Hospitality and Accommodation I: The Distinctive Characteristics of the Hospitality Industry, Atithi Devo Bhava, Hotels and Other Lodging, Types of Hotels and Their Departments, Hotel Classification and the HRACC, Chain Operations, E-Hospitality, Accommodation Management, Fiscal and Non-Fiscal Incentives, and the Ethical, Regulatory and International Framework

Unit VI is hospitality, and its first paragraph is the industry as a whole. This chapter explains what makes hospitality different from other businesses, inflexibility, intangibility, perishability, fixed location and heavy investment among other traits; the idea of Atithi Devo Bhava; hotels and the other forms of lodging; the types of hotels and the departments of a hotel; the classification of hotels, including the Ministry of Tourism's star and heritage categories decided by the Hotel and Restaurant Approval and Classification Committee (HRACC); the ways chains operate; e-hospitality; the types of accommodation and the activities of accommodation management; the fiscal and non-fiscal incentives offered to the hotel industry in India; and the ethical and regulatory aspects of running a hotel, with the international rules on hotel-keepers' liability. The departments are taken in detail in the next two chapters. NET Home Science teaches food service and NET Management general management; this chapter is specific to the lodging industry.

1. The distinctive characteristics of the hospitality industry, and Atithi Devo Bhava

CharacteristicMeaningConsequence for management
InflexibilityThe supply of rooms is fixed in the short run and cannot be increased for a peak or reduced for a slump; the building's design and location cannot be changedPricing and marketing, not capacity, must match demand to supply
IntangibilityThe guest buys an experience, rest, comfort and service, that cannot be seen, touched or tried before purchaseTangible cues (the lobby, uniforms, photographs, reviews) and brand reputation reassure the buyer
PerishabilityA room-night unsold tonight is lost forever and cannot be stored for tomorrowRevenue (yield) management, overbooking and last-minute offers
Fixed locationThe product cannot be moved to the customer; the customer must travel to itLocation decides success, and distribution brings the guest to the hotel
Relatively large financial investmentLand, construction and fittings require heavy capital with a long payback and high fixed costsHigh break-even occupancy and dependence on long-term finance
Others: inseparability, heterogeneity, labour intensity, seasonality, round-the-clock operationProduction and consumption happen together with the guest present; quality varies with staff; many people are needed; demand fluctuates; the hotel never closesTraining, standard operating procedures, shift planning and service culture

"Atithi Devo Bhava", "the guest is God", comes from the Taittiriya Upanishad, where the teacher instructs the departing student to treat his mother, father, teacher and guest as divine (matru devo bhava, pitru devo bhava, acharya devo bhava, atithi devo bhava). It expresses the Indian ideal of hospitality as a duty rather than a transaction, and the Ministry of Tourism has used it for a public campaign, alongside Incredible India, urging citizens, taxi drivers, guides and shopkeepers to treat visitors with courtesy and honesty, because the way a tourist is treated on the street is part of the product as much as the hotel room.

2. Hotels and other lodging, types of hotels and hotel departments

BasisTypes of hotel
LocationCity-centre (downtown) hotels, suburban, airport hotels, resort hotels (beach, hill, spa), highway motels and motor inns
Clientele and purposeCommercial (business) hotels, convention hotels, residential hotels and serviced apartments, casino hotels, transit hotels
Level of serviceFull-service luxury hotels, mid-market, limited-service and budget hotels, boutique hotels with individual design
Special typesHeritage hotels in palaces, forts and havelis; eco-lodges; floatels (floating hotels on water); capsule hotels
Ownership and operationIndependent hotels; chain-owned, franchised, managed and leased hotels; timeshare resorts

Beyond hotels, "other lodging facilities", also called supplementary accommodation, carry a large share of India's travellers: guest houses, bed-and-breakfast establishments and homestays (many approved under the Ministry of Tourism's Incredible India bed-and-breakfast scheme), dharamshalas and pilgrim rest houses, youth hostels, government tourist bungalows, dak bungalows and circuit houses, camps and tented accommodation, houseboats, caravans, holiday homes and timeshare, serviced apartments and home rentals listed on online platforms. They are cheaper, spread tourism income into places without hotels and offer local experience. A hotel is organised into revenue-producing departments (rooms, divided into front office and housekeeping; food and beverage service; food production; and minor operated departments such as the spa and laundry) and support departments (engineering and maintenance, sales and marketing, human resources, accounts, security and purchase).

3. The classification of hotels and chain operations

Classification grades hotels by their facilities and service so that guests know what to expect and governments can target incentives. Worldwide there is no single system; most countries use one to five stars, some add a deluxe grade, and private rating by online reviews now carries as much weight. In India the Ministry of Tourism classifies hotels through the Hotel and Restaurant Approval and Classification Committee (HRACC), which inspects them against published criteria for the building, rooms, bathrooms, public areas, food and beverage outlets, staff qualifications, guest services, safety and eco-friendly practices. The categories are one-star to five-star, five-star deluxe, and three heritage categories for hotels in buildings of historic character: Heritage Basic, Heritage Classic and Heritage Grand. The Ministry also approves hotel projects at the planning stage, so that investors can claim the incentives linked to approved projects. Classification is voluntary but most hotels seeking foreign and corporate business apply, and approved hotels must renew their classification periodically.

Mode of chain operationHow it worksExample of use
OwnershipThe chain owns and operates the hotelThe flagship hotels of Indian chains
Management contractThe owner keeps the property and its risks and pays the chain a fee to operate it under the chain's brandThe usual way international brands enter India, with Indian owners
FranchiseThe owner operates the hotel himself but pays for the right to use the chain's name, standards, reservation system and marketingMid-market and budget brands
LeaseThe chain rents the building from its owner for a period and runs itHeritage and city properties
Referral group or consortiumIndependent hotels join for shared marketing and reservations while keeping their own names and ownershipLuxury and heritage collections

India's hotel chains began with the Taj Mahal Palace in Bombay, opened by Jamsetji Tata in 1903, the foundation of the Indian Hotels Company (IHCL); M. S. Oberoi took over Clarkes Hotel at Shimla in 1934, the beginning of the Oberoi group; ITC entered hotels in 1975; and the public-sector ITDC runs the Ashok group. The largest international chains by rooms are Marriott, Hilton, IHG, Accor, Hyatt and Wyndham, most operating in India through management contracts and franchises with Indian owners. Chains offer brand recognition, central reservations and distribution, loyalty programmes, standard operating procedures, purchasing economies and access to finance; their drawback for an owner is the fees and the loss of independence.

4. E-hospitality, types of accommodation and the activities of accommodation management

E-hospitality is the use of information and communication technology across the hotel business. At its core is the property management system (PMS), which holds reservations, room status, guest folios and billing and links to the point-of-sale systems of the restaurants and bars, the telephone exchange, key-card locks and accounts. Around it sit the central reservation system and the channel manager, which update room availability and rates across the hotel's own website, GDSs and online travel agencies; revenue management systems that set prices by forecast demand; online and mobile check-in, digital keys and in-room tablets; guest relationship and loyalty databases; reputation management of online reviews; and social media marketing. The benefits are speed, accuracy, direct bookings and personalisation; the risks are dependence on OTAs and their commissions, and data security.

Accommodation is divided into primary (serviced) accommodation, the hotels, resorts and motels that sell rooms with services, and supplementary accommodation, the guest houses, homestays, hostels, dharamshalas, camps and apartments described above, which offer fewer services at lower cost. Accommodation management covers the activities of the front office, which sells the rooms, receives and registers guests, handles their accounts and is the hotel's nerve centre; housekeeping, which keeps rooms and public areas clean, safe and attractive and manages linen and laundry; the bar and restaurant, which serve food and beverages; and the supporting services, engineering, security, purchase, stores, human resources and accounts, without which the guest-facing departments cannot work.

5. Fiscal and non-fiscal incentives, and the ethical, regulatory and international framework

Kind of incentiveExamples in India
Fiscal (affecting tax, cost or finance)An investment-linked deduction under section 35AD of the Income-tax Act for building and operating a new hotel of two-star category or above; the inclusion of hotels above a project-cost threshold in the Harmonised Master List of Infrastructure Sub-sectors from 2013, which eases long-term finance; import of capital goods under the Export Promotion Capital Goods scheme against export obligations met by earning foreign exchange; state capital subsidies, stamp-duty and land concessions, and power at industrial tariffs
Non-fiscal (affecting procedure and support)Industry status for tourism; project approval and classification by the Ministry of Tourism; single-window clearance and simpler licensing in many states; land allotment in tourism zones; promotion of classified hotels abroad; and skill-development programmes such as Hunar Se Rozgar Tak, started in 2009, which trains young people for hospitality jobs

A hotel operates under many licences and laws: a food business licence under the Food Safety and Standards Act 2006; excise licences for liquor; municipal trade and health licences and police registration of an eating house or lodging; fire safety clearance; pollution control consents; lift and boiler licences; licences for playing recorded music; labour laws; and the duty to record every guest and to report foreign guests to the immigration authorities. Ethical practice goes beyond compliance: honest advertising and rate display, respect for guests' privacy and data, no discrimination in admission, fair wages and working hours, responsible service of alcohol, and sustainable use of water and energy. A hotel-keeper's liability for guests' property is, in Indian law, largely that of a bailee under the Contract Act, and internationally it was addressed by the Council of Europe's convention on the liability of hotel-keepers for the property of their guests (Paris, 1962), which limits liability except for valuables deposited for safe keeping or loss caused by the hotel's fault, and by the International Hotel Regulations adopted by the International Hotel Association in 1981, which set out the hotel contract, including overbooking, deposits and the guest's obligations.

⚠️ Fiscal means money, non-fiscal means procedure
A tax deduction, a subsidy, cheaper finance through infrastructure status or duty-free import of equipment is fiscal. Single-window clearance, classification, land allotment, promotion and training are non-fiscal: they cost the hotel less time or give it support, but do not change its tax or cost directly.

Key takeaways

  • Hospitality is inflexible (fixed capacity), intangible, perishable (an unsold room-night is lost), fixed in location and capital-heavy, as well as inseparable, heterogeneous, labour-intensive, seasonal and round-the-clock; Atithi Devo Bhava comes from the Taittiriya Upanishad.
  • Hotels are typed by location, clientele, service level, special type (heritage, floatel, eco-lodge) and ownership; supplementary accommodation includes homestays, dharamshalas, hostels, camps and houseboats; departments are revenue-producing (rooms, F&B) or support.
  • The Ministry of Tourism's HRACC classifies hotels from one to five stars, five-star deluxe and three heritage categories (Basic, Classic, Grand) and approves projects; chains operate by ownership, management contract, franchise, lease or referral; the Taj Mahal Palace (1903) began IHCL.
  • E-hospitality runs on the PMS, CRS and channel manager, revenue management and reviews; accommodation management covers front office, housekeeping, bar and restaurant and support services.
  • Fiscal incentives include section 35AD, infrastructure status (HML, 2013) and EPCG; non-fiscal ones include classification, single-window clearance and Hunar Se Rozgar Tak (2009); hotels need FSSAI, excise, fire, police and pollution licences; hotel-keepers' liability is addressed by the 1962 Council of Europe convention and the IHA's International Hotel Regulations (1981).

Practice questions (10)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

  1. A hotel room that remains unsold tonight cannot be stored and sold tomorrow. This characteristic of the hospitality product is

    1. intangibility
    2. perishability
    3. heterogeneity
    4. inflexibility of location
    Show answer

    Answer: B — perishability

    Perishability means unsold capacity is lost for ever, which is why hotels practise revenue management, overbooking and last-minute pricing. Intangibility is that the service cannot be seen before purchase, and heterogeneity that quality varies.
  2. Which of the following are heritage hotel categories used by the Ministry of Tourism in classifying hotels? Select all that apply.

    1. Heritage Grand
    2. Heritage Classic
    3. Heritage Deluxe
    4. Heritage Basic
    Show answer

    Answer: A — Heritage Grand; B — Heritage Classic; D — Heritage Basic

    The three heritage categories are Heritage Basic, Heritage Classic and Heritage Grand, for hotels in buildings of historic character. "Deluxe" is used only in the five-star deluxe category, not among the heritage grades.
  3. The phrase "Atithi Devo Bhava" is drawn from

    1. the Taittiriya Upanishad
    2. the Bhagavad Gita
    3. the Arthashastra
    4. the Rigveda's Purusha Sukta
    Show answer

    Answer: A — the Taittiriya Upanishad

    It is part of the teacher's instruction to the departing student in the Taittiriya Upanishad: treat mother, father, teacher and guest as divine. The Ministry of Tourism uses it for a campaign on the treatment of visitors.
  4. An arrangement in which a property owner keeps the hotel and its risks but pays an international chain a fee to operate it under the chain's brand is a

    1. referral consortium
    2. management contract
    3. lease
    4. franchise
    Show answer

    Answer: B — management contract

    Under a management contract the chain operates the hotel for the owner. Under a franchise the owner operates it himself using the chain's brand and systems; under a lease the chain rents the building; a consortium links independent hotels for marketing.
  5. In which year did the Taj Mahal Palace hotel in Bombay, the foundation of the Indian Hotels Company, open? Give the year.

    Numerical answer — type the value.

    Show answer

    Answer: 1903

    Jamsetji Tata opened the Taj Mahal Palace in 1903. M. S. Oberoi's group began with Clarkes Hotel, Shimla, in 1934, and ITC entered hotels in 1975.
  6. Which of the following are fiscal incentives available to the hotel industry in India? Select all that apply.

    1. Import of capital goods under the Export Promotion Capital Goods scheme
    2. The investment-linked deduction under section 35AD for new hotels of two-star category and above
    3. Skill training under Hunar Se Rozgar Tak
    4. Single-window clearance of approvals
    Show answer

    Answer: A — Import of capital goods under the Export Promotion Capital Goods scheme; B — The investment-linked deduction under section 35AD for new hotels of two-star category and above

    A tax deduction and duty-free import of equipment change the hotel's tax or cost, so they are fiscal. Single-window clearance and training programmes are non-fiscal support.
  7. A hotel built on a vessel or pontoon floating on a lake, river or sea is called a

    1. motel
    2. capsule hotel
    3. boutique hotel
    4. floatel
    Show answer

    Answer: D — floatel

    A floatel is a floating hotel. A motel is a roadside motor hotel, a capsule hotel offers tiny sleeping pods, and a boutique hotel is a small hotel with individual design.
  8. Assertion (A): Hotels vary room rates by day, season and demand, and accept some overbooking. Reason (R): The hotel product is perishable and its capacity is inflexible in the short run.

    1. Both A and R are true, and R is the correct explanation of A
    2. Both A and R are true, but R is not the correct explanation of A
    3. A is true, but R is false
    4. A is false, but R is true
    Show answer

    Answer: A — Both A and R are true, and R is the correct explanation of A

    Both are true and R explains A. With a fixed number of rooms that cannot be stored, the only way to maximise revenue is to manage price and occupancy, filling rooms in weak periods with lower rates and protecting against no-shows with controlled overbooking.
  9. Which of the following are forms of supplementary accommodation? Select all that apply.

    1. Five-star deluxe hotels
    2. Youth hostels
    3. Dharamshalas
    4. Homestays
    Show answer

    Answer: B — Youth hostels; C — Dharamshalas; D — Homestays

    Supplementary accommodation offers fewer services at lower cost outside the hotel sector: dharamshalas, hostels, homestays, guest houses, camps and houseboats. A five-star deluxe hotel is primary, serviced accommodation.
  10. The international convention of 1962 that limits a hotel-keeper's liability for guests' property, except for valuables deposited for safe keeping or loss caused by the hotel's fault, was adopted under the auspices of

    1. the World Tourism Organization
    2. ICAO
    3. the World Travel & Tourism Council
    4. the Council of Europe
    Show answer

    Answer: D — the Council of Europe

    The Convention on the Liability of Hotel-keepers concerning the Property of their Guests was concluded in Paris in 1962 by the Council of Europe. The World Tourism Organization began work only in 1975, and ICAO deals with civil aviation.