Financial challenges in the Indian hospitality industry

Abstract

PurposeThe purpose of this paper is to provide a practitioners' perspective on financial challenges prevalent in the Indian hospitality industry. The paper also makes an attempt to give useful insights into possible solutions to the issues raised.Design/methodology/approachThe study assimilates data from senior finance professionals from a spectrum of hotels in India. The study involves the collection of primary data through structured interviews.FindingsThe study highlights that some of the financial challenges faced by the Indian hospitality industry include high financing costs, multiplicity of taxes charged, licensing and legal issues, working capital issues and eroding margins. The study also gives some useful insights to the possible solutions to the challenges identified.Research limitations/implicationsThis paper provides some very useful qualitative analysis of the contemporary challenges and their possible solutions prevalent in the Indian hospitality sector. The findings will be useful for hoteliers, policy makers and researchers to deliberate on the issues raised. However, it does not involve any quantitative analysis.Originality/valueThis study makes a sincere attempt to bring forth some real life issues, challenges and solutions which would be a good value addition to the existing literature.

Recent innovative measures across different functions in the Indian hospitality industry

“…Further, as yet, the hotel does not seem to have taken any remarkably innovative 487 Recent innovative measures steps in its accounting and finance function and the literature suggests that this is an effective way of controlling costs. Finally, Sanjeev et al (2012) suggest that financing, especially high operating costs and difficulty in raising finance, is the key issue that needs to be addressed by the hospitality industry.…”

Challenges to implement innovative ideas and practices

“…For example, Hyatt hotels experienced some guest resistance to its self-service kiosk initiative. Funding-related challenges : HVS India concluded in its 2013 report that the main challenge facing hotel owners in India relates to the high interest rates charged on loans and the relatively high repayment costs. India’s rigidity in relation to lending norms also creates a challenge for hotel owners in India and so it is possible to conclude that there are fewer options available to hoteliers to raise funds economically in India than might be the case in other emerging markets (Sanjeev et al , 2012). Development-related challenges : The rising prices of land in India mean that it is critical to maximize space-related revenue.…”

The emerging strategic and financial issues in the Indian hospitality industry

“…Elgonemy (2002) has elucidated that the risk associated with the hotel business has been perceived to be high by lenders as banks often charge a much higher rate than their PLR. In part, this is because there are few options for hoteliers to raise finance at competitive prices (Sanjeev et al , 2012). In this context, it is of particular interest to find out what the industry is doing about both operating and non‐operating costs. Impact of inflation on profit margins: All industries are hit by inflation.…”