u g hotels and resorts ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1) Industry Structure and Development

The Hotel Industry is playing in vital role on the economy. Buoyancy of tourist traffic increases with stable socio-economic conditions. Indias socio-economic fabrics are anything but strengthening over the years. Coupled with this the economy is poised for a strong turn around on the back of.stress on all around infrastructure development. With near normal rainfall during current season albeit little late farm economys revival will provide much needed impetus to overall economic growth. The total direct and indirect economic impact of the Industry in India, was Rs. 6385 billion, being 6.6% of the GDP and over 39 million jobs, according to World Travel and Tourism Council (WTTC) Report. As per statistics updated by the Indian Ministry of Tourism, the foreign tourist arrivals in India for 2012, has been 6,65 million which is an 5.4 % increase over 6.31 million tourists of 2011. In terms of hospitality industry performance in India, data from Smith Travel Research reports indicate that the overall rates, occupancies and RevPAR (Revenue Per Available Room) have seen a decline in 2012, owing to the impact of increased supply in the marketplace and this trend is expected to continue for the next few years, given the gestation period for new hotel supply. The Company has registered a mixed trend in both revenue and occupancy rate of the Resort. While the business environment for the tourism industry in the country is so far from optimistic.

2) Financial Performance

The company was unable to achieve a desired growth during the year under review, The main reason for lower income was due to not being able to undertake major up gradation of the hotel facilities due to financial constraints and low rate of occupancy. The companys total income has been increased from Rs. 168.10 lacs to Rs. 240.77 lacs. The companys revenue, besides room rent, includes sale of food & beverage, recreational and health services. Revenue is recognized on completion of provision of services. Operating and administrative expenses comprise primarily on food & beverage cost, personnel cost, electricity & water charges, advertisement & Publicity, repair & maintenance cost etc. Company makes continuous efforts to rationalize costs while simultaneously achieving growth. Personnel cost include salaries & wages, contribution made to provident & other funds, staff welfare & medical expenses.

3) Opportunities, Threats, Risks and concerns.

Despite the economic and political scenario worldwide, demand for business travel has remained relatively robust. Companies are likely to increase spends and the multiplier effect of healthy salary increases will discretionary spending, especially on leisure travels. The companys resort having already built up a brand image amongst discerning travelers owing to its exclusive & enchanting location is expected to improve its revenues in coming times.

Though every business is subject to market risk at any one point of its time cycle but company resorts location and its attendant facilities, including vast expanse of captive lush green open areas makes it much less vulnerable to any sever competition. Although vocational advantages of your, Companys resort has enabled it to emerge as an attractive destination to domestic leisure traveler. However, over the years more players in leisure tourist market have made the market competitive. The company endeavors its best to capitalize on any business opportunity and rationalize costs in order to enhance returns to its shareholders.

4) Internal Control Systems and Their Adequacy.

The companys management has an effective & result oriented internal control system in place. Accountings of revenues and expenses & inventory management processes are subject to regular cross checking. Any untoward transaction, in a consolidated form, is reported to the Audit committee of the Board of Directors and necessary corrective action taken as suggested by the Audit committee.

5) Human Resources/ Industrial Relations.

HR is an integral part of companys strategy. This has resulted in creating genuine commitment amongst its personnel at all levels. Motivated to core, every employee endeavors to provide maximum value to each & every guest at the resort. Crucial ingredients of companys HR policy comprise- active team working, quality decision making through delegation, providing incentives for superior performance and practicing fair and ethical treatment to one and all. Company maintains most congenial industrial relations by imposing trust, prompt addressing of grievances, practicing participative management and continuous counseling to all its work force.

6) Cautionary Statement

Statements, made herein describing the Companys expectations or predictions, are "forward-Looking statements". The actual results may differ from those expected or predicted. Prime factors that may take a difference to the Companys performance include market conditions, raw material costs, Government Regulations, Economic developments and final outcomes of the proceedings in the Courts and other incidental factors.