Financial Analysis-A Case Study on Hotel Industry in India

Performance Evaluations & Ratio Analysis of Hotels in India: A Case Study on Hotel Leelaventure Ltd

Profitability Analysis of Leading Player in Hotel Industry in India

Research Proposal Writing Help on MBA Finance Topics

Introduction, Importance and Significance of the Study

Hotel room demand recovered to pre-crisis levels of 2007-08 in the latter half of 2009-10 with an increase in foreign tourist arrivals and a recovery in business related travel. Average room rates (ARRs), on the other hand remained around 20 per cent lower than the peak levels seen in 2007-08 at Rs 8,000, mainly due to a 13 per cent increase in supply; resulting in a sluggish growth in revenues per available room (RevPARs). At a pan-India level, RevPARs are expected to grow at a CAGR of 4 per cent. Amongst the business destinations, RevPAR growth of hotels located in Mumbai, NCR and Bengaluru will be in the range of 4-6 per cent. The increase in RevPARs is likely to be driven by a recovery in business related travel in Mumbai and Bengaluru, while NCR will reap the benefits of increased arrival of leisure tourists as well. On the other hand, room demand in destinations such as Hyderabad and Ahmedabad is also expected to increase with a recovery in corporate travel. RevPARs are likely to remain relatively flat in the market as a result of large supply additions, which will restrict the ability of hoteliers to increase ARRs significantly. 

 With increasing foreign tourist arrivals expected over the coming years and relatively lower supply additions (when compared to business destinations), hotels located in leisure destinations- Goa, Agra and Jaipur will see a RevPAR growth of 4-8 per cent over the next 5 years. In 2010-11, hotel revenues are expected to grow at 15-20 per cent after two years of decline. CRISIL Research estimates operating margins of hoteliers to improve y-o-y to 36-38 per cent of sales in 2010-11 from 32 per cent in 2009-10.

Rationale for the Study

The ratio analysis tool has used to examine liquidity, profitability and solvency qf the firm. The ability of the firm to meet its obligations on time depends on its liquidity and solvency position and its ability to meet all expenditures depends on its earning capacity. Both liquidity and profitability of the firm enhance the credit worthiness of the firm that in turn leads to enjoy all the benefits of high credit worthiness. The high degree of liquidity affects adversely to profitability and high degree of profitability affects adversely to liquidity of the firm. Therefore, it is necessary to strike the balance between liquidity and profitability of the firm. In this background, the present study is a modest attempt to analyze the performance appraisal of Hotel Leelaventure Ltd.

Objectives of the Study

This study has the following broad objectives:

• To conduct performance appraisal of Hotel Leelaventure Ltd for the financial years, from 2006-07 to 2010-11.

• To calculate the liquidity, profitability and solvency ratios

• To ascertain the effectiveness in financing, investment and distribution decision.

• To evaluate the trends in asset and liability structure and trends in capital employed and net worth of the firm.

• To consider the trends in sales, cost of goods sold, gross profit/loss and net profit/loss

Hypothesis for the Study

The following hypotheses will be formulated and tested in the present study:

H0: The firm has given more importance to long-term solvency as compared to short-term solvency and profitability.

H1: The firm has not given more importance to long-term solvency as compared to short-term solvency and profitability.

Research Methodology

Research Approach:  A questionnaire survey approach will be adopted.

Sample Size and Profile : 50 finance officers who are supposed to have personal

knowledge of their organizations’ performance measurement system.

Source of Data:  Annual Reports of the Company, Crisil Database, Newspapers and Journals.

Tools of Data Analysis

• The technique of ratio analysis will also use to examine the different aspects of liquidity of both the companies.
• Correlation test  will be employed to find the significant correlations between the general profile variables

Expected Contribution from the Study

Due to globalization and liberalization of world markets, competition faced by the organizations has become more and more intense, and the pressure to perform better is unavoidable. The findings of this study will not only enrich the field of research pertaining to the use of financial and non-financial performance measures, but more importantly, it also raises public awareness of the performance measurement issue in India. In addition, these findings form the basis of an in depth investigation into these practices at Indian Hotels industry. Little research has been carried out in this field of knowledge relating to the developing countries. It is hoped that this study would encourage or at least plant some seeds for further research efforts in this increasingly important area.

Chapterisation

·         Introduction

·         Literature Review

·         Research Methodology

·         Data Analysis and Findings

·         Recommendations & Conclusion

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