RESEARCH

PROJECT REPORT

QUALITY OF WORK
LIFE IN HOTEL
INDUSTRY

Compiled by:

APARNA KAPOOR

3 RD YEAR

IHM, LUCKNOW

GUIDE’S CERTIFICATE
I have the pleasure to certify that a student of

____________________ has pursed his research work

and prepared the PROJECT under my supervision

and guidance . The work is the result of this own

research to the best of my knowledge. This is

being submitted to the Institute for Integrated in

Learning Management for the Partial fulfillment of

the requirements of the three year full- time

degree in hotel Management.

Guides Signature
 ACKOWLEDGEMET

I gratefully thank ________________ who guided me for

the complication of this project.

He gave us all the important information required for the

project. Without his help the project would not have been
possible.

I am grateful to all the people who have given suggestions

to improve the project.

OBJECTIVE
• To find the Characteristics of Hotel Industry

• To find the Service quality

• To find the Service Marketing

• To find the Human Resource Strategies.

• To find the Training & Development

• To find the Working Condition

• To find the Welfare Association

• To find the Action Plan

• To find the Factors Affecting Demand & Supply

• To find the SWOT Analysis of Hotel Industry

CHARACTERISTICS OF HOTEL INDUSTRY

A H otel is a funny industry. Almost every businessman
uses their services, but a few know how they really work.

Never before has the hotel industry’s bottomless bulged

so much from the boom in tourism, business or
otherwise. Though the fact remains, the hotel industry
depends on the tourism sector.

The major characteristics of Hotel Industry are:

a) The Hotel Industry is a labour intensive requiring

skilled labour, being a service-oriented industry.

b) The industry is also highly capital intensive due

to soaring real estate prices and has a gestation
period of 3 to 5 years.

c) The industry is seasonal in nature, especially for

hotels in tourist places where the occupancy rate
touches 100% in peak season and 30-40% in off
season.

d) Most of the approved hotels have collaborations

with foreign hotels and have Franchise
agreements with international hotel chains.
In India, hotels can be broadly classified in two
categories viz. Approved by Department of Tourism
(DOT), Government of India and non approved hotels.
Hotels are categorised into a number of segments. The
Department of Tourism has assigned ratings to the hotels
from 1 star to 5 star deluxe depending on the facilities
offered.

Department of tourism has also added one more category

of Heritage class hotels which comprises old palaces
converted into hotels.

Hotels have various working codes . T hese are referred

to in packages designed for the consumers:

1. Category of Rooms

i) (a) Normal (b)Deluxe (c)Executive

(d) Suite (e)Deluxe Suite (f) Presidential Suite

(g) Elite (h) Classic (i) Comfort

ii) Air-conditioned or Non Air conditioned rooms.

2. Plans of Hotels

Hotels have various Meal plans which they work on:

EP (European Plan) Room only basis

CP (Continental Plan) Room plus Breakfast basis

MAP (Modified American Plan) Room Plus

Breakfast, plus one meal i.e. launch or Dinner. Also
called Half Board.

AP (American Plan) Room plus three meals

(Breakfast, launch & Dinner). Also full board.

3. Tariff of Hotels are presented as follows:

FIT (Free Independent Traveller). This is applied for

individual travelling.
 INTRODUCTION

The 3 commandments of this philosophy are: -

• The Customer is the King

• In God only we trust, rest all gather data

• Variation is the enemy of all processes

Manufacturing, automobile, aviation, medical transcription,

software, ITES, banks and even other financial institutions are
following this methodology.

The question then is why not Hotels?

If the first commandment of Six Sigma talks about the customer,

how can we leave out an industry which is the epitome of
customer service and thrives purely on achieving customer delight
consistently.

In an industry where customer interactions occur on an hourly

basis, each customer touch point is critical for building
personalised service credibility and developing customer affinity.

Some of the areas/ processes where this approach may add value:
-
Hotel-wide

• Enhance Customer Loyalty

• Reduce Employee attrition

• Productivity/Efficiency Improvement

• Improve Work-life balance

• Reduce Billing errors/losses

• Developing better performance measures/ metrics

• Increase Revenue

• Reduce Cost

• Capture 'Voice of Customer' data

Front Office Operations/ Sales & Marketing

• Reduce wait time during peak check-in time

• Reduce wait time during peak check-out time

• Eliminate billing errors and improve accuracy

• Reduce No shows

• Increase Occupancy

• Optimal utilisation of the current product mix

(rooms) to increase revenue
 • Increase customer delight at the Executive Club

• Reduce/eliminate loss calls (Operators area)

• Accuracy of information

Food and Beverage Service / Production

• To maintain optimal inventory

• Minimise wastage/pilferage

• Standardised output of Food and Beverage

• Reduce the time from order to service

• Optimal utilisation of current product mix

(F&B/Outlets) to increase revenue

Accommodation Operation (Housekeeping)

• Reduce the turnaround time of making/turning

down a room

• Standardisation of cleanliness across areas

Purchase/Stores

• Reduce Inventory surplus

• Cost Benefit Analysis between cost of inventory and

cost of storage of products where prices vary
seasonally

• Standardise the operating procedure of issuance to

various departments

• Reduce the turnaround time of issuance to various

departments

Human Resources/ Personnel

• Accuracy of payroll

• Documentation management

• Reduce the turnaround time of recruitment

• Reduce the turnaround time of relieving

• Increase the employee satisfaction rate

Leveraging the approach of the Starwood group, our leading hotel

chains in India viz. Oberoi, Taj, Hyatt, Meridien, Intercontinental,
ITC, Leela, Park etc can also benefit from this program. In order
to enhance Customer Experience and Reduce Cost, all they need
to do is welcome Six Sigma with open arms and make it a part of
their culture.A number of Hotel Management graduates like me
are today a part of the Six Sigma galaxy and we wait for the day
when Six Sigma becomes a household name in the hotel fraternity
- an industry which launched their careers, an industry which
would remain their first love.
 SERVICES MARKETING

THE CONCEPT OF SERVICES

To define service narrowly as only relating to service industries is

clearly incorrect. Today there is an increasing trend to attempt to
differentiate product by service elements.

Understanding the position of a particular service on each

continuum, and the position of competitors, is an important step
towards finding possible sources of competitive advantage.
POSITIONING AND DIFFERENTIATION OF SERVICES

The positioning of a restaurant is a very important aspect for the

marketers since it helps them to recognize the component
characteristic of the services the customers need. Combining an
analysis of customer needs on a segment-by-segment basis with an
understanding of competitive offerings enables the marketer to
identify opportunities for serving a particular segment’s needs
better than anyone else. If offering such a service is seen as
compatible with the organization’s resources and value, then the
firm should be able to develop a profitable niche for itself in the
market.

Here we have to understand that the buyers have different needs

and hence they are attracted to different offers. It is therefore,
important to select distinguishing characteristics, which satisfy
the following criteria.

• Importance – the difference is highly valued to a sufficiently

large market.

• Distinctiveness- the difference is distinctly superior to other

offerings, which are available.

• Communicability – it is possible to communicate the

difference in a simple and strong way.

• Superiority – the difference is not easily copied by

competitors.
 • Affordability – the target customer will be and is willing to
pay for the difference. Any additional cost of the distinguishing
characteristic(s) will be perceived as sufficiently valuable to
compensate for any additional cost.

• Profitability – the company will achieved additional profits

as a result of introducing the difference

It is very important for the restaurants to position their services

and products to recognize the component characteristic of the
services the customers need. It helps the Hotel managers to
identify opportunities for serving a particular segment’s needs
better than anyone else.
 SERVICE QUALITY:

One of the major ways a service firm can differentiate it

is by delivering consistently higher quality than its
competitors do. Studies have shown that service quality
affects customer satisfaction, which in turn affects
buying intentions. Outstanding service quality can give a
service company to superior sales and profit
performance. The key is to exceed the customer’s service
quality expectations.

Productivity:

There are seven approaches to improve service

productivity.

1. Work more skillfully.

2. Increase the quantity of service by surrendering some

quality.

3. Industrialize the service by adding equipments and

standardizing production.
4. Make obsolete the need for a service by inventing a
product solution.

5. Design an effective service.

6. Present customers with incentives to substitute their

own labor for company labor.

7. Harness the power of technology.

 HUMAN RESOURCE STRATEGIES

The subject matter of personnel policies is as wide as the

scope of personnel management. In most companies,
polices are established regarding various functions of
personnel management which are as follows:

1. Employment: All policies concerning recruitment,

selection, and separation of employees are included in
this function. Employment policies should provide
clear guidelines on the following points:

a. Minimum hiring qualifications.

b. Preferred sources of recruitment.

c. Reservation of seats for scheduled castes, scheduled

tribes, handicapped persons and ex-servicemen.

d. Employment of local people and relations of

existing staff.

e. Reliance on various selection devices such as

university degrees, tests, interviews, reference
checks, physical examination, etc.
 f. Basis (length of service or efficiency) to be followed
in discharging employee.

g. Probation period.

h. Layoff and rehiring.

2. Training and Development:

a. Attitude towards training- whether it is regarded as

a device overcome specific problems or as a
continuing relationship between superior and
subordinate.

b. Objectives of training

c. Opportunities for career development.

d. Basis of training

e. Methods of training - on the job or off the job.

f. Programmes of executive development.

g. Orientation of new employees.

3. Transfer and Promotions:

a. Rationale of transfer.

b. Periodicity of transfer.

c. Promotion from within or outside the organisation.

d. Seniority required for promotion.

e. Relative weightage to seniority and merit in

promotion.

f. Seniority rights.

g. Channels of promotion.

4. Compensation

a. Job evaluation system.

b. Minimum wages and salaries.

c. Method of wage payment.

 d. Profit sharing and incentive plans.

e. Non monetary rewards

f. Executive stock option plan

g. Procedure for getting pay

h. Whether to pay prevailing or more than prevailing

salary scales.

5. Working Conditions:

a. Working hours.

b. Number and duration of rest intervals.

c. Overtime work.

d. Shift work.

e. Safety rules and regulations.

f. Leave rules.
 g. Employee Services and Welfare:

a. Types of services - housing, transportation, medical

facilities, education of children, group insurance,
credit facilities, purchase of company's products at
discount, company stores, social security, etc.

b. Financing of employee services

c. Incentives to motivate.

6. Industrial Relations:

a. Handling of grievance

b. Recognition of trade union.

c. Suggestions schemes.

d. Discipline and conduct rules.

e. Workers' participation in management.

f. Employees' news sheet and house journals.

Present Marketing Strategies of Major Players

As occupancy rates is premium hotels drop, and the

demand for mid range and budget hotels is growing,
most hotel chains are now turning to the less glamorous
segments for growth. Falling occupancy rates, at an
average of 10-15% in the past year, has made it clear
that hotels can no longer rely on their premium
categories alone to rake in the kind of money that they
were:

Consider the case of ‘ The East India Hotel’ owned

Oberoi chain of hotels, that is investing Rs. 1500 crore
over the next four years. The thrust of this investment
will be for leisure destination properties & budget hotels
in Jaipur, Cochin, Delhi, Udaipur, Mysore, Madras,
Coimbatore, Varanasi Jaisalmer & Jodhpur.

When East India hotels, which is known for its strictly

luxury - oriented hotels, concentrates the better part of
its future investment on the budget segment, it implies
that, while on the micro level, the hotel majors are
chalking out strategies to counter the slump with
aggressive marketing by the way of discount & freebies,
on the macro level, a distinct trend is shaping up. The
trend is - Hotel majors are looking towards expanding
their base hence, looking down towards the mid-market
category.

The Taj Group of Hotels, part of the Indian Hotel

Company Limited (IHCL), has definite future plans for
its Gateway & Residency brand to keep pace with its
competitors. Its Rs. 800-900 crore, 5 year expansion
plans includes the setting of one hotel in Rajasthan.

In a market a particular service industry does marketing

based on three basic strategies. They are:

⇒DIFFERENTIATION

⇒SERVICE QUALITY

⇒PRODUCTIVITY

Differentiation

This can be done through:

a) Offer

b) Delivery
c) image

♦ The offer can include innovative features to

distinguish it from competitor’s offers. What the
customer expects is the primary service package and
to this can be added secondary service features.
E.g., the high-tech travelers can be provided with
computers, fax machines, e-mails, by a hotel in their
accommodation.

♦ A service company can distinguish its service delivery

quality by having more able and reliable customer-
contact people than its competitors.
E.g., in a hotel, a more attractive physical
environment can be developed in which the services
are delivered.

♦ Service companies can also work on differentiating

their image. They often do this through symbols and
branding. E.g., the Taj Group of Hotels have their own
symbols which they use in their stationery, crackers,
bed-sheets, advertisements and incluvery tangible that
is included in their service.
Hotels Low Occupancy in a Row

IT was a year of waiting for the Indian Hotel Industry -

for the guests who never came and the Government that
dithered and stumbled as it tried to put forward a
tourism policy to lure foreign tourists to India.

The year saw the red carpet rolled out for foreign tourist
with their dollars but only 2.55 million of them are
expected to touchdown by the end of the year as per the
Government estimates - a dismal performance by any
standards.

With the turn around in the economy in the second half

of the year and a new Government installed things will
hopefully be better in the new year as foreign investment
creeps up slowly.

A silver lining was offered by the domestic tourists whose

number continued to swell as the Indian middle-class zig
zagged across the country discovering and rediscovering
the eternal tourist dream foreign Indian hoteliers to
recognise the home market.
This could be gauged from the fact that hoteliers.
Including the big hotel chains, have started focussing on
budget hotels and four-star hotels exemplified by the
Trident Hotels. Major hotel groups have also been on an
expansion and revocation spree during the year in
preparation for better times in the new millennium. Like
ITC Hotels is currently expanding its Maurya Sheraton
Hotel in New Delhi besides planning to open one more
five-star hotel in the Capital and also in Mumbai by the
middle of next year.

The year also witnessed major international chains

setting up shops in India as the Marriott in Goa readies
itself for an opening by the end of this year.

The Hilton, Chennai, heralded the return of the

American hotel major even as the Radisson group
expanded its presence in India through several sub-
brands.

Along with this, all major chains have also expressed

interest in acquiring stake in the Government-owned
India Tourism Development Corporation (ITDC)
managed hotels which have been put on the block for
sale.
The New Year will have to see the Government take a
final decision on this front if it wants privatisation in the
sector to take off.

Several States have shown considerable progress on this

front, especially Madhya Pradesh which has already put
up various properties for long term lease to the private
sector as the State Government takes on the role of
facilitator leaving actual management of the hotels and
resorts to the private entrepreneur.

Another problem which remains unresolved during the

year was the open sky policy which the entire tourism
sector has been advocating to bring in foreign tourists.
Hotel Occupancy Decreases

The Indian Hotel Industry has registered a fall in

occupancy levels from 52.2 per cent in 1999-2000 to
49.7 in 2000-01. While average room in the same period
increased by 2.7 per cent, a decrease in revenues of 2
per cent in 2001-02 was recorded.

Inspite of falling revenues, the Indian Hotel Industry

showed an inability to manage departmental operating
expenses such as rooms, Food and Beverages, telephone
etc., with these expenses rising 10.2 per cent during this
same period.

Undistributed operating expenses like administration,

marketing, operation and maintenance too were
uncontrolled and rose by 10.9 per cent.

Food sales showed a growth of only 0.1 per cent,

perhaps reflecting the supply and popularity of
independent restaurants in many Indian cities, as well as
consumer resistance to the exorbitant pricing and tax
levels at in-hotel restaurants. Telephone revenue showed
a fall of 8.7 per cent, reflecting the increasing use of E-
mail and mobile phones.
"In the changing market scenario in the country the
hospitality industry has to demonstrate an ability to
drastically cut costs and improve productivity otherwise
many hotels will soon find their existence threatened.
There must be paradigm shift towards a value
proposition to consumers and the industry must reinvest
itself in terms of product, service and pricing.

The government must rationalise tax structure, which in

some cases as high as 40 per cent.

The significance due to reliability and viability of the

database drawn from the audited results of participating
hotels form almost all the major chain and key
independent hotels.

The five leading countries on rooms yield are Italy,

France, Russia, UK, Sweden, while the bottom five are
Egypt, Pakistan, India, Kenya and Morocco. Even in
occupancy, India ranks third from the bottom after
Kuwait at 42.7 per cent and Kenya at 47.5 per cent.

As a result, operating profit recorded a staggering fall of

20 per cent from 40.9 per cent to 33.3 per cent.
Hotel Industry Seeks Service Tax Abolition

The hotel and restaurant industry has sought abolition of

five per cent service tax. There is no justification in
levying service tax as they are already paying 10 per
cent expenditure tax and sales tax on the same bill.

The revenue collected by the Government by way of

service tax is the range of Rs.100-150 crores.

The Government had imposed service tax on the industry

in 2002, mainly targeting the unorganised sector of
caterers, who did not pay any tax on transactions. But
the Government exempted service tax for shamiana
contractors last years.

The hotel and restaurants industry to be included in the

list of infrastructural facilities. If the hotel industry is
included in the list of infrastructure sectors, then 100 per
cent exemption from income tax will be available for the
first five years. Loans from financial institutions can
also be availed of.

On recession in the industry, the industry was hoping to

come out of it in 2002; but hopes were dashed since the
growth in the peak season of December to February was
just three to four per cent.

The industry is expecting a growth rate of over five per

cent in the coming years. The trend of brand hotels
entering into contracts to manage other hotels seems to
be gaining ground and would be a welcome boost to the
smaller hotels to become a part of the organised sector.
Hotel Sector Demands All Export Incentives

The hotel industry has demanded the status of an export

industry with all tax incentives at par with computer
software exporters besides withdrawal of expenditure tax
on guests making payments in foreign exchange.

In its pre-budget memorandum although the hospitality

industry had been granted the status of export industry
last year, in reality it had only got the status of export
industry last year, in reality it had only got the status of
export house as the Government had not extended all
incentives as available to other exporters.

"Hotels and tourism units earning foreign exchange are

not treated as exporters and are not treated as exporters
and are not given all the incentives available to other
exporters. The Government should new give us the
balance of the incentives available to exporters.

The industry had last year been given income tax

incentives facilities of EPCG (Export Promotion Capital
Goods) imports, EEFC (Export Earner Foreign
Currency) accounts and some other benefits.
Pointing out that exporters are not required to pay any
local taxes on their foreign exchange earnings.

Reduction of service tax leveled on the hotel and

restaurant industry since 1999. The threshold limit of
turnover for service tax should be the same as for
exemption of excise duties for small-scale units as a
large number of restaurants have a very small annual
turnover for services on which the tax is levied.
 ACTION PLANS

1. Recruitment Plan:

a. Number and type of person required

b. Time periods when required

c. Possible sources of recruitment

d. Selection techniques to be used

e. Any special problems anticipated and how they are

to be overcome.

2. Redeployment Plan:

a. Transferring to other units.

b. Retraining for new jobs.

3. Redundancy Plan:

a. Number and names of redundant

 b. Departments/units where redundancy exists

c. Time of redundancy

d. Retraining whenever possible

e. Voluntary separation

f. Retrenchment and layoff

4. Promotion Plan:

a. Ratio of promotion to external recruits

b. Basis of promotion

c. Reservations, if any, in promotion.

5. Transfer Plan:

a. Transfer policy and rules

b. Channels of transfer
6. Training and Development Plan:

a. Number of people to be trained

b. Existing employees to be retrained

c. Skill areas for training

d. Availability of trainers

e. Methods of training

f. Training period

g. New courses to be developed and changes to be

made in existing courses.

7. Productivity Plan:

a. Work simplification

b. Mechanisation and automation

c. Job redesign

d. Training and refresher training

 e. Incentives and profit-sharing schemes

f. Participation

g. Productivity bargaining

8. Retention Plan:

a. Improving compensation levels

b. Providing opportunities for career development

c. Changes in work requirements

d. Opportunity for participation

 ACTIVITY FLOW CHART

Corporate Mission - Strategy -

Structure

Planning Horizon - HRI System - Inventory

Profile

Changes + Needs +
Deployment

Need for Defining

HRP

Basis for Planning - Demand - Supply

- Environment (Ext. - Int.)

Methods - Judgement -
Ratios

Organisation Process -
Approvals

Redeployment/Retraining/Voluntary
Retirement Scheme
 SWOT Analysis of the Hotel Industry

Strengths Opportunities

• India’s rich cultural • Boom in tourism

heritage
• Privatization of airlines
• Second largest forex
earner • Increase in disposable
incomes
• Demand exceeds
supply

Weaknesses Threats

• Capital intensive • Sensitive to

disturbances in the
• Labour intensive country

• Non-availability • Competition from

of land International chains

High taxes may render

India as an unviable
destination.
 Factors Affecting Demand & Supply

There is an enormous demand supply mismatch in the

industry. This is mainly due to the continuously inflow of
tourist into the country. On the other hand, there has not
been a corresponding increase in the number of rooms.

Factors Affecting Demand

1. Corporate Travellers:

Large hotel companies have historically earned around

65 per cent of their revenues from foreign travellers.
There was pronounced seasonally in tourist arrivals into
Indian with April - September accounting for around 40
per cent of total arrivals and the second half for 60 per
cent. However, in the post - liberalisation era, with the
entry of corporate travellers, off-season occupancies in
business hotels in the metros have shot up to around 80
per cent as compared to 60 per cent earlier. As result,
most of the hotels in the metros have positioned
themselves as corporate hotels.

2. Industrial Activity:

With the opening up of the economy, MNCs have made

an entry into India and this has led to flurry of industrial
activity in the country. A number of companies are now
setting up new hotels to cater to the increase in demand.

3. Service:

The industry, being a service industry, has to provide

certain facilities and service to its users. There is a
direct relation between customer satisfaction and the
occupancy rates. The business traveller, who has stayed
in international hotels, demands for similar facilities in
the domestic hotels thus necessitating tie - ups with
international chains.

Therefore, hotels are striving hard to provide a “home

away from home” and an “office away from office” to
the customers. To lure the international customer, who
expects the best, hotels have introduced various facilities
like health club, golf club, etc.

Latest communication facilities like E-mail, and fax, are

becoming common in most of the 5 star hotels.
Management is also paying particular attention to
individual / group preferences, as these are return
visitors. Companies are also wooing customers by
giving them discounts. Corporate discounts range
between 10 to 15 per cent while the discounts to tourists
are around 25 per cent. In addition, hotels are also
offering innovative value - added series to lure the
customer, like the Oberoi's have gone one-step ahead by
computerizing all the operations. Others have also set
up cyber clubs to enable the tourists to surf the net. Only
Hotels offering the best services are expected to survive
in the long run.

4. Disposable Income:

Given that political disturbances act as deterrent, over -

relined on foreign tourist might cripple the industry. It
is hare that the domestic travellers come to the resource
of the industry. Of late, with the rising disposable
incomes, there has been a perceptible shift in the
spending pattern of the domestic travellers. A 250
million strong middle class offers a potential market for
the industry. With the domestic travellers preferring
reasonably priced accommodation, the demand for the
budget hotels and holidays resorts has increased.
Therefore, rising incomes will have beneficial impact on
the industry.
Factors Influencing Supply:

1. Land:

Land is the Most critical for the growth of the industry.

The prices of land in prime cities like. Mumbai, Delhi,
Calcutta, Bangalore, etc. are astronomically high. In
fact, the land prices in Mumbai are the highest in Asia
next only to Hong Kong. Various factors like location
importance as a tourism or business center, availability
of land, presence of an international airport, etc. have a
bearing on land prices. Hotels in centres of business,
catering to corporate travellers and foreign tourists
usually have high occupancy rates.

2. Regional Concentration:

Around 70 per cent of the rooms are situated in 12

manor cities. Mumbai and Delhi alone account for 42
percent of the total rooms, since these two cities have a
high incidence of business traffic. This leads to high
occupancy rates in these towns resulting in
unprecedented increases in average room's rates (ARRs).
The ARRs in these two destinations has grown at an
average compound annual growth rate of above 20 per
cent in the past. Mumbai has 7,102 rooms while Delhi
has 7,328 rooms in 5-star category. In contrast, Hong
Kong has more than 40,000 rooms.

3. Occupancy rates and ARRs:

The high occupancy rates, as seen above, have led to

hikes in the room tariffs leading to higher profitability
for the companies. Lured by high profits a number of
players are entering the industry.

4. Demand - Supply Gap:

With the eight plan target to add 55,000 rooms at an

outlay of Rs. 39,000 crore by the end of 1997 out of
reach, there is likely to be a shortage of 37,000 rooms
which is expected to increase to 70,000 rooms by 2002.
The government has estimated that at least 1,25,000
classified hotel rooms are required to accommodate the
foreign business and leisure travellers and domestic
travellers in the coming years. This clearly represents
the gross demand supply mismatch prevalent in the
industry.

To meet the demand, the government has approved in all

a total of 592 hotel projects (31,026 rooms involving a
total investment of Rs. 10,000 crore, which will result in
a 66 per cent incase in supply. These projects are
expected to come on stream by the year 2005. The 5 star
segment accounts for only 20 percent of this increase
while 53 per cent of the new rooms are in the 3 star
segment. This implies that the new projects are highly
skewed towards the budget hotels and on completion, the
share of the 3 star segment will increase from 16 per
cent to 30 per cent. Even if the existing projects are
completed there is expected to be a shortage of about
30,000 rooms.
 CUSTOMER SATISFACTION & RETENTION

CUSTOMER SATISFACTION

‘Satisfaction is defined as a post consumption evaluation that the

chosen alternative is consistent with prior beliefs and
expectations (with respect to it). Dissatisfaction, of course, is the
outcome when this confirmation does not take place.

Consumer satisfaction is the outcome when expectations are

matched by service experience, conversely, dissatisfaction occurs
when there is a mismatch and expectations are not fulfilled by the
service delivered.

The Importance of Customer Satisfaction

In principle, an organization can increase its turnover in two

ways:

1. Increase sales to existing customers: In order for the

organisation to do this, the customers need to be satisfied and
still want to buy more products and services from the
organisation.

2. Win new customers: In order to the organisation to do this, the

new customers need to form a positive impression of the
organisation. This impression may be formed either through
marketing and sales initiatives or because satisfied customers
 speak favorably of the organisation’s products, services, and
staff.

Customer satisfaction is crucial to the organisation’s future,

because:

• Satisfied customers come back. Dissatisfied customers do not

come back.

• Satisfied customers are often “goodwill” ambassadors and

help the organisation to win more customers. Dissatisfied
customers share their dissatisfaction with anyone who will
listen and in the process give the organisation a bad reputation.

• Satisfied customers are usually prepared to buy new products/

services from the organisation. Dissatisfied customers rarely
return as customers.

• Potential customers are more inclined to listen to existing and

previous customers than to the organization’s marketing
campaigns. The “information service” provided by dissatisfied
customers can spoil the effect of even the most powerful
marketing campaigns.

• Satisfied customers are a source of inspiration to the

organization and contribute to giving the employees increased
job satisfaction.
It is very important for an organization to satisfy the needs and
expectations of their customers. The organization should deliver
quality products and services to their customers in order to
maximize the repeat clientele. Strategically, they should try to
provide all the services and products in the same way, which they
promised during the campaigns and advertisements.
 RELATION BETWEEN EMPLOYEE AND GUEST
SATISFACTION

Customer satisfaction has emerged as an important component in

the bottom-line success of service businesses. Satisfying
customers is especially important because it encourages repeat
business and fosters word-of-mouth advertising.

Employees feel good when they feel that they are involved in
decision making, receive adequate training, and are recognized
for their contributions. Empowerment is recognized as an
important tool for improving employee morale and performance.

Pay and benefits are a strong consideration in employee

satisfaction, and most employees feel that they are underpaid for
the job they do regardless of their compensation. Pay and
benefits, however, are only one factor among many. A study by
Bruce and Blackburn, for instance, indicated that the absence of
those economic factors will lead to discontent, but their presence
will not add to long-term satisfaction. On the other hand, job-
enrichment factors, such as recognizing contributions, employee
involvement in decision making, and management keeping the
lines of communication open, continue to be important factors in
employee satisfaction.
On the other hand the guests feel strongly about the treatment they
receive from the hotel’s employees, and guests are happier if
employees respond to guests individual needs. We can thus
conclude that a happy employee does influence the guest’s attitude
towards the hotel and thereby increasing customer loyalty.
CUSTOMER RETENTION

Companies must be customers centered to be successful in current

market scenario. They must deliver superior value to their target
customers and must become adept in building customers and not
just building products.

Many companies think that obtaining customers is the job of the

marketing or sales department. But in reality although marketing
plays a leading role, it can be only a partner in attracting and
keeping customers.

Customer satisfaction measures how well a customer’s

expectations are met. If customers received what they expected,
they are satisfied. If their expectations were exceeded, they are
extremely satisfied. Customer loyalty, on the other hand,
measures how likely customers are to return and their willingness
to perform partnershipping activities for the organization.

Customer satisfaction is requisite for loyalty. The customer’s

expectations must be met or exceeded in order to build loyalty.

But the real issue is retention of customers that all marketers need
to consider. The restaurant industry benefits from continued
patronage of loyal customers because of reduced marketing costs,
decreased price sensitivity of loyal customers, and partnership
activities of loyal customers. The restaurant requires fewer
marketing dollars to maintain a customer than to create one and
the creation of new customers through the positive word of mouth
of loyal customers thereby reducing marketing costs.

Reichheld and Sasser found that a 5% increase in customer

retention resulted in a 25 to 125% increase in profits in nine
service industry groups they studied. It is found that that building
a relationship with customers should be a strategic focus of most
service firms.

As the competition is strong and often there is little differentiation

between products in the same product class in the restaurant
industry it becomes imperative to reatin customers. Increased
competition with little differentiation between core product is one
of the factors that led to the development of relationship
marketing in the 1990s. Relationship marketing enables
companies to build loyalty with their customers. Developing
customers as partners is different from traditional marketing,
which is more transactions-based. Beyond building a stronger
relation with their partners in the supply chain, thus companies
today must work to develop stronger bonds and loyalty with their
ultimate customers. Thus relationship marketing is a useful tool
to retain customer,
 RECOMMENDATIONS

♦ The Hotel Industry as a whole must understand the importance

of Customer Satisfaction and Loyalty and make all efforts to
retain customers.

♦ Hotel must be given a higher ratio of importance as future

trends signify that the mentioned sector will be a cash cow for
the investors.

♦ Advertising costs should be minimized as they account for

nearly 10 percent of a businesses profit.

♦ Ensuring exceptional guest care by each and every employee

should be the norm. To ensure this, flatter structures are
recommended to stimulate communication process and close
working as a team.

• Staff levels must be offered better pay packages since they are
the ones in direct contact with your customers. Competitive pay
packages will also help in retention of staff and better services
to the customers.
• Empower employees, encourage and -support them in their
decisions to build confidence. This will lead to better customer
service at guest contact points.

• Outsourcing options should be considered seriously, and in as

many services as possible. This will definitely lower payroll
costs and may also improve efficiency of operations.
 LIMITATIONS

The dissertation is based on the use of secondary data. It gives us

a birds eye view of the Hotel Industry.

Time was a biggest constraint but all efforts were made by me to

collect all the relevant information for the dissertation.
 BIBLIOGRAPHY

1. Various Publications and Journals By Confederation

of Indian Industry [CII]

2. Various Magazines and Newspapers

3. Various Journals and Magazines By British High

Commission Library

4. Various Journals and Magazines By INSDOC Library

5. Human Resource Management By Frederick E.

Schuster

6. Publications and Journals By Various Hotels

Trade journals & magazines:

1. Hotelier and caterer
2. FHRAI magazine
3. Cornell Hotel and Restaurant administration Quarterly
4. Journal of Marketing
5. Business Week Magazine
6. Indian Journal of Marketing
Websites
• www.fhrai.com

• www.hotelinteractive.com

• www.thomsonlearning.co.uk

• www.hcima.com

• www.ehotelier.com