Low Budget Hotel Industry in India

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Low Budget Hotel Industry in India - Introduction Travel & Tourism continues to be one of the worlds largest industries. The total impact of the industry means that, in 2011, it contributed 9% of global GDP, or a value of over US$6 trillion, and accounted for 255 million jobs. Over the next ten years this industry is expected to grow by an average of 4% annually, taking it to10% of global GDP, or some US$10 trillion. By 2022, it is anticipated that it will account for 328 million jobs. or 1 in every 10 jobs on the planet. Budget travel in India for the discerning traveller has always been hard to negotiate. Luxury hotel brands are predictable and standardized. But not everybody is at the top end. The changing trends in the Indian travel and tourism market have altered the course of the hospitality industry and the growing affluence of the Indian middle class has opened up new opportunities. The countrys economic growth, coupled with increased tourist inflow and more domestic travel thanks to cheaper domestic flights, has resulted in a boom in hospitality and the need for quality accommodation at affordable prices. As per the latest data available, the Sales of the Hotel Industry in India is Rs.28,28,42,00,000 (Year Ending Jan 2012). Thus there is witnessed great potential in the hotel industry sector and the first to recognize the requirement for high quality at small budget hotels were the larger hotel companies. But budget hotel chains, as a separate segment in India, are not yet there. The large gap between demand and supply can be seen in the tourist inflows - 4.2 million visitors and 400 million domestic trips made by Indians in the last year, and the total capacity of all listed or classified hotels is just 120,000 rooms1. The two-to-four-star hotel category is practically untouched by any branded player. Competition is thus poor, with only 20 percent to 25 percent of the market catered to by a known brand. Source : World Travel and Tourism Council and the Corporate Information website

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Great potential for budget hotels in India; Chitra Balasubramaniam; 28 Oct 2008; Hotel News Now

Some Players Ginger, a TATA enterprise, from Roots Corporation Ltd. a subsidiary of the Indian Hotels Co. Ltd. (Taj Group of Hotels) has been among the first to set up low cost hotels with no compromise on comfort and standards. It now has hotels in 14 cities, with a special emphasis on Tier-II cities, and with many more coming up. Ginger Hotels believes the dependence on sub-par, unclassified, hotels needs to go and service quality needs to become the motivator. Ginger operates in the three-star category and its prices range from a competitive Rs.999 for a single room to not more than Rs.1799 for a double room, inclusive of taxes. And the tariffs are the same across destinations and seasons. One of the other new brands in this sector is Lemon Tree. Lemon Tree Hotels, financed by Warburg Pincus, offer full-service, moderately priced hotels for business and leisure travellers. Typically, each Lemon Tree Hotel has about 125 smartly furnished rooms with facilities designed for safety, security, hygiene and comfort. They offer a spate of facilities that feature on any larger hotels tariff. Multi-cuisine dining, a bar, recreation and fitness facilities, a swimming pool (where possible) as well as a business centre, meeting rooms and state of the art conference halls along with basic services like housekeeping, laundry and room service. Their marketing motto is the picture of youth, spirit, efficiency, and genuineness. Hometel by Sarovar Hotels initially came up as an offering to the IT traveller. It positioned itself as a classic, conveniently located stop-over for business travellers. It offers all modern facilities at affordable prices, something the corporate world was on the look out for. Hometel now has a presence in three cities and has another four properties in the pipeline. 50 hotels in the next 5 years is their target. Red Fox properties are slated to come up in 148 locations in the next 12 years, with one each in Delhi, Hyderabad and Jaipur in the next two years. The founder of Deccan Aviation is planning to open a chain called Deccan Hospitality. New Yorkbased Berggruen Holdings' Indian hospitality venture Berggruen Hotels is also in the process of setting up the their brand of 38 boutique budget hotels called "Keys" in India at an investment of $100 million. Walton Street Capital, a US-based real estate private equity fund, has invested in Shriram properties, which is opening up 70 budget

hotels. Foreign investment and international joint ventures include French Accor teaming with Emaar to bring 100 Formule 1 and Ibiz hotels to India. Hilton Hotels International has tied up with DLF Group to offer the same service. Super8 Motels, CountryHearth, Americas Best Inns and Best Value Inn are also all set to enter the Indian market through the franchisee route. Even the railway ministry has leased out land at 11 places for budget hotels and plans to upgrade its Yatri Niwas properties across the country.

GINGER HOTELS INTRODUCTION In June 2004, what is now called Ginger Hotels, launched the Smart Basics concept that changed the game for the Indian hospitality industry. A new generation of hotels, Ginger signifies simplicity, convenience, informality, style, warmth, modernity and affordability. This unique concept was developed in association with renowned corporate strategy thinker, Dr C. K. Prahalad, with the hotels being designed and developed by IHCL.

The Ginger hotels are built around a unique concept that provides facilities to meet the key needs of today's traveller, at surprisingly affordable rates. The primary objective behind the launch of these hotels is to provide a superior product offering and consistent experience to travellers, beyond the present offerings in the industry. Value pricing by providing intelligent, thought-out facilities and services is the central idea. Ginger offers this affordability using product design and simplicity to make as many service gateways controlled by individual guests themselves. For example, there are no bellboys, no lift operators, etc. and computerization and IT-enabling ensures minimal use of physical man-hours.

Vision, Mission, Values The vision statement Ginger is a fresh and warm experience, of an unsurpassed value.

Their mission : To provide smart, clean and safe hospitality offerings by adopting next-practices that constantly enhance value for patrons. They are driven by respect for people and nature and passion for our stakeholders.

Values : Customer-driven excellence: We anticipate expectations and delight our patrons with convenient and modern facilities at an unsurpassed value Entrepreneurship: We strive to take ownership of the tasks we perform and to

create an environment that encourages and supports initiative and appropriate risktaking Innovation: We believe that making meaningful changes to improve products, services and processes to create value for all stakeholders is an integral part of the daily work of the organisation Valuing employees, partners and communities: We believe in nurturing and developing internal and external partnerships, balancing the growth of the core business while preserving natural resources and contributing to society Speed and agility: We deliver on promises with a sense of urgency and short response time Fun, joy and zing: We believe that a happy employee leads to a delighted guest IDENTIFYING & CLASSIFYING THE FIRMS RESOURCES - RESOURCE BASED VIEW The RBV framework sees firms as a unique combination of valuable tangible assets, intangible assets and organizational capabilities that lead it toward a competitive advantage among rivals. The resource heterogeneity between various players provides for the construction, accumulation and achievement of competitive advantages.2 The relative strengths and opportunities possessed by the ownership of certain resources ensure the barriers to duplication by competitors. The tangible assets/intangible assets/capabilities typology gives an implicit hierarchy of resources that provides the basis to formulate a strategy of sustainable development. Broadly speaking intangible resources and capabilities are more difficult to duplicate and form the basis for strategy development. Masstige Service Differentiation Strategy

Differentiation strategy hotels always have higher room costs than those using a cost leadership strategy, and also have competitive advantage that is not easily imitated. Ginger differentiates itself from other budget hotels by its SMART BASICS feature. Smart Basics concept was co-created by Ginger with the help of the Management Guru CK Prahlad. Smart Basics provide a value proposition that signifies simplicity,2

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convenience, informality, style, modernity and affordability. The hotels offering is high end, reliable and standardized facilities at an affordable price tag. Ginger offers a customer A/C, electronic lock, comfortable beds, work area, 17" Flat TV, Direct Dial with STD, Gym, cyber cafe etc. at a rate of Rs 999 for single and 1790 for double room. The hotels operate with skeletal staff but is highly process oriented so that most of the necessities of the customers are taken care. Some of the services are outsourced but available to the customer on call. As the tagline says " Please Help Yourself", most of the services are self service ( to reduce cost) including check in. Ginger thus effectively fills the gap for a budget hotel that delivers reasonable/assured service. Ginger is an example of a Masstige service, in marketing terminology.

The price proposition Gingers competitive prices ranging from Rs.999 to Rs.1799, inclusive of taxes, follow a standardized rate format. Flexible pr