‘Getting People to Change Their Travel Habits is a Challenge’

Indian Hotels Co. Ltd (IHCL), owner of the Taj Group, is one of the largest hospitality companies in the country, with revenues of more than Rs1,800 crore in fiscal 2006.

In addition to its luxury brand, Indian Hotels has attempted to break into the budget segment in the last three years with the Ginger hotels chain, run by subsidiary Roots Corp. Ltd. Prabhat Pani, chief executive officer of Roots, spoke to Mint. Edited excerpts:

How many hotels are you hoping to set up and in what time frame?

We’re aiming to get to 25 hotels by March 2008. We’re currently at seven, and seven to eight (are) under construction.

You wouldn’t be able to talk about the overall plans for what you’re going to do beyond the financial year? Are you hoping to move at this pace indefinitely?

Very certainly in the near future we would expect to move along those lines. See, the opportunities for us are very large. We’re not only talking about (entering) newer cities. We’re also talking about multiple locations in same city. Just to give you an example, our current hotel is operational in Pimpri (near Pune); we’re looking at another one in…the IT hub for Pune.

The opportunities for us are multiple locations in larger cities and both existing…and industrial locations that are going to come up. We’re currently constructing a hotel in Pantnagar. Now, this was just brought on the map a few months back, but, suddenly, with a whole host of people who are coming there, we expect it to be a large industrial centre, so we’re there.

So when you look at a combination of multiple locations in larger cities—some of the tier-I, tier-II cities—and when you look at upcoming towns and industrial (areas), the opportunities are immense.

What kinds of hotels are you comparing yourselves to? Who are your competitors?

…The competition as we see it would be some existing direct competition, but a lot with indirect competition.

The direct competition category—a lot of it is really in the unorganized sector. You have a lot of one-off hotels in multiple locations—family run.

People do not really have the expertise to be able to manage and continue to deliver good properties. So, very often…a new hotel…will be built with very nice rooms and a comfortable stay for the first few months and after that things slip.

So we’re clearly saying that there’s an organized chain with very strong antecedents that not only provides good service on day one, but would continue to (provide) equivalent or better service…

The second category would be one of companies.

With the kinds of increases that have happened on tariff rates…they have gone to these guest houses and service apartments, and the likes of them. We’re really saying we would like to commission this product as a replacement because that’s not really the core business of those companies.

I would say another form of competition is getting people to change their travel habits. There are a lot of locations that people do not stay through because they feel there isn’t decent accommodation available. And I can give you an example in that, a lot of people didn’t stay in a place such as Haridwar, people who travelled on business. So theytook the Shatabdi in the morning, finished the day’s work and got back.

Now when they find that there’s a good alternative available that also meets their requirements on price, they’re quite often willing to stay there.

Has all of your land come from IHCL’s land bank?

No. In fact, we do things completely independent of IHCL in terms of land primarily because the parcels of land that is required by IHCL for their hotels is much larger where as our requirements are much, much lesser.

We ideally look for a parcel of about one acre for a 100-room hotel, but if it gets into a squeeze, we can even do with lesser than that.

We (also) go to state governments and seek their support on getting lands allocated to us at industrial rates.

I don’t think they are talking about any rates lower than that, but that’s good enough, because quite often that rate is lower than the prevailing market rates

And the third one that we do is, when we can’t afford it—and I would say quite a few parts of the country are now really becoming very, very critical in terms of our being able to acquire—we’re looking at options of leasing.If you look at even the one we have at Pune, it is not land that is owned by us, it is land which is leased by us…If we’re putting in investments into the land, we certainly look at least 25 to 30 years with an option towards 10 more.

Is there competition within Indian Hotels between Taj and Ginger or is it more of a partnership?

It’s clearly recognized that this is totally a different segment of customers, it’s in a different market slot as it were, which is why it needs to run operationally different.

So, I would say that many of the customer-facing parts are completely (different)…

The way that the front office person from Ginger would come across would be very, very different from the way the front officer person from the Taj (would come across).