV 2.91 3.8 2.4 3.5 3.75 3.73
D/E 0.54 0.06 - 0.14 0.78 10.44
EPS 0.91 7.9 16.18 1.86 -0.6 18.88
P/CF 9.68 25.94 11.92 28.29 22 1.26
EV/EBITDA 19.16 10.03 9.99 26.43 28 13.12
* as on 20/3/2018
Bibliography
- World Travel & Tourism Council (WTTC)
- Data from individual Company website, annual report, investor presentation, conference call.
- Ministry of Tourism
- HVS website
- IBEF website

Disclaimer
This report should not be taken as a recommendation and is solely for information purpose.
Authored by Karan Agarwal
(An individual investor and not a SEBI registered analyst)
Email: karan.agarwal0111@yahoo.com
LinkedIn: www.linkedin.com/in/karanagarwal0111

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