30 Minute Interview

The budget boutique

As the budget segment simmers further, the latest entrant, Berggruen Hotels, backed by Berggruen Holdings Inc with an equity capital of US$ 100 million, has announced plans to operate 38 hotels in the next five years under the brand Keys. Sanjay Sethi, founding director on board and CEO of Berggruen Hotels, speaks to Neeti Mehra of its ‘key’ strategy in India

Sanjay Sethi Founding Director on Board and CEO of Berggruen Hotels

How will you position Keys in India?

Keys is a budget boutique brand. Today, the hospitality industry is diversifying itself in terms of the product experience it offers and there are niche markets that people are developing. Our research shows that 80 per cent of travel in India is for business. Out of this, 25-30 per cent are international travellers. If we can provide a quality of life, manage stress levels of the traveller and give an opportunity to unwind, then we have a customer for life. And that's where we would like to position ourselves in terms of products and services - like a four-star hotel. However, our price positioning will be between a two- and three-star hotel.

How would you define a 'boutique budget' hotel? How do you differentiate your brand from others in the segment?

Product differentiation is extremely important because once you build a brand you can leverage it and have product extensions. Today, all budget hotels are coming with simple basic cookie-cutter rooms. We are offering aesthetically appealing rooms along with the public areas and the bar, for lifelong. People in the budget segment are looking for secure, clean, dependable and aesthetically appealing accommodation, and that is what defines this segment.

What will be your development strategy at a time when capital and operational costs are spiraling out of control?

There are two aspects to this. Real estate costs are a real challenge to the industry today. We are making the hotel financially efficient through the initial design, and also from the human resources point of view. Training is going to play a critical role in keeping costs to a minimum, and the hotel schools we are investing in will be a major resource to us.

What cities are you looking at and what is your strategy?

In terms of destinations, we have a mix of business cities and resorts, and also serviced apartments, evenly distributed across tier I, II and III locations, each with 100 to 170 rooms. The first three business hotels will be in business cities, while Goa and Kovalam will have resorts. We are also looking at service apartments as a mix either on the same property or as exclusive service apartments. By March, we would have at least 13 properties in hand. Our prime focus is on greenfield projects, through outright purchase or a minimum of 50-year long-term lease. We are open to special purpose projects or joint ventures with two to three strategic partners with multiple sites in India, yielding 14-20 sites. We are looking at railway and government land and mixed-use projects. At some point of time after we launch the brand, we will also be open to franchises.

How important is technology to enable your sales and marketing strategy?

Our sales and marketing strategy is very clear - it's going to be IT-enabled to a large extent, supplemented with a field sales force. Internet is extremely important. We expect 30-40 per cent of our business to come through the internet, through our own Web venture which will be launched by the end of this year.

What is the five-year outlook of the brand?

Our first hotel will be launched around June 2008 with opening room rates of Rs 1,400-Rs 2,200 depending on the location. We are building 4,200 rooms in five years, but given the supply gap it will be a drop in the ocean.