TRENDS IN HOSPITALITY INDUSTRY IN ASSAM

Transcription

1 CHAPTER 3 TRENDS IN HOSPITALITY INDUSTRY IN ASSAM 3.1 HOSPITALITY INDUSTRY: AN OVERVIEW Hospitality industry includes primarily the accommodation and food establishments (hotels, lodges, restaurants, eating joints, etc.) for a large ingredient of the service mix in the tourism industry. The hospitality services begin with a smile. This is the universal language of hospitality, which means being friendly, helpful and going out of the way to exceed guest s expectations. The hospitality industry focuses on the relationship with customers and has been focusing on how this relationship can be measured in terms of satisfaction and value (Singh, 2007). In broader sense, hospitality industry covers everything, i.e. providing attentive and courteous services, facilities and amenities to a traveler meeting and greeting him at the door, providing efficient and caring service of food and beverage, i.e. providing a home away from home and making his visit a memorable and pleasant experience. The hotel industry is perhaps one of the oldest commercial endeavours in the world. The first inns go back to the sixth century BC where the products of the urge to travel, spurred by the invention of the wheels. The earliest inns were ventures by husband and wife and their family members who provided large halls for travelers to make their own beds and sleep on the floor. They also provided modest wholesome food, thirst quenchers like wine, port, ale, etc. and stabling facilities. Entertainment and recreation were provided by the host s wife or his wenches. The entire cooking, service and recreation were provided by the husband and wife and team of their family (Andrews, 1986). These conditions prevailed for several hundred years. The advent of the industrial revolution in England brought ideas and progress in the business of inn keeping. The development of railways and steamships made travelling more prominent. The industrial revolution also changed travel from social or government travel to business travel and there was an increasing need for quick and clean stay and eating services. The lead in hotel keeping was taken by the emerging nations of Europe, especially Switzerland. It was in Europe that the birth of an organized hotel industry took place in the shape of chalets and small hotels which provided a variety of services and were mainly 42

2 patronized by the aristocracy of the day. However, the real growth of the modern hotel industry took place in the USA, which began with the opening of City Hotel in New York in This was the first building specifically erected for hotel purposes. This eventually led to great competition between different cities and resulted in frenzied hotel building activity. Some of the finest hotels of the USA were built in this era, but the real boom in hotel building came in the twenties of the last century. This period also saw the beginning of chain operations under the guidance of E.M. Statler. It involves big investments, big profits and trained professional to manage the business. The economic depression in 1930 had a disastrous effect on the hotel industry. It was felt that the industry would never recover; but the outbreak of World War II brought a tremendous upsurge. This prosperity continued through the war years into the 1950s when two new concepts in hospitality sector have emerged, viz. (a) motels and (b) international chain operations. While the growth of motels was restricted to the North American continent, international chain operations gradually spread into all continents of the world (Andrews, 1986). The Hotel Industry is considered as a part of vast concept of hospitality sector and is more complex and sensitive to political systems and public policies than any other category of tertiary activities. It is a service industry, being hospitality as its product. It handles human beings. The success of the industry depends upon: a) political system and its stability, b) level of economic development, c) judicial system, d) efficient and safe transport and communication facilities, e) prescribed standard of cleanliness and public health measures. In developing countries once political stability has been achieved, hotel development quickly follows as an integral part of an overall socio-economic progress. An example of this would be the former European Union countries and former Soviet Republics, who for the past few years have offered development opportunities for Hotel Corporation. It is easy to understand the relationship between international development of hotels and the increase in international tourism trade and commerce. The growth in tourism in Pacific Rim countries is expected to continue at the same rate as in recent years which give boost to the growth of hospitality sector. Several resorts are planned in Indonesia, Malaysia, Thailand, Mexico and Vietnam. Further international hotel development opportunities exist in Eastern Europe, Russia and other republics of the former Soviet Union (Walker, 2005). 43

3 The global economy is splintered into massive trading blocks, such as European Economic Community (EEC), and the North America Free Trade Agreement (NAFTA) among Canada, the United States and Mexico comprising a total population of million customers (NAFTANOW.org). The European Union (EU) with a population of million (2009) in 27 nations is an economic union that has removed national restrictions not only on trade but also on the movement of people and capital. The synergy developed among these 27 member nations are beneficial to all and is a form of self-perpetuating development. As travel, tourism, commerce and industry have increased within the European Economic Community and beyond, so has the need for hotel accommodation. In oriental world, it is noted that Hong Kong s growth has been encouraged by booming economies throughout Asia, and moreover the existing tax systems are found to be more investor friendly. The Hong Kong government levied a 16.5 percent corporate tax and a 15 percent individual income tax and no tax on capital gains or dividends. Several hotel corporations have their headquarters in Hong Kong. Among them are Madrian, Oriental Peninsula and Shangri-la, all renowned for their five star statuses in the hospitality sector around the globe. They are based in Hong Kong because of corporate taxation and the ability to bring in senior expatriate executives with minimum bureaucratic difficulties (Walker, 2005). In India, there were very few hotels prior to the 2 nd World War. During the 1940s, the hotels and restaurants in larger cities mushroomed, as they did a brisk business on account of large number of foreign tourist influx into the country. However the number of hotels was not up to the required standard. Some constraints prevailed even after independence when first organized count was made in The total number of guest rooms in hotels on the approved list was around 7055 rooms in 186 approved hotels. Incidentally in the same year ( ) hotels were classified under the star categories. It was around 1960 that Government of India first gave serious attention to this industry and thus ITDC entered the scene in a big way, taking the tourist target into consideration. It envisaged a strategy for other infrastructural development. Thereafter, the concept of hotel chains like the Taj Group, ITC group, the Oberoi group, the Welcome group, etc. came into being. With the ASIAD and Non- Aligned summit, the Hotel Industry received a big boost but still gross imbalance in the location of accommodation units persists, which tends to hamper the India s new line of approach unless adequate rooms are offered to the tourists (Mohanty, 2008). In India 44

4 total number of approved hotels was around 1829 and number of rooms was around during 2009 which increased to 2483 number of hotels and number rooms during the year Thus, there is a growth of percent of the number of hotels and percent in the number of rooms over the year 2009 (Table 3.1). Table 3.1: Approved hotels and availability of hotel rooms in India (2009 and 2010) Category of Hotels As on Source: India Tourism Statistics, 2010 No. of Hotels As on No. of Rooms As on As on One Star Two Star Three Star Four Star Five Star Five Star Deluxe Apartments Hotels Time Share Resorts Heritage Hotels Silver bed & Breakfast Establishment Guest House Unclassified Total In responds to the gradually growing hospitality sector and travel infrastructure, there has been a continuous increase in domestic tourist visits in India. The compound annual growth rate (CAGR) of domestic tourist visits to all States/Union Territories from 1991 to 2010 being stands at 13.5 percent. The foreign tourist visits too have been increasing over the years, though there was a negative growth in the years 1992, 2002 and 2009 (Table 3. 2). The foreign tourist visits to all States/Union Territories during 1991 to 2010 witnessed a compound annual growth rate (CAGR) of 9.6 percent. The year 2010 witnessed a growth of 10.7 percent in domestic tourist visits over the year 2009, which is, however, lower than the growth of 18.8 percent in the year 2009 over 45

5 Table 3.2: Domestic and foreign tourist visits to States / UTs, Year Tourist Visits Annual Growth Rate Domestic Foreign Domestic Foreign % -1.6% % 14.4% % 13.8% % 15.2% % 8.4% % 9.3% % 0.7% % 5.3% % 1.1% % -7.8% % -5.1% % 30.1% % 24.6% % 19.0% % 18.0% % 12.9% % 8.5% % -0.1% % 24.2% Source: India Tourism Statistics, During 2010, the visits by foreign tourists have registered a growth of 24.2 percent over 2009, as compared to negative growth of 0.1 percent in 2009 over With the many fold increase of tourist arrivals to the country, the hospitality sector revealing immense potential and global hospitality majors are exploring plans of entering the Indian market. These include Dawnay Day, White Bread, Jumeirah, Golden Tulip, Istithmar and Mandarian Oriental apart from existing ones. Hotel companies like Golden Tulip are looking to launch budget hotels in India. The Jumeirah and Mandarian Oriental are the luxury hotel brands looking to set base in the country. Dubai s leading Alternative Investment house Istithmer is looking for investment into luxury hotels in 46

6 the key gateway cities around the globe and emerging markets. Hospitality majors in India and abroad are likely to pump in close to US dollars 1 billion in the next two years into the sector (Ministry of tourism, 2007). Indian hotel industry is going through transformation, changing trends and entry of many more global players in the Indian market spells great future for the hospitality industry. Apart from many more luxury hotels coming up in every corner, the budget hotels spreading wings across the country. This boom is here to stay giving guest true value for their money (Berry, 2008). Other reasons for the boom are the low cost carriers which have changed the very concept of travel within the country. Flying till now was always associated with the moneyed class just like staying in good hotels was. The low cost carriers have brought affordability to the sky just as the budget hotels have got affordability on the ground. Together these two will be combination worth keeping a close look at in the coming years (Anand, 2008). While India has a booming domestic market there is also the inbound leisure segment which is looking for well priced and clean accommodation in places of tourist interest. India as a destination falls woefully short in this offering. According to the India Tourism Statistics, 2010, the hotel industry in India has a supply of 1, 17,815 rooms. With the increase in growth of tourist arrivals (domestic and international), there is a shortage of hotel rooms in India. With this opportunities India is a destination for hotel chains looking for growth. India ranks 18 th in tourism business travel and will be among top five in this decade. It is estimated that demand is going to exceed supply by hundred percent over next two years. With this disparity, the hotel room rates in India are most likely to rise 25 percent annually and occupancy will rise 80 percent over the next two years. Thus the hotel industry in India will be eroding its competitiveness as a cost effective destination (India Tourism statistics, 2010) Though hotel industry is at infancy stage in Assam, it is gaining momentum due to its gradually transforming economy of the state along with the reduction of insurgency problems. At the same time the cost of travel has also fallen down following the government liberation of the airline industry which has initiated a price war among the airlines. As a result, the domestic market continues to expand, the escalating economy provides the rising middle class with increased disposable income. The travel of low cost airlines and the associated price wars have given domestic tourists more options than ever before. The Incredible India campaign has also helped the growth 47

7 of domestic markets including religious tourism. All these factors have further enhanced the demand for hotel rooms in the state. There has been a increase in domestic tourists to the state, though there was a negative growth in the financial year , and with compound annual growth rate of domestic tourists from the financial year to being percent (Table 3.3). The foreign tourist visits to the state too have been Table 3.3: Domestic and foreign tourist arrivals to Assam, to Financial year No. of tourist Annual growth rate Domestic Foreign Domestic Foreign ,37,793 5, ,93,902 3, % % ,71,567 4, % 34.73% ,81,985 6, % 46.78% ,61,954 6, % 2.30% ,90,672 5, % % ,02,455 7, % 34.89% ,30,107 6, % -2.60% ,86,240 9, % 36.82% ,86,428 8, % % ,79,870 13, % 64.36% ,89,814 13, % 1.04% ,98,706 14, % 5.32% ,95,525 14, % 1.14% ,27,447 15, % 6.35% ,08,336 16, % 6.57% Source: Directorate of Tourism, Assam Statistics, increasing over the years, though there was a negative growth during the financial year , , and The foreign tourists visit to the state 48

8 during the financial year to witnessed a compound annual growth rate of percent. The financial year witnessed a growth of 6.37 percent in domestic tourists visit over the financial year which is more than the growth of 5.95 percent in the financial year During , the visits by foreign tourists have registered a growth of 6.57 percent over the financial year , as compare to the growth of 6.57 percent in Among the states and union territories of India, Assam ranked 20 th in terms of receiving domestic tourist and 24 th in terms of receiving foreign tourist with a share of 0.5 percent domestic tourists and 0.1 percent foreign tourists (Indian Tourism statistics, 2010) With the increase in both domestic and foreign tourist inflow to the state, it has fueled demand for accommodation across Assam. Assam has a good number of hotels and lodges to meet the growing demand of the tourist of different economic background. As the movement of tourist to the state is increasing, the hotel business is also increasing gradually. Apart from the private operator, department of tourism, Govt. of Assam has also set up several tourist lodges in all leading tourist spots of Assam (Table 3.4). These accommodations are either for economic category or for budget class of tourists. From the field survey it was found that the tourist lodges of Guwahati and Kaziranga are doing good business in terms of room occupancy and rest of the lodges hardly receive tourists. This is because of the poor management of the lodges. Table 3.4: Distribution of government tourist lodges in Assam, 2012 Sl.no. Place No. of accommodation unit Bed capacity 1 Guwahati Kaziranga Barpeta Road Bhalukpong Nagaon Sivsagar Diphu Haflong Chandubi Manas Hajo Pobitora

9 13 Jorhat Sadiya Silchar Golaghat Dhubri Tezpur Jorhat Hailakandi Karimganj 1 10 Source: Assam Tourism Development Corporation Ltd., 2012 At many tourist spots, the tourists prefer to stay at the privately managed hotels/lodges over the govt. tourist lodges because private hotels and lodges are better managed with hygienic rooms at almost the same price or below. Now department of tourism, Govt. of Assam has transferred 5 numbers of its lodges to its sister concern Assam Tourism Development Corporation Ltd. for managing these lodges which is engaged in developing tourist infrastructure including construction of tourist lodges, restaurants, wayside amenities etc. in the state for tourism development and for marketing tourism products of the state within the state and in the country. Tourism sector cannot grow to its full potential with Government efforts only. However, at present there are 220 different developmental projects undertaken for execution by Assam Tourism Development Corporation limited and some of them will be leased out to the private parties for management after completion of the projects (Table 3.5). These projects includes tourist lodges, restaurants, way side amenities for tourist, tourist arrival cum reception centre, eco tourism projects, information and technology projects, development of cruise vessel, sound and light show at specific sites, etc. ATDC has also taken a mega project of luxury cruise named M.V. Mahabaahu, a four-storied luxury cruise liner in collaboration with Far Horizon, a Delhi-based travel firm in the line of public-private partnership to boost the river tourism in a bigger way. The cruise liner will be travelling a long distance touching attractions like Kaziranga and Majuli river island. The cruise liner will be one of the finest in Asia. The cost of the project is 7.42 Crore and is funded jointly by the Ministry of Tourism Government of India and Far Horizon with the share being Rs Crore 50

10 Table 3.5: Tourism projects that have been undertaken by ATDC Year No. of Projects Amount involved( in Lakhs) Source: ATDC Office, Guwahati, 2012 and Rs Crore respectively. The centrally air conditioned cruise will have the best of amenities including swimming pool, boutique, multi-cuisine restaurant with ethnic food, bar, dance floor, library, home theater, Ayurvedic massage room, saloon, sauna bath, gym etc. The luxury liner will have eight deluxe rooms and two suites. Everything has been done meticulously to meet international standards and every norm for long distance river cruise. This luxury curse liner has been developed to attract international tourist and to showcase Assam s rich heritage before a global audience. This will also help to utilize the river tourism in a long way. This cruise will have additional facilities like excursion boats and night cruising, enabling the travelers to go for occasional short sight-seeing trips during the course of the cruise. Far Horizon will be responsible for maintaining the cruiser s day to day operation and also will be responsible for global marketing while ATDC will get a share of revenue generated. The cruise liner is expected to operate from January Once the operation is started it will open up new vistas on Tourism front of Assam (The Assam Tribune, 26 th October, 2009). 51

11 Apart from these tourist accommodations available, there are also circuit houses, inspection bungalows of public works department and forest department have some beds available meeting the need of official visitors of concerned government departments. Another trend which has come into accommodation sector in Assam especially at Guwahati is the setting up of guest houses or taking on contract basis. These guest houses are generally managed by corporate house itself. These guest houses are confined to the big corporate houses. The corporate houses prefer to keep their supervisors, junior and middle level managers in the guest house over the hotels for cutting company costs. Department of Tourism, Government of Assam has also recognized a number of hotels and lodges for the tourists visiting Assam for their comfortable stay throughout state comprising of economic, budget and luxury category (Table 3.6). At present, Department of Tourism, Government of Assam has recognized 240 numbers of hotels and lodges for the tourist in the state. Table 3.6: Recognized hotels and lodges of Assam, 2012 Sl. no. Place No. of accommodation units 1 Abhayapuri 1 2 Balipara 2 3 Barpeta 3 4 Barpeta Road 4 5 Bhalukpong 3 6 Bongaigaon 9 7 Bokakhat 3 8 Chandubi 1 9 Dhubri 4 10 Digboi 1 11 Diphu 5 12 Doomdooma 1 13 Dibrugarh 7 14 Dhemaji 3 15 Goalpara 3 16 Guwahati Haflong 4 52

12 18 Jorhat Kaziranga Kokrajhar 3 21 Lakhimpur 3 22 Majuli 7 23 Mangaldoi 2 24 Nagaon 6 25 Nalbari 3 26 Numaligarh 3 27 Silchar 5 28 Sivsagar Tezpur 9 30 Tinsukia 4 Total 240 Source: Directorate of Tourism, Govt. of Assam, 2012 Assam has to its credit 20 numbers of approved hotels having a room capacity of 723 ( Out of 2483 approved hotels (India tourism statistics, 2010) of India, Assam has a share of only 0.81 percent of total approved hotels in the country. The maximum numbers of approved hotels are in the category of three stars (14 numbers) with a room capacity of 523 followed by two star hotels (5 numbers) with a room capacity of 129. Assam, has also one four star hotel having a room capacity of 71. It is located at Guwahati. The two star and three star hotels are spread over cities like Guwahati and many important towns and tourist places of the state. Apart from Guwahati, these hotels are located at Tezpur, Kaziranga, Jorhat, Dibrugarh and Karimganj. However major share of the approved hotels i.e 60 percent with a room capacity of percent are located at Guwahati. The internationally famous tourist spot Kaziranga which has also been able to attract many foreign tourists has only 2 three star hotels having a room capacity of 66 rooms. Though there are only 20 numbers of approved hotels i.e two, three and four star but many of hotels are there which can be classified as four, three and two star category looking at the physical facilities they are providing to their guests apart from the approved one. From the discussion with the owners/directors during the field visit it came to light that many of them are either planning for classification or have already applied for classification. However, Assam 53

13 does not have any five star and five star deluxe hotels for the high end domestic or foreign tourists. With the improving law and order situation, Assam has registered a positive growth in terms of tourist arrivals to the state. If the economic growth continues and law and order situation further stabilized in future, it will attract more and more corporate, business and leisure tourists, etc. In Assam, especially Guwahati, the gateway to the northeast which is one of the 100 fastest growing cities in the world ( has registered potential growth in terms of physical expansion, population and commercial activities. With the commercial activities increasing in many folds, Guwahati has been able to attract more and more corporate, business and leisure travelers to the city. This unprecedented growth is likely to substantiate demand for accommodation units. Seeing this prospect, a good number of hospitality giants, both national and international like Taj group, Mariott group, Radision group, Hyatt group, Lemon Tree group apart from local entrepreneur/ companies have spread their wings and eyeing for Assam s hospitality market and are in the process of setting up approved hotels ranging from three star to five star category at Guwahati (Table 3.7) Sl. no. Name of the hotels Table 3.7: Proposed hotels in Guwahati Proposed star category Expected year of completion No. of rooms 1 Taj Vivanta Prithani Group Saradha Group Spring Valley * Belle View * Charter Hotel * Maxion Infrastructure * Radisson * Bora and sons pvt. Ltd Shoolin Grand Deltoid Con. Pvt. Ltd * Ramee Guestline * Grand Plaza * Mriduli properties pvt

14 Ltd. 14 Lemon Tree Decolite Yatri Nivas Source: A final project report on market survey for hotels in Guwahati, and field survey, (*project yet to be completed) 3.2 TRENDS IN HOTEL DEVELOPMENT Accommodation sector includes such establishments and facilities where the tourist stops being travelers and become guests. These are the places, where the tourists spend most of the travel time and money. Accommodation facilities constitute a vital and fundamental part of the tourist supply and the most visible segments of the infrastructural facilities among the important inputs which cater to the tourists forming a vital component of the tourism infrastructure and an important feature of the total tourist image of the state. It is, rather the core of the tourism industry. There exists a strong correlation between tourist s arrivals and availability of accommodation facilities of a place. Thus, the provision of proper accommodation of acceptable standards, largely determine the level and rate of flow of tourists traffic to the state. (Mohanty, 2008). The growth of hotel industry in any region or state largely depends on the flow of tourists and strangers with other travel purposes. Supply of tourist product is greatly influenced by the level of development of other constituent activities in the region i.e., development of tourist spots, transport and communication facilities, marketing, entertainment, travel agencies, courier services, etc. Thus the growth of hotel industry involves in the development of uncoordinated sectors in order to achieve coordinated results by breaking the vicious circle somewhere (Mohanty, 2008). So far the hotel industry is concerned; it is observed that there has been considerable degree of variation in its growth in different parts of the state. The factors responsible for localization of the initial establishments and the present hospitality firms are numerous. The geographical spread of the industry is determined by great complexity of consideration namely, historical, political, economic, natural and many other factors. Data pertaining to the hotel development in Assam could not be traced from any secondary source like Department of Tourism, Government of Assam, Hotel 55

15 Owners Association, etc. However study conducted by Bhattacharya (2004) made a pioneering attempt to provide a spatio-temporal picture of accommodation sector of the state. The work has categorized 419 accommodation units during , which is the result of the intensive door to door survey by the author. However over the years the number of accommodation units has gone up. As the Department of Tourism, Government of Assam, hotel owners association etc., do not yet attempted to generate fresh data regarding the development of hotels, it was found necessary to take up an investigation of hotels and lodges of the state to get an overall picture of the accommodation sector at present. A door to door survey of accommodation units was carried out in as many as 9 important towns and cities of Assam covering all the accommodation units in those places. These 9 cities and towns cover around 80 percent of the total accommodation units in the state. The history of development of hotel business in Assam can be linked to the establishment of Berry White School of Medicine which was established at Dibrugarh in 1900 and later renamed to become Assam Medical College in the year 1947 and was the first medical college of the north eastern region serving patients of Assam and the neighboring states. The flow of patients and their attendants to the hospital from other areas eventually led to the demand for accommodation. Capitalizing this, the first accommodation unit of the state came up at Dibrugarh in the year 1945 in the form of a lodge named Asha Refreshment lodge to cater to the needs of the patients and the attendants of the patients, with a room capacity of four. However, to meet the need of official visits, network of Dak Bungalows, circuit house, etc. were established in district headquarters and major places of importance in the British era. Subsequently, the number of hotels and lodges started growing steadily in the administrative and important communication nodes like Dhubri and Silchar in the year 1950 and Although Guwahati emerged as the gateway to the north east India, hotel business started only in the late fifties (1956) with a hotel named Hotel Suravi and over the years the number of hotels rose to 171. Most of the star category hotels of Assam are located at Guwahati. To develop Kaziranga as one of the potential tourist spots in the state, the Department of Tourism, Govt. of Assam constructed a tourist lodge at Kaziranga named Banani Lodge in the year 1960 with five double bedded rooms. With the declaration of Kaziranga as National park in 1968, the number of hotels increased with the increase of domestic and international tourists. Another landmark for 56

16 the development of hotel industry at Kaziranga is the declaration of Kaziranga National Park as a world heritage site by UNESCO in the year Over the years the accommodation units at Kaziranga rose to 32 (2009). In the rest of the towns, the growth of hotels/lodges started in and around seventies except Tezpur, where the hotel business started with a lodge named Southern Lodge in the year 1960 with a room capacity of five. In the later stage many hotels/lodges have come up with the development of township elsewhere in the state catering to the market demand for the service of the hospitality industry (Table 3.8). There are more concentration of hotels and lodges in the areas especially near to the hospitals, nursing homes, bus terminus Table 3.8: Growth of hotels and lodges in Assam Sl no. Period No. of hotels and lodges established No. of rooms No. of beds onwards Total Source: Field survey,

17 and railway stations due to connectivity advantages. There is a trend in the increase of economic category of hotels/lodges in comparison to the growth of luxury and budget class hotels. The economic category has registered a very impressive growth trend in the state. 3.3 TREND IN FOOD AND BEVERAGE OPERATION From time immemorial the human race has explored the world in search of food. Hunger has been the force behind its onward march. This march has led the way for the art of cooking since ancient times. The first cook was a primitive man who had put a chunk of meat close to the fire, which he had lit to warm himself. He discovered that the meat heated in this way was not only tasty but it was also much easier to masticate. From that moment in unrecorded past, cooking had evolved to reach the present level of sophistication (Arora, 2006). With the passage of time food service operations continues to enjoy tremendous improvement and development together with considerable advances in quality. The demand for food and beverages away from home has increased and with a broader spectrum of the population eating out, customer needs have diversified. Food and restaurant styles are also diversifying to meet the challenges of the demand being made by increasingly knowledgeable and value conscious customers. Menu and beverage list contents are also continually being influenced by trends, fads and fashions, the relationship between health and eating, special diets, cultural and religious influences, the advance of vegetarianism and customer acceptance, or otherwise, of irradiation and genetically modified foods. The customers are now seen as being central to the process and also an active participant within it. Increasing competition has also meant the quality of the food and drinks and the perceived value of the experience by customers are the main differentiators between operators who are seeking to attract similar customers. Consequently, understanding the customer s involvement in the process and identifying the experience, they are likely to have, has become critical to the business of food service operations. Good food and beverage service in any sector is achieved where customers needs are being met and where management consistently reinforce and support service staff in the maintenance of clearly identified technical standards and service goals. 58

18 As an important constituent of hospitality service, restaurants play an important role in society. Dining out in restaurants fulfills an important sociological need as people need not only nourishment, but also the social interaction that takes place in a restaurant setting. Restaurants are one of the few places where we use all of our senses to enjoy the experience. Our taste, sight, smell, hearing and touch are all employed to savor the food, service, and atmosphere of the restaurant. Successful restaurant concepts are created with guests in mind. Restaurants provide a social gathering place where employees, guests and management can get their adrenaline flowing in positive ways. The restaurant business is exciting and challenging. With the right location, food, atmosphere and service, it is possible to attract the market and make a good return on investment. There are several examples of restaurant concepts that have endured over the past few decades. Applebee s, Chart House, Hard Rock Café, Olive Garden, Red Lobster and TGI Friday s are some of the better known U.S. chain restaurant concepts (Walker, 2005). The Indian restaurant services sector is estimated to be worth Rs. 57,000 crore, out of which only Rs. 3,940 crore or 6.9 percent is shared by the organized sector. The vast unorganized segment mainly comprises street side stalls/kiosks constituting the majority of consumers food service units and is characterized by intense fragmentation and a virtual absence of standardization of operations. Business of this segment was Rs.35,000 crore in 2004, which grew by about 18 percent to Rs. 41,400 crore in 2005 and in 2006 the segment recorded a growth of nearly 19 percent over previous year and business stood at Rs. 49,200 crore based on constant prices as base (Fig. 3.1). In India, major domestic and international players in the arena have on an average extended their retail reach by 45 percent in 2006 as compared to Tier-II cities are currently the biggest growth drivers. The total number of outlets increased dramatically in 2006 registering an annual growth of around 70 percent as compared to the rate of 29 percent in 2005 (Gopal and Shetty, 2008). The trend towards home delivery is also fast gaining popularity with value sales shooting the roof over the last couple of years. India is one of the few countries where foreign players like MC Donald s have introduced its home delivery service. 59

19 Figure 3.1: Size of Indian restaurant and catering (F&B) services (Value in Rs. Crore at Prices) Rupees (in crores) < Year > Source: India Retail Report-2007, Indian Retail Forum 2007 In Assam, 99 percent of the restaurant business is occupied by the low scale restaurant comprising of street side stalls, kiosk and Bhator hotel (locally known as in Assamese) whereas about 0.75 percent is occupied by the upscale restaurant and about 0.25 percent is occupied by the fine dining restaurant (Fig.3.2). Fine dining restaurants are limited to Guwahati city whereas upscale restaurants are scattered in all the major cities and towns of Assam. Low scale restaurants are found in all the towns and cities of Assam. Taking the advantage of the situation in this sector, some of the people have chosen entrepreneurship as an alternative to the government jobs. So it is expected that the market of the fine dining and upscale restaurant will also flourish in the near future. The gradually emerging consumers of the state of Assam with increased disposable income invariably seek variety and are willing to experience new cuisine. Assam is having quite a good number of restaurants with context to the above in various categories ranging from low price, medium price and high price serving Chinese, Indian, and Thai etc. apart from its own cuisine and are doing good business especially in the major nodes like Guwahati. Of late, the local Assamese cuisine in gaining momentum because of its exotic and mild flavors. Some indigenous dishes with less oily and less spicy foods have been able to attract consumers from inside and outside the state. Some of the restaurants like Khorika, Juti Logai Kham, Gums delicacy, Paradise, etc. are doing brisk business by selling local food. As the people of Assam 60

20 Fig. 3.2: Percentage of business by different category of restaurants of Assam 120% 100% Percentage of Business 80% 60% 40% 20% 0% Low scale restaurant Upscale Restaurant Category of Restaurants Fine Dining Restaurant Source : Field survey are seeking varieties and are willing to experience with new food, the trends within the restaurant industry is changing. The restaurant industry is expected to respond to consumer demand by offering more variety and ordering options. Of late, some of the national and international chains of restaurants have opened up outlets like Yellow Chilly, Kentucky Fried Chicken (KFC), Pizza Hut, Dominos, Café Coffee Day etc., in Guwahati, seeing the potential of the food business in the state. As the guest opts for various types of food in the restaurant, therefore a good number of restaurants have come up in the state serving fast food, North Indian, Chinese, local foods etc. An assessment of the food preference in the restaurants of the state shows an interesting pattern (Table 3.9 and fig. 3.3). Preference for local food stands at percent, followed by north Indian food with percent. On interaction with the guest, it was found that local foods are more preferred over the other foods, because of its less oily and spicy nature and comparatively less priced on the menu. The restaurants serving local foods are being preferred by the lower middle class customers, whereas the elite class is attracted by upscale restaurant. The survey also reveals that fast food 61

21 Table 3.9 : Food preference in restaurants of Assam Type of food/preferences of respondents Sl. no. Place Continental/ respondents % Chinese/ respondents % North Indian / respondents % Local food /respondents % Total respondents 1 Dhubri Barpeta Road Guwahati Tezpur Kaziranga Sivsagar Dibrugarh Tinsukia Silchar Source : Field survey, is preferred by 90 percent of the customers belongs to the age group below 25 whereas preference for local food is more i.e., 70 percent among the people of the age of 40 Fig 3.3: Preference of customers for different types of food Food preference of people of Assam 3.64% 15.46% 45.45% Continental Chinese North Indian Local food 35.45% Source: Field survey

22 years and above (Table 3.10 and Fig. 3.4). The customers in the age group between 25 and 40 has a mixed response for food preference (15 percent prefers fast food, 40 percent prefers North Indian food, 10 percent prefers Chinese food whereas 35 percent prefers to have local food in their meal). Table 3.10: Preference of food according to age group of guests in the restaurants of Assam Type of food Age group/respondents <25 % % >40 % Fast Food North Food Indian Chinese Local Food Total Sample Source : Field survey, Along with the rest of the world, the concept of restaurant business is also changing in Assam. To encash the situation, the owners should also change their strategies to have a market share as per the requirement of the customers. The trend of eating out has increased as compared to the previous years being nuclear family with one or two children and husband and wife both working and having more disposable income. It is frequently observed that business man and executives working in the multinationals have further added to the list of the eateries, especially in the major business and administrative nodes of the state. This class generally visits branded fine dining restaurant rather than the upscale restaurants minimum once in a month. They keep on switching over from one restaurant to another in search of new dish and taste. The people having more disposable income with their own vehicle, would like to break their hectic schedule so they prefers to visit during weekend to restaurants for dining, generally to nearby places (generally outskirts of the city), having a place for recreation, within a journey of half an hour to one hour with their children. These are generally expensive restaurant having spacious ambiances. 63

23 Fig. 3.4: Preference of food by different age groups Percentages of preferences < >40 0 Fast Food North Indian Food Chinese Local food Type of food Source : Field survey, A good number of ethnic restaurants have been opened up at nodes like Guwahati accommodating cuisines of local communities like Assamese, Mishing, Naga, etc., to attract customers from those communities along with food lover from different section of the society. Hopefully, this concept will flourish and will be taking a good share of food business in near future. With the coming up of shopping mall culture, a good number of fast food joints are mushrooming in the major cities and towns of Assam. As a result, a number of multinational and national fast food chains like Kentucky Fried Chicken (KFC), Pizza Hut, Dominos, Café Coffee Day etc., have opened up their outlets, eyeing on the younger generation market, with quick and efficient service, colorful décor and fun music playing in the background. Besides, the menu options are diverse and innovative and the taste and quality of foods are being maintained at a consistent level. Some of the restaurants attached to the hotels, especially at Guwahati, in the fine dining category, have opted for show kitchen to attract the high income group where the kitchen is partitioned with a glass attached to the restaurant. The guest can see the preparation of their dishes by the chef, from the restaurant. This is totally a new trend in 64

24 Assam in the restaurant business, which is likely to be followed by many of the fine dining restaurants. As there are tough competitions between the restaurants to attract more and more guests, they are now concentrating more on the service part. Many restaurants are trying to have niche marketing over service to have advantage on their competitors. Therefore they are putting more emphasize on getting smart, professionally trained service brigade for their restaurants. 3.4 ECONOMIC ASPECTS OF HOSPITALITY INDUSTRY Hotels have long been important contributors in the economies of many countries. The enormous increase in tourism and travel trade of the 21 st century has caused the hotel business to outgrow national boundaries and become global in character. Hotels are directly linked to and are integral part of many other economic activities. In particular, the relationship between tourism and hotels is very crucial in understanding of the role of the hotels in the process of economic development of a state. Ogilvie is perhaps the first economist, to realize the impact of tourism on the accommodation infrastructure when he observes a nation of shopkeepers has, in a large measure, become a nation of inn keepers (Mohanty, 2008). Thus, hotel industry plays a very pivotal role in tourism and has tremendous potentialities for earning foreign exchange, yielding tax revenues, providing employments, promoting the growth of ancillary industrial activities and overall development of industrially backward regions through its broader linkage effects. Assam is a state which lies in the North Eastern region of India with its economic potentialities. Different valuable natural resources are in the possession of this state. But as the nature is niggardly, it never allowed Assam to flourish economically with its resources as the state is subjected to variety of problems which include geographical location, transport bottleneck, insurgency problem and infrastructural development. However, with the development of touristic infrastructure in the state, the valuable natural and cultural resources can be utilized and the economy of Assam can be given a boost to a great extent. The term tourist infrastructure associated with the development of accommodation sector, food and beverage sector, transport system, touristic spots, travel agencies, tour operators, the entrainment industries, art and crafts, the souvenir industry and so on. Economist frequently put stress on the development of touristic infrastructure as it is the prerequisite for its accelerating economic growth. The 65

25 hospitality sector can act as a catalyst for accelerating economic growth for economically backward state like Assam. Though the hospitality sector in Assam is at budding stage the hospitality sector is one of the important sector for economic development of Assam in terms of its contribution to employment generation, foreign exchange earnings, income generation, and output growth that hospitality sector has significant impact on state economy (Table 3.11). Though the direct earning from tourist is not that impressive, but the increasing trend reflects the increasing inflow of tourists to the state and it has a multiplier effect in overall economic health of the state. Table 3.11: Revenue earned by the Government of Assam from government owned tourist lodges Year Revenue earned (Rs in lakh) Source: Directorate of Tourism, Govt. of Assam. The employment and income effects of hospitality sector are very closely related and follow a common source, namely expenditure on accommodation and food and beverage by the tourist. Tourist expenditure provides direct income and also generates employment in hotels, restaurant, bars, bakery etc. This sector also generates an immense volume of indirect employment and income with a multiplier effect. Apart from the first recipient of the tourist money, there are many others who become beneficiaries. Although often, as and when the money changes hands, its size gets 66

26 reduced because several successive recipients retain a parts of it for services they provide and pass on the balance to the others. With the coming of tourists to the state the demand of hotels and catering outlets will generate direct employment in one hand and it will open up yet another dimension in the economic scenario. The additional consumption demand arising indirectly out of this sector will generate more employment and income and once again generate a further multiplier effect through a chain of transactions. However the multiplier effect will be greater if all the requirement of this sector is met from the local market. Hospitality sector has good potential to create both direct and indirect employment. The hotel and catering houses provides direct employment to various categories of people at various positions whether it is in the front desk or at the back of houses. The indirect employment which is generated by this sector are the people who are supplying vegetables, fish, poultry, cereals etc. to the hotel and catering houses. Electricians, plumbers, furnishings and furniture repairs, in fact, all those who are providing ancillary services to the hotel customers. Every hotel room, the World Bank estimates, creates 1 to 2 jobs directly or indirectly. In theory a hotel with 300 rooms can create 600 jobs (Rao, 2001). According to the study of the Institute of Public Opinion, in 1980, over 6 million people were employed only in hotels approved by the department of tourism, Govt. of India (Sengupta, 2006). The accepted ratio of employees to hotel rooms in India is 2.5:1 however in Assam it stands around 3.5:1, as reveled from field investigation. With the increasing movement of tourist, indirect economic sectors like agriculture, fisheries, transport system and local crafts get stimulated and thus indirect employment increases. In the handicraft sector quite a good number of people are employed as because the mass tourism could ask for a souvenir or memento to take back home either to keep it for remembrance or to present it to their friends and relatives. Development of hospitality sector encourages domestic and international tourists, which in turn improves the frequency and quality of air transport, road transport and railways. An economic analysis of tourism activity normally focuses on changes in sales, income and employment in a region resulting from tourism activity (Sengupta, 2006). Government of Assam earns revenue from the hospitality sector in the form of luxury tax, sales tax, value added tax, entrainment tax, excise duty, etc. Luxury taxes earned alone from the hotels and lodges in the year stands at Rs crores 67