 "Making downtime count")
Last year was one more difficult year for the tourism and hospitality industry in India. A protracted global slowdown and a sharp deceleration in the Indian economy have been at the root of their misery over the last few years. High inflation, especially the sharp rise in food and utility costs, rising interest rates and currency volatility have compressed players' margins and squeezed their profitability. Unavailability of land, particularly in the metros, and the delay in securing government approvals stretched project outlays, undermining investor sentiment in the sector.
"The prolonged environment of economic uncertainty and lower economic growth rate has resulted in reduced travel spends across key business segments," points out Siddharth Thaker, managing partner, Prognosis Global Consulting. Even the fresh inventory coming in doesn't help, leading to further fragmentation of demand, dragging occupancies down.
The average hotel occupancy rate in India dropped to a low of 60.4 per cent in 2012-13, marginally higher than the 59.9 per cent occupancy of 2009-10. The average room rate also increased only marginally from Rs 4,487 in 2008-09 to Rs 4,507 in 2012-13, a Rs 20 increase over five years, according to Federation of Hotels & Restaurant Associations of India. The net income for this period fell from 37.9 per cent to 30 per cent.
While average room rents have been depressed for five years, operating costs - especially labour and utilities - have skyrocketed. Things are not expected to turn around too quickly either. In its September 2013 report, Indian Hotel Industry, ratings agency ICRA put out a negative outlook for the sector for 2013-14, stating, "With occupancy levels yet to firm up, we do not foresee adequate tractions in rates during the current fiscal."
If that is the more gloomy part of the story, the bright side is about how the pressure on margins has forced hoteliers to focus on operating efficiently. While many hoteliers have reduced their staffing levels and are exploring other cost-cutting options, others are looking to cut idling costs and make every resource they own count. This has some serious lessons for other industries.
Minor departments become major
The revenue streams of a hotel can be divided into five parts mainly: rooms, food and beverage (F&B), banquets and conferences, telephone and minor operated departments. The weightage of each of these revenue centres in the overall pie has undergone some shifts over the past few years. Telephone, for instance, has become redundant. The proliferation of mobile phones and the ubiquitous 3G networks may be thanked - or blamed, depending on which side of the fence you stand - for that. Similarly, F&B has gained a place of prominence, with the eating out culture seeing a steady uptick and hotels catering to walk-ins in equal numbers as hotel guests.
The emerging star may as well be referred to the minor operated departments. The term encompasses all the conceivable 'extras' that a hotel pools together in its customer service bid. Typically, it would include services such as laundry, gift shops, business centre, spa, gym, pool, news stand, parking etc. "Last year, June onwards we noticed that occupancies had started dipping, continuing in the vein for the remainder part of the year. This year, we've seen the occupancies pick up," said Sumit Kant, GM and VP, Four Points By Sheraton. That hasn't stopped the hotel from looking at activating the ancillary departments for extra revenues.
The hotel has worked out plans for its minor operating departments like gym, pool and spa. It does not rely on hotel guests alone for using these departments optimally, opening up the services to the general public. For instance, the hotel has opened up its pool facility and gym for wider membership starting last year. Now it has a membership of over 700. At an annual membership fee of Rs 18,000 (plus taxes) for both , it is proving a serious revenue generator, while the fee remains prohibitive, ensuring that membership is regulated at the same time.
Similarly, the hotel has tied up with partners for these departments, bringing in expertise and distancing itself from non-core areas simultaneously. For example, the hotel has tied up with Mickey Mehta's Wellness Group for programmes at the hotel gym and a corporate spa brand, Aristo, for its largely business traveller clientele.
Even as the hotel focuses on these select minor operating departments, it has kept certain others out of the ambit of the revenue-generation pressure. Taking on outsourced laundry loads is one of them. Select five star-chains like Marriott and Hyatt are known to take on outsourced laundry loads from smaller establishments in the neighbourhood. This practice is picking up, especially with the rise of budget hotel chains. These chains do not have in-house capabilities to manage their laundry loads, given their acute focus on cost management.
Taking on these additional loads can prove to be a double-edged sword though. The hotel taking on the job may not only earn additional revenues but also utilise its installed capacity optimally. However, this can bring with itself a unique set of challenges. The prime one being: logistics. "For any outsourced assignment, you need to have a completely separate logistics mechanism, right down to the entrance, the in-and-out movement of the load and its storage. The problem gets compounded in case of hotel loads. Most properties use white linens. There can be cases of mix ups, losses etc. Resources must then be additionally deployed to sort out these issues," says Kant. Due to these reasons, Four Points By Sheraton has stayed away from such "outsourced" assignments. However, the hotel does take on a load from a regular guest on a chargeable basis, of course, even if they are not staying with them at that moment. "We have several senior level corporate guests who stay with us for prolonged durations. Even after they move out, though, they like to use our hotel's laundry services. We extend them these services purely as a way of building our relationships," says Kant.
Optimisation beyond revenue generation
Resources tend to lie idle during lean times. Looking at out of the box solutions to up their usage and earn an extra buck at the same time is one way of looking at it. The other is to use the downtime to get the much needed chores done, that may be an eyesore otherwise.
Vacation owner Club Mahindra doesn't face the pinch of falling occupancy in the traditional sense as it has a captive consumer base as well as revenue stream in the form of annual maintenance fees. But non-peak season is an inescapable reality for the company too. "We have on occasion put out select inventory with online travel agents for non-members. But that is a limited practice. We use the downtime to mostly get the repairs and cleaning programmes done. The staff is also encouraged to coincide its annual leave with the lean period, so that we are fully staffed when the load is heavier," says Deepali Naair, CMO, Club Mahindra. She adds, "With multiple properties on our plate, it is also possible for us to shuffle our staff around depending on requirement."
No such thing as idle fleet
An American cab service-of sorts, Uber launched its operations in India in September last year with Uber Black, a premier sedan-led, on-call cab service. Users can log on to the Uber app, check for the nearest available Uber cab and book a ride. The catch is that the cab pulling up at the consumer's doorstep is not owned by Uber. These are fleets attached to hotels or rental agencies that have signed on to take clients on behalf of Uber. They are not under any obligation to Uber and work in their free time.
Hotel fleets are beginning to experiment and explore this option. So, remember that the next time an Uber cab pulls up, you may just be driven by the guy who just dropped off a Fortune 500 CEO.
"The prolonged environment of economic uncertainty and lower economic growth rate has resulted in reduced travel spends across key business segments," points out Siddharth Thaker, managing partner, Prognosis Global Consulting. Even the fresh inventory coming in doesn't help, leading to further fragmentation of demand, dragging occupancies down.
The average hotel occupancy rate in India dropped to a low of 60.4 per cent in 2012-13, marginally higher than the 59.9 per cent occupancy of 2009-10. The average room rate also increased only marginally from Rs 4,487 in 2008-09 to Rs 4,507 in 2012-13, a Rs 20 increase over five years, according to Federation of Hotels & Restaurant Associations of India. The net income for this period fell from 37.9 per cent to 30 per cent.
While average room rents have been depressed for five years, operating costs - especially labour and utilities - have skyrocketed. Things are not expected to turn around too quickly either. In its September 2013 report, Indian Hotel Industry, ratings agency ICRA put out a negative outlook for the sector for 2013-14, stating, "With occupancy levels yet to firm up, we do not foresee adequate tractions in rates during the current fiscal."
If that is the more gloomy part of the story, the bright side is about how the pressure on margins has forced hoteliers to focus on operating efficiently. While many hoteliers have reduced their staffing levels and are exploring other cost-cutting options, others are looking to cut idling costs and make every resource they own count. This has some serious lessons for other industries.
Minor departments become major
The revenue streams of a hotel can be divided into five parts mainly: rooms, food and beverage (F&B), banquets and conferences, telephone and minor operated departments. The weightage of each of these revenue centres in the overall pie has undergone some shifts over the past few years. Telephone, for instance, has become redundant. The proliferation of mobile phones and the ubiquitous 3G networks may be thanked - or blamed, depending on which side of the fence you stand - for that. Similarly, F&B has gained a place of prominence, with the eating out culture seeing a steady uptick and hotels catering to walk-ins in equal numbers as hotel guests.
The emerging star may as well be referred to the minor operated departments. The term encompasses all the conceivable 'extras' that a hotel pools together in its customer service bid. Typically, it would include services such as laundry, gift shops, business centre, spa, gym, pool, news stand, parking etc. "Last year, June onwards we noticed that occupancies had started dipping, continuing in the vein for the remainder part of the year. This year, we've seen the occupancies pick up," said Sumit Kant, GM and VP, Four Points By Sheraton. That hasn't stopped the hotel from looking at activating the ancillary departments for extra revenues.
The hotel has worked out plans for its minor operating departments like gym, pool and spa. It does not rely on hotel guests alone for using these departments optimally, opening up the services to the general public. For instance, the hotel has opened up its pool facility and gym for wider membership starting last year. Now it has a membership of over 700. At an annual membership fee of Rs 18,000 (plus taxes) for both , it is proving a serious revenue generator, while the fee remains prohibitive, ensuring that membership is regulated at the same time.
Similarly, the hotel has tied up with partners for these departments, bringing in expertise and distancing itself from non-core areas simultaneously. For example, the hotel has tied up with Mickey Mehta's Wellness Group for programmes at the hotel gym and a corporate spa brand, Aristo, for its largely business traveller clientele.
Even as the hotel focuses on these select minor operating departments, it has kept certain others out of the ambit of the revenue-generation pressure. Taking on outsourced laundry loads is one of them. Select five star-chains like Marriott and Hyatt are known to take on outsourced laundry loads from smaller establishments in the neighbourhood. This practice is picking up, especially with the rise of budget hotel chains. These chains do not have in-house capabilities to manage their laundry loads, given their acute focus on cost management.
Taking on these additional loads can prove to be a double-edged sword though. The hotel taking on the job may not only earn additional revenues but also utilise its installed capacity optimally. However, this can bring with itself a unique set of challenges. The prime one being: logistics. "For any outsourced assignment, you need to have a completely separate logistics mechanism, right down to the entrance, the in-and-out movement of the load and its storage. The problem gets compounded in case of hotel loads. Most properties use white linens. There can be cases of mix ups, losses etc. Resources must then be additionally deployed to sort out these issues," says Kant. Due to these reasons, Four Points By Sheraton has stayed away from such "outsourced" assignments. However, the hotel does take on a load from a regular guest on a chargeable basis, of course, even if they are not staying with them at that moment. "We have several senior level corporate guests who stay with us for prolonged durations. Even after they move out, though, they like to use our hotel's laundry services. We extend them these services purely as a way of building our relationships," says Kant.
Optimisation beyond revenue generation
Resources tend to lie idle during lean times. Looking at out of the box solutions to up their usage and earn an extra buck at the same time is one way of looking at it. The other is to use the downtime to get the much needed chores done, that may be an eyesore otherwise.
Vacation owner Club Mahindra doesn't face the pinch of falling occupancy in the traditional sense as it has a captive consumer base as well as revenue stream in the form of annual maintenance fees. But non-peak season is an inescapable reality for the company too. "We have on occasion put out select inventory with online travel agents for non-members. But that is a limited practice. We use the downtime to mostly get the repairs and cleaning programmes done. The staff is also encouraged to coincide its annual leave with the lean period, so that we are fully staffed when the load is heavier," says Deepali Naair, CMO, Club Mahindra. She adds, "With multiple properties on our plate, it is also possible for us to shuffle our staff around depending on requirement."
No such thing as idle fleet
An American cab service-of sorts, Uber launched its operations in India in September last year with Uber Black, a premier sedan-led, on-call cab service. Users can log on to the Uber app, check for the nearest available Uber cab and book a ride. The catch is that the cab pulling up at the consumer's doorstep is not owned by Uber. These are fleets attached to hotels or rental agencies that have signed on to take clients on behalf of Uber. They are not under any obligation to Uber and work in their free time.
Hotel fleets are beginning to experiment and explore this option. So, remember that the next time an Uber cab pulls up, you may just be driven by the guy who just dropped off a Fortune 500 CEO.