 "Ginger loses its bite")
A little over a decade since it was launched, Ginger, the hotel brand from the Tata group, is struggling. Targeted at the budget- business traveler, the hotel chain has missed its expansion targets, deferred plans for an initial public offering and is being slowly edged out of the category by a pack of bash and aggressive hoteliers. Ginger's room rates are far higher than most of the other budget hotels and besides, it rarely features among the top 10 searches in any of the popular hotel booking sites.
The company refused to comment or divulge its plans, but it seems, internal introspection over the brand has already begun. Cyrus Mistry, chairman, Indian Hotels Company announced at the recently held annual general meeting, "We are relooking at the strategy for Ginger."
But soon Ginger exited the niche it had crafted for itself. A look at the rates for its property in Mumbai shows that the brand has inched closer to many of regular branded hotels which were meant to operate at least 2-3 levels higher in terms of room rents and facilities offered. For instance, a night at Ginger (August 19) comes for Rs 3,800 (with taxes, Rs 4,500) as per its web-based booking system. Meanwhile, Keys Hotel, a mid-segment (3-star) brand, charges Rs 3,613 and Hyatt Regency (5-star), Rs 6,000 for a night. Accor-owned upscale brand Ibis, which is a stone's throw from the airport, comes for Rs 4,700. All these hotels are located within 5 kms of Ginger, which is in suburban Andheri.
The brand has lost the affordability edge in almost all its properties. In 34 operational hotels, Ginger charges anywhere between Rs 1,800-4,000 with the average charge being around Rs 2,600 a night. This is much higher than the Rs 999 with which it started. Officials of Roots Corporation, the 67 per cent subsidiary of Tata controlled-Indian Hotels Company which owns the Ginger brand, blame high development and operating costs for high room tariffs.
Although the company refused to talk, it is believed that the asset heavy model that Ginger followed has cost it dearly. It has developed the majority of its properties, which is why it has taken far longer to become profitable say industry experts. The high cost of development pushed up room tariffs and could well nudge Ginger completely out of the niche it wanted to be a leader in.
It has taken Ginger over a decade to break even. As per IHCL's annual report Roots Corporation posted a net profit of just Rs 2.1 crore for the last financial year. This is perhaps the reason for the hotel puting its expansion plans on hold. The target was to have 75-80 operational properties by 2015-16, but it is presently operating at half that number. An initial public offering for Roots Corporation, in the works provided it reached 100 properties, also seems to have been shelved. While IHCL's investors are raising doubts over the future of Ginger on the back of increased competition, its management is confident of a turnaround. A detailed questionnaire sent to Roots Corporation seeking to know the way forward did not elicit a response.
To add to Ginger's woes, a new breed of young entrepreneurs is setting up cheaper, better and more attractive hotels. Offering accommodation in the heart of any city for as little at Rs 1,300 per night including complimentary breakfast and free WiFi, the hotel aggregating companies are snatching away large slices of Ginger's pie. Web-based companies like Oravel Stays (Oyo Rooms), Stayzilla, Zo Rooms, Zen Rooms are among the dozen-odd brands which address the needs of the traditional budget conscious guest. The new hotel aggregators and hotel chains are also digital natives and hence far nimbler when it comes to reaching out to customers, booking them in and responding to their complaints.
Still there is scope for growth in the category and Ginger could, if it got its act together recover lost glory. Research and consultancy company, HVS, says that at 62 per cent average country-wide occupancy, the budget segment has not only outperformed other segments, but it has marked a growth in occupancy when other segments fell. Aggregators like OYO Rooms, with more than 121 properties in Mumbai, Thane and Navi Mumbai, including 38 hotels in Ginger's neighbourhood believe the segment has immense potential. Ritesh Agarwal, CEO, OYO Rooms, says, "Our promise of a high-quality hotel room at rock-bottom price is our attempt to shake up the budget travel market in the country. With standardised rooms across India priced as low as Rs 999 a night, we are completely changing the value perception of a budget hotel stay for business or leisure travellers." Ginger could either take heart from his words or retreat further into its corner; the path it takes will define the brand's future.
The company refused to comment or divulge its plans, but it seems, internal introspection over the brand has already begun. Cyrus Mistry, chairman, Indian Hotels Company announced at the recently held annual general meeting, "We are relooking at the strategy for Ginger."
| UNDER PRESSURE |
Net Profit (FY 2015-16) Rs 2.1 Cr |
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Where did Ginger go wrong? When it launched in 2004, it promised hospitality at an affordable price. The concept was developed in association with the late Dr C K Prahlad and the group positioned it as a brand that complemented its upmarket chain of hotels under the Taj umbrella. It stood for consistent quality and a comfortable and clean stay.
But soon Ginger exited the niche it had crafted for itself. A look at the rates for its property in Mumbai shows that the brand has inched closer to many of regular branded hotels which were meant to operate at least 2-3 levels higher in terms of room rents and facilities offered. For instance, a night at Ginger (August 19) comes for Rs 3,800 (with taxes, Rs 4,500) as per its web-based booking system. Meanwhile, Keys Hotel, a mid-segment (3-star) brand, charges Rs 3,613 and Hyatt Regency (5-star), Rs 6,000 for a night. Accor-owned upscale brand Ibis, which is a stone's throw from the airport, comes for Rs 4,700. All these hotels are located within 5 kms of Ginger, which is in suburban Andheri.
The brand has lost the affordability edge in almost all its properties. In 34 operational hotels, Ginger charges anywhere between Rs 1,800-4,000 with the average charge being around Rs 2,600 a night. This is much higher than the Rs 999 with which it started. Officials of Roots Corporation, the 67 per cent subsidiary of Tata controlled-Indian Hotels Company which owns the Ginger brand, blame high development and operating costs for high room tariffs.
Although the company refused to talk, it is believed that the asset heavy model that Ginger followed has cost it dearly. It has developed the majority of its properties, which is why it has taken far longer to become profitable say industry experts. The high cost of development pushed up room tariffs and could well nudge Ginger completely out of the niche it wanted to be a leader in.
It has taken Ginger over a decade to break even. As per IHCL's annual report Roots Corporation posted a net profit of just Rs 2.1 crore for the last financial year. This is perhaps the reason for the hotel puting its expansion plans on hold. The target was to have 75-80 operational properties by 2015-16, but it is presently operating at half that number. An initial public offering for Roots Corporation, in the works provided it reached 100 properties, also seems to have been shelved. While IHCL's investors are raising doubts over the future of Ginger on the back of increased competition, its management is confident of a turnaround. A detailed questionnaire sent to Roots Corporation seeking to know the way forward did not elicit a response.
To add to Ginger's woes, a new breed of young entrepreneurs is setting up cheaper, better and more attractive hotels. Offering accommodation in the heart of any city for as little at Rs 1,300 per night including complimentary breakfast and free WiFi, the hotel aggregating companies are snatching away large slices of Ginger's pie. Web-based companies like Oravel Stays (Oyo Rooms), Stayzilla, Zo Rooms, Zen Rooms are among the dozen-odd brands which address the needs of the traditional budget conscious guest. The new hotel aggregators and hotel chains are also digital natives and hence far nimbler when it comes to reaching out to customers, booking them in and responding to their complaints.
Still there is scope for growth in the category and Ginger could, if it got its act together recover lost glory. Research and consultancy company, HVS, says that at 62 per cent average country-wide occupancy, the budget segment has not only outperformed other segments, but it has marked a growth in occupancy when other segments fell. Aggregators like OYO Rooms, with more than 121 properties in Mumbai, Thane and Navi Mumbai, including 38 hotels in Ginger's neighbourhood believe the segment has immense potential. Ritesh Agarwal, CEO, OYO Rooms, says, "Our promise of a high-quality hotel room at rock-bottom price is our attempt to shake up the budget travel market in the country. With standardised rooms across India priced as low as Rs 999 a night, we are completely changing the value perception of a budget hotel stay for business or leisure travellers." Ginger could either take heart from his words or retreat further into its corner; the path it takes will define the brand's future.