Session

Great Indian budget boom

Speaking of the emergence of the budget segment and the traditional preference for luxury hotels, Himmat Anand, founder of Tree of Life luxury resort, laid the platform for the session. "Everyone is bullish of the 55,000 rooms coming up, but only 20 per cent of these are in the budget segment," he stated and subsequently questioned the panelists of their interest in the budget segment, and what was drawing them to it.

Aly Shariff, MD (India) of Premier Inn, which expects its first property to launch in 2009, speaking of their interest in the market, said, "This has been bubbling under the surface for a long time. With the relaxation of FDI norms, and international travellers coming in the country and domestic tourism picking up, there is a burgeoning need to provide accommodation at this level."

Arjun Baljee, MD of Peppermint Hotels, which currently has a property in Hyderabad, emphasised that the emergence of this segment was not a sudden occurrence. "The unbranded hotel segment exists; there is opportunity in converting these properties. Consider these statistics - 60 per cent of Indians are below 30 years, and there is huge opportunity in value priced accommodation."

Adding to this, Prabhat Pani, CEO of Roots Corporation, which owns Ginger Hotels, said, "The modern Indian traveller is changing due to media exposure and frequent international travel, and thus their expectations and demands are different. Also the development of new economic hubs that previously dotted the map have contributed to this boom." Shifting the discussion to price points, Suresh Kumar, president of Fortune Park Hotels, said, "A budget hotel offers competitive price points and good value for money."

Moving onto challenges facing this segment, Anand asked the panelists to spell out other challenges plaguing this sector, leaving out the manpower crunch and the lack of availability of land. Pani pointed out that the escalating costs of inputs has thrown budgets out of control, with the increase in some cases being as high as 90 per cent over 2005 levels. Pani said that to meet the evolving needs of customers, hoteliers must keep innovating instead of taking a cookie-cutter approach to the look and feel of these hotels and save costs. Yet things need to be customised to a certain degree to save on time and cost.

How many of these budget dreams will actually materialise? Baljee stated, "There is a disconnect between ambition and reality. Perhaps those with grand plans have the cash to back it, but there are impediments to the growth of hotels." While Shariff's Premier Inn is looking at 79 hotels by the end of 10 years, Pani expects 20 Ginger hotels to be operating by the end of the year, whereas Kumar expects the brand to have 6,000 rooms under control by 2012.

Speaking of distribution channels, Shariff said that the group will dispense away with travel agents. "On an average 50 per cent of our bookings are through the internet. We need to educate the market," he explained. Baljee stated that alliances with channel partners will be needed to drive business. But the point echoing in unison was after the hotel numbers crossed critical mass, commissions to agents would be dispensed with.

While Pani revealed that their internet booking levels ranged between 10-20 per cent, Kumar stated that yield management will hold the key in the long run. Kumar added, "We have evolved with the agent, and we can't change that." In conclusion, the panelists were unanimous that the biggest challenge was the identity crisis facing this sector. "We need to change the mindset of the Indian traveller and decide how much our products need to change for the Indian market," stated Shariff.

Pani stated that while the company had learnt much over the years, it wouldn't be right to decide what to include and what to eliminate from the model. With trial and error, finally, the budget boom will move from paper to reality.