Main Feature

'Niche'ing on the future

Developments in Indian hospitality have followed those of more mature markets in the west, moving from a one-size-fits-all approach to offering a vast repository of niche products tailor-made to meet the demands of focused segments. Achal Dhruva traces this growth trajectory in the Indian context

The rapidly changing dynamics of the tourism industry across the globe has catapulted the trend of going niche into prominence. It is of special relevance to a huge and diverse country like India and the players have either already adopted a niche approach or will be forced to do so in order to sustain themselves.

Segmentation has come a long way from the first phase in the Indian hospitality industry. After the emergence of luxury, business and budget hotels, there were resorts that further diversified into luxury resorts, spa resorts, wildlife resorts, etc. While business hotels were based on similar lines as luxury hotels, they did not have too many frills and were focused on business-oriented activities like meetings and conferences, health activities, internet and wireless connectivity, etc. Today, they are witness to niche segments like budget business hotels and service apartments, which are a relatively recent phenomenon. This development was a result of the need to cater to a niche market with specific requirements.

Broadly, this trend of going niche can be classified as niche by product, niche by region/destination and niche by target audience. In the next five to ten years, these approaches will be adopted either singularly or in combination.

Going no-frill

Consider this. Indian Hotels Company (IHCL), which operates the Taj Group of Hotels, took a detour from the luxury path it had trodden for the past ten decades and forayed into the niche segment of branded budget business hotels to launch indiOne (now called Ginger) brand of no-frills business hotels. It established a new subsidiary, Roots Corporation, to run these 'smart basics' hotels. They fall in the two- and three-star categories with a tariff of Rs 999 per room per night. The first Ginger property opened in Bangalore in June 2004 and now operates in Bhubaneshwar and Haridwar, Mysore, Thiruvananthapuram, Pune and Durgapur as well. Goa, along with Nashik, Agartala, Pondicherry and Tripura are on the anvil. The company plans to have about 40 such hotels in various business and leisure destinations in the next couple of years.

With the flurry of players with big plans for this segment, including Sarovar Hotels & Resorts (with Hometel), Kamat Hotels India (KHIL) (with Kamfotel), Accor with plans of 100 of its 'Formula 1' budget hotels across India in the next 10 years, easyGroup with easyHotel, and Lemon Tree with its Red Fox brand, indicates that this long untapped segment is as niche as it gets, and not surprisingly, exists.

Research by IHCL showed that there was an entire sector of tertiary markets comprising domestic traders and tourists, self-employed professionals, pilgrims and backpackers who wanted a branded product with competitive pricing. Ginger has all the standard comforts like air-conditioned rooms, 17-inch flat screen television and internet connectivity. Apart from this, it has a cyber cafe, an ATM, safe deposit vault, 24-hour restaurant, a meeting room and a gymnasium, facilities associated with premium products in India circa the 1990s. Vithal Kamat, CMD of KHIL, says that considering its location, rooms at Kamfotels would be priced from Rs 1,200 in secondary markets to Rs 2,000 in a metro.

Customising needs

Another distinct niche is environmentally 'mindful' hotels, a route KHIL has followed in its business hotels. Backed by research that implied that a large percentage of international clientele patronise 'green hotels', KHIL upgraded its hotel Kamat Plaza in Mumbai to a five-star property in 1995 and renamed it The Orchid. The company not only tied up with international firm HVS Eco Services of HVS International, New York to undertake specific environmental programmes but also got the Ecotel certification - a strategy which in hindsight follows the present traveller's concern for the environment, and willingness to shell out green bucks for a green cause.

The segment of boutique hotels is yet another niche product that has arrived in India, but has not yet made significant headway. The term 'boutique hotel' refers to hotels designed with the same attention to detail that one would find in a specialised store or boutique that offers customised services and products. These hotels tend to attract a different type of traveller - one who is young, independent, casual, and one who always seeks new experiences. Priya Paul, director of Apeejay Surrendra Group, which manages the stylish The Park boutique hotels explains, "People check-in at boutique hotels because besides being fashionable, it offers them an experience, not a product. Professional, intimate and personalised services are prominent features of these hotels."

Another niche within the vertical, which has been there for a long time and has been highly successful, is that of heritage hotels. A number of old forts, palaces and havelis have been restored and converted to heritage hotels, especially in Rajasthan. Today, there are almost 80 such hotels in India including Umaid Bhavan Palace (Jodhpur), Lake Palace Hotel (Udaipur), Rambagh Palace (Jaipur), the 700-year Kesroli Fort (near Alwar), Khimsar Fort, Woodville Palace (Himachal Pradesh), Judge's Court (Pragpur-Himachal Pradesh), Rajendra Vilas Palace (Mysore), Windermere (Darjeeling), the Amar Vilas (Agra).

Francis Wacziarg, who teamed up with Indian businessman Aman Nath to foray into hospitality with the Neemrana chain of vintage hotels, says, "What makes these hotels unique is that no two properties are similar. Its first heritage property was the Neemrana Fort. Apart from the individual entrepreneurs comprising mostly erstwhile maharajas, major players like the Taj, Oberoi, ITC WelcomGroup and Choice Hotels have taken to this niche segment in a big way. Industry sources say that heritage hotels generated some Rs 700 million (US$ 15 million) during 2005. Consequently some 10-12 new properties are expected to come up in the next few years.

Resorts too have become more specialised over the years and offer everything from spa to ayurvedic treatments to rejuvenation. Even major hotel chains are introducing spas in their luxury and business hotels. Taj has created its own spa brand Jiva, while other hotel chains have tied up with international spa brands like Banyan Tree. There are also standalone spa resorts like Ananda in the Himalayas and Angsana Spa & Resort in Bangalore. According to Ashok Khanna, managing director of Ananda in the Himalayas, the growing consciousness among people about health and wellness is a key factor for the growth of such resorts. The clientele profile at these destinations is a mix of foreigners and high-end domestic tourists and business travellers.

Where doth the road diverge?

Most of the niche segments prevalent today will witness a further segmentation based on price. Moreover, a large number of international funds are looking at business budget hotels and specialty restaurants. Even the major players have moved on from their core segments and forayed into either one or a range of niche segments. Large chains will not only spread across all segments but will also develop niches along the way. Also there will be many new players who will solely focus on niche segments, specialising in them. Apart from the Taj, KHIL and Sarovar Group, there will be a host of international brands like Marriott, InterContinental, Accor, Hilton, Carlson and Starwood.

The category of 'smart business hotel' has emerged as a compelling business opportunity and its growth will be propelled by the rise in domestic tourism and business travel. According to Siddharth Thaker, senior associate at HVS International, the size of the extended-stay market segment is estimated to be in the range of 11 to 13 per cent. Serviced apartments are certainly a niche and offer huge potential. Not to be outdone, even eco-friendly hotels have their share of supporters. Param Kannampilly, director of Concept Hospitality, says, "The emergence of eco-friendly business hotels will be much faster since the overall cost of operation in the long run is lower due to energy conservation practices.”

There will also be a proliferation of heritage hotels as more and more states are promoting heritage tourism. Madhya Pradesh has created a special heritage tourism policy to attract investors. While Rajasthan is viewed as being synonymous with heritage hotels, Kerala has also actively promoted this niche and will have a slew of resorts that have been designed on the lines of traditional Kerala houses.

The major players in this space will also usher in new ideas to the concept. WelcomHeritage, according to Rakesh Mathur, its president, has made a foray in the north-east with a concept called 'tee off in tea country'. "There are 24 tea estates along the Brahmaputra with 19 golf courses between them. Most of these estates have bungalows or buildings that are over 150 years old. We are looking at restoring them and conducting golf circuits in the region," he reveals.

Apart from the above, the coming decade will also see a wider spectrum of accommodation options, feels Prem Subramaniam, head (Tourism Infrastructure), Infrastructure Development Finance Company (IDFC). In his opinion, basic accommodation at petrol pumps on highways and inter-modal transport terminals, retiree villages, spiritual campuses, accommodation at sports stadia, floating homes, and temporary luxury tented complexes could all add to the existing inventory. "It is likely that more indigenous brands with different configurations based on the changing customer preference will emerge. Lower room inventories, more food outlets, themed areas offering culture and cuisine are likely to emerge. As a result, ownership and operations of hotels and other forms of accommodation will change. A chef for instance could end up running a high-end boutique hotel," is his vision.

Another idea that might materialise in the near future is hotel companies getting into old age homes or vacation homes for senior citizens. This segment is growing the world over and almost 77 per cent of the travel market in the US is dominated by people over the age of 55. Marriott International has created specific programmes to cater to this segment. India with its huge population will soon have a sizeable base in this segment as well and will pose as a huge opportunity for its hospitality industry.

Eco-tourism is considered the fastest growing market in the industry and a major product of eco-tourism is packaged lodge accommodation in remote, natural areas - an eco-lodge. While a number of Indian states have identified eco-tourism as a thrust area, there has been no development on the eco-lodge front, barring isolated cases like the CGH Earth group of hotels in Kerala that has defined its business as 'experiential holiday'. The six properties of CGH Earth showcase ideas that have grown directly from their environment like rainwater harvesting, bio-digesters and waste treatment plants that convert effluents into clean fuel, the replication of traditional fisherman's huts and the transplanted and renovated traditional family homes or tharavads.

However, according to Kannampilly, resorts catering to travellers who visit a place with a purpose of contributing to that society have yet to make a mark. These are long staying repeat guests who come periodically, probably for a few years to check on the progress of the project they have undertaken.

Wildlife resorts and jungle lodges also show huge potential. However, despite the fact that we have about 80 national parks, 441 sanctuaries and 15 Project Tiger reserves, this segment has not been tapped to its potential. According to Shoeb Kader, partner at Indian Adventures Wildlife Resorts, a wildlife resort chain based in Mumbai, the reason for this could be that most sanctuaries and parks are off the main tourist circuit. "Moreover, it is a highly seasonal business as parks and sanctuaries are open only from October to June. Therefore, parks should be kept open throughout the year. Other than that, the government needs to create infrastructure, access roads, provide tax incentives and publicity for wildlife destinations," he says.

Dotted along the highway in the US, the motels sustain its domestic tourism. But it is a relatively new concept in India. However, the big boost that road tourism is getting in the country, with the development of highways, this segment is likely to grow. Haryana and Kerala are among the few to tap this potential. While the former has set up motels across the state, Kerala Tourism Development Corporation runs Yatri Nivas and motels for travellers on a shoestring budget. The state has also introduced Vazhiyoram - small restaurants with living facilities similar to motels. The state government is targeting 250 such properties across the state and is offering a subsidy of 25 per cent to those investing up to Rs 20 lakh in these Vazhiyorams. Petrochemicals giant Reliance has also announced plans to set up around 145 inns and motels.

It is no hidden fact that while they may not be legal, casinos are an integral part of the hospitality and entertainment industry. This phenomenon however is expected to make inroads into mainstream business with the government taking a more liberal stance. While Goa has been proactive in this regard, only electronically-managed machines are allowed in its casinos in five-star hotels. But this, according to sources, is expected to change shortly. States like Andhra Pradesh, Uttaranchal and Jharkand are also keen on introducing it, which is likely to pave the way for another niche segment.

However, going niche comes with its own set of challenges. According to Kannampilly, the biggest challenge for a large organisation planning to go niche is to sustain the interest even internally since the return on investment takes longer in a niche approach. The gestation time for a new idea to catch on is also what deters hoteliers to go totally niche and they first enter a more established segment before exploring the niche option. The single biggest factor is the success in promoting the idea, to generate visibility and to bankroll the initial enthusiasm into a long term habit.