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With a huge and untapped demand for mid-market and budget hotels in India, Ginger Hotels, from Roots Corporation- a subsidiary of The Indian Hotels Company Limited (IHCL) is all set to expand in new markets. The hospitality player is eyeing the existing family owned hospitality players across India to create synergies for low cost expansions.
Talking to Komal Amit Gera, the Managing Director and Chief Executive Officer , Roots Corporaion Limited, P K Mohankumar shared his vision for the brand ‘Ginger’ and trends in hospitality sector. The excerpts of the interview are as under:
What are challenges for the mid-segment hospitality industry in India?
There is a tremendous scope for the growth of the mid-sized hotels in India due to consistent increase in demand. But the high investments (particularly fixed cost in terms of land) makes projects unviable. An average investment of Rs 40 lakh per room (including land cost) is required for expansion.
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Since the employment potential is high in this sector (one additional room churns direct and indirect employment of 16 persons), the government should recognise hospitality in the category of infrastructure.
How can this help the growth of hospitality sector?
In the masterplan of the upcoming townships, urban space zoning and provision of subsidised land on long-term lease basis for budget hotels can give a big boost to the new projects.
The formulation of consultative and advisory committee for major shift in policy for inclusion of hospitality in infrastructure should be initiated.
Many states have introduced the ‘single-window clearance’ for the new projects to mobilise higher investments. Did it help the hospitality sector?
The nomenclature ‘Single Window’ if implemented in toto can help the industry in a big way. But a lot remains to be done. We still have to seek licenses from different departments for instance sewerage, pollution, boilers.
In most of the states, the tourism department functions as a facilitataor and does not have execution powers. This restrains the momentum of growth of new projects.
What are expansion plans of ‘Ginger’?
We have a footprint of 28 hotels across India and our first priority is to achieve higher operational excellence in the existing hotels.
We envisage to have 50 more hotels under ‘Ginger’ by the year 2017 and expect to add 20 hotels by 2015-16.
There has been a creation of over-capacity in the hospitality sector in the last few years. Do you think the expansion would actually fetch business to you?
The economic slowdown in the last few years did effect luxury segment but there is a lot of buoyancy in the budget segment. There is already a shortfall of supply in the budget segment. We intend to fill the gap by expansion.
What business model would you follow for the expansion?
Since the cost of greenfield projects is very high due to exorbitant land cost we are looking at lease rental-lease franchise model.
We are open for greenfield expansions provided the land cost is viable.
The family run business can migrate to ‘Ginger’ and this can be a win-win proposition for both.
Can the consumer also benefit from such tie-ups?
The whole purpose of creating such synergies is to pass on the benefit of cost-cutting to the visitors in the form of more affordable tarrifs.
We may be needing about Rs 800 crore to create a capacity of 2,000 rooms in 20 hotels the micro markets.
The cost of debt may not allow us to offer state-of-the-art facilities at a competitive price. So engaging existing infrastructure at good locations in the emerging markets would help us to deliver quality services at economical price.
