To perform marketing research on the

Indian hospitality industry and

understand changing dimensions in the
industry.

Marketing
Research
Indian Hospitality Industry

Submitted to –
Dr S.K. Tyagi

Submitted by -
GROUP 5 SEC-B PGDM GEN 2017-
19
 ACKNOWLEDGEMENT

Behind every achievement lies a deep sea of gratitude to those who have
extended their support and without whom it would have been very difficult to
accomplish the task successfully. To them I lay the words of gratitude.

Through this acknowledgment, we express our sincere gratitude to all those

people who have been associated with this project and have helped us with it
and made it a worthwhile experience.

First and foremost, we would like to thank my supervisor of this project, Prof.
S.K. Tyagi for his valuable guidance and advice. He inspired us greatly to work
on this project. His willingness to motivate us contributed tremendously to our
project.

Besides, we would also like to thank Ms. Nandi Nailwal (Librarian), for
providing us access to various research journal portals and always helping us
out in searching the required papers.

We also extend our thanks to the various people who have shared their opinions
and experiences through questionnaires and interviews by which we received
the required information crucial for our report.

i
 PREFACE

The Tourism and hospitality industry is on a rise with large number of people
traveling for either leisure or business purposes. The hotel chains are making
most of the situation by trying different methods to make travel a worthwhile
and everlasting experience for its customers.

Recently the hotel industry started experiencing major shifts in the consumers’
behavior and preferences with the advent of budget hotel aggregators like Oyo,
Fab hotels, Treebo etc. The budgeted hotel aggregators provide customers with
both comfort and fulfill the requirements of the customers at an affordable rate
which is much below that provided by other hotels.

These startups went into the mind of its target audience and studied their
mindset giving major hotel chains a run for their money. Many customers who
earlier used to stay in luxury hotels have shifted to the budgeted hotels since
they are both pocket friendly and modern.

This project is an attempt to understand the industry by studying customer

perception and to draw a framework for developing a road map for success of
Fab hotels.

ii
 EXECUTIVE SUMMARY

A project research is a systematic and scientific investigation for identifying a

specific problem or study in a particular area of an industry & thereby analyzing
the same to give the best possible solution.

In order to grow and expand a company has to conduct various researches and
study the perception of the customers on various aspects and study how their
perception influences their behavior and what steps could be taken to change the
perception of the customers.

The objective of this research project is to study the changes taking place in the
hotel industry and to study the perception and spending trends of the customers
and analyze factors driving consumer choice of a budgeted hotel.

We have applied the concepts and knowledge gained during the lectures and the
interaction with the audience in our research project.

iii
 TABLE OF CONTENTS

Particulars Page No.

BACKGROUND 1

MDP AND MRP 3

RESEARCH DESIGN 4

SECONDARY RESEARCH 5

PRIMARY RESEARCH 9

ANALYSIS 12

RECOMMENDATIONS 21

iv
 BACKGROUND
HOTEL INDUSTRY IN INDIA
Tourism and hospitality industry in India accounts for 9.6% of the GDP with a direct
contribution of $ 71.53 billion in 2016. The direct contribution to GDP of the tourism and
hospitality industry is expected to reach $148 billion by 2025.

Currently 44% of the Indian hospitality industry is occupied by International hotel chains
which are expected to increase to 50% by 2022. A decade ago the Indian hospitality industry
comprised of large private players and small unorganised hotels. The consumer was not given
much of a choice. Either it was expensive, luxurious, comfort of expensive hotels set up in all
major cities or small budget hotels providing basic infrastructure in both metropolitans and
smaller cities.

However, with the advent of budget hotel aggregators like OYO, Fab Hotels, Treebo
and others that offer basic comfort and necessities at an affordable rate in every state
and city imaginable in India for the purpose of both leisure and business and online travel
websites (Makemytrip, yatra etc) which have brought lakhs of hotels online, the dimensions
of hospital industry have changed altogether. These budget hoteliers, by the way of both
aggregating and establishing their own infrastructure, have given established hotel chains a
run for their money.

Pocket friendly yet modern’ is the new mantra for budget travellers across the world. Today’s
budget tourist is young and tech savvy and has the right tools on his mobile to find the best
deal for smart travel. That’s the reason why new start-ups like Oyo and Treebo are giving
tough competition to big hotel chains like Taj, ITC, Lemon tree, Oberoi, Radisson and others.

These start-ups understood the mind-set of the customers better than the big hotel chains. In
today’s time travellers are becoming more budget conscious and start-ups like Oyo and
Treebo understood the market sentiments and tried to standardize the process. Instead of hotel
charging varied rates dependent on room types, room view and amenities, they’re charging a
fixed amount for a standard room where they promise you few basic things which you need; a
good hygienic room with breakfast, internet, hot water, TV and safety.

1
Fab-Hotels, operated by Casa2 Stays Pvt Ltd, are generally located near a business hub,
airport or railway station and provide 3-star or business budgeted hotels. Currently,
fab hotels are available in top 15 Indian cities and having more than 100 locations
receives more than 80% bookings from business travellers, mostly between 25 and 45
years old, who travel for meetings, projects or training where as the market leader in
this category receives 36% of bookings from business travellers

According to reports people spend more on leisure stays than business stay.

2
Management Decision problem-
How fab-hotels can expand its business to attract leisure stay travellers.

Marketing Research Objective –

1. Reasons for change in spending trends of customers in leisure travel
2. To understand underlying factors that drive consumer choice of a budgeted hotel
3. To understand brand positioning of fab-hotels in budgeted hotel segment

3
 Marketing Research Design

Research design is a plan of action for the execution of the research project. It details the
procedures necessary for obtaining the information needed to structure and solve the
marketing research problem. It is the blueprint of how the research will be conducted.

Exploratory Research Conclusive Research

Objective To provide insights and understanding
To test hypothesis and
examine relationships
Characteristics  Information needed is loosely  Information needed
defined. is clearly defined.
 Informal and unstructured.  Research is formal
 Sample is small and and structured.
unrepresentative.  Sample is large and
 Qualitative analysis representative.
 Data analysis is
quantitative.
Findings Tentative Conclusive
Outcome Leads to further exploratory or Leads to decision making.
conclusive research

Research Methodology.

 Under Conclusive Research we have used Descriptive Research

 Descriptive Research is done through Survey

TYPES OF DATA USED

 Secondary Data- -
i. Reports of NSSO
ii. HVS annual report on Hotels in India
iii. Company(s) website

 Primary Data- Survey through Internet and E-mail

4
 SECONDARY RESEARCH

The industry is set to grow 15% per year. Indian hotel industry room rates are most likely to
rise 25% annually and occupancy to rise by 80% over the next two years. Hotel industry is
gaining its competitiveness as a cost effective destination.

Growing consistently since 1995/96 from just 120 hotels with about 18,000
branded/organised rooms to a record 887 hotels with a room count of 1,13,622 in 2015/16,
India has witnessed an increase of 5,170 rooms.

Existing hotel rooms in India: 202,963,.

Rooms being built across hotel categories: 114000

Investment in rupees- approximation of INR 400 million.

According to a report by HVS and The World Travel and Tourism Council, the travel
industry in India is expected to reach 1,747 million travellers by 2021, which will require
1,88,500 additional hotel rooms. Demand for rooms and average room rates are expected to
grow by 15-20 per cent annually. Domestic tourism is witnessing an unprecedented boom
with its size swelling to 230 million. The hotel industry is witnessing record occupancies and
rising growth rates.

• Leisure tourists constituted about 41.9% of the total guests and the remaining 58.1% were
business guests.

• While the average stay of foreign guests was 2.9 days, it was 2.5 days for domestic guests.

• Average stay of business and leisure guests was 2.4 days and 2.1 days, respectively

BUDGET HOTEL SEGMENT

Budget hotel is a new trend in the Indian hotel industry to capitalize on the growing tourism
sector in India. It offers comfortable accommodation and hygienic food at affordable prices.
Located in comparatively smaller cities like Haridwar and Indore, these hotels are reaching
out to mid-level business travellers and tourists

As the number of business travellers’ surges and more and more Indians travel on holidays,
other major players too are expected to make a bid for the emerging sector of stripped-down
versions of luxury hotels

5
6
 TOP HOTELS IN THIS SEGMENT
1. FAB- HOTELS

Fab-hotels is operated by Casa2 Stays Pvt. Ltd. Fab hotels are taking technology as one of the
major aspect for consumer experience. They are building a budgeted hospitality brand. Fab
hotel operates in the $30 per night, value for money, 3-star hotel segment. Fab hotels are
generally located near a business hub, airport or railway station and provide 3-star or business
budgeted hotels. Currently, fab hotels are available in top 15 Indian cities and having more
than 100 locations. Fab hotels operate more than 2500 rooms and are able to generate 85% of
occupancy month to month. Fab hotels are building customized technology for real-time
inventory, room pricing and guest experience.

2. OYO ROOMS

Oyo currently operates in more than 200 Indian towns and is expanding its business at
international level. Currently, Oyo has around 70,000 Rooms in 8,500 hotels across 230
towns of India. Oyo hotels pledge to provide standardization on 30 measures in each room
including free Wi-Fi and breakfast, flat screen TVs, spotless white bed linen of a certain

7
thread count, branded toiletries, 6-inch shower heads, a beverage tray and so on. The
standards are audited every few days so that every customer is assured a quality experience.
Oyo’s budget stays range from 999 rupees to 1,500 rupees while its midscale rooms are
priced at 1,600 to 4,000 rupees. Oyo provides asset owners with support such as quality
standardized supplies and service training.

3. TREEBO HOTELS

Treebo Hotels operates in the budgeted segment of hospitality industry. Currently, they are
operating in 40 cities with over 5200 rooms. They are mainly looking to extend their business
in tier 1, tier 2, and tier 3 cities. Also, the Treebo hotel runs at a high occupancy rate of 75%
to 80%, in contrast to the earlier 30-35% rate of most budget hotels, a repeat rate of 40% for
retail customers, and 80% for corporate customers. The company offers budget hotels rooms
to travellers in the 1,000 - 3,000 price range, with average booking rate at 2,000.

4. LEMON TREE HOTELS

8
Lemon Tree is India’s largest hotel chain in mid-priced sector. Lemon Tree operates 45
hotels in 28 cities with 4700 rooms. They are located in metro cities like Delhi, Mumbai, etc.
as well as in tier 1 and tier 2 cities like Jaipur, Ahmedabad, Pune etc. Lemon Tree hotels are
midscale business and leisure hotels. Price of Lemon Tree varies according to the different
cities. Average standard price of Lemon Tree is 2,000 – 5,000 per night. Each room comes
with a flat screen LED TVs, comfortable beds, running hot and cold water, air-conditioning
and a mini-fridge.

PRIMARY RESEARCH

RESEARCH INSTRUMENT USED

Questionnaire

SCALE OF MEASUREMENT
The scale being used is Likert Scale, a type of Itemized Scale under the category of Non
Comparative Scaling. This is an Interval Scale.

SAMPLING DESIGN

Population Universe- It is aggregate of all the samples. In our research study the population
is people in the age group above 18 years in Delhi NCR region

Sampling Frame- It is subset of population. In our research sampling frame is friends and
family in the age group 20-60 years

Sampling unit – Individual

METHOD OF SAMPLING USED

Non Probability Sampling- Non-probability sampling is a sampling technique where the

samples are gathered in a process that does not give all the individuals in the population equal
chances of being selected.

9
RELIABILITY TESTING

 Reliability in statistics and psychometrics is the overall consistency of a measure. A

measure is said to have a high reliability if it produces similar results under consistent
conditions.
 "It is the characteristic of a set of test scores that relates to the amount of random error
from the measurement process that might be embedded in the scores. Scores that are
highly reliable are accurate, reproducible, and consistent from one testing occasion to
another. That is, if the testing process were repeated with a group of test takers,
essentially the same results would be obtained.
 Various kinds of reliability coefficients, with values ranging between 0.00 (much
error) and 1.00 (no error), are usually used to indicate the amount of error in the
scores." For example, measurements of people's height and weight are often
extremely reliable.
 Now to do primary research we need a set of questionnaire which needs to be checked
for its reliability. So, for that Cronbach’s Alpha is calculated. It basically measures
internal consistency among test scores. Cronbach's alpha will generally increase as the
inter-correlations among test items increase, and is thus known as an internal
consistency estimate of reliability of test scores. Because inter-correlations among test
items are maximized when all items measure the same construct, Cronbach's alpha is
widely believed to indirectly indicate the degree to which a set of items measures a
single one-dimensional latent construct.
.

Case Processing Summary

N %
Cases Valid 32 100.0

Excludeda 0 .0

Total 32 100.0

a. Listwise deletion based on all variables in the

procedure.

Reliability Statistics

Cronbach's
Alpha N of Items

.886 10

10
Reliability Statistics table that provides the actual value for Cronbach's alpha, which
is 0.886, that indicates a high level of internal consistency in our scale for a particular set of
questionnaire with this specific sample

SAMPLING SIZE

We will use continuous variables on an Itemized rating scale (Likert Scale). So for
calculating sample size, we have the formula-

Where n is the sample size

Sigma is population standard deviation of the variable we are trying to find

E is the Tolerable Error

Z is the value from the standard normal distribution table for the given confidence level

Sample size calculation

As all the responses are measured on scale of 1 -5

Sample size = (Z*S/E) ^2

Standard error of sample = range/6

S = 4/6 = .67

Tolerable error = 0.06

Confidence interval = 95%, thus Z= 1.96 from the standard normal distribution table.

Therefore sample size= (1.96*.67/0.06)^2=325

11
 DATA ANALYSIS

TYPES OF TEST USED

1. Chi-Square
2. Factor Analysis
3. Multi-dimensional Scaling – Attribute Mapping

CHI SQUARE-

Chi Square is a statistical method assessing the goodness of fit between a set of observed
values and expected value

Hypothesis Testing

i. Null Hypothesis – There is no significant association between income level and

level of expenditure..
ii. Alternate Hypothesis – There is significant association between income level and
level of expenditure.
iii. Confidence interval – 95%

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

Expenditure * Income 321 100.0% 0 0.0% 321 100.0%

Expenditure * Income Crosstabulation
Count

Income

100000- 25000- 50000- Above Below

200000 50000 100000 200000 25000 NIL Total

Expenditure High 9 18 21 0 12 32 92

Low 1 9 8 1 4 12 35

Moderate 8 16 32 2 29 66 153

Very
18 0 8 5 0 2 33
High

Very Low 0 0 2 0 4 2 8
Total 36 43 71 8 49 114 321

12
 Chi-Square Tests

Asymptotic
Significance (2-
Value Df sided)

Pearson Chi-Square 125.460a 20 .000

Likelihood Ratio 103.933 20 .000
N of Valid Cases 321

a. 14 cells (46.7%) have expected count less than 5. The minimum

expected count is .20.

 Since asymptotic significance is less than chosen level of significance i.e 0.05, null
hypothesis is rejected.
 There is significant association between income level and level of expenditure.

FACTOR ANAYSIS

Factor analysis is a statistical method used to describe variability among observed,

correlated variables in terms of a potentially lower number of unobserved variables
called factors.

VARIABLES
1. STAFF BEHAVIOUR
2. ADDITIONAL SERVICES
3. PRICE
4. AMBIENCE
5. SAFETY
6. LOACTION
7. EASE OF BOOKING
8. COMFORT
9. BRAND IMAGE

13
 KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .884

Bartlett's Test of Sphericity Approx. Chi-Square 1617.161

df 45

Sig. .000

1. Staff should perform the services within the promised time duration
2. Hotel has adequate facility and supplies
3. The price to quality ratio should be satisfactory
4. The hotel should have a beautiful ambience
5. I should feel safe and secure during the stay
6. I should get value for additional services
7. I didn’t face any difficulty in finding this hotel.
8. I prefer to book hotels online
9. Stay should be comfortable.
10. I choose hotels based on brand image.

Rotated Component Matrixa

Component

1 2

1 .790 .143
2 .808 .127
3 .781 .295
4 .516 .596
5 .859 .124
6 .736 .310
7 .217 .692
8 .402 .544
9 .604 .550
10 -.056 .839

Extraction Method: Principal Component

Analysis.
Rotation Method: Varimax with Kaiser
Normalization.
a. Rotation converged in 3 iterations.

Total Variance Explained

14
 Extraction Sums of Squared Rotation Sums of Squared
Initial Eigenvalues Loadings Loadings

% of Cumulative % of Cumulative % of Cumulative

Component Total Variance % Total Variance % Total Variance %

1 5.115 51.146 51.146 5.115 51.146 51.146 4.010 40.096 40.096

2 1.266 12.663 63.809 1.266 12.663 63.809 2.371 23.712 63.809
3 .869 8.691 72.500
4 .585 5.846 78.345
5 .511 5.111 83.457
6 .449 4.489 87.946
7 .359 3.585 91.531
8 .314 3.140 94.670
9 .293 2.931 97.601
10 .240 2.399 100.000

Extraction Method: Principal Component Analysis.

FACTORS-

1. Staff behaviour, price to quality ratio, added services, safe stay, additional services,
comfort- VALUE FOR MONEY
2. Location, ambience, ease of online booking, brand image- BRAND VALUE

15
MULTI DIMENSIONAL SCALING-

Perceptual mapping by multi-dimensional scaling

BRANDS Mean Std. Deviation

OYO VALUE 2.6000 1.81659

LOCATION 4.0000 1.73205

COMFORT 2.6000 1.14018

VAS 2.2000 1.30384

SAFETY 1.4000 .54772

STAFF 1.6000 .89443

ADDITIONAL 1.6000 .89443

BOOKING 1.4000 .54772

SERVICE 1.2000 .44721

BRANDING 1.2000 .44721

FAB VALUE 3.0000 1.22474
LOCATION 3.0000 .00000
COMFORT 1.6000 .89443
VAS 2.0000 1.00000
SAFETY 2.4000 .89443
STAFF 2.2000 .83666
ADDITIONAL 2.0000 .70711
BOOKING 2.6000 .89443
SERVICE 2.8000 .44721
BRANDING 2.4000 .89443
LEMONTREE VALUE 2.6000 1.14018
LOCATION 3.0000 1.58114
COMFORT 2.6000 1.34164
VAS 3.2000 1.64317
SAFETY 3.2000 1.64317
STAFF 3.2000 1.64317
ADDITIONAL 2.6000 1.14018
BOOKING 3.0000 1.00000
SERVICE 2.6000 1.34164
BRANDING 4.0000 .00000
TREEBO VALUE 2.6000 1.51658
LOCATION 2.2000 1.30384
COMFORT 3.2000 .83666

16
 VAS 3.0000 1.00000
SAFETY 3.4000 .89443
STAFF 3.2000 .83666
ADDITIONAL 4.0000 .70711
BOOKING 3.8000 1.09545
SERVICE 3.4000 .89443
BRANDING 3.0000 .00000
STAYZILLA VALUE 4.2000 1.30384
LOCATION 2.6000 .89443
COMFORT 5.0000 .00000
VAS 4.6000 .89443
SAFETY 4.6000 .89443
STAFF 4.8000 .44721
ADDITIONAL 4.8000 .44721
BOOKING 4.2000 1.78885
SERVICE 5.0000 .00000
BRANDING 5.0000 .00000
Total VALUE 3.0000 1.44338

LOCATION 2.9600 1.30639

COMFORT 3.0000 1.44338

VAS 3.0000 1.44338

SAFETY 3.0000 1.44338

STAFF 3.0000 1.44338

ADDITIONAL 3.0000 1.44338

BOOKING 3.0000 1.44338

SERVICE 3.0000 1.44338

BRANDING 3.1200 1.39403

X Y

VALUE .892 -.124

LOCATION -.687 -.097
COMFORT .000 .310
VAS -.150 -1.320
SAFETY -.952 -.045
STAFF .282 -.516
ADDITIONAL .494 1.378
BOOKING .484 .760
SERVICE .999 .620
BRANDING .951 -.791

17
 Functions at Group Centroids

Function

BRANDS 1 2 3 4

OYO -7.574 .004 -1.548 .263

FAB -2.136 .229 2.244 .424
LEMONTREE .687 -2.984 .188 -.559
TREEBO 1.059 2.801 .003 -.622
STAYZILLA 7.964 -.050 -.887 .495

Unstandardized canonical discriminant functions evaluated at group

means
Prior Probabilities for Groups

Cases Used in Analysis

BRANDS Prior Unweighted Weighted

OYO .200 5 5.000

FAB .200 5 5.000
LEMONTREE .200 5 5.000
TREEBO .200 5 5.000
STAYZILLA .200 5 5.000
Total 1.000 25 25.000

18
 PLOT OF ATTRIBUTES
2

ADDITIONAL
1.5

1 BOOKING
SERVICE
COMFORT
0.5

SAFETY LOCATION VALUE

0
-1.5 -1 -0.5 0 0.5 1 1.5
STAFF
-0.5 BRANDING

-1
VAS

-1.5

19
 PERCEPTION MAP
10.000
SAFETY
8.000

6.000

4.000 TREEBO

2.000 COMFORT VAS

OYO FAB STAYZILLA
0.000
0 1 LOCATION
2 3 4 5 6
-2.000 LEMONTREE

-4.000

-6.000 VALUE
-8.000

-10.000

FINDINGS –

Function 1 – Value, Staff behaviour and Branding.

Function 2 – Additional services, ease of booking and comfort.

 Oyo is better than competition on Function 1.

 Fab is equidistant to both functions
 Fab hotels are perceived to be good on both Function 1 and 2.
 To attract more travellers and broaden their market fab hotels need to focus on these 6
attributes comprising of function 1 and 2.

20
 RECOMMENDATIONS

 As there is significant association between income level and level of expenditure,

Fab-hotels should attract high income guests by offering luxury with affordability.
They can offer a new product for premium guests like OYO Townhouse.
 Fab- hotels should focus on providing value for money to its guests by providing
more services and ensuring safe and comfortable stay for its guests.
 Fab-hotels can open new hotels at new and popular locations and make its
app/website interface friendlier for ease of booking
 Fab-hotels should pay special attention for creating brand awareness and building
a unique brand image

21